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 and Exchange Commission
Date of report: August 27, 1997
ELECTRIC & GAS TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
TEXAS 0-14754 75-0259192
(State or other juris- (Commission file) I.R.S. Employer Identif-
dicition of incorporation ication No.)
or organization)
13636 Neutron Road, Dallas, Texas 75244-4410
(Address of principal executive offices, including zip code)
Registrant telephone number (including area code) (972) 934-8797
Current report on Form 8-K
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FORM 8-K
ELECTRIC & GAS TECHNOLOGY, INC.
Item 2. Acquisition or Disposition of Assets.
Electric & Gas Technology, Inc. ("ELGT") signed a "Assets
Purchase Agreement" (Agreement) to sell 100% of its wholly-owned
subsidiary Logic Design Metals, Inc. ("Logic") on July 15, 1997.
The Agreement provided for an effective date of sale as of July
31, 1997 and was closed on August 18, 1997. Logic constituted
the Metal Fabrication segment of ELGT's business. The sale was
for approximately $21,000,000 in cash. The acquiring company was
Chatham Industries Inc. a privately owned business.
Sales, operating profits and identifiable assets for Logic
as of and for the years ended July 31, were as follows:
1997 1996 1995
Sales $17,000,000 $15,200,000 $14,100,000
Operating profits $2,500,000 $234,000 $800,000
Identifiable
Assets $9,300,000 $9,300,000 $9,900,000
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Item 7. Financial Statements and Exhibits.
10.37 Assets Purchase Agreement amoung
New Logic Design Metals Inc. of
Chatham Enterprises Inc., of
Chatham Technologies, Inc., Logic
Design Metals, Inc. and Precision
Techniques, Inc. and Electric & Gas
Technology, Inc. Dated July 15,
1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
ELECTRIC & GAS TECHNOLOGY, INC.
By: /s/ Edmund W. Bailey
Edmund W. Bailey
Vice President and CFO
Date: August 27, 1997
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INDEX TO EXHIBIT
Sequentially
Number
Exhibit No. Description
Page
10.37 Assets Purchase Agreement amoung New Logic Design
Metals Inc. of Chatham Enterprises Inc., of Chatham
Technologies, Inc., Logic Design Metals, Inc. and
Precision Techniques, Inc. and Electric & Gas
Technology, Inc. Dated July 15, 1997. 5-57
Page 4
ASSET PURCHASE AGREEMENT
among
NEW LOGIC DESIGN METALS INC.
as the Buyer, a wholly owned subsidiary
of
CHATHAM ENTERPRISES INC.,
a wholly-owned subsidiary
of
CHATHAM TECHNOLOGIES, INC.,
LOGIC DESIGN METALS, INC.
and
PRECISION TECHNIQUES, INC.,
a wholly-owned subsidiary of Logic Design Metals, Inc.
as the Sellers,
and
ELECTRIC & GAS TECHNOLOGY, INC.
as Sole Shareholder of Logic Design Metals, Inc.
Dated July 15, 1997
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TABLE OF CONTENTS
PAGE
1. Sale and Purchase of Assets . . . . . . . . . . . . . 1
1.1 Sale and Purchase . . . . . . . . . . . . . . . 1
1.2 Excluded Assets . . . . . . . . . . . . . . . . 3
1.3 Consents . . . . . . . . . . . . . . . . . . . . 3
2. Assumption of Specified Liabilities . . . . . . . . . 4
2.1 Assumption . . . . . . . . . . . . . . . . . . . 4
2.2 Excluded Liabilities . . . . . . . . . . . . . . 4
3. Purchase Price and Payment . . . . . . . . . . . . . 5
3.1 Purchase Price . . . . . . . . . . . . . . . . . 5
3.2 Calculation and Adjustment of Net Current Assets
Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Sales and Use Taxes . . . . . . . . . . . . . . 8
3.4 Allocation of Purchase Price . . . . . . . . . . 8
4. Closing . . . . . . . . . . . . . . . . . . . . . . . 8
5. Representations and Warranties of the Sellers and the
Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Organization . . . . . . . . . . . . . . . . . . 9
5.2 Capitalization . . . . . . . . . . . . . . . . . 9
5.3 Authorization; Validity of Agreement . . . . . . 9
5.4 No Violations . . . . . . . . . . . . . . . . . 9
5.5 Financial Statements . . . . . . . . . . . . . 10
5.6 No Material Adverse Change . . . . . . . . . . 10
5.7 No Undisclosed Liabilities. . . . . . . . . . 12
5.8 Litigation; Compliance with Law; Licenses and
Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 Employee Benefit Plans; ERISA . . . . . . . . 13
5.10 Real Property. . . . . . . . . . . . . . . . 14
5.11 Intellectual Property; Computer Software. . . 17
5.12 Title to Acquired Assets; Capital Budget. . 17
5.13 Material Contracts. . . . . . . . . . . . . . 18
5.14 Taxes. . . . . . . . . . . . . . . . . . . . . 19
5.15 Affiliated Party Transactions . . . . . . . . 21
5.16 Environmental Matters . . . . . . . . . . . . 22
5.17 No Brokers . . . . . . . . . . . . . . . . . . 24
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5.18 Receivables . . . . . . . . . . . . . . . . . 24
5.19 Inventories . . . . . . . . . . . . . . . . . 24
5.20 Product Claims . . . . . . . . . . . . . . . . 24
5.21 Warranties and Returns . . . . . . . . . . . . 24
5.22 Assets Utilized in the Business . . . . . . . 25
5.23 Insurance . . . . . . . . . . . . . . . . . . 25
5.24 Delivery of Documents; Corporate Records . . . 25
5.25 Customers, Suppliers and Distributors . . . . 25
5.26 Labor Matters . . . . . . . . . . . . . . . . 26
5.27 Directors, Officers and Certain Employees . . 26
5.28 No Misstatements or Omissions . . . . . . . . 26
6. Representations and Warranties of the Buyer . . . . 26
6.1 Organization . . . . . . . . . . . . . . . . . 26
6.2 Authorization; Validity of Agreement . . . . . 26
6.3 No Violations.. . . . . . . . . . . . . . . . 27
6.4 Litigation . . . . . . . . . . . . . . . . . . 27
7. Other Agreements of the Parties . . . . . . . . . . 28
7.1 Conduct of Business . . . . . . . . . . . . . 28
7.2 Access and Information . . . . . . . . . . . . 28
7.3 Tax Returns; Taxes . . . . . . . . . . . . . . 28
7.4 Notice of Developments . . . . . . . . . . . . 28
7.5 Non-Disclosure of Confidential Information . . 29
7.6 No Solicitation of Employees, Suppliers or
Customers. . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.7 Non-Competition. . . . . . . . . . . . . . . . 29
7.8 Public Statements . . . . . . . . . . . . . . 30
7.9 Other Actions . . . . . . . . . . . . . . . . 30
7.10 Change of Name . . . . . . . . . . . . . . . . 30
7.11 Cooperation on Taxes . . . . . . . . . . . . . 30
7.12 Employees . . . . . . . . . . . . . . . . . . 31
7.13 Consents; Releases . . . . . . . . . . . . . . 32
7.14 Buyer Savings Plan . . . . . . . . . . . . . . 33
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8. Conditions Precedent to the Closing . . . . . . . . 33
8.1 Conditions Precedent to the Buyer's Obligations to
Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.2 Conditions Precedent to the Sellers' Obligations
to Close . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9. Documents to be Delivered at the Closing . . . . . 37
9.1 Deliveries of the Sellers . . . . . . . . . . 37
9.2 Deliveries of the Buyer . . . . . . . . . . . 39
10. Termination . . . . . . . . . . . . . . . . . . . . 39
11. Indemnification . . . . . . . . . . . . . . . . . . 40
11.1 Indemnification by the Sellers and the
Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.2 Indemnification by the Buyer . . . . . . . . . 40
11.3 Limitations on Amount . . . . . . . . . . . . 41
11.4 Indemnification Procedures . . . . . . . . . . 41
11.5 Survival of Representations and Warranties . . 42
12. Miscellaneous . . . . . . . . . . . . . . . . . . . 42
12.1 Transaction Fees and Expenses . . . . . . . . 42
12.2 Notices . . . . . . . . . . . . . . . . . . . 42
12.3 Amendment . . . . . . . . . . . . . . . . . . 44
12.4 Waiver . . . . . . . . . . . . . . . . . . . . 44
12.5 Governing Law . . . . . . . . . . . . . . . . 44
12.6 Jurisdiction . . . . . . . . . . . . . . . . . 44
12.7 Remedies . . . . . . . . . . . . . . . . . . . 44
12.8 Severability . . . . . . . . . . . . . . . . . 44
12.9 Further Assurances . . . . . . . . . . . . . . 45
12.10 Assignment . . . . . . . . . . . . . . . 45
12.11 Binding Effect . . . . . . . . . . . . . 45
12.12 No Third Party Beneficiaries . . . . . . 45
12.13 Entire Agreement . . . . . . . . . . . . 45
12.14 Headings . . . . . . . . . . . . . . . . 45
12.15 Counterparts . . . . . . . . . . . . . . 45
12.16 Bulk Sales Law . . . . . . . . . . . . . 45
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Schedules
Schedule 1.2(d) Excluded Assets
Schedule 5.2 Capitalization; Liens
Schedule 5.4(a) Violations
Schedule 5.4(b) Consents and Approvals
Schedule 5.5 Financial Statements
Schedule 5.6 Material Adverse Changes
Schedule 5.8(a) Litigation
Schedule 5.8(b) Violations of Law
Schedule 5.9(a) Employee Benefit Plans
Schedule 5.9(b) Employee Benefit Plans subject to Title
IV of ERISA
Schedule 5.10(a) Owned Real Property
Schedule 5.10(b) Leases
Schedule 5.10(c) Real Estate Related Contracts
Schedule 5.11(a) Intellectual Property; Rights of
Ownership
Schedule 5.11(b) Licenses, etc. Rights of Ownership
Schedule 5.12(a) Liens
Schedule 5.12(b) Fixed Assets Ledger
Schedule 5.12(c) Capital Budget
Schedule 5.13 Material Contracts; Defaults or Events of
Default
Schedule 5.14(a) Taxes
Schedule 5.14(b) Tax Returns
Schedule 5.14(c) Jurisdictions
Schedule 5.16 Environmental Matters
Schedule 5.19 Inventories
Schedule 5.20 Service and Product Liability Claims
Schedule 5.21 Warranties and Returns Policies; Product
Failures or Defects
Schedule 5.22 Assets Utilized in the Business
Schedule 5.23 Insurance Policies
Schedule 5.25 Sales; Sales to Customers; Suppliers and
Distributors
Schedule 5.27 Directors, Officers, Certain Employees
Schedule 7.6 No Solicitation
Schedule 7.7 Non-Competition
Schedule 7.12(a) Employees
Schedule 7.13 Releases
Exhibits
Exhibit 3.1(b) Form of Settlement Escrow Agreement
Exhibit 3.1(c) Form of Deposit Escrow Agreement
Exhibit 3.4 Allocation of Purchase Price
Exhibit 8.1(i) Form of Opinion of Counsel for the Sellers
and the Shareholder
Exhibit 8.2(f) Form of Opinion of Counsel for the Buyer
Exhibit 8.2(h) Form of Bill of Sale, Assignment and
Assumption Agreement
Exhibit 9.1(a)(i) Form of Deed
Exhibit 9.1(a)(ii) Form of Lease Assignment
Exhibit 9.1(a)(iii) Form of SNDA Agreement
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ASSET PURCHASE AGREEMENT
Dated July 15, 1997
The parties to this Asset Purchase Agreement (this
"Agreement") are Chatham Enterprises Inc., a Delaware corporation
("Chatham Enterprises"), New Logic Design Metals Inc., a Delaware
corporation and wholly-owned subsidiary of Chatham Enterprises
(the "Buyer"), Logic Design Metals, Inc., a Texas corporation
("Logic"), Precision Techniques, Inc., a Texas corporation and
wholly-owned subsidiary of Logic ("Precision" and, together with
Logic, the "Sellers" and, individually, a "Seller"), and Electric
Gas & Technology, Inc., a Texas corporation which owns all of the
outstanding capital stock of Logic (the "Shareholder").
W I T N E S S E T H
The Sellers are in the business of the fabrication of
custom and precision metal enclosures, card cages, and housing
devices for companies in the telecommunications and computer
industries (collectively, the "Business").
The Buyer desires to purchase from the Sellers, and the
Sellers desire to sell to the Buyer, all of the Sellers' assets
and properties relating to the Business excluding only certain
assets specified below, in consideration for the payment of cash
and the assumption of the liabilities specified below, on the
terms and subject to the conditions set forth herein.
It is therefore agreed as follows:
I.Sale and Purchase of Assets.
A.Sale and Purchase. Upon the terms and subject to the
conditions contained in this Agreement, at the Closing (as
defined in section 4), the Sellers shall sell, assign, transfer
and deliver to the Buyer, and the Buyer shall purchase and accept
from the Sellers, all of the assets and rights of every nature,
kind and description, tangible and intangible, wherever located,
that are owned, used or held for use by the Sellers in or for the
Business, as the same shall exist on the Closing Date
(collectively, the "Acquired Assets"), free and clear of any and
all Liens (as defined in section 5.6(a)) including, without
limitation, the following:
1.accounts receivable, notes receivable, drafts or other similar
instruments;
2.inventory, including but not limited to finished goods, work in
process, raw materials and supplies;
3.prepaid expenses and deposits;
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4. machinery, equipment, tools and dies, hand tools, vehicles,
computers and other data processing hardware (and all software
related thereto or used therewith) and other tangible personal
property of similar nature, including but not limited to all
items set forth on Seller's fixed asset ledger attached to this
Agreement on Schedule 5.12(b) (collectively, the "Machinery and
Equipment");
5.office furniture, office equipment, fixtures and other tangible
personal property of similar nature (collectively, the "Furniture
and Fixtures");
6.interests to the extent owned by the Sellers in any patent,
copyright, trademark, trade name, brand name, service mark, logo,
symbol, trade dress, design or representation or expression of
any thereof, or registration or application for registration
thereof, or any other invention, trade secret, technical
information, know-how, proprietary right or intellectual
property, technologies, methods, designs, drawings, software
(including documentation and source code listings), processes and
other proprietary properties or information (collectively, the
"Intellectual Property");
7.real property interests described in Schedule 5.10(a) and
Schedule 5.10(b) to this Agreement together with all buildings,
facilities and other improvements thereon and all licenses,
leases, rights, privileges and appurtenances thereto including,
without limitation, all leases, agreements and other rights to
use, occupy or possess, or otherwise with respect to, real
property or machinery, equipment, vehicles, and other tangible
personal property of similar nature to which either Seller is a
party, and all rights arising under or pursuant to such leases,
agreements and rights;
8.to the extent not included above, and subject to section 1.3,
all contracts, agreements, options, commitments, understandings,
licenses, leases and instruments relating to the Business
including, without limitation, customer and supplier contracts,
sales representative and distributor contracts and commission
contracts with respect thereto, and each of the Material
Contracts as listed on Schedule 5.13 (collectively, the "Assigned
Contracts");
9.customer and supplier lists, mailing lists, catalogs, brochures
and handbooks relating to the Business;
10.other books, records, files, contracts, plans, notebooks,
production and sales data and other data of the Sellers relating
to the Business, whether or not in tangible form or in the form
of intangible computer storage media such as optical disks,
magnetic disks, tapes and all similar storage media;
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11.the names Logic Design Metals, Precision Techniques and all
variations thereof and all similar names and the goodwill
associated therewith, together with all trademarks, service marks
and trade names of the Sellers related to the Business, if any;
12.rights related to any portion of the Business or the Acquired
Assets, including third party warranties and guarantees and other
similar contractual rights, as to third parties held by or in
favor of each Seller, respectively, and arising out of, resulting
from or relating to the Business or the Acquired Assets; and
13.rights to insurance and condemnation proceeds relating to any
damage, destruction, taking or other similar impairment of any of
the Acquired Assets.
B.Excluded Assets. The only assets of the Sellers that the
Buyer is not acquiring hereby (the "Excluded Assets") are:
1.the consideration to be delivered to the Sellers pursuant to
this Agreement for the Acquired Assets to be sold to the Buyer
hereunder and the rights of the Seller hereunder;
2.the certificate of incorporation, corporate seals, minute
books, stock books, tax returns and supporting data prepared
expressly in connection therewith, and other records prepared
directly in connection with the corporate organization and
capitalization of each of the Sellers and/or its operation as a
corporation under applicable Laws (as defined in section 5.8(b));
3.shares of the capital stock of the Sellers and the Shareholder;
4.the assets set forth in Schedule 1.2(d);
5.any asset with respect to which the Buyer shall make a claim
under this Agreement and which the Buyer shall not pay for under
the provisions of this Agreement; and
6.the RCT account receivable.
C.Consents. To the extent that the assignment of any Assigned
Contract shall require the Consent (as defined in section 5.4(b))
of the other parties thereto or of any third parties, this
Agreement shall not constitute an agreement to assign the same if
an attempted assignment would constitute a breach thereof or of
other obligations or commitments of either Seller. The Sellers
shall take any and all action necessary to obtain all such
Consents prior to the Closing Date. If any such Consent is not
obtained, and the Buyer waives the obtaining of such Consent as a
condition precedent hereunder, then the Sellers shall continue
such efforts after the Closing Date and until such Consent is
obtained and shall cooperate with the Buyer in any arrangement
(such as subcontracting, sublicensing or subleasing) reasonably
requested by the Buyer
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intended to provide for the Buyer all of the benefits of Logic or
Precision, as the case may be, under such Contract.
II.Assumption of Specified Liabilities.
A.Assumption. Upon the terms and subject to all of the
conditions contained herein, at the Closing, the Buyer shall
assume, and agree to pay, perform and discharge, the obligations
and liabilities of the Sellers that are reflected as accounts
payable and accrued expenses on the April 30, 1997 balance sheets
of the Sellers (the "Third Quarter Balance Sheet") not discharged
by the Sellers before the Closing, and the liabilities and
obligations of the Sellers constituting accounts payable and
accrued expenses incurred since April 30, 1997 in the ordinary
course of business and which are unpaid as of the Closing Date
and related to the ordinary operation of the Business (all of the
foregoing, collectively, the "Assumed Liabilities" and,
individually, an "Assumed Liability").
B.Excluded Liabilities. The Buyer is only assuming the
liabilities and obligations of the Sellers expressly set forth in
section 2.1. Without limiting the generality of the foregoing,
the Buyer will not be assuming, and the Sellers shall remain
responsible for and shall promptly pay, perform and discharge,
all of the liabilities and obligations of the Sellers other than
the Assumed Liabilities (the "Excluded Liabilities") such that
the Buyer will incur no liability in connection therewith, and
the Sellers shall jointly and severally indemnify the Buyer with
respect to and shall hold the Buyer harmless from and against all
such Excluded Liabilities, including but not limited to the
following:
1.any obligation or liability of the Sellers arising from a
breach of a representation or warranty herein on its part or its
failure to fully, faithfully and promptly perform any agreement
or covenant on its part contained herein;
2.any obligation or liability of the Sellers to the extent the
same arise prior to the Closing out of or result from
noncompliance with any federal, state or local Laws applicable to
the Business, whether relating to the environment, the health and
safety standards applicable to employees, employee benefit plans,
wage and hour Laws or other labor related matters or otherwise;
(c) any obligation or liability of the Sellers to the
extent that the Seller shall be indemnified by an insurer;
(d) any expenses of the Sellers incurred in connection with the
transactions contemplated hereunder, it being understood
that all such expenses (including but not limited to fees
and expenses of finders, investment bankers, business
brokers, attorneys and accountants) shall be paid by the
Sellers out of the consideration to be delivered to the
Sellers pursuant to this Agreement for the Acquired Assets
to be sold to the Buyer hereunder and the rights of the
Sellers hereunder, and not out of any of the Acquired
Assets;
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(e) any obligations relating to an Excluded Asset;
(f) any liability for Taxes (as hereinafter defined);
(g) any indebtedness for borrowed money or any guaranty thereof;
(h) any amount due to the Shareholder;
(i) any pension, profit-sharing or workmen's compensation or
other employee benefit or post retirement plan and any
liability or obligation arising thereunder;
(j) any liability or obligation for, with respect to, related to
or arising out of any goods sold, shipped or delivered by
the Seller prior to Closing, including but not limited to
any liability as a result of any injury to persons or
property;
(k) all waiver of premium claims as of the Closing Date to the
extent relating to events, conditions or circumstances that
occur or exist prior to the Closing; and
(l) all claims of employees arising out of events, conditions
and circumstances existing or occurring prior to Closing,
including, but not limited to, medical and health claims and
disability claims.
3. Purchase Price and Payment.
3.1 Purchase Price.
(a) As consideration for the sale, assignment, transfer and
delivery of the Acquired Assets by the Sellers to the Buyer,
and upon the terms and subject to the conditions contained
herein, at the Closing the Buyer shall pay to the Sellers an
aggregate purchase price for the Acquired Assets equal to
the sum of (i) $18,600,000 and (ii) an amount equal to the
"Net Current Assets Payment" to be determined in accordance
with section 3.2 below (the "Purchase Price").
(b) Payment of the Purchase Price by the Buyer upon the Closing
shall be made by wire transfer as follows:
(i) to accounts designated by the Sellers,
(ii) $500,000 to be deposited, and held in
escrow with Carl A. Generes, Esq., as Escrow Agent, pursuant to
the terms of an Escrow Agreement in the form attached hereto as
Exhibit 3.1(b) (the "Settlement Escrow Agreement") to provide for
any adjustments to the Purchase Price to be effected following
the Closing, and
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(iii) an amount equal to the Net Current Assets
Payment to an account designated by the Sellers.
(c) Simultaneously with the execution and delivery of this
Agreement, the Buyer is delivering to Carl A. Generes, Esq.,
as Escrow Agent, by check or wire transfer, the amount of
$250,000 as an escrow deposit (the "Deposit"), such Deposit
to be subject to the terms and conditions of the Escrow
Agreement in the form attached hereto as Exhibit 3.1(c) (the
"Deposit Escrow Agreement"). At the Closing, the Deposit
shall be delivered to the Buyer. In the event, however,
that the Closing does not occur by August 31, 1997, unless
agreed by the Buyer and the Sellers, and the Sellers is not
then in breach of this Agreement and is otherwise ready,
willing and able to consummate the Closing, the Sellers
shall be entitled to the Deposit as liquidated damages and
the Escrow Agent shall deliver the Deposit to the Sellers.
The Escrow Agent shall promptly refund the Deposit to the
Buyer upon written demand in the event that the Sellers are
not entitled to the Deposit as set forth above.
3.2 Calculation and Adjustment of Net Current Assets Payment.
(a) The "Net Current Assets Payment" shall mean an amount equal
to (i) the sum of all accounts receivable (less allowance
for doubtful receivables and excluding the RCT account
receivable) and inventories and prepaid expenses and
deposits, less (ii) the sum of accounts payable and accrued
expenses, such calculations to be made consistent with the
Sellers' prior practice and GAAP (as defined in section
3.2(h)), subject to adjustment as provided in this section
3.2(a). The Net Current Assets Payment to be paid to the
Sellers at the Closing shall be the Net Current Assets
Payment amount to be set forth on the Draft Closing Date
Balance Sheet (as defined in section 3.2(b)). If the Net
Current Assets Payment as shown on the Closing Date Balance
Sheet (as defined in section 3.2(d)), as that Closing Date
Balance Sheet becomes final and binding in accordance with
section 3.2(d), is less than the Net Current Assets Payment
shown on the Draft Closing Date Balance Sheet, the Purchase
Price shall be reduced by an amount equal to that deficiency
(the "Reduction"), provided however, that if the Net Current
Assets Payment as shown on the Closing Date Balance Sheet,
as that Closing Date Balance Sheet becomes final in
accordance with section 3.2, is greater than the Net Current
Assets Payment shown on the Draft Closing Balance Sheet, the
Purchase Price shall be increased by an amount equal to that
excess (the "Increase").
(b) Not fewer than three business days before the day of the
Closing, the Sellers shall deliver to the Buyer (i) a
balance sheet (the "Draft Closing Date Balance Sheet")
prepared in accordance with GAAP and reflecting the Sellers'
best estimate of each of the items, and the amounts thereof,
to be included on the Closing Date Balance Sheet and (ii) a
certificate of the Sellers to the effect that the Draft
Closing Date Balance Sheet has been prepared in accordance
with this section 3.2 and reflects the Sellers' best
estimate of, and to the best knowledge of each of the
Sellers fairly presents, each
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of the items, and the amounts thereof as of the Determination
Time (as defined in section 3.2(d)), to be included on the
Closing Date Balance Sheet.
(c) The Net Current Assets Payment to be paid by the Buyer at
the Closing shall be subsequently adjusted, if applicable,
in accordance with the principles of this section 3.2.
(d) Promptly after the Closing, the Buyer shall prepare a
balance sheet (the "Closing Date Balance Sheet"), which
shall include only (i) the assets and liabilities of the
Sellers as of the close of business on the day immediately
preceding the Closing (the "Determination Time"), and (ii)
the Acquired Assets and Assumed Liabilities as of the
Determination Time, in accordance with GAAP. After
preparation of the Closing Date Balance Sheet, the Buyer
shall deliver to the Sellers a certificate of the Buyer (the
"Buyer's Adjustment Certificate") which shall (i) state that
the Closing Date Balance Sheet has been prepared in
conformity with GAAP and fairly presents the Net Current
Assets Payment in accordance with GAAP and (ii) include a
calculation showing, in reasonable detail, the calculation
of the Reduction or Increase, as the case may be, in
accordance with section 3.2(a) and the amount owed by the
Sellers to the Buyer, or by the Buyer to the Sellers, as the
case may be.
(e) Any Reduction shall be paid to the Buyer by the Sellers
within 10 days after delivery of the Buyer's Adjustment
Certificate, provided that if the Sellers raise any issues
in accordance with the procedures specified in section
3.2(g), the Sellers shall pay, within 10 days after delivery
of the Buyer's Adjustment Certificate, the amount of such
Reduction with respect to which no issues are raised and
shall pay the remaining amount of such Reduction, if any,
within ten days after resolution of those issues pursuant to
section 3.2(g).
(f) Any Increase shall be paid to the Sellers by the Buyer
within ten days after delivery of the Buyer's Adjustment
Certificate, provided that if the Sellers raise any issues
in accordance with the procedures specified in section
3.2(g), the Buyer shall pay, within 10 days after delivery
of the Buyer's Adjustment Certificate, the amount of such
Increase with respect to which no issues are raised and
shall pay the remaining amount of such Increase, if any,
within ten days after resolution of those issues pursuant to
section 3.2(g).
(g) The Closing Date Balance Sheet and the Buyer s Adjustment
Certificate shall be final, binding and conclusive on the
parties, unless, within ten days after delivery thereof, the
Sellers give the Buyer written notice (an "Issue Notice")
describing in reasonable detail one or more issues with
respect to the Closing Date Balance Sheet. If an Issue
Notice is given, the parties shall consult with each other
with respect to the issues specified therein. If the
parties are unable to reach agreement within 15 days after
the Issue Notice has been given, the issues therein shall be
resolved by a firm of independent accountants of national
standing selected by the parties or, if the parties
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are unable to agree upon the selection of such a firm within
30 days after the Issue Notice has been given, selected by the
American Arbitration Association at the request of either
party (the "Resolution Accounting Firm"). The resolution of
the dispute by the Resolution Accounting Firm shall be
final, binding and conclusive on the parties. The fees and
expenses of the Resolution Accounting Firm shall be borne
one-half by the Buyer and one-half by the Sellers.
(h) "GAAP," wherever used in this Agreement shall mean generally
accepted accounting principles as of the date of this
Agreement.
3.3 Sales and Use Taxes. All sales and use taxes imposed by any
state, county, local or other governmental entity or taxing
authority as a result of the transfer of the Acquired Assets
hereunder and the other transactions contemplated hereby
shall be paid by the Sellers.
3.4 Allocation of Purchase Price.
(a) Upon the Closing, the Buyer and the Sellers shall effect the
allocation of the Purchase Price and the amount of the
Assumed Liabilities among the Acquired Assets in accordance
with the requirements set forth in Exhibit 3.4 hereto. The
Buyer shall, as promptly as practicable after the Closing,
prepare and deliver to the Sellers the foregoing allocation
of the Purchase Price in accordance with the relative fair
market values of the Acquired Assets as determined in the
Buyer's reasonable determination. Each of the parties shall
report this transaction for state and federal tax purposes
in accordance with such allocation of the Purchase Price.
(b) The Buyer and Sellers shall cooperate in the timely
preparation of their respective Forms 8594 in connection
with the transactions contemplated by this Agreement, which
shall reflect the above allocation of the Purchase Price and
the amount of the Assumed Liabilities for attachment to
their respective federal income Tax Returns and the
satisfaction of any other requirements of section 1060 of
the Internal Revenue Code of 1986 and the Treasury
Regulations promulgated thereunder (the "Code").
4. Closing. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at
the offices of Carl A. Generes, Esq., 4315 West Lovers Lane,
Dallas, Texas 75209-2803, at 10:00 a.m. local time on July 31,
1997, or at such other date and time on which all the conditions
set forth in section 8 of this Agreement are satisfied (the
"Closing Date"). The execution and/or delivery of each document
to be executed and/or delivered at the Closing and each other
action to be taken at the Closing shall be subject to the
condition that every other document to be executed and/or
delivered at the Closing is so executed and/or delivered and
every other action to be taken at the Closing is so taken, and
all such documents and actions shall be deemed to be executed
and/or delivered or taken, as the case may be, simultaneously.
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5. Representations and Warranties of the Sellers and
the Shareholder.
Each Seller and the Shareholder jointly and severally
represent and warrant to the Buyer as follows:
5.1 Organization. Each Seller and the Shareholder is a
corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation. Each Seller and the Shareholder has all
requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is
now being conducted. Each Seller is duly qualified or
licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of
the business conducted by it makes such qualification or
licensing necessary. Each Seller has delivered to the Buyer
true, correct and complete copies of such Seller's
certificate of incorporation and bylaws, as currently in
effect.
5.2 Capitalization. The Shareholder is the sole shareholder of
Logic and owns all of the issued and outstanding capital
stock of Logic of record and beneficially free and clear of
all Liens. Logic is the sole shareholder of Precision and
owns all of the issued and outstanding capital stock of
Precision of record and beneficially free and clear of all
Liens except as set forth on Schedule 5.2.
5.3 Authorization; Validity of Agreement. Each of the Sellers
and the Shareholder has the requisite capacity and authority
to execute, deliver and perform this Agreement and each of
the other agreements, instruments, documents and
certificates to be executed and delivered pursuant to this
Agreement, including but not limited to, any item referred
to in Section 9 (collectively, with this Agreement, the
"Transaction Documents") to which it is a party and to
assume and perform its obligations hereunder and thereunder,
and to consummate the transactions contemplated hereby.
This Agreement has been duly executed, authorized and
delivered by each of the Sellers and the Shareholder and is
a valid and binding obligation of each of the Sellers and
the Shareholder, enforceable against each of the Sellers and
the Shareholder in accordance with its terms, except as such
enforceability may be subject to or limited by applicable
bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally.
5.4 No Violations.
(a) The execution, delivery and performance of this Agreement by
each of the Sellers and the Shareholder do not, and the
consummation by each of the Sellers and the Shareholder of
the transactions contemplated hereby will not, (i) violate
any provision of the certificate of incorporation or bylaws
of the Sellers, (ii) except as set forth in Schedule 5.4(a)
result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment,
cancellation or acceleration) under any of the terms,
conditions or
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provisions of any note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness,
license, lease, option, contract, undertaking,
understanding, covenant, agreement or other instrument or
document (collectively, a "Contract") to which either Seller
or the Shareholder is a party or by which any of the
properties or assets of either Seller or the Shareholder may
be bound or otherwise subject or (iii) violate any order,
writ, judgment, injunction, decree, law, statute, rule or
regulation applicable to either Seller or the Shareholder or
any of their respective properties or assets.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any foreign,
provincial, United States federal, state, county, municipal
or other local jurisdiction, political entity, body,
organization, subdivision or branch, legislative or
executive agency or department or other regulatory service,
authority or agency (a "Governmental Entity") or any other
individual or other entity (a "Person") is required in
connection with the execution, delivery and performance of
this Agreement by either Seller or the Shareholder or the
consummation by either Seller or the Shareholder of the
transactions contemplated hereby, except for such consents,
approvals, orders, authorizations, notifications, notices,
estoppel certificates, registrations, ratifications,
declarations, filings or any waiver, exemption or variance
with respect to any license, permit or order as are set
forth on Schedule 5.4(b) hereof ("Consents").
5.5 Financial Statements. Attached to Schedule 5.5 are
unaudited balance sheets of the Sellers as of April 30,
1997, together with the related statements of operations for
the nine-month period ended April 30, 1997, the audited
balance sheets of the Shareholder as of July 31, 1994, 1995
and 1996 together with the related statements of operation
and cash flows (including the related notes) for the three
fiscal years then ended, together with the supplemental
information including the balance sheets of Logic, as of
July 31, 1994, 1995 and 1996, and the related statements of
operations for the three fiscal years then ended and the
balance sheets of Precision as of July 31, 1995 and 1996 and
the related statements of operation for the year ended July
31, 1996 and period from March 1, 1995 to July 31, 1995.
Attached thereto is the Supplemental Report of Jackson &
Rhodes, P.C. The foregoing financial statements, as
applicable, have been derived from, and agree with, the
books and records of each Seller and fairly present the
financial position of each Seller as of the respective dates
thereof and the results of operations of each Seller for the
respective periods set forth therein, in each case as if the
Sellers were a stand-alone entity, except as otherwise
indicated on Schedule 5.22 hereof. Each of the foregoing
financial statements has been prepared in accordance with
GAAP as of the dates and for the periods involved, subject,
in the case of the April 30, 1997 balance sheet (the "Third
Quarter Balance Sheet") and the related statements of
operations for the interim period, to normal fiscal year-end
adjustments in the ordinary course (none of which,
individually or in the aggregate, will be material).
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5.6 No Material Adverse Change. Since the date of the Third
Quarter Balance Sheet, there has been no material adverse
change in the Business or the Acquired Assets or the Assumed
Liabilities, or in the condition, financial or otherwise, or
in the results of operations, or in the prospects of, either
Seller or Business. Since the date of the Third Quarter
Balance Sheet, the Business has been conducted in the
ordinary course and consistent with past practice. As
amplification and not limitation of the foregoing, since the
date of the Third Quarter Balance Sheet, except as set forth
on Schedule 5.6 attached hereto, neither Seller has:
(a) created, incurred, assumed or granted, or permitted or
allowed any of the Acquired Assets to be subject to, any
lien other than a "Permitted Encumbrance" ("Lien"). A
"Permitted Encumbrance" shall mean any mechanic's, workmen's
and similar statutory liens, or any liens arising out of or
relating to Taxes not yet due and payable;
(b) made any change in any method of accounting or accounting
practice, principle or policy used by such Seller;
(c) amended, terminated, canceled, or compromised any claims of
such Seller, canceled, forgave or discharged any debt owed
to such Seller, or waived any other material rights of value
to such Seller;
(d) sold, transferred, leased, subleased, licensed, assigned, or
otherwise disposed of any Acquired Assets or any interest
therein, whether real, personal or mixed, other than in the
ordinary course of the Business consistent with past
practice;
(e) redeemed any of such Seller's outstanding securities or
declared, set aside, made, committed to make, or paid any
dividends, distributions, bonuses or fees (whether in cash,
securities or property);
(f) made any capital expenditures or commitment for any capital
expenditure in excess of $10,000 in the aggregate except
with the prior written consent of the Buyer;
(g) made any changes in the customary methods of operations of
such Seller;
(h) merged or consolidated with any corporation, acquired
control or acquired any capital stock or other securities of
any corporation or business entity, or took steps incident
to or in furtherance of any such actions whether by entering
into an agreement providing therefor or otherwise;
(i) entered into any employment agreement or became liable for
any bonus, profit-sharing or incentive payment to any of its
officers or directors, except pursuant to existing plans,
arrangements or agreements disclosed in a Schedule hereto;
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(j) committed a material breach under, or amended or terminated,
any Material Contract (as defined in section 5.13) or any
License (as defined in section 5.8) or other right of the
Seller;
(k) incurred any damage, destruction or similar loss, whether or
not covered by insurance, adversely affecting either Seller,
the Business or the Acquired Assets;
(l) incurred any indebtedness, obligation or liability
(including any guaranty, indemnity, make-whole agreement for
or with respect to any indebtedness, obligation or liability
of another Person), or paid, satisfied or discharged any
indebtedness, obligation or liability prior to the due date
or maturity thereof, except current indebtedness,
obligations and liabilities in the ordinary course of
business;
(m) effected any change in either Seller's business policies or
practices, accounting methods, conventions, principles or
assumptions or any change in the nature of the business
relationships with its clients, or effected any transaction
not in the ordinary course of business;
(n) amended or terminated any Contract to which it is a party or
entered into or become a party to any Contract under which
the reasonably anticipated costs and expenses will exceed
the reasonably anticipated revenues or which would
materially and adversely affect the Business or the Acquired
Assets;
(o) failed to continue in full force and effect all of its
insurance policies, as described in Schedule 5.23 attached
hereto;
(p) increased the compensation payable or to become payable to
any of its officers, directors, employees or agents, or made
any bonus payment to or similar arrangement with any such
person, other than pursuant to existing plans, arrangements
or agreements disclosed herein or in a schedule hereto;
(q) effected any capital reorganization, or acquired the
business or assets, substantially as a whole, of any other
Person; and
(r) entered into any new lease or renewed an existing lease.
5.7 No Undisclosed Liabilities.
(a) Neither Seller has, and as of the Closing will not have, any
liabilities (whether accrued, contingent, known, or
otherwise) other than those that (i) are set forth or
reserved against in the balance sheets referred to in
section 5.5; or (ii) were incurred since April 30, 1997 in
the ordinary course of business, none of which, individually
or in the aggregate, is material to the business,
operations, condition or prospects of the Business.
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(b) The accounts payable of the Sellers set forth in the balance
sheets referred to in section 5.5. or arising subsequent
thereto are the result of bona fide transactions in the
ordinary course of business and have been paid or are not
yet due and payable as at the Closing Date, in accordance
with the respective invoices relating thereto.
5.8 Litigation; Compliance with Law; Licenses and Permits.
(a) Except as set forth in Schedule 5.8(a), there is no claim,
suit, action or proceeding ("Proceeding") pending, nor, to
the best knowledge of either Seller or the Shareholder, is
there any investigation or Proceeding threatened, that
involves or affects either Seller or the Business, by or
before any Governmental Entity, court, arbitration panel or
any other Person.
(b) Each Seller and the Business have, and on the Closing Date
will have, complied with all applicable foreign, provincial,
United States federal, state, county, municipal or other
local criminal, civil or common laws, statutes, ordinances,
orders, codes, rules, regulations, permits, policies,
guidance documents, judgments, decrees, injunctions, or
agreements of any Governmental Entity (collectively,
"Laws"), including but not limited to Laws relating to
zoning, building codes, antitrust, occupational safety and
health, industrial hygiene, environmental protection, water,
ground or air pollution, the generation, treatment, storage
or disposal of Hazardous Substance (as defined in
section 5.16), consumer product safety, product liability,
hiring, wages, hours, employee benefit plans and programs,
collective bargaining and the payment of withholding and
social security taxes. Since January 1, 1995, neither
Seller has received any notice of any violation of any Law
except as set forth on Schedule 5.8(b).
(c) Each of the Sellers and Business have every license, permit,
certification, qualification or franchise issued by any
Governmental Entity (each, a "License") and every approval,
authorization, waiver, variance, exemption, consent or
ratification by or on behalf of any Person that is not a
party to this Agreement (each, a "Permit") required for it
to conduct its business as presently conducted. All such
Licenses and Permits are in full force and effect and
neither Seller nor the Shareholder has received notice of
any pending cancellation or suspension of any thereof nor,
to the best knowledge of each Seller and the Shareholder, is
any cancellation or suspension thereof threatened. The
applicability and validity of each such License and Consent
will not be adversely affected by the consummation of the
transactions contemplated by this Agreement.
5.9 Employee Benefit Plans; ERISA.
(a) Schedule 5.9(a) lists each "employee benefit plan" (as
defined in section 3(3) of ERISA), and all other material
employee benefit (including, without limitation, any non-
qualified plans), bonus, deferred compensation, incentive,
stock option (or other equity-based), severance, change-in-
control, medical insurance and fringe benefit plans
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maintained for the benefit of, or contributed to by each
Seller, respectively, or any trade or business, whether or
not incorporated (an "ERISA Affiliate"), that would be
deemed a "single employer" within the meaning of section
4001 of the Employee Retirement Income Security Act of 1974
("ERISA"), for the benefit of any employee or former
employee of each Seller, respectively (the "Plans"). The
Sellers have heretofore delivered to the Buyer true, correct
and complete copies of each of the Plans, including all
amendments to date.
(b) Each of the Plans that is subject to ERISA complies with
ERISA and the applicable provisions of the Internal Revenue
Code of 1986 (the "Code") and has been administered in
accordance with ERISA and, where applicable, the Code. Each
of the Plans intended to be "qualified" within the meaning
of section 401(a) of the Code has received a timely
determination letter from the Internal Revenue Service that
it is so qualified and neither Seller nor the Shareholder
knows of any facts or circumstances that would materially
adversely affect such qualification prior to and including
the close of business on the day immediately preceding the
Closing Date. Except as set forth in Schedule 5.9(b), none
of the Plans is subject to Title IV of ERISA. No
"reportable event", as such term is defined in section
4043(b) of ERISA (for which the 30-day notice requirement to
the Pension Benefit Guaranty Board ("PBGC") has not been
waived), has occurred with respect to any Plan. There are
no pending or, to the best knowledge of each Seller,
respectively, and the Shareholder, threatened claims (other
than routine claims for benefits), actions, suits or
proceedings by, on behalf of or against any of the Plans or
any trusts related thereto.
(c) No Plan provides benefits including, without limitation,
death or medical benefits (whether or not insured), with
respect to any employees or former employees of either
Seller beyond their retirement or other termination of
service (other than (i) coverage mandated by applicable law,
(ii) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in section
3(2) of ERISA, or (iii) benefits the full cost of which is
borne by the current or former employee (or his or her
beneficiary)).
(d) With respect to each Plan, neither Seller, the Shareholder
nor any ERISA Affiliate has engaged in a "prohibited
transaction" (as such term is defined in section 4975 or
section 406 of ERISA) that would subject either Seller or
the Buyer to any taxes, penalties or other liabilities
resulting from prohibited transactions under section 4975 of
the Code or section 409 or 502(i) of ERISA.
(e) Each Seller has complied with the notice and continuation of
coverage requirements of section 4980B of the Code and the
regulations thereunder with respect to each plan that is, or
was during any taxable year of such Seller for which the
statute of limitations on the assessment of federal income
taxes remains open, by consent or otherwise, a group health
plan within the meaning of section 4980B(g) of ERISA.
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(f) No Plan has incurred an "Accumulated Funding Deficiency" (as
defined in section 302(a) of ERISA or section 412(a) of the
Code), whether or not waived.
(g) Neither Seller nor any ERISA Affiliate has incurred or would
incur a "withdrawal" or "partial withdrawal", as defined in
sections 4203 and 4205 of ERISA, from any Plan that has
resulted or would result in a withdrawal liability of either
Seller or any ERISA Affiliate under such Plan.
5.10 Real Property.
(a) Schedule 5.10(a) sets forth a list and description
(including the legal description) of all real property owned
by each Seller, respectively (the "Owned Real Property").
Each Seller has good and marketable title to and owns the
Owned Real Property applicable to it in fee simple subject
to no Liens except such immaterial easements and rights-of-
way, none of which interfere with the operation of the
Business or as otherwise set forth on Schedule 5.10(a).
Neither Seller has received notice of any default or breach
by either Seller under any of the covenants, conditions,
restrictions, easements, or rights-of-way affecting the
Owned Real Property or any portion thereof, and to the best
knowledge of the Sellers and the Shareholder, no such
default or breach now exists, and no event has occurred or
is continuing which with notice or the passage of time or
both, would constitute a default thereunder.
(b) Schedule 5.10(b) sets forth a list and description of all
real property leases and subleases under which each Seller,
respectively, is tenant or subtenant (the "Leases"),
including the date of the Lease, the premises demised
thereunder, the name of the lessee and lessor, the
commencement date and expiration date of the Lease and the
annual rent payable by the lessee under the Lease. As used
herein, the term "Leased Real Property" shall mean the real
property demised by the Leases.
(c) The Sellers have heretofore delivered to the Buyer a true,
correct and complete copy of the most recent survey and
title insurance policy with respect to each parcel of Owned
Real Property. Neither Seller has entered into any leases,
subleases, licenses or occupancy agreements relating to the
Owned Real Property and no Person has any rights to acquire,
lease, sublease or otherwise occupy the Owned Real Property
or any part thereof or to otherwise obtain any interest
therein, and there are no outstanding options, rights of
first refusal or rights of reverter relating to the Owned
Real Property or any interests therein. Except as set forth
in Schedule 5.10(c), there are no service or maintenance
contracts, management agreements or similar agreements
relating to the Owned Real Property. There has been no
service, material or other work provided or supplied to the
Owned Real Property that has not been paid in full, except
as set forth on Schedule 5.10(c).
(d) The Sellers have heretofore delivered to the Buyer true,
correct and complete copies of the Leases. Each of the
Leases is in full force and effect and is enforceable in
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accordance with its terms. Each Seller is in possession of
and quietly enjoys the Leased Real Property applicable to it
and such Seller has a valid and enforceable leasehold
interest, subject to no Liens except such immaterial
easements and rights-of-way, none of which interferes with
the operation of the business. To the best knowledge of the
Sellers and the Shareholder, no event has occurred or failed
to occur that, with the giving of notice or the passage of
time or both, would constitute a default under any Lease.
Neither Seller has entered into any assignment of any Lease,
sublease of all or any portion of any Leased Real Property
and no person has any right to occupy the Leased Real
Property other than the Sellers.
(e) With respect to each of the Owned Real Property and the
Leased Real Property (collectively, the "Real Property") (i)
there is a right of ingress and egress to public
thoroughfares to and from the Real Property, (ii) the Real
Property has adequate water supply and sewer service for the
present use thereof and all sewer service land water supply
facilities required for the present use of the Real Property
are properly and fully installed and operating, and (iii)
all curb cut and street opening permits or licenses required
for vehicular access to and from any part of the Real
Property to any adjoining public street have been obtained
and, if required, paid for by the Seller and are in full
force and effect. The Sellers have heretofore delivered to
the Buyer true, correct and complete copies of any
certificate or certificates of operation for any
incinerator, boiler or other burning equipment on the Real
Property.
(f) All licenses, permits and certificates of occupancy (the
"Approvals"), in connection with the construction, use,
occupancy and maintenance of any Real Property are in full
force and effect in accordance with the respective terms
thereof, and none of the Approvals has been amended,
assigned, pledged or otherwise transferred. There is no
alteration, improvement or change in use of any building or
other improvement located on the Owned Real Property that
would require any new Approvals or amendment of an existing
Approval. The condition and use of the Owned Real Property
conforms to each Approval. The Sellers are in compliance
with all Laws including, without limitation, those relating
to zoning, building and land use restrictions that are
applicable to any portion of the Real Property or any
buildings, plants or improvements owned by the Seller.
(g) The Real Property including, without limitation, all
building systems and equipment, all structural components,
the roof, the basement, all plumbing, electrical,
mechanical, heating, ventilating, air conditioning and
sprinkler systems, and all sewer, waste water, paving and
parking equipment, systems and facilities, are fully
installed and as applicable, operating, in good condition
and repair and as applicable, free of leaks, adequate of the
conduct of the business of the Seller as presently and
proposed to be conducted, and there are no defects in the
same that would hinder or impair the business and operations
of the Seller. The electricity service and all other public
or private utilities ("Utilities") serving the Real Property
are fully installed and operating, adequate for the conduct
of the business of the Seller as presently and proposed to be
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conducted, and enter the Real Property through adjoining
public streets or through valid easements across adjoining
private lands, and all installation, connection and capital
recovery charges in connection with the Utilities have been
paid in full.
(h) To the best knowledge of each of the Sellers, there is no
pending or proposed or contemplated or anticipated (i)
annexation, condemnation, eminent domain or similar
proceeding affecting, or that may affect, all or any portion
of the Real Property, (ii) proceeding to change or redefine
the zoning classification of all or any portion of the Real
Property, (iii) imposition of any special or other
assessments for public betterments or otherwise, (iv)
special assessments affecting the Real Property or any
portion thereof that are or would be payable by the Seller
and could result in a Lien against any of the Real Property,
(v) change in any applicable Laws relating to the use,
occupation or operation of the Real Property, or (vi) tax
certiorari proceeding with respect to any Real Property.
(i) Neither Seller has received notice from any insurance
company or Board of Fire Underwriters (or organization
exercising functions similar thereto) or from any mortgagee
requesting the performance of any work or alteration in
respect of any of the Real Property, and to the best of each
of the Seller's and the Shareholder's knowledge, there are
no outstanding requirements or recommendations from any of
the foregoing.
(j) There has been no damage to any portion of the Real Property
within the last 24 months caused by fire or other casualty
that has not been repaired.
5.11 Intellectual Property; Computer Software.
(a) Schedule 5.11(a) lists all Intellectual Property including,
without limitation, trademarks, trade names, service marks,
service names, mark registrations, logos, assumed names,
copyrights, copyright registrations, patents, know-how and
all applications therefor that are owned by (i) each Seller,
respectively, or (ii) any other Person and used by either
Seller in the operations of the Business, and there are no
pending or threatened claims by any Person relating to
either Seller's use of any Intellectual Property. Except as
set forth in Schedule 5.11(a), each Seller has such rights
of ownership (free and clear of all Liens) of, or such
rights by license, lease or other agreement to use (free and
clear of all Liens) the Intellectual Property as are
necessary to permit such Seller to conduct its business and
neither Seller is obligated to pay any royalty or similar
fee to any Person in connection with either Seller's use or
license of any of the Intellectual Property.
(b) Except as set forth on Schedule 5.11(b), each Seller has
such rights of ownership (free and clear of all Liens) of,
or such rights by license, lease or other agreement to use
(free and clear of all Liens), the computer software
programs including, without limitation, application software
that are used by such Seller and that are material to the
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conduct of its business as currently conducted, as are
necessary to permit the conduct of its business as currently
conducted. None of the Seller's ownership rights or rights
to use any of the computer programs referred to above will
be adversely affected by any of the transactions
contemplated hereby.
5.12 Title to Acquired Assets; Capital Budget.
(a) Each Seller has good and marketable title to the Acquired
Assets, as the case may be, including, without limitation,
all assets shown on the Financial Statements, free and clear
of all Liens, other than (i) Liens, if any, for personal
property taxes and assessments not yet due and payable, (ii)
inventories sold since the date of the Financial Statements
in the ordinary course of business and consistent with past
practice and (iii) Liens disclosed on Schedule 5.12(a). At
the Closing, the Seller will have caused each Lien referred
to on Schedule 5.12(a) (other than Liens relating to leased
equipment) to have been terminated, and the Buyer will
obtain good and marketable title to all of the Acquired
Assets free and clear of all Liens.
(b) Except as set forth on Schedule 5.12(b), all material items
of machinery, equipment, tooling and other tangible personal
property owned or leased by each Seller, respectively, and
used in the conduct of its business (other than items of
inventory) are listed in the detailed fixed assets ledger of
such Seller attached to Schedule 5.12(b) (collectively, the
"Personal Property"). The Personal Property conforms in all
material respects to all requirements of applicable Laws.
All of the items of machinery, equipment and tooling
included within the Personal Property are fully operational
and operating in the ordinary course of each Seller's
business, as applicable, are in good operating condition and
in a good state of maintenance and repair, are adequate for
use in the conduct of such Seller's business as previously
conducted and as proposed to be conducted and are capable of
manufacturing the products of such Seller's business on an
efficient and profitable basis.
(c) Schedule 5.12(c) includes a true, correct and complete
capital budget for the fiscal year ending July 31, 1997.
Except as set forth on Schedule 5.12(c), no capital
expenditures are contemplated by either Seller for the
Business.
5.13 Material Contracts.
(a) Schedule 5.13 sets forth a true, complete and correct list
of every Contract that (i) provides for aggregate future
payments by either Seller or to either Seller of more than
$25,000 and has an unexpired term exceeding six months and
may not be canceled upon 60 days notice without any
liability, penalty or premium (excluding purchase orders and
invoices arising in the ordinary course of business); (ii)
was entered into by either Seller with the Shareholder, or
an officer, director or significant employee of such Seller
or the Shareholder; (iii) is a collective bargaining or
similar agreement; (iv) guarantees or indemnifies or
otherwise causes either Seller to be liable or otherwise
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responsible for the obligations or liabilities of another or
provides for a charitable contribution by either Seller; (v)
involves an agreement with any bank, finance company or
similar organization; (vi) restricts either Seller or the
Business from engaging in any business or activity anywhere
in the world; (vii) is an employment agreement, consulting
agreement or similar arrangement with any employee of either
Seller; or (viii) any other Contract that is material to the
rights, properties, assets, business or operations of either
Seller or the Business (the foregoing, collectively,
"Material Contracts"). The Sellers have heretofore provided
true, complete and correct copies of all Material Contracts
to the Buyer.
(b) Except as set forth in Schedule 5.13, (i) there is not, and
to the best knowledge of each of the Sellers and the
Shareholder there has not been claimed or alleged by any
Person with respect to any Material Contract, any existing
default, or event that with notice or lapse of time or both
would constitute a default or event of default, on the part
of either Seller or, to the best knowledge of each of the
Sellers and the Shareholder, on the part of any other party
thereto and (ii) no consent, approval, authorization or
waiver from, or notice to, any Governmental Entity or other
Person is required in order to maintain in full force and
effect any of the Material Contracts, other than such
consents and waivers that have been obtained and are
unconditional and in full force and effect and such notices
that have been duly given and copies of such consents,
waivers and notices have been delivered to the Buyer.
(c) The Contracts to which each Seller, respectively, is a party
do not involve the payment by such Seller thereunder of more
than $50,000 per year in the aggregate (excluding purchase
orders received from customers in the ordinary course for
the sale of products at standard prices) and are not
otherwise material, individually or in the aggregate, to
such Seller or the Business.
5.14 Taxes.
(a) Except as set forth in Schedule 5.14(a):
(i) the Shareholder has (A) duly and timely
filed or caused to be filed with the Internal Revenue Service or
other applicable Governmental Entity (collectively, "Taxing
Authorities") all Tax Returns (as defined below) that are
required to be filed by or on behalf of each of the Sellers,
respectively, or that include or relate to such Seller, its
income, assets or business, which Tax Returns are true, correct
and complete, and (B) duly and timely paid in full or caused to
be paid in full, or recorded a provision for such payment on the
books and records of such Seller in accordance with GAAP for the
payment of, all Taxes (as defined below) for which such Seller is
or may be liable;
(ii) each Seller has complied with all
applicable Laws relating to the collection or withholding of
Taxes, and the remittance thereof to the applicable Taxing
Authorities;
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(iii) no audit, examination, investigation,
reassessment or other administrative or court proceeding
(collectively, a "Tax Proceeding") is pending or proposed, or to
the best knowledge of each of the Sellers or the Shareholder
threatened, with regard to any Tax Return referred to in clause
(i) above or any Tax for which either Seller is or may be liable;
(iv) there is no Lien for Taxes upon any
property of either Seller;
(v) the portion of the federal income Tax
Returns related to the Business filed by or on behalf of each
Seller, as the case may be, or that include or relate to its
income, assets or business, have never been examined by the
Internal Revenue Service;
(vi) (A) there is no pending request for a
ruling from any Taxing Authority and (B) there is no outstanding
subpoena or request for information by any Taxing Authority, with
respect to any Tax for which either Seller is or may be liable or
with respect to such Seller's income, assets or business;
(vii) neither the time to file any Tax Return nor
the statute of limitations for the assessment or collection of
any Tax for which either Seller is or may be liable or with
respect to such Seller's income, assets or business has ever been
extended or waived;
(viii) all Taxes asserted or proposed with
respect to each Seller's income, assets or business, or for which
either Seller is or may be liable as a result of any Tax
Proceeding have been paid;
(ix) there is no closing agreement, within the
meaning of section 7121 of the Code or any analogous provision of
applicable Law relating to any Tax for which either Seller is or
may be liable or with respect to either Seller's income, assets
or business;
(x) neither Seller has any, and could not
reasonably be expected to have any, liability in respect of any
Tax under an indemnification agreement or on a transferee
liability theory, of any person or entity, and either Seller is
not a party to any Tax allocation or Tax sharing agreement,
arrangement or understanding;
(xi) there is no power of attorney in effect
relating to any Tax for which either Seller is or may be liable
or with respect to such Seller's income, assets or business;
(xii) any adjustment related to or in connection
with any Tax for which the Seller is or may be liable or with
respect to such Seller's income, assets or business that is or
was required to be reported to any Taxing Authority has been so
reported, and any additional Taxes owed with respect thereto have
been paid;
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(xiii) neither Seller is a party to any
Contract that would result, individually or in the aggregate with
any other Contract, in the payment of any amount that would not
be deductible by reason of section 162, section 280G or section
404 of the Code or any similar provision of applicable Law;
(xiv) neither Seller is a "consenting
corporation" within the meaning of section 341(f) of the Code or
any similar provision of applicable Law;
(xv) neither Seller has any "tax-exempt use
property" within the meaning of section 168(h) of the Code or any
similar provision of applicable Law with respect to such Seller,
its income, assets or business;
(xvi) none of the assets of either Seller are
required to be treated as being owned by any other person
pursuant to the "safe harbor" leasing provisions of section
168(f)(8) of the Internal Revenue Code of 1954 as in effect prior
to the repeal of those "safe harbor" leasing provisions or any
similar provision of applicable Law;
(xvii) no election under section 338 of the
Code or any similar provision of applicable Law has been made or
required to be made by or with respect to either Seller;
(xviii) neither Seller is, nor has it been, a
"United States real property holding corporation" within the
meaning of section 897(c)(2) of the Code at any time during the
applicable period referred to in section 897(c)(1)(A)(ii) of the
Code.
(b) Schedule 5.14(b) sets forth a list of all jurisdictions
(foreign and domestic) in which any Tax Returns have been
filed by or on behalf of each Seller, respectively, or with
respect to each such Seller's income, assets or business
since July 31, 1993 and a description of each such Tax
Return and the period for which it was filed.
(c) Schedule 5.14(c) sets forth a list of all jurisdictions
(foreign and domestic) in which state income, franchise and
other Tax Returns referred to in clause (a)(i) have ever
been examined by the applicable Governmental Entity since
March 1993 and a description of each such Tax Return and the
period for which it was filed.
(d) Each Seller has provided to the Buyer (i) a copy of all Tax
Returns relating to, and (ii) all audit reports relating to
each proposed adjustment, if any, made by any Taxing
Authority with respect to any taxable period ending after
July 31, 1993 to any Taxes for which such Seller is or may
be liable with respect to such Seller's income, assets or
business.
(e) Any Tax allocation or Tax sharing agreement, arrangement or
understanding to which each Seller, respectively, was a
party has been terminated as of the Closing Date without
further obligation of either Seller.
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(f) As used herein, (i) "Tax Return" means any return,
declaration, report, information return or statement, and
any amendment thereto, including without limitation any
consolidated, combined or unitary return or other document
(including any related or supporting information), filed or
required to be filed with any Taxing Authority in connection
with the determination, assessment, collection, payment,
refund or credit of any federal, state, local and foreign
Tax or the administration of any Laws relating to any Tax or
ERISA, and (ii) "Taxes" means any and all taxes, charges,
fees, levies, deficiencies or other assessments of whatever
kind or nature including, without limitation, all net
income, gross income, profits, gross receipts, excise, real
or personal property, sales, ad valorem, withholding, social
security, retirement, excise, employment, unemployment,
minimum, estimated, severance, stamp, property, occupation,
environmental, windfall profits, use, service, net worth,
payroll, franchise, license, gains, customs, transfer,
recording and other taxes, customs duty, fees assessments or
charges of any kind whatsoever, imposed by any Taxing
Authority, including any liability therefor as a transferee
(including without limitation under section 6901 of the Code
or any similar provision of applicable Law), as a result of
Treasury Regulation 1.1502-6 or any similar provision of
applicable Law, or as a result of any Tax sharing or similar
agreement, together with any interest, penalties or
additions to tax relating thereto.
5.15 Affiliated Party Transactions. Except for obligations
arising under this Agreement, as of the Closing Date neither
Seller will have, directly or indirectly, any obligation to
or claim against the Business and Shareholder will not have,
directly or indirectly, any obligation to or cause of action
or claim against either Seller.
5.16 Environmental Matters. Except as set forth in Schedule
5.16:
(a) each Seller is in compliance with, and the Business has been
conducted in material compliance with, all Environmental
Laws (as defined below) and Environmental Permits (as
defined below);
(b) no Site (as defined below) is a treatment, storage or
disposal facility, as defined in and regulated under the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et
seq., is on or ever was listed or is proposed for listing on
the National Priorities List pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, 42
U.S.C. 9601 et seq., or on any similar state list of sites
requiring investigation or cleanup;
(c) Neither Seller nor the Shareholder has received any notice
that remains pending or outstanding with respect to its
business or any Site from any Governmental Entity or Person
alleging that either Seller is not in material compliance
with any Environmental Law;
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(d) there has been no Release (as defined below) of a Hazardous
Substance (as defined below) at, from, in, to, on or under
any Site and no Hazardous Substances are present in, on,
about or migrating to or from any Site that could give rise
to an Environmental Claim (as defined below) against either
Seller;
(e) there are no pending or outstanding corrective actions
requested, required or being conducted by any Governmental
Entity for the investigation, remediation or cleanup of any
Site, and there have been no such corrective actions,
whether still pending or otherwise;
(f) the Business has obtained and holds all necessary
Environmental Permits, and those Environmental Permits will
remain in full force and effect after the consummation of
the transactions contemplated hereby;
(g) there are no past or pending, or to the best knowledge of
each of the Sellers or the Shareholder threatened,
Environmental Claims against either Seller or, with respect
to the Business, the Sellers or the Acquired Assets, the
Shareholder, and neither of the Sellers nor the Shareholder
is aware of any facts or circumstances which could
reasonably be expected to form the basis for any
Environmental Claim against the Business;
(h) neither Seller, any predecessor of either Seller, nor any
entity previously owned by either Seller, has transported or
arranged for the treatment, storage, handling, disposal, or
transportation of any Hazardous Substance to any off-Site
location that could result in an Environmental Claim against
either Seller;
(i) there are no (i) underground storage tanks, active or
abandoned, (ii) polychlorinated biphenyl containing
equipment, or (iii) asbestos containing material at any
Site; and
(j) there have been no environmental investigations, studies,
audits, tests, reviews or other analyses (which have been
reduced to writing) conducted by, on behalf of, or that are
in the possession of either Seller with respect to any Site
or any transportation, handling or disposal of any Hazardous
Substance that has not been delivered to the Buyer prior to
execution of this Agreement.
(k) As used herein, (i) "Environment" means all air, surface
water, groundwater, or land, including land surface or
subsurface, including all fish, wildlife, biota and all
other natural resources; (ii) "Environmental Claim" means
any and all administrative or judicial actions, suits,
orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information,
proceedings or other communications (written or oral),
whether criminal or civil, (collectively, "Claims") pursuant
to or relating to any applicable Environmental Law by any
person (including, but not limited to, any Governmental
Entity, Person and citizens' group) based upon, alleging,
asserting, or claiming any actual or potential (x) violation
of or liability under
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any Environmental Law, (y) violation
of any Environmental Permit, or (z) liability for
investigatory costs, cleanup costs, removal costs, remedial
costs, response costs, natural resource damages, property
damage, personal injury, fines, or penalties arising out of,
based on, resulting from, or related to the presence,
Release, or threatened Release into the Environment, of any
Hazardous Substances at any location, including, but not
limited to, any off-Site location to which Hazardous
Substances or materials containing Hazardous Substances were
sent for handling, storage, treatment, or disposal; (iii)
"Environmental Law" means any and all Laws relating to the
protection of health and the Environment, worker health and
safety, and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture,
distribution, formulation, packaging, labeling, or Release
of Hazardous Substances, whether now existing or
subsequently amended or enacted, and the state analogies
thereto, all as amended or superseded from time to time; and
any common law doctrine, including, but not limited to,
negligence, nuisance, trespass, personal injury, or property
damage related to or arising out of the presence, Release,
or exposure to a Hazardous Substance; (iv) "Environmental
Permit" means any permits, licenses, approvals, consents or
authorizations required by any Governmental Entity under or
in connection with any Environmental Law; (v) "Hazardous
Substance" means petroleum, petroleum hydrocarbons or
petroleum products, petroleum by-products, radioactive
materials, asbestos or asbestos-containing materials,
gasoline, diesel fuel, pesticides, radon, urea formaldehyde,
lead or lead-containing materials, polychlorinated
biphenyls; and any other chemicals, materials, substances or
wastes in any amount or concentration which are now included
in the definition of "hazardous substances," "hazardous
materials," "hazardous wastes," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "pollutants," "regulated substances,"
"solid wastes," or "contaminants" or words of similar
import, under any Environmental Law; (vi) "Release" means
any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or
disposing of a Hazardous Substance into the Environment; and
(vii) "Site" means any of the real properties currently or
previously owned, leased, used or operated by either of the
Sellers, any predecessors of either of the Sellers or any
entities previously owned by either of the Sellers,
including all soil, subsoil, surface waters and groundwater
thereat.
5.17 No Brokers. Neither Seller nor the Shareholder has
employed, or otherwise engaged, any broker or finder or
incurred any liability for any brokerage or investment
banking fees, commissions, finders' fees or other similar
fees in connection with the transactions contemplated by
this Agreement.
5.18 Receivables. All accounts receivable of each Seller,
respectively, have arisen, and as of the Closing Date will
have arisen, from bona fide transactions in the ordinary
course of such Seller's business consistent with past
practice and established in the ordinary course of such
Seller's business consistent with past practice.
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5.19 Inventories. As reflected on the Financial Statements, the
inventories of each Seller, respectively, has been valued
at the lower of cost (on the first-in, first-out method) or
market in accordance with GAAP, consistently applied, and
the value of obsolete materials and materials of below
standard quality has been written down in accordance with
GAAP, consistently applied. Except as reflected in the
Third Quarter Balance Sheet referred to in section 5.5, the
inventories of each Seller, respectively, contain no amount
of items not saleable or usable within 12 months from the
date thereof at normal profit margins consistent with
historical sales practices. Except as set forth in Schedule
5.19, neither Seller is under any liability or obligation
with respect to the return of inventory or merchandise in
the possession of wholesalers, distributors, retailers or
other customers.
5.20 Product Claims. No product liability claim is pending, or
to the best knowledge of each of the Sellers or the
Shareholder threatened, against either Seller or against any
other party with respect to the products of the Business.
Schedule 5.20 lists all service and product liability claims
seeking damages in excess of $1,000 asserted against either
Seller (or in respect of which either Seller or Shareholder
received notice) with respect to the products of the
Business or either Seller during the last five years.
Claims not listed on Schedule 5.20 do not aggregate more
than $20,000.
5.21 Warranties and Returns. Schedule 5.21 sets forth a summary
of the practices and policies followed by each Seller,
respectively, with respect to warranties and returns of any
products manufactured or sold by it, whether such practices
are oral or in writing or are deemed to be legally
enforceable. Except as set forth on Schedule 5.21, there is
not presently, nor has there been since July 31, 1995, any
failure or defect in any product sold by either Seller that
has required, or that may require, a general recall or
replacement campaign or similar action with respect to such
product or a reformulation or change of such product, nor
has there been any acceptance of returned or defective goods
of either Seller in excess of $10,000 in the aggregate for
all such transactions with respect to products sold by it
since July 31, 1995.
5.22 Assets Utilized in the Business. Except as set forth in
Schedule 5.22, the assets, properties and rights owned,
leased or licensed by each Seller, respectively, or used in
connection with the Business, and that will be owned, leased
or licensed by such Seller as of the Closing Date, and all
the agreements to which such Seller is a party, constitute
all of the properties, assets and agreements necessary to
each such Seller in connection with the operation and
conduct by the Sellers of the Business as presently and as
proposed to be conducted. Included in Schedule 5.22 are all
services provided by the Shareholder to each Seller,
respectively, and all other arrangements involving the
Shareholder and each Seller, respectively, which are not
included in the Acquired Assets.
5.23 Insurance. Schedule 5.23 contains a complete and correct
list of all policies of insurance of any kind or nature
covering each Seller, respectively, including policies of
life, fire, theft, casualty, product liability, workmen's
compensation, business
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interruption, employee fidelity and other casualty and
liability insurance, indicating the type
of coverage, name of insured, the insurer, the expiration
date of each policy, the amount of coverage and whether on
an "occurrence" or "claims made" basis. All such policies
(i) are with insurance companies that are financially sound
and reputable and are in full force and effect; (ii) are
sufficient for compliance with all material requirements of
law and of all applicable material agreements; and (iii) are
valid, outstanding and enforceable policies. Complete and
correct copies of such policies have been furnished to the
Buyer. All such insurance policies or comparable coverage
shall be continued in full force and effect through the
Closing Date. Since July 31, 1993, the Seller has not been
denied any insurance coverage which it has requested.
5.24 Delivery of Documents; Corporate Records. Each Seller has
heretofore delivered to the Buyer true, correct and complete
copies of all documents, instruments, agreements and records
referred to in this section 5 or in the Schedules to this
Agreement and copies of the minute and stock record books of
each such Seller. The minute and stock record books of each
Seller, respectively, contain true, correct and complete
copies of the records of all meetings and consents in lieu
of a meeting of the Board of Directors (and any committee
thereof) and the stockholders of each Seller, respectively,
since the date of its incorporation.
5.25 Customers, Suppliers and Distributors. Schedule 5.25 sets
forth (i) the sales of each Seller, respectively, for the
fiscal year ended July 31, 1996 and the sales of each
Seller, respectively, for the nine months ended April 30,
1997, (ii) the ten customers with the highest dollar volume
of purchases from each such Seller during each of those
periods indicating the approximate total sales to each of
those customers; and (iii) the ten largest suppliers and the
ten largest distributors of each Seller, respectively,
during each of those periods. There has not been any
adverse change in the business relationship of either Seller
with any such customer, supplier or distributor, and neither
Seller nor the Shareholder is aware of any threatened loss
of any such customer, supplier or distributor.
5.26 Labor Matters. There are no labor strikes, slow-downs or
stoppages or other labor troubles pending or, to the best
knowledge of each of the Sellers and the Shareholder,
threatened with respect to the employees of either Seller;
to the best knowledge of each of the Sellers and the
Shareholder, no representation questions exist; there is no
collective bargaining agreement binding on either Seller and
there is no agreement which restricts either Seller from
relocating or closing any or all of its businesses or
operations; there are no grievances asserted that might have
an adverse effect upon either Seller's business, or the
financial condition or prospects of either Seller, nor is
there pending any arbitration proceeding arising out of or
under any labor union agreement; neither Seller has
experienced any work stoppage during the last five years.
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5.27 Directors, Officers and Certain Employees. Schedule 5.27
sets forth a complete and correct list of the names, current
annual salary, bonus and title, for each director and
officer and each other employee of each Seller, respectively
who is a party to an employment agreement with such Seller
or who received annual compensation during such Seller's
most recently ended fiscal year or, who is entitled to
receive compensation, on an annualized basis, whether or not
paid to date, in excess of $50,000. Neither Seller nor the
Stockholder is aware of any employee in either Seller's
senior management who intends to terminate his or her
employment relationship with the Business, either as a
result of the transactions contemplated hereby or otherwise.
5.28 No Misstatements or Omissions. No representation or
warranty by either Seller or the Shareholder contained in
this Agreement and no statement contained in any
certificate, list, Schedule, Exhibit or other instrument
specified or referred to in this Agreement, whether
heretofore furnished to the Buyer or hereafter furnished to
the Buyer pursuant to this Agreement, contains or will
contain any untrue statement of a material fact or omits or
will omit any material fact necessary to make the statements
contained therein, in light of the circumstances under which
it was made, not misleading.
6. Representations and Warranties of the Buyer. The
Buyer represents and warrants to the Sellers as follows:
6.1 Organization. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its
business as it is now being conducted. The Buyer is duly
qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in
which the nature of the business conducted by it makes such
qualification or licensing necessary. The Buyer has
heretofore delivered to the Seller true, correct and
complete copies of its certificate of incorporation and
bylaws as currently in effect.
6.2 Authorization; Validity of Agreement. The Buyer has the
requisite corporate power and authority to execute, deliver
and perform this Agreement and each other agreement executed
or to be executed by the Buyer pursuant to the terms of this
Agreement (collectively, the "Chatham Agreements") and to
consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by the Buyer of this
Agreement and the Chatham Agreements and the consummation of
the transactions contemplated hereby and thereby have been
duly and validly authorized by the Board of Directors of the
Buyer, and no other corporate proceedings on the part of the
Buyer are necessary to authorize the execution, delivery and
performance of this Agreement and the Chatham Agreements by
the Buyer and the consummation of the transactions
contemplated hereby. This Agreement and each Chatham
Agreement has been duly executed and delivered by the Buyer
and, assuming due authorization, execution and delivery of
this Agreement by the Sellers and the Shareholder, is a valid
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and binding obligation of the Buyer enforceable
against the Buyer in accordance with its terms, except as
such enforceability may be subject to or limited by
applicable bankruptcy, insolvency, reorganization, or other
similar laws, now or hereafter in effect, affecting the
enforcement of creditors' rights generally.
6.3 No Violations.
(a) The execution, delivery and performance of this Agreement
and the Chatham Agreements, by the Buyer do not, and the
consummation by the Buyer of the transactions contemplated
hereby and thereby will not, (i) violate any provision of
the certificate of incorporation or Bylaws of the Buyer,
(ii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, license,
contract, agreement or other instrument to which the Buyer
is a party or by which the Buyer or any of their properties
or assets may be bound or otherwise subject or (iii) violate
any order, writ, judgment, injunction, decree, law, statute,
rule or regulation applicable to the Buyer or any of its
properties or assets.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any Governmental
Entity is required in connection with the execution,
delivery and performance of this Agreement or the Chatham
Agreements by the Buyer or the consummation by the Buyer of
the transactions contemplated hereby and thereby, except
filings with the Federal Trade Commission and with the
Department of Justice pursuant the HSR Act and filings
required under state and federal securities laws to give
effect to the registration rights granted under the
Registration Rights Agreement (as hereinafter defined).
6.4 Litigation. There is no Proceeding pending nor, to the best
knowledge of the Buyer, is there any investigation or
Proceeding threatened, which involves or affects the Buyer,
by or before any court, Governmental Entity or arbitration
panel or any other Person.
7. Other Agreements of the Parties.
7.1 Conduct of Business. From the date hereof through the
Closing Date, each Seller shall conduct the Business in the
ordinary course and consistent with past practice, and
neither Seller shall, except as the Buyer may otherwise
consent to in writing:
(i) engage in any practice, take any action,
fail to take any action or enter into any transaction which could
cause any representation or warranty of either Seller to be
materially untrue or result in a material breach of any covenant
or agreement made by either Seller in this Agreement; and
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(ii) take, permit to be taken or suffer to occur
any of the actions set forth in items (a) through (s) of
section 5.6.
Without limiting the foregoing or anything contained elsewhere in
this Agreement, including but not limited to section 5.6(f), it
is the intent of the parties that none of the Sellers' profits
earned through the Closing shall be distributed to the
Shareholder or the other Seller.
7.2 Access and Information. From the date hereof until the
Closing Date, each Seller shall, and shall cause each of
such Seller's officers, directors, employees, agents,
accountants and counsel to, upon reasonable notice, (i)
afford the officers, employees and authorized agents,
accountants, counsel and representatives of the Buyer
reasonable access, during normal business hours, to (A) the
offices, properties, plants, other facilities, books,
Contracts and records of such Seller and any records
concerning such Seller maintained and accumulated by its
representatives, and (B) those officers, directors,
employees, agents, accountants and counsel of such Seller
who have any knowledge relating to such Seller or the
Acquired Assets, and (ii) furnish to the officers, employees
and authorized agents, accountants, counsel and
representatives of the Buyer such additional financial and
operating data and other information regarding the Acquired
Assets (including, without limitation, any Contracts,
licenses and patents in effect as of the date hereof and any
Contracts or licenses being negotiated or entered into
between the date hereof and the Closing Date), properties
and goodwill of either Seller as the Buyer may from time to
time reasonably request.
7.3 Tax Returns; Taxes. All Tax Returns with respect to each
Seller, respectively, shall be timely filed by such Seller
on a basis consistent with prior Tax Returns except to the
extent required under applicable Law. Each Seller shall
timely pay all Taxes required to be paid by it. Each Seller
shall promptly forward to the Buyer a copy of all written
communications from any Taxing Authority received by it in
any way relating to the Business or Acquired Assets.
7.4 Notice of Developments. Prior to the Closing Date, each
Seller shall promptly notify the Buyer in writing of (i) all
events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement which could result
in any material breach of a representation or warranty or
covenant of either Seller in this Agreement or which could
have the effect of making any representation or warranty of
either Seller in this Agreement untrue or incorrect in any
material respect, and (ii) all other material developments
affecting the Acquired Assets, liabilities, Business,
financial condition, operations, results of operations,
customer or supplier relations, employee relations,
projections or prospects of either Seller.
7.5 Non-Disclosure of Confidential Information. From and after
the date hereof, each Seller and the Shareholder agree not
to divulge, communicate, use to the detriment of the Buyer
or for the benefit of any other Person, or misuse in any
way, any confidential information or trade secrets included
in or relating to the Acquired Assets
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including, without limitation, personnel information, secret
processes, know-how, customer lists or other technical data.
7.6 No Solicitation of Employees, Suppliers or Customers.
Neither Seller nor the Shareholder shall, and shall not
permit any Affiliate of either Seller to, from and after the
Closing Date, and for a period of five years thereafter,
directly or indirectly, for itself or on behalf of any other
Person, employ, engage or retain any Person who, at any time
during the preceding 12-month period, shall have been an
employee of the Buyer, or contact any supplier, customer or
employee of the Buyer for the purpose of soliciting or
diverting any such supplier, customer or employee from the
Buyer. Notwithstanding anything to the contrary contained
in this section 7.6, none of the activities set forth on
Schedule 7.6 shall be deemed to contravene the provisions
contained in this section 7.6.
7.7 Non-Competition.
(a) Until the third anniversary of the Closing Date, neither
Seller, the Shareholder, nor any Affiliate of any of the
foregoing shall, anywhere in North America or Europe,
directly or indirectly, alone or in association with any
other Person, firm, corporation or other business
organization (i) acquire or own in any manner, any interest
in any Person that is engaged in any facet of the Business,
(ii) engage in any facet of the Business or compete in any
way with the Business, (iii) be employed in any capacity by,
serve as an employee of, or consultant or advisor to, or
otherwise participate in the management or operation of, any
Person that (x) engages in any facet of the Business, or
(y) competes with the Business in any way; provided,
however, that notwithstanding the foregoing, the Sellers,
the Shareholder and any Affiliate of the foregoing
(collectively and not individually) may own up to 2% of the
voting securities of any publicly-traded company; and
provided further, however, that the subsidiaries of the
Shareholder may continue to operate their business as
presently conducted consistent with past practice as set
forth on Schedule 7.7.
(b) The parties hereto intend that the covenant contained in
this paragraph shall be construed as a series of separate
covenants, one for each state or country specified. Except
for geographic coverage, each such separate covenant shall
be deemed identical in terms to the covenant contained in
paragraph (a) above. If, in any judicial proceeding, a
court shall refuse to enforce any of the separate covenants
deemed included in this paragraph, then such unenforceable
covenant shall be deemed reduced in scope or, if necessary,
eliminated from these provisions for the purpose of those
proceedings to the extent necessary to permit the remaining
separate covenants to be enforced.
(c) The foregoing provisions notwithstanding, the Sellers, the
Shareholder and any Affiliate thereof may invest its funds
in securities of any issuer if the securities of such issuer
are listed for public trading on a registered stock exchange
or actively traded in
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the over-the-counter market and each
of the Seller's or the Shareholder's and all of their
respective Affiliates' aggregate holdings therein represent
less than five percent (5%) of the total number of shares or
principal amount of the securities of such issuer then
outstanding.
(d) Each of the Sellers and the Shareholder acknowledges that
the provisions of this section, and the period of time,
geographic area and scope and type of restrictions on its
activities set forth herein, are reasonable and necessary
for the protection of the Buyer and are an essential
inducement to the Buyer's entering into the Transaction
Documents to which it is a party and consummating the
transactions contemplated thereby.
7.8 Public Statements. From and after the date hereof and until
the Closing Date, none of the Buyer, the Shareholder nor
either Seller shall, or permit any Affiliate thereof to,
either make, issue or release any press release or any oral
or written public announcement or statement concerning or
with respect to, or acknowledgment of the existence of, or
reveal the terms, conditions and status of, the Transaction
Documents or the transactions contemplated thereby, without
the prior written consent of each of the other parties
hereto (which consent shall not be unreasonably withheld or
delayed), unless such announcement is required by Law or a
Governmental Authority, in which case the other parties
shall be given notice of such requirement prior to such
announcement and the parties shall consult with each other
as to the scope and substance of such disclosure.
7.9 Other Actions. Each of the parties hereto shall use all
reasonable efforts to (i) take, or cause to be taken, all
actions, (ii) do, or cause to be done, all things, and
(iii) execute and deliver all such documents, instruments
and other papers, as in each case may be necessary, proper
or advisable under applicable Laws, or reasonably required
in order to carry out the terms and provisions of this
Agreement and to consummate and make effective the
transactions contemplated hereby.
7.10 Change of Name. Simultaneously with the Closing, the Seller
shall take such action necessary to change its name to a
name that does not include the words "Logic or "Design" and
the name of Precision to a name that does not include the
words "Precision" or "Techniques."
7.11 Cooperation on Taxes. Each of the Sellers and the Buyer
shall cooperate with each other by executing or causing to
be executed any required documents and by making available
to the other, all books and records relating to the Acquired
Assets or the Business (including work papers, records and
notes of any kind) at all reasonable times, for the purpose
of allowing the appropriate party to complete its Tax
Returns, respond to audits, make any determination required
under this Agreement (including, but not limited to,
determinations as to which period any asserted Tax liability is
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attributable), verify issues and negotiate settlements
with Tax authorities or defend or prosecute Tax claims.
7.12 Employees.
(a) The Buyer and the Sellers shall prepare a mutually agreeable
list of employees of the Sellers to be attached to this
Agreement as Schedule 7.12(a). The Buyer shall offer
employment effective as of the Closing to all employees of
the Sellers listed on Schedule 7.12(a) to this Agreement
(all such employees who accept such offer of employment
being the "Transferred Employees"). Each Seller,
respectively, shall obtain, and provide the Buyer with the
written agreement of each Transferred Employee applicable to
it to the Buyer's review of the personnel file of such
Transferred Employee, prior to the Buyer's review of such
personnel file. In addition to the obligation of the
Sellers set forth below, all responsibility for employees of
each of the Sellers, respectively, other than Transferred
Employees including, without limitation, claims arising out
of the decision not to include such employees on Schedule
7.12(a) shall be Excluded Liabilities.
(b) Subject to the terms and conditions of this section 7.12,
from and after the Closing, the Buyer shall provide the
Transferred Employees with terms and conditions of
employment including, without limitation, salaries, hourly
wages, employee benefits and other perquisites, that have
been reviewed and discussed with the applicable Seller and
are reasonably agreeable to the Buyer and to such Seller and
that include, without limitation, one or more qualified
retirement plans that provide benefits similar to those
provided under such Seller's current plans. The Buyer shall
count Transferred Employees' service with the Sellers
("Seller's Service") as service with the Buyer for purposes
of determining Transferred Employees' eligibility to
participate in, and vesting of benefits under, all of the
Buyer's employee benefit plans and arrangements. The Buyer
shall, between the date of the execution of this Agreement
and the Closing Date, establish insurance or other
arrangements through which the employee benefits and other
perquisites to be provided by the Buyer to Transferred
Employees may be provided commencing as of the Closing Date,
and the Shareholder and Sellers shall lend such cooperation
as the Buyer may reasonably request in connection with such
efforts.
(c) The Buyer shall not be responsible for any payments,
expenses and costs paid or required to be paid in connection
with the employment or termination of employment of any
employees of either Seller who are not listed on Schedule
7.12(a) to this Agreement, or who are listed on Schedule
7.12(a) and do not accept the Buyer's offer of employment
with the Buyer.
(d) Except to the extent expressly provided in the other
subsections of this section 7.12, the Sellers shall remain
responsible for (A) payment of any and all wages, accrued
vacation pay, bereavement pay, jury duty pay, disability
income, supplemental
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unemployment benefits, fringe benefits
or other perquisites of employment, termination indemnities
or similar benefits (whether arising under any plan,
program, policy or arrangement of the Sellers or under
applicable local law), payroll taxes and other payroll
related expenses and (B) payments to or under employee
benefit plans (within the meaning of section 3(3) of ERISA)
maintained or contributed to by the Sellers, in either case
arising out of or relating to the employment of any of the
Transferred Employees by the Sellers prior to the Closing.
(e) The Buyer shall only assume responsibility for the Sellers'
liability for accrued vacation pay to the extent such
liability is expressly included in the Assumed Liabilities.
(f) The Sellers shall retain responsibility and liability for
all workers' compensation claims of the Transferred
Employees to the extent relating to events, conditions or
circumstances that occur or exist prior to the Closing.
Notwithstanding the foregoing, the Buyer shall assume
responsibility for the supervision, defense or settlement of
any such workers' compensation claims at the Buyer's cost
and expense, provided that such costs and expenses are
reasonable. The Buyer shall keep the Sellers reasonably
apprised of the status of such workers' compensation claims.
The Sellers may, at their own expense, participate in the
supervision, defense or settlement of any such workers'
compensation claims, and shall cooperate in the supervision,
defense or settlement of any such workers' compensation
claims if requested to do so by the Buyer. The Buyer shall
have sole responsibility and liability for any workers'
compensation claims of Transferred Employees to the extent
relating to any event, condition or circumstance that occurs
after the Closing.
(g) In respect of grievances or EEOC Claims of Transferred
Employees to the extent relating to their employment by
either Seller including, without limitation, any such
grievances or EEOC Claims filed before state or local
authorities for which payment has not been made prior to the
Closing, the Sellers shall retain responsibility and
liability for all amounts due with respect thereto
including, without limitation, the payment of any amounts in
the nature of back pay or employee compensation, and any
state or federal taxes in connection with such back pay or
employee compensation. Handling of such grievances and EEOC
Claims shall be at the Sellers' cost and expense. The Buyer
shall have sole responsibility and liability for any EEOC
Claims of Transferred Employees that relate to their
employment with Buyer.
(h) Nothing in this section 7.12 shall limit the at will nature
of the employment of the Transferred Employees or the right
of the Buyer to alter or terminate any employee benefit
plan.
7.13 Consents; Releases. The Shareholder shall or shall cause
the Sellers to receive all Consents on or prior to the
Closing Date each of which are set forth on Schedule 5.4(b)
attached hereto. At or prior to the Closing, the
Shareholder and/or the Sellers
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shall cause the Business and the Acquired Assets to be
released from all liabilities, liens or other obligations
not constituting an Assumed Liability, a schedule of which
is set forth on Schedule 7.13 attached hereto.
7.14 Buyer Savings Plan.
(a) On or prior to the Closing Date, the Buyer shall establish a
defined contribution plan and related trust (the "Buyer
Savings Plan") under which all Transferred Employees shall
be covered and that shall (i) provide for the transfer to
the trust under the Buyer Savings Plan of the assets
attributable to the accounts of the Transferred Employees
under the defined contribution plan of the Sellers and
related trust under which the Transferred Employees were
covered prior to the Closing Date (the "Sellers Savings
Plan") and the crediting and maintenance of such accounts
under the Buyer Savings Plan, (ii) preserve for the
Transferred Employees who were participants in the Seller
Savings Plan all benefits required to be preserved under
Section 411(d)(6) of the Code, (iii) commencing on the
Closing Date, provide for the participation in the Buyer
Savings Plan of each Transferred Employee who was a
participant in the Seller Savings Plan immediately prior to
the Closing Date and (iv) provide that periods of employment
with Sellers (including, without limitation, any predecessor
in interest of Sellers, and any current or former Affiliate
of the Sellers or any such predecessor), to the extent
recognized under the Seller Savings Plan immediately prior
to the Closing Date, shall be taken into account for
purposes of determining, as applicable, eligibility for
participation, distributions, vesting and amount of employer
contributions of any Transferred Employee under the Buyer
Savings Plan. Without limiting the foregoing, the Buyer
Savings Plan shall accept the transfer of outstanding loans
from the Seller Savings Plan and shall provide for the
continued administration of such transferred loans for the
remainder of their terms in accordance with the provisions
thereof. Nothing herein shall require the Buyer to provide
to Transferred Employees the same investment options as
provided under the Sellers Savings Plan. The Transferred
Employees shall be eligible to commence participation
immediately in the Buyer Savings Plan regardless of the date
on which assets are transferred with respect to such
employees in accordance with the provisions of this
paragraph.
(b) The Sellers and the Shareholder shall cause the trustee of
the Seller Savings Plan to transfer the account balances
consisting of only cash and participant loans under the
Seller Savings Plan of the Transferred Employees to the
trustee of the Buyer Savings Plan. The Buyer shall cause
the trustee of the Buyer Savings Plan to accept such
transfer as of the end of a valuation period on a date
occurring after the Closing Date that is mutually acceptable
to the Sellers, on the one hand, and the Buyer, on the other
hand; provided, however, that such transfer may be made in
more than one transaction commencing as of the aforesaid
valuation date upon the agreement of the parties and the
trustees of the Buyer Savings Plan and the Seller Savings
Plan.
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(c) The Sellers and the Shareholder shall provide any
information reasonably required by the Buyer Savings Plan
trustee or plan administrator relating to accounts
transferred from the Seller Savings Plan to the Buyer
Savings Plan. The Sellers and the Shareholder shall
promptly provide the Buyer with such information as the
Buyer shall reasonably request in order to assure the Buyer
that the Seller Savings Plan continues to be qualified under
Section 401(a) of the Code.
8. Conditions Precedent to the Closing
8.1 Conditions Precedent to the Buyer's Obligations to Close.
The obligation of the Buyer to enter into this Agreement and
to consummate the transactions contemplated hereby is
subject to the satisfaction prior to or on the Closing Date
of each of the following conditions; provided, however, that
the Buyer shall have the right to waive all or any part of
each such condition, and to close the transactions
contemplated hereby without however, releasing either Seller
from any covenant, obligation, agreement or condition
contained herein or from any liability for any loss or
damage sustained by the Buyer by reason of the breach by
either Seller or the Shareholder of any covenant,
obligation, agreement or condition contained herein, by
reason of any misrepresentation made by either Seller or the
Shareholder; and provided further, however, that the Buyer's
participation in the Closing shall not in any way be deemed
to be a waiver of any claim it may have hereunder for any
breach of any representation, warranty, covenant or
agreement:
(a) The representations and warranties of the Sellers and the
Shareholder contained in this Agreement shall have been true
and correct when made and shall be true and correct in all
material respects as of the Closing Date, with the same
force and effect as if made on the Closing Date, except for
such representations and warranties as are made as of a
specific date, which shall be true and correct in all
material respects as of such date.
(b) The covenants and agreements of the Sellers and the
Shareholder contained in this Agreement and required to be
complied with or performed on or prior to the Closing Date
shall have been complied with or performed in all respects.
(c) The Buyer shall have received (i) a certificate dated the
Closing Date and executed by an appropriate officer of each
Seller, and (ii) a certificate dated the Closing Date and
executed by an appropriate officer of the Shareholder, in
each case certifying the satisfaction of the conditions
referred to in sections 8.1(a) and (b).
(d) The Buyer and the Sellers shall have received, each in form
and substance reasonably satisfactory to the Buyer, all
Consents of, and estoppel certificates and releases from,
and shall have delivered all notices to, any Governmental
Entity or other Person which is required for the
consummation of the transactions contemplated hereby and for
the Buyer to conduct and operate the Business, which
Consents, notices and estoppel
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certificates are listed in Schedule 5.4(b) attached hereto
and which releases are listed in Schedule 7.13.
(e) No event or events shall have occurred between the date
hereof and the Closing Date which, individually or in the
aggregate, have, or are reasonably likely to have, a
material adverse effect on the Acquired Assets or the
Business.
(f) The Buyer shall have received a certificate of each of the
Sellers (the "Seller Secretary's Certificates") certifying
the resolutions duly and validly adopted by the Board of
Directors of such Seller, their respective authorization of
the execution and delivery of this Agreement and the other
Transaction Documents to which such Seller is a party and
the consummation of the transactions contemplated hereby and
thereby, and the names and signatures of the officers of
such Seller authorized to sign this Agreement and the other
Transaction Documents.
(g) The Buyer shall have received all such documents and
instruments including, without limitation, such deeds of
transfer, title reports and property surveys with respect to
the transfer of all legal rights in the real property to be
transferred pursuant to this Agreement.
(h) The form and substance of all certificates, transfer
documents, title reports, property surveys, deeds, opinions,
consents, instruments, and other documents delivered to the
Buyer under this Agreement shall be satisfactory in all
reasonable respects to the Buyer and its counsel.
(i) The Buyer shall have received from counsel for the Sellers
and the Shareholder, an opinion dated the Closing Date in
the form of Exhibit 8.1(i) attached hereto.
(j) The Buyer shall have received from each Seller at the
Closing a certificate of non-foreign status, in the form
required by section 1445 of the Code and the regulations
thereunder.
(k) The Buyer shall have received a copy of a Phase I
Environmental Report relating to the Sellers' Leased Real
Property which shall be satisfactory in the sole judgment of
the Buyer.
(l) The Buyer shall have obtained the financing required to fund
the purchase hereunder and the transactions contemplated by
the parties hereto on terms and conditions acceptable to the
Buyer.
(m) Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall
have expired or been terminated and no notice shall have
been received by any party from any Governmental Entity of
any pending or threatened investigation or providing
concerning the acquisitions.
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(n) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity that
prevents the consummation of the transactions contemplated
by this Agreement or Proceeding that threatens to prevent
such transactions.
8.2 Conditions Precedent to the Sellers' Obligations to Close.
The obligation of the Sellers to consummate the transactions
contemplated hereby is subject to the satisfaction prior to
or on the Closing Date of each of the following conditions;
provided, however, that the Sellers shall have the right to
waive all or any part of each such condition, and to close
the transactions contemplated hereby without however,
releasing the Buyer from any covenant, obligation, agreement
or condition contained herein or from any liability for any
loss or damage sustained by either Seller by reason of the
breach by the Buyer of any covenant, obligation, agreement
or condition contained herein, by reason of any
misrepresentation made by the Buyer; and provided further,
however, that the Sellers' participation in the Closing
shall not in any way be deemed to be a waiver of any claim
it may have hereunder for any breach of any representation,
warranty, covenant or agreement:
(a) The representations and warranties of the Buyer contained in
this Agreement shall have been true and correct when made
and shall be true and correct in all material respects as of
the Closing Date, with the same force and effect as if made
as of the Closing Date, other than such representations and
warranties as are made as of a specific date, which shall be
true and correct in all material respects as of such date.
(b) The covenants and agreements contained in this Agreement to
be complied with by the Buyer on or before the Closing Date
shall have been complied with in all material respects.
(c) The Sellers shall have received a certificate dated the
Closing Date and executed by an officer of the Buyer,
certifying to the satisfaction of the conditions referred to
in sections 8.2(a) and (b).
(d) The Sellers shall have received a certificate of the
Secretary of the Buyer (the "Buyer Secretary's Certificate")
certifying the resolutions duly and validly adopted by the
Buyer evidencing its authorization of the execution and
delivery of this Agreement and the other Transaction
Documents to which the Buyer is a party and the consummation
of the transactions contemplated hereby and thereby, and the
names and signatures of the officers of the Buyer authorized
to sign this Agreement and the other Transaction Documents
to be delivered hereunder.
(e) The form and substance of all certificates, opinions,
consents, instruments and other documents delivered to the
Sellers under this Agreement shall be satisfactory in all
reasonable respects to the Sellers and their counsel.
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(f) The Sellers shall have received from Parker Chapin Flattau &
Klimpl, LLP, counsel for the Buyer, an opinion dated the
Closing Date in the form of Exhibit 8.2(f) attached hereto.
(g) No Law shall be in effect which prohibits any party hereto
from consummating the transactions contemplated hereby.
(h) The Sellers shall have received a Bill of Sale, Assignment
and Assumption Agreement duly executed by the Buyer, in
which, among other things, the Buyer agrees to assume the
Assumed Liabilities, in the form of Exhibit 8.2(h) attached
hereto (the "Bill of Sale, Assignment and Assumption
Agreement").
(i) Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall
have expired or been terminated and no notice shall have
been received by any party from any Governmental Entity of
any pending or threatened investigation or providing
concerning the acquisitions.
(j) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity that
prevents the consummation of the transactions contemplated
by this Agreement or Proceeding that threatens to prevent
such transactions.
9. Documents to be Delivered at the Closing.
9.1 Deliveries of the Sellers. At the Closing, the Sellers
shall deliver or cause to be delivered the following items
to the Buyer:
(a) the following documents with respect to the transfer of
interests in real property:
(i) a warranty deed (the "Deed") in the form
attached hereto as Exhibit 9.1(a)(i), containing all customary
covenants, so as to convey to the Buyer good, marketable and
insurable fee simple absolute title to the Owned Real Property,
free of all liens and encumbrances.
(ii) assignments, each in the form attached
hereto as Exhibit 9.1(a)(ii) (collectively, the "Assignments"
and, individually, an "Assignment"), of each of the Leases
(including, without limitation, any security interests/pledge
liens created thereby), collateral guarantees and all security
deposits made thereunder, containing a covenant of good title and
the Seller's representation and warranty that (A) there have been
no prior assignments of the Leases, (B) such Leases are in full
force and effect and are enforceable in accordance with their
terms, and (C) neither the Leases nor the security deposits made
thereunder are then subject to any liens, security interests or
adverse claims.
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(iii) subordination, non-disturbance and
attornment agreements and lender's estoppel certificates each in
the form attached hereto as Exhibit 9.1(a)(iii) (collectively,
the "SNDA Agreements" and, individually, a "SNDA Agreement") for
each of the Leases.
(iv) the Deed and each Assignment and each SNDA
Agreement shall be in recordable form and the Deed shall be duly
executed and acknowledged by Logic and the Assignments shall be
duly executed, delivered and acknowledged by the Sellers and
Ammon & Rizos Co. Inc., as the case may be, and the SNDA
Agreements shall be duly executed, delivered and acknowledged by
each applicable lender. The Deed shall have affixed thereto any
requisite surtax and documentary tax stamps, in proper amount,
affixed and at the Seller's sole cost and expense. At the
Closing, the Seller shall pay the appropriate tax collecting
agency all taxes and charges in connection with the sale and
transfer of the Owned Real Property by Seller to Buyer and the
recording of the Deed.
(v) (A) true and complete maintenance records
for the Real Property; (B) a validly issued permanent certificate
of occupancy for each of the buildings comprising a part of the
Real Property; (C) all original licenses and permits,
authorizations and approvals pertaining to the Real Property; and
(D) all guarantees and warranties which each Seller, respectively
has received in connection with any work or services performed or
equipment installed in the aforementioned buildings and all
improvements erected on the Real Property.
(vi) a set of plans and specifications of the
buildings and all improvements comprising a part of the Real
Property.
(vii) The following are to be apportioned between
the parties as of and on the Closing Date:
(A) ad valorem, real estate and
personal property taxes, water charges, and sewer rents;
(B) charges and payments payable under
the transferable contracts and agreements; and
(C) utilities, including telephone,
steam, electricity and gas.
(b) the Bill of Sale, Assignment and Assumption Agreement duly
executed by the Sellers which, among other things, conveys,
transfers and sells to the Buyer all right, title and
interest of the Sellers in and to the Acquired Assets;
(c) the releases referred to in section 7.13;
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(d) the certificates referred to in section 8.1(c) duly executed
by an officer of each the Sellers and an officer of the
Shareholder;
(e) the Consents referred to in section 8.1(d);
(f) the Sellers Secretaries' Certificate referred to in section
8.1(f) duly executed by the Secretary of each Seller,
respectively;
(g) the opinion of counsel to the Sellers referred to in section
8.1(i);
(h) a certificate of non-foreign status in the form required by
section 1445 of the Code duly executed by each of the
Sellers; and
(i) a tax, lien and judgment search of each Seller and the
Acquired Assets showing no items not disclosed in the
schedules to this Agreement.
9.2 Deliveries of the Buyer. At the Closing, the Buyer shall
deliver or cause to be delivered the following items to the
Seller:
(a) the certificate referred to in section 8.2(c) duly executed
by an officer of the Buyer;
(b) the Buyer Secretary's Certificate referred to in section
8.2(d) duly executed by the Secretary of the Buyer;
(c) the opinion of counsel to the Buyer referred to in section
8.2(f);
(d) the Purchase Price; and
(e) The Bill of Sale, Assignment and Assumption Agreement duly
executed by the Buyer.
10. Termination.
(a) This Agreement may be terminated at any time prior to the
Closing:
(i) by the mutual agreement of the Buyer and
the Sellers;
(ii) by the Buyer or the Sellers (if such party
is not in breach of or default under this Agreement) giving
written notice to such effect to the other party if the Closing
shall not have occurred on or before August 31, 1997, or such
later date as the parties shall have agreed upon prior to the
giving of such notice; or
(iii) by either the Buyer or the Sellers in the
event of a material breach by or default of the other party
hereto.
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(b) Upon termination of this Agreement pursuant to section
10(a), all obligations of the parties shall terminate except
those under section 11; provided, however, that no such
termination shall relieve either Seller or the Shareholder
of any liability to the Buyer, or the Buyer of any liability
to the Sellers, by reason of any breach of or default under
this Agreement.
11. Indemnification.
11.1 Indemnification by the Sellers and the Shareholder. Each of
the Sellers and the Shareholder shall jointly and severally
indemnify and defend the Buyer and each of its officers,
directors, employees, shareholders, agents, advisors or
representatives (each, a "Buyer Indemnitee") against, and
hold each Buyer Indemnitee harmless from, any loss,
liability, obligation, damage or expense including, without
limitation, reasonable attorneys' and consultants' fees and
disbursements (collectively, "Damages"), that any Buyer
Indemnitee may suffer or incur arising out of, relating to
or in connection with and of the following (whether or not
in connection with any third party claim):
(a) the failure of any representation or warranty made by either
Seller or the Shareholder to be true and correct on the date
hereof and on the Closing Date;
(b) either Seller's or Shareholder's failure to perform or to
comply with any covenant or condition required to be
performed or complied with by the Sellers or the Shareholder
hereunder; or
(c) the ownership or operation of the Business or Acquired
Assets prior to the Closing Date except for the Assumed
Liabilities.
11.2 Indemnification by the Buyer. The Buyer shall indemnify and
defend each Seller and the Shareholder and each of its
officers, directors, employees, shareholders, agents,
advisors or representatives (each, a "Seller Indemnitee")
against, and hold each Seller Indemnitee harmless from, any
Damages that such Seller Indemnitee may suffer or incur
arising from, related to or in connection with any of the
following:
(a) the failure of any representation or warranty made by the
Buyer to be true and correct on the date hereof and on the
Closing Date;
(b) the Buyer's failure to perform or to comply with any
covenant or condition required to be performed or complied
with by the Buyer hereunder; or
(c) the acts or inactions relating to the Business or Acquired
Assets arising from events first occurring after the
Closing.
11.3 Limitations on Amount. Anything to the contrary
notwithstanding, the Sellers and the Shareholder shall have
no liability with respect to Damages in excess of $500,000.
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The forgoing limitation shall not apply to any liability for
any Taxes which are the responsibility of the Sellers or the
Shareholder or for any claims of employees up to the
Closing.
11.4 Indemnification Procedures.
(a) Promptly after notice to an indemnified party of any claim
or the commencement of any Proceeding, including any
Proceeding by a third party, involving any Damage referred
to in section 11.1 or 11.2, such indemnified party shall, if
a claim for indemnification in respect thereof is to be made
against an indemnifying party pursuant to this section 11,
give written notice to the latter of the commencement of
such claim or Proceeding, setting forth in reasonable detail
the nature thereof and the basis upon which such party seeks
indemnification hereunder; provided, however, that the
failure of any indemnified party to give such notice shall
not relieve the indemnifying party of its obligations under
such section, except to the extent that the indemnifying
party is actually prejudiced by the failure to give such
notice.
(b) (i) In the case of any such Proceeding by a third party
against an indemnified party, the indemnifying party shall,
upon notice as provided above, assume the defense thereof,
with counsel reasonably satisfactory to the indemnified
party, and, after notice from the indemnifying party to the
indemnified party of its assumption of the defense thereof,
the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses
subsequently incurred by the indemnified party in connection
with the defense thereof (but the indemnified party shall
have the right, but not the obligation, to participate at
its own cost and expense in such defense by counsel of its
own choice) or for any amounts paid or foregone by the
indemnified party as a result of the settlement or
compromise thereof (without the written consent of the
indemnifying party).
(ii) Anything in section 11.4(b)(i)
notwithstanding, if both the indemnifying party and the
indemnified party are named as parties or subject to such
Proceeding and either such party determines with advice of
counsel that there may be one or more legal defenses available to
it that are different from or additional to those available to
the other party or that a material conflict of interest between
such parties may exist in respect of such Proceeding, then the
indemnifying party may decline to assume the defense on behalf of
the indemnified party or the indemnified party may retain the
defense on its own behalf, and, in either such case, after notice
to such effect is duly given hereunder to the other party, the
indemnifying party shall be relieved of its obligation to assume
the defense on behalf of the indemnified party, but shall be
required to pay any legal or other expenses including, without
limitation, reasonable attorneys' fees and disbursements,
incurred by the indemnified party in such defense.
(c) If the indemnifying party assumes the defense of any such
Proceeding, the indemnified party shall cooperate fully with
the indemnifying party and shall appear and give
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testimony, produce documents and other tangible evidence,
allow the indemnifying party access to the books and records
of the indemnified party and otherwise assist the indemnifying
party in conducting such defense. No indemnifying party
shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement or
compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect
of such claim or Proceeding. Provided that proper notice is
duly given, if the indemnifying party shall fail promptly
and diligently to assume the defense thereof, then the
indemnified party may respond to, contest and defend against
such Proceeding (but the indemnifying party shall have the
right to participate at its own cost and expense in such
defense by counsel of its own choice) and may make in good
faith any compromise or settlement with respect thereto, and
recover from the indemnifying party the entire cost and
expense thereof including, without limitation, reasonable
attorneys' fees and disbursements and all amounts paid or
foregone as a result of such Proceeding, or the settlement
or compromise thereof. The indemnification required
hereunder, shall be made by periodic payments of the amount
thereof during the course of the investigation or defense,
as and when bills or invoices are received or loss,
liability, obligation, damage or expense is actually
suffered or incurred.
11.5 Survival of Representations and Warranties. The
representations and warranties of each of the parties shall
survive the Closing, notwithstanding any investigation or
inquiry made by any other party, and continue until the
first anniversary of the Closing Date.
12. Miscellaneous.
12.1 Transaction Fees and Expenses. Each party hereto shall bear
such costs, fees and expenses as may be incurred by it in
connection with this Agreement and the transactions
contemplated hereby.
12.2 Notices. Any notice, demand, request or other communication
which is required, called for or contemplated to be given or
made hereunder to or upon any party hereto shall be deemed
to have been duly given or made for all purposes if (a) in
writing and sent by messenger or a recognized national
overnight courier service for next day delivery with receipt
therefor, (b) sent by facsimile transmission with a written
copy thereof sent on the same day by postage paid
first-class mail or (c) by personal delivery to such party
at the following address:
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To the Buyer or Chatham Enterprises:
c/o Kidd & Company, LLC
Three Pickwick Plaza
Greenwich, Connecticut 06830
Attention: William J. Kidd
Telecopier No.: (203) 661-1839
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036-8735
Attention: Edward R. Mandell
Telecopier No.: (212) 704-6288
To Logic at:
Logic Design Metals, Inc.
3233 West Kingsley
Garland, Texas 75041
Attention: President
Telecopier No.: (972) 840-6064
To Precision at:
Precision Techniques, Inc.
3233 West Kingsley
Garland, Texas 75041
Attention: President
Telecopier No.: (972) 840-6064
To the Shareholder at:
Electric & Gas Technology, Inc.
13636 Neutron Road
Dallas, Texas 75244
Attention: S. Mort Zimmerman, Chairman
Telecopier No.: (214) 991-3265
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with respect to each of Logic and Precision and the
Shareholder, with a copy to:
Carl A. Generes, Esq.
4315 West Lovers Lane
Dallas, Texas 75209-2803
Telecopier No.: (214) 350-2142
or such other address as either party hereto may at any time, or
from time to time, direct by notice given to the other party in
accordance with this section. The date of giving or making of
any such notice or demand shall be, in the case of clause (a)(i),
the date of the receipt; in the case of clause (a)(ii), 5
business days after such notice or demand is sent; and, in the
case of clause (b), the business day next following the date such
notice or demand is sent. A copy of any notice to the
Shareholder shall be sent concurrently to each Seller and a copy
of any notice to either Seller shall be sent concurrently to the
other Seller and the Shareholder.
12.3 Amendment. Except as otherwise provided herein, no
amendment of this Agreement shall be valid or effective
unless in writing and signed by or on behalf of the party
against whom the same is sought to be enforced.
12.4 Waiver. No course of dealing of any party hereto, no
omission, failure or delay on the part of any party hereto
in asserting or exercising any right hereunder, and no
partial or single exercise of any right hereunder by any
party hereto shall constitute or operate as a waiver of any
such right or any other right hereunder. No waiver of any
provision hereof shall be effective unless in writing and
signed by or on behalf of the party to be charged therewith.
No waiver of any provision hereof shall be deemed or
construed as a continuing waiver, as a waiver in respect of
any other or subsequent breach or default of such provision,
or as a waiver of any other provision hereof unless
expressly so stated in writing and signed by or on behalf of
the party to be charged therewith.
12.5 Governing Law. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the
State of Texas.
12.6 Jurisdiction. Each of the parties hereto hereby irrevocably
consents and submits to the exclusive jurisdiction of the
United States District Court for the Northern District of
Texas Fifth Circuit in connection with any Proceeding
arising out of or relating to this Agreement or the
transactions contemplated hereby, waives any objection to
venue in such District (unless such court lacks jurisdiction
with respect to such Proceeding, in which case, each of the
parties hereto irrevocably consents to the jurisdiction of
the courts of the State of Texas in connection with such
Proceeding and waives any objection to venue in Dallas
County, State of Texas, and agrees that service of any
summons, complaint, notice or other process relating to such
Proceeding may be effected in the manner provided by clause
(a)(ii) of section 12.2.
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12.7 Remedies. In the event of any actual or prospective breach
or default by any party hereto, the other parties shall be
entitled to equitable relief, including remedies in the
nature of rescission, injunction and specific performance.
All remedies hereunder are cumulative and not exclusive.
Nothing contained herein and no election of any particular
remedy shall be deemed to prohibit or limit any party from
pursuing, or be deemed a waiver of the right to pursue, any
other remedy or relief available now or hereafter existing
at law or in equity (whether by statute or otherwise) for
such actual or prospective breach or default, including the
recovery of damages.
12.8 Severability. The provisions hereof are severable and if
any provision of this Agreement shall be determined to be
legally invalid, inoperative or unenforceable in any respect
by a court of competent jurisdiction, then the remaining
provisions hereof shall not be affected, but shall, subject
to the discretion of such court, remain in full force and
effect, and any such invalid, inoperative or unenforceable
provision shall be deemed, without any further action on the
part of the parties hereto, amended and limited to the
extent necessary to render such provision valid, operative
and enforceable.
12.9 Further Assurances. Each party hereto covenants and agrees
promptly to execute, deliver, file or record such
agreements, instruments, certificates and other documents
and to perform such other and further acts as the other
party hereto may reasonably request or as may otherwise be
necessary or proper to consummate and perfect the
transactions contemplated hereby.
12.10 Assignment. This Agreement, and each right, interest
and obligation hereunder, may not be assigned by any
party hereto without the prior written consent of all
of the other parties hereto. Notwithstanding the
foregoing, each of the Buyer and its successors shall
have the right to assign its rights and obligations
hereunder to any Affiliate thereof or to any Person who
(i) acquires all or a substantial part of the assets of
the Buyer, and (ii) agrees in writing to be bound by
and to assume the Buyer's obligations under this
Agreement.
12.11 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and
their respective legal representatives, successors and
permitted assigns.
12.12 No Third Party Beneficiaries. Nothing contained in
this Agreement, whether express or implied, is
intended, or shall be deemed, to create or confer any
right, interest or remedy for the benefit of any Person
other than as otherwise provided in this Agreement.
12.13 Entire Agreement. This Agreement (including all the
schedules and exhibits hereto), together with the
Exhibits, Schedules, certificates and other
documentation referred to herein or required to be
delivered pursuant to the terms hereof, contains the
terms of the entire agreement among the parties with
respect to the subject matter hereof and supersedes any
and all prior agreements, commitments, understandings,
discussions,
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negotiations or arrangements of any nature relating
thereto.
12.14 Headings. The headings contained in this Agreement are
included for convenience and reference purposes only
and shall be given no effect in the construction or
interpretation of this Agreement.
12.15 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed
an original, but all of which together shall constitute
one and the same instrument.
12.16 Bulk Sales Law. The parties waive compliance with the
provisions of any bulk sales law that may be applicable
to the transactions contemplated hereby.
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Sellers: LOGIC DESIGN METALS, INC.
By: /s/ S. Mort Zimmerman
Name: S. Mort Zimmerman
Title: Chairman of the
Board
PRECISION TECHNIQUES, INC.
By: /s/ S. Mort Zimmerman
Name: S. Mort Zimmerman
Title: Chairman of the
Board
Buyer: NEW LOGIC DESIGN METALS INC.
By: /s/ William J. Kidd
Name: William J. Kidd
Title: Chairman of the
Board
Chatham Enterprises: CHATHAM ENTERPRISES INC.
By: /s/ William J. Kidd
Name: William J. Kidd
Title: Chairman of the
Board
Shareholder: ELECTRIC & GAS TECHNOLOGY
INC.
By: /s/ S. Mort Zimmerman
Name: S. Mort Zimmerman
Title: Chairman of the
Board and
President
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