SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of earliest
event reported): October 2, 1997
Gehl Company
(Exact name of registrant as
specified in its charter)
Wisconsin 0-18110 39-0300430
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
143 Water Street, West Bend, Wisconsin 53095
(Address of principal executive offices, including zip code)
(414) 334-9461
(Registrant's telephone number)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On October 2, 1997, Gehl Company ("Gehl") acquired from Brunel
Holdings, plc ("Brunel Holdings") all of the issued and outstanding shares of
capital stock of Brunel America Inc. ("Brunel America"). Such purchase of
capital stock and certain related transactions are referred to herein as the
"Acquisition". The total cash consideration paid by Gehl at the closing of
the Acquisition was $27,700,000. The purchase price paid by Gehl in the
Acquisition was determined on the basis of arm's length negotiations between
the parties. There is no material relationship between Brunel Holdings and
Gehl or any of its affiliates, directors or officers or any of their
associates.
The Acquisition was consummated in accordance with the terms of
a Stock Purchase Agreement, dated September 12, 1997 (the "Stock Purchase
Agreement"), by and between Gehl and Brunel Holdings. In connection with the
Acquisition, Gehl (a) acquired the Brunel America stock from Brunel Holdings
for $26,700,000; and (b) entered into a five (5) year Noncompetition Agreement
with Brunel Holdings pursuant to which Gehl paid to Brunel Holdings the sum of
$1,000,000. The purchase price is subject to a post-closing net worth
adjustment.
To provide financing for the Acquisition, Gehl borrowed
$27,700,000 under its credit facility with Deutsche Financial Services
Corporation.
In connection with the Acquisition, Gehl, through Brunel
America, acquired all of the issued and outstanding shares of capital stock of
the following direct and indirect subsidiaries of Brunel America: Mustang
America, Inc.; Mustang Manufacturing Company, Inc.; Mustang Finance Inc.; and
Mustang International, Inc. (collectively referred to as the "Mustang
Subsidiaries").
The Stock Purchase Agreement is filed as an exhibit to this
Current Report on Form 8-K and is incorporated herein by reference. The brief
summaries of the provisions of the Stock Purchase Agreement set forth above
are qualified in their entirety by reference to the Stock Purchase Agreement
filed as an exhibit hereto.
The Mustang Subsidiaries design, manufacture and distribute
skid steer loaders and related attachments. It is the intention of Gehl to
continue to operate the business of the Mustang Subsidiaries at their present
headquarters and manufacturing location in Owatonna, Minnesota and to conduct
the business of the Mustang Subsidiaries in substantially the same manner as
it had been conducted prior to the Acquisition.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) and (b) Financial Statements of Business Acquired and Pro
Forma Financial Information.
It is impractical at this time to file any financial statements
and pro forma financial information required to be filed
pursuant to Item 7 of Form 8-K. Such financial statements and
pro forma financial information that may be required will be
filed as soon as practicable, but not later than 60 days from
the date hereof.
(c) Exhibits. The following exhibits are being filed herewith:
(2) Stock Purchase Agreement, dated as of September 12, 1997,
between Gehl Company and Brunel Holdings, plc. Schedules
to the Stock Purchase Agreement have not been filed
herewith. Gehl agrees to furnish a copy of any omitted
schedule to the Commission upon request.
(4.1) Amendment to Amended and Restated Loan and Security
Agreement by and between Deutsche Financial Services
Corporation, f/k/a ITT Commercial Finance Corp., Deutsche
Financial Services Canada Corporation and Gehl Company and
its subsidiaries, dated October 2, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GEHL COMPANY
Date: October 16, 1997 By:
William D. Gehl
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
GEHL COMPANY
Exhibit Index to Current Report on form 8-K
Dated October 16, 1997
Exhibit
Number
(2) Stock Purchase Agreement, dated as of September 12, 1997, between Gehl
Company and Brunel Holdings, plc. Schedules to the Stock Purchase Agreement
have not been filed herewith. Gehl agrees to furnish a copy of any omitted
schedule to the Commission upon request.
(4.1) Amendment to Amended and Restated Loan and Security Agreement by and
between Deutsche Financial Services Corporation, f/k/a ITT Commercial Finance
Corp., Deutsche Financial Services Canada Corporation and Gehl Company and its
subsidiaries, dated October 2, 1997.
STOCK PURCHASE AGREEMENT
By and Between
GEHL COMPANY
And
BRUNEL HOLDINGS, plc
September 12, 1997
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
1. PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . . . . . 2
2. PURCHASE PRICE - PAYMENT . . . . . . . . . . . . . . . . . . . . . 2
2.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 2
2.2. Payment of Purchase Price . . . . . . . . . . . . . . . . . . 2
2.3. Determination of Consolidated Net Worth . . . . . . . . . . . 3
3. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . 5
3.1. Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2. Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3. No Violation . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . 11
3.5. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 14
3.7. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.8. Absence of Certain Changes . . . . . . . . . . . . . . . . . 15
3.9. Absence of Undisclosed Liabilities . . . . . . . . . . . . . 16
3.10.No Litigation . . . . . . . . . . . . . . . . . . . . . . . . 17
3.11.Compliance With Laws and Orders . . . . . . . . . . . . . . . 17
3.12.Title to and Condition of Properties . . . . . . . . . . . . . 19
3.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.14.Contracts and Commitments . . . . . . . . . . . . . . . . . . 21
3.15.Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 23
3.16 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 23
3.17.Employment Compensation . . . . . . . . . . . . . . . . . . . 27
3.18.Trade Rights . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.19.Major Customers and Suppliers . . . . . . . . . . . . . . . . 28
3.20.Product Warranty and Product Liability . . . . . . . . . . . . 28
3.21.Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . 29
3.22.Affiliates' Relationships to BAI and Mustang Subsidiaries . . 29
3.23.No Brokers or Finders . . . . . . . . . . . . . . . . . . . . 29
3.24.Liabilities and Claims With Respect to Former Subsidiaries . . 29
3.25.Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . 30
4.1. Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.3. No Brokers or Finders . . . . . . . . . . . . . . . . . . . . 30
4.4. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.5. Investment Intent . . . . . . . . . . . . . . . . . . . . . . . 31
4.6. No Wilful Withholding of Information by Buyer . . . . . . . . 31
5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.1. Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . 31
5.2. Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.3. Environmental Remediation . . . . . . . . . . . . . . . . . . 32
5.4. Noncompetition; Confidentiality . . . . . . . . . . . . . . . 32
5.5. General Releases . . . . . . . . . . . . . . . . . . . . . . 34
5.6. Access to Information and Records . . . . . . . . . . . . . . 34
5.7. Conduct of Business Pending the Closing . . . . . . . . . . . 34
5.8. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.9. Other Action . . . . . . . . . . . . . . . . . . . . . . . . 36
5.10.Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . 36
5.11.Buyer's Right of Access Prior to Closing Date . . . . . . . . . 36
5.12.Change of BAI Corporate Name . . . . . . . . . . . . . . . . . 36
5.13.Access to Books and Records . . . . . . . . . . . . . . . . . 36
5.14.Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.15.Product Warranty on Model 2040 . . . . . . . . . . . . . . . . 37
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS . . . . . . . . . . . . 37
6.1. Representations and Warranties True of the Closing Date . . . . 37
6.2. Compliance With Agreement . . . . . . . . . . . . . . . . . . 37
6.3. Absence of Litigation . . . . . . . . . . . . . . . . . . . . . 37
6.4. Consents and Approvals . . . . . . . . . . . . . . . . . . . 37
6.5. Title Insurance . . . . . . . . . . . . . . . . . . . . . . . 37
6.6. Hart-Scott-Rodino Waiting Period . . . . . . . . . . . . . . . 37
6.7. Section 1445 Affidavit . . . . . . . . . . . . . . . . . . . . 37
6.8. Bank Guarantee . . . . . . . . . . . . . . . . . . . . . . . . 38
6.9. Environmental Remediation . . . . . . . . . . . . . . . . . . . 38
6.10.Actions by Seller's Banks . . . . . . . . . . . . . . . . . . . 38
7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS . . . . . . . . . . . 38
7.1. Representations and Warranties True on the Closing Date . . . 38
7.2. Compliance With Agreement . . . . . . . . . . . . . . . . . . 38
7.3. Absence of Litigation . . . . . . . . . . . . . . . . . . . . 38
7.4. Hart-Scott-Rodino Waiting Period . . . . . . . . . . . . . . . 39
7.5. Approval of Seller's Shareholders . . . . . . . . . . . . . . 39
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.1. By Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.2. By Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.3. Indemnification of Third-Party Claims . . . . . . . . . . . . 39
8.4. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.5. Limitations on Indemnification . . . . . . . . . . . . . . . . 41
9. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.1. Documents to be Delivered by Company and Seller . . . . . . . 43
9.2. Documents to be Delivered by Buyer . . . . . . . . . . . . . 44
10. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.1.Right of Termination Without Breach . . . . . . . . . . . . . 45
10.2.Termination for Breach . . . . . . . . . . . . . . . . . . . . 45
11. RESOLUTION OF DISPUTES . . . . . . . . . . . . . . . . . . . . . . 46
11.1.Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2.Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.Procedures; No Appeal . . . . . . . . . . . . . . . . . . . . 46
11.4.Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.5.Entry of Judgment . . . . . . . . . . . . . . . . . . . . . . 46
11.6.Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 47
11.7.Tolling . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.1.Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . 47
12.2.Further Assurance . . . . . . . . . . . . . . . . . . . . . . 47
12.3.No Negotiations or Discussions . . . . . . . . . . . . . . . . 47
12.4.Preparation of Tax Returns Due Subsequent to the Closing Date 47
12.5.Break-Up Fee Due Buyer Under Certain Circumstances . . . . . . 48
12.6.Audit of BAI Consolidated June 30, 1997 Financial Statements . 49
12.7.Escrow Agreement for Bank Guarantee . . . . . . . . . . . . . 49
12.8.Disclosures and Announcements . . . . . . . . . . . . . . . . 49
12.9.Assignment; Parties in Interest . . . . . . . . . . . . . . . 49
12.10Law Governing Agreement . . . . . . . . . . . . . . . . . . . 49
12.11Amendment and Modification . . . . . . . . . . . . . . . . . . 49
12.12Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.13Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.14Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 51
12.15Counterpart . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.16Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.17Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . 52
Disclosure Schedule
Schedule 2.2 - Wire Transfer Instructions
Schedule 2.3.(b)(v) - Accounting Policies
Schedule 3.1.(c) - Foreign Corporation Qualification
Schedule 3.1.(d) - Ownership of Equity or Other Investment
Interests; Absence of Encumbrances
Schedule 3.1.(g) - Former Subsidiary Disclosure Schedule
Schedule 3.1.(h) - Summary of Group Facilities
Agreement
Schedule 3.3 - Violation, Conflict, Default
Schedule 3.4 - Financial Statements
Schedule 3.5.(b) - Tax Returns (Exceptions to Representations)
Schedule 3.5.(c) - Tax Audits
Schedule 3.5.(d) - Consolidated Tax Returns
Schedule 3.5.(e) - Tax, Other
Schedule 3.6 - Accounts Receivable (Aged Schedule)
Schedule 3.7 - Inventory Off Premises
Schedule 3.8 - Absence of Certain Changes
Schedule 3.9 - Off-Balance Sheet Liabilities
Schedule 3.10 - Litigation Matters
Schedule 3.11.(a) - Non-Compliance with Laws
Schedule 3.11.(b) - Licenses and Permits
Schedule 3.11.(c) - Environmental Matters (Exceptions
Representations)
Schedule 3.12 - Liens
Schedule 3.12.(b) - Condition of Real Property
Schedule 3.12.(c) - Owned Real Property
Schedule 3.13 - Insurance Matters
Schedule 3.14.(a) - Real Property Leases
Schedule 3.14.(b) - Personal Property Leases
Schedule 3.14.(c) - Purchase Commitments over $25,000
Schedule 3.14.(d) - Accepted Orders Over $500,000
Schedule 3.14.(e) - Contracts with Affiliates and Certain Others
Schedule 3.14.(f) - Powers of Attorney
Schedule 3.14.(g) - Collective Bargaining Agreements
Schedule 3.14.(h) - Loan Agreements, etc.
Schedule 3.14.(i) - Guarantees
Schedule 3.14.(k) - Restrictive Agreements
Schedule 3.14.(1) - Material Contracts
Schedule 3.15 - Labor Matters
Schedule 3.16.(a) & (d) - Employee Plans/Agreements;
Controlled Group
Schedule 3.16.(g) - Triggering on Acceleration of Obligations
Schedule 3.17 - Employment Compensation
Schedule 3.18 - Trade Rights
Schedule 3.19.(a) - Major Customers
Schedule 3.19.(b) - Major Suppliers
Schedule 3.19.(c) - Dealers and Distributors
Schedule 3.20 - Product Warranty, Warranty Expense and Liability
Claims
Schedule 3.21 - Bank Accounts
Schedule 3.22.(a) & (b) - Contracts with Affiliates; No Adverse Interests
Schedule 6.8 - Bank Guaranty
Schedule 6.10 - Form of Release with respect to General
Facilities Agreement, Lender Consents and Legal
Opinion
Exhibits
Exhibit 9.1.(c)-I, II & III - Opinion of Seller's Counsel
Exhibit 9.2.(c) - Opinion of Buyer's Counsel
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated September 12, 1997, by
and between GEHL COMPANY, a Wisconsin corporation ("Buyer"),and BRUNEL
HOLDINGS, plc, ("Brunel, plc") an English public limited company (the
"Seller").
RECITALS
A. The Seller owns all of the issued and outstanding shares (the
"Shares") of capital stock of Brunel America Inc., a Delaware corporation
(individually referred to as "BAI" and together with its direct and indirect
subsidiaries referred to as "BAI and Subsidiaries"); BAI owns all of the
issued and outstanding shares of capital stock of Mustang America, Inc., a
Delaware corporation ("Mustang America"); and Mustang America, Inc. owns all
of the issued and outstanding shares of capital stock of Mustang Manufacturing
Company, Inc., a Minnesota corporation ("Mustang Manufacturing"). Mustang
Manufacturing Company, Inc., together with its wholly-owned subsidiaries
Mustang Finance Inc., a Minnesota corporation ("Mustang Finance"), and Mustang
International, Inc., a Barbados corporation ("Mustang International"), is
engaged in business as a manufacturer and distributor of skid steer loaders
and related attachments (the "Business"). Mustang America, Mustang
Manufacturing, Mustang Finance and Mustang International are sometimes
collectively referred to herein as the "Mustang Subsidiaries."
B. As of June 30, 1997, BAI also owned all of the issued and
outstanding shares of capital stock of the following corporations: B. H.
Exports, Inc., a Delaware corporation ("B. H. Exports"), Cameron
Converting, Inc., a Delaware corporation ("Cameron"), RMC Liquidation
Corporation, a Delaware corporation ("RMC"), Spooner Industries, Inc., a
Delaware corporation ("Spooner"), and Wadkin North America, Inc., a Delaware
corporation ("Wadkin") and Mustang Manufacturing owned all of the issued and
outstanding shares of capital stock of Mustang of Georgia, Inc., an inactive
Georgia corporation ("Mustang of Georgia"). B.H. Exports, Cameron, RMC,
Spooner, Wadkin and Mustang of Georgia are together sometimes referred to
herein as the "Non-Mustang Subsidiaries." Prior to the date of this
Agreement, BAI transferred all of its right, title and interest in the
Non-Mustang Subsidiaries to Sineco America Inc., a Delaware corporation which
is a subsidiary of Seller.
C. The facilities of the Business consist of the Real Property located
in Owatonna, Minnesota described in Schedule 3.12.(c) (the "Facilities").
D. Buyer desires to purchase the Shares from Seller, and Seller
desires to sell the Shares to Buyer, upon the terms and conditions herein set
forth.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree
as follows.
1. PURCHASE AND SALE OF SHARES
Subject to the terms and conditions of this Agreement, on the Closing
Date (as hereinafter defined) Seller shall sell to Buyer and Buyer shall
purchase from Seller all of the Shares.
2. PURCHASE PRICE - PAYMENT
2.1. Purchase Price. The purchase price payable for the Shares
shall be Twenty-Six Million Seven Hundred Thousand ($26,700,000) Dollars or
such lesser amount as is determined pursuant to Sections 2.2.(b) below. The
Purchase Price for the Noncompetition Agreement of Seller set forth in Section
5.4 is One Million ($1,000,000) Dollars. The Purchase Price for the Shares
and the Noncompetition Agreement are collectively referred to as the "Purchase
Price" (which in the aggregate is Twenty-Seven Million Seven Hundred Thousand
($27,700,000) Dollars). Buyer acknowledges that Seller will allocate the
purchase price for the covenant not to compete between the United States and
other jurisdictions.*
_____________________
* The amount allocated to the covenant not to compete is not releveant to the
question of Buyer's damages if the covenant should be breached.
2.2. Payment of Purchase Price. The Purchase Price shall be paid
by Buyer as follows:
2.2.(a) Cash at Closing. At the Closing, Buyer shall pay the
Purchase Price by wire transfer of immediately available funds to Seller
per the wire transfer instructions set forth on Schedule 2.2 attached
hereto.
2.2.(b) Post-Closing Adjustment of Purchase Price. On or before the
fifth business day following the final determination of the Final Closing
Balance Sheets (as hereinafter defined) (such date being hereinafter
referred to as the "Settlement Date"), a calculation shall be made, if
applicable, to determine the amount, if any, by which the Consolidated
Net Worth of BAI and Mustang Subsidiaries, as determined as of the
Closing Date is less than Ten Million One Hundred Thousand ($10,100,000)
Dollars. The determination shall be based on the Final Closing Balance
Sheets. The amount so determined is herein referred to as the "Post
Closing Purchase Price Adjustment."
2.2.(c) Final Purchase Price Adjustment. On or before the tenth
business day following final determination of the Final Closing Balance
Sheets, Seller shall pay to Buyer the amount of the Post-Closing Purchase
Price Adjustment, together with interest calculated at the rate of eight
percent (8%) per annum on the amount being paid from January 31, 1998.
If and to the extent that the Seller does not pay to Buyer the full
amount (if any) payable under the preceding sentence within such ten
business day period, the amount of such deficiency shall be promptly
remitted to Buyer by National Westminster Bank plc as Guarantor pursuant
to the Guaranty Agreement attached as Schedule 6.8 hereto (the "Bank
Guaranty").
2.3. Determination of Consolidated Net Worth.
2.3.(a) Definition of Consolidated Net Worth. The term
"Consolidated Net Worth" shall mean the consolidated net worth of BAI and
Mustang Subsidiaries or Mustang Manufacturing Company and subsidiaries,
as the case may be, as reflected in the Final Closing Balance Sheets.
2.3.(b) Final Closing Balance Sheets. The Final Closing Balance
Sheets of BAI and Mustang Subsidiaries and Mustang Manufacturing Company,
Inc. and subsidiaries prepared as of the Closing Date and certified by
Seller's independent accountants ("Seller's Accountants") shall be
prepared on a consolidated basis as follows:
(i) Within 60 days after the Closing Date,
Seller shall deliver to Buyer a balance sheet of BAI and Mustang
Subsidiaries and a balance sheet of Mustang Manufacturing Company,
Inc. and subsidiaries as of the Closing Date prepared in accordance
with generally accepted accounting principles from the books and
records of BAI and Mustang Subsidiaries and Mustang Manufacturing
Company, Inc. and subsidiaries, on a basis consistent with the
generally accepted accounting principles theretofore followed by BAI
and Mustang Subsidiaries or Mustang Manufacturing Company, Inc. and
subsidiaries, as the case may be, and in accordance with this
Section 2.3, and fairly presenting the financial position of BAI and
Mustang Subsidiaries and Mustang Manufacturing Company, Inc. and
subsidiaries, as the case may be, as of the Closing Date. The
balance sheets shall be accompanied by detailed schedules of the
assets and liabilities of BAI and Mustang Subsidiaries and Mustang
Manufacturing Company, Inc. and subsidiaries, as the case may be, at
the Closing Date and by a report of Seller's Accountants for each
such balance sheet (1) setting forth the amount of Consolidated Net
Worth (as defined) reflected in the balance sheet, (2) stating that
(a) the examination of the balance sheet has been made in accordance
with generally accepted auditing standards and (b) the balance sheet
has been prepared in accordance with generally accepted accounting
principles, on a basis consistent with the accounting principles
theretofore followed by BAI and Mustang Subsidiaries, or Mustang
Manufacturing Company, Inc. and subsidiaries, as the case may be,
except as otherwise provided in this Section 2.3, and (3) setting
forth the amount of any adjustment to the Purchase Price to be paid
pursuant to Section 2.2.(c) hereof.
(ii) Within 30 days following the delivery of
the balance sheets, Buyer or a firm of independent accountants
engaged by Buyer ("Buyer's Accountants") may object to any of the
information contained in the balance sheets for BAI and Mustang
Subsidiaries or accompanying schedules. Any such objection shall be
made in writing and shall state Buyer's determination of the amount
of the Consolidated Net Worth in issue.
(iii) In the event of a dispute or disagreement
relating to the said balance sheet or schedules, which Buyer and
Seller are unable to resolve, either party may elect to have all
such disputes or disagreements resolved by an accounting firm of
nationally recognized standing (the "Third Accounting Firm") to be
mutually selected by Seller and Buyer or, if no agreement is
reached, the Third Accounting Firm shall be Deloitte Touche. The
Third Accounting Firm shall, as appropriate, make a resolution of
any disputes related to the Final Closing Balance Sheet of BAI and
Mustang Subsidiaries and the calculation of Consolidated Net Worth,
which shall be final and binding for purposes of this Article 2.
The Third Accounting Firm shall be instructed to use every
reasonable effort to perform its services within 15 days of
submission of the balance sheet to it and, in any case, as soon as
practicable after such submission. The fees and expenses for the
services of the Third Accounting Firm shall be shared equally by
Buyer and Seller.
(iv) Buyer agrees to permit Seller, Seller's
Accountants, and their respective representatives, during normal
business hours, to have reasonable access to, and to examine and
make copies of, all books and records of BAI and Mustang
Subsidiaries and Mustang Manufacturing Company, Inc. and
subsidiaries for this purpose. Seller shall permit Buyer and
Buyer's Accountants to have access to, to examine and to make copies
of the schedules and work papers and audit programs of Seller and
Seller's Accountants and access to representatives of Seller's
Accountants, which documents and access are necessary to review the
balance sheets delivered by Seller in accordance with Section
2.3.(b)(i). In addition, Buyer's Accountants shall have the
opportunity to observe the taking of the inventory in connection
with the preparation of such balance sheet.
(v) Notwithstanding any provision contained
herein requiring that the Final Closing Balance Sheet be prepared in
a manner consistent with past practices of BAI or in accordance with
generally accepted accounting principles, the Final Closing Balance
Sheet shall be prepared using the criteria set forth on Schedule
2.3.(b)(v).
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties to Buyer, each
of which is true and correct on the date hereof, shall remain true and correct
to and including the Closing Date, shall be unaffected by any investigation
heretofore or hereafter made by Buyer, or any knowledge of Buyer except as
provided in Section 4.6, and shall survive the Closing of the transactions
provided for herein. For purposes hereof, the term "Former Subsidiary" means
any entity (other than a Mustang Subsidiary) in which BAI (formerly known as
Blackwood Hodge, Inc.) has directly or indirectly held an equity or ownership
interest at any time prior to the Closing Date. The term "Former Subsidiary"
shall include the Non-Mustang Subsidiaries, Linder Industrial Machinery
Company, Mitchell Distributing Company, Rent-Equip, Inc., B.H. (Southeast)
Inc., Carolina Investment Company, Midway Equipment Company, Mitchell
Equipment Company and Preferred Development Corporation as well as any entity
which was merged with or liquidated into a Former Subsidiary. Whenever in
this Agreement Seller's representations and warranties are qualified by
reference to "Seller's knowledge" or the "best of Seller's knowledge", no
distinction is intended between the terms "knowledge" and best of knowledge",
and the term "knowledge" shall be read to include the knowledge of both BAI
and the Mustang Subsidiaries, which for this purpose shall mean officers,
directors and the twenty-nine employees identified on the list of employees
attached to Schedule 3.17 (which includes certain officers and directors).
3.1. Corporate.
3.1.(a)(i) BAI Organization. BAI is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware.
3.1.(a)(ii) Mustang America Organization. Mustang
America, Inc. is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
3.1.(a)(iii) Mustang Manufacturing Company Inc.
Organization. Mustang Manufacturing Company, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Minnesota.
3.1.(a)(iv) Mustang International, Inc. Organization.
Mustang International, Inc. is a corporation duly organized, validly
existing and in good standing under the laws of Barbados.
3.1.(a)(v) Mustang Finance, Inc. Organization.
Mustang Finance, Inc. is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota.
3.1.(b)(i) Corporate Power of BAI. BAI has all
requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as and where such is now being
conducted.
3.1.(b)(ii) Corporate Power of Mustang America.
Mustang America, Inc. has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as and
where such is now being conducted.
3.1.(b)(iii) Corporate Power of Mustang Manufacturing
Company, Inc. Mustang Manufacturing Company, Inc. has all requisite
corporate power and authority to own, operate and lease its properties
and to carry on its business as and where such is now being conducted.
3.1.(b)(iv) Corporate Power of Mustang International
Inc. Mustang International, Inc. has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its
business as and where such is now being conducted.
3.1.(b)(vi) Corporate Power of Mustang Finance, Inc.
Mustang Finance, Inc. has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as and
where such is now being conducted.
3.1.(c)(i) Qualification of BAI. BAI is duly licensed
or qualified to do business as a foreign corporation, and is in good
standing, in each jurisdiction wherein the character of the properties
owned or leased by it, or the nature of its business, makes such
licensing or qualification necessary and the failure to be so licensed or
qualified would have a material adverse consequence. The states in which
BAI is licensed or qualified to do business are listed in Schedule
3.1.(c).
3.1.(c)(ii) Qualification of Mustang America, Inc.
Mustang America, Inc. is duly licensed or qualified to do business as a
foreign corporation, and is in good standing, in each jurisdiction
wherein the character of the properties owned or leased by it, or the
nature of its business, makes such licensing or qualification necessary
and the failure to be so licensed or qualified would have a material
adverse consequence. The states in which Mustang America, Inc. is
licensed or qualified to do business are listed in Schedule 3.1.(c).
3.1.(c)(iii) Qualification of Mustang Manufacturing
Company, Inc. Mustang Manufacturing Company, Inc. is duly licensed or
qualified to do business as a foreign corporation, and is in good
standing, in each jurisdiction wherein the character of the properties
owned or leased by it, or the nature of its business, makes such
licensing or qualification necessary and the failure to be so licensed or
qualified would have a material adverse consequence. The states in which
Mustang Manufacturing Company, Inc. is licensed or qualified to do
business are listed in Schedule 3.1.(c).
3.1.(c)(iv) Qualification of Mustang International,
Inc. Mustang International, Inc. is duly licensed or qualified to do
business as a foreign corporation, and is in good standing, in each
jurisdiction wherein the character of the properties owned or leased by
it, or the nature of its business, makes such licensing or qualification
necessary and the failure to be so licensed or qualified would have a
material adverse consequence. The states in which Mustang International,
Inc. is licensed or qualified to do business are listed in Schedule
3.1.(c).
3.1.(c)(v) Qualification of Mustang Finance, Inc.
Mustang Finance, Inc. is duly licensed or qualified to do business as a
foreign corporation, and is in good standing, in each jurisdiction
wherein the character of the properties owned or leased by it, or the
nature of its business, makes such licensing or qualification necessary
and the failure to be so licensed or qualified would have a material
adverse consequence. The states in which Mustang Finance, Inc. is
licensed or qualified to do business are listed in Schedule 3.1.(c).
3.1.(c)(vi) Maximum Aggregate Cost Associated with
Failure to Qualify. BAI and Mustang Subsidiaries will not incur any
taxes, fines, penalties, costs, liabilities, obligations or expenses
(including costs associated with corrective measures such as filing past
due returns and reports, but not for the usual and customary costs of a
first time filing exclusive of any costs because the filing was not
timely made) which in the aggregate exceed Twenty Thousand ($20,000)
Dollars as the result of the failure of BAI or any Subsidiary to be
qualified to transact business prior to the date hereof in any
jurisdiction in which such entities transacted business prior to the date
hereof. For purposes of this representation, it is assumed that Buyer
will cause BAI and Mustang Subsidiaries to mitigate, to the extent
reasonably possible, the costs associated with a failure to qualify in
the event Buyer receives any inquiry or directive related to
qualification or in the event Buyer determines that BAI or any Mustang
Subsidiary should be qualified to transact business in a jurisdiction in
which it has not previously been qualified.
3.1.(d) Subsidiaries. Except for the Mustang Subsidiaries and as
listed in Schedule 3.1.(d), BAI does not own, directly or indirectly, any
capital stock or other equity securities of any corporation or have any
direct or indirect equity or other ownership interest in any entity or
business. Except for the two pledges of the outstanding capital stock of
their subsidiaries given by BAI and Mustang America, pursuant to the
terms of a group facilities agreement dated September 21, 1993 made
between Brunel Holdings plc, Brunel Holdings plc and certain other
companies, Barclays Bank PLC, National Westminster Bank PLC and Societe
Generale as lenders, National Westminster Bank PLC as security trustee,
and National Westminster Bank PLC as coordinator, as amended and restated
by a supplemental agreement dated November 29, 1994, as amended by
supplemental agreements dated November 24, 1995, July 2, 1996 and as
amended and restated by a supplemental agreement dated April 22, 1997
(the "Group Facilities Agreement"), which pledge of shares will be
released as of the Closing Date pursuant to the form of release attached
hereto as Schedule 6.10, all of the outstanding shares of capital stock
of each Mustang Subsidiary owned directly or indirectly by BAI are free
and clear of any security interest, restriction, option, voting trust or
agreement, proxy, encumbrance, claim or charge of any kind whatsoever,
and are validly issued, fully paid and nonassessable. There are no (a)
securities convertible into or exchangeable for the capital stock or
other securities of any Mustang Subsidiary, (b) options, warrants or
other rights to purchase or subscribe to capital stock or other
securities of any Mustang Subsidiary or securities which are convertible
into or exchangeable for capital stock or other securities of any Mustang
Subsidiary, or (c) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale or transfer of
any capital stock or other equity securities of any Mustang Subsidiary,
any such convertible or exchangeable securities or any such options,
warrants or other rights. The copies of the Articles or Certificate of
Incorporation, as the case may be, and By-Laws of each Mustang
Subsidiary, including any amendments thereto, which have been heretofore
delivered by Seller to Buyer, are true, correct and complete copies of
such instruments as presently in effect. The corporate minute book and
stock records of each Mustang Subsidiary have been furnished to Buyer for
inspection and accurately reflect all material corporate action taken by
each such Mustang Subsidiary and are to the best of Seller's knowledge
true, correct and complete.
3.1.(e) Corporate Documents, etc. The copies of the Certificate of
Incorporation and By-Laws of BAI, including any amendments thereto, which
have been delivered by Seller to Buyer are true, correct and complete
copies of such instruments as presently in effect. The corporate minute
book and stock records of BAI which have been furnished to Buyer for
inspection accurately reflect all material corporate action taken by BAI
and are to the best of Seller's knowledge true, correct and complete.
The directors and officers of BAI are listed in Schedule 3.1.(e).
3.1.(f) Capitalization of BAI. The authorized capital stock of BAI
consists entirely of 3,000 shares of common stock, par value $1.00 per
share. No shares of such capital stock of BAI are issued or outstanding
except for 1,529 shares of common stock which are owned of record and
beneficially by Seller. All such shares of capital stock of BAI are
validly issued, fully paid and nonassessable. There are no (a)
securities convertible into or exchangeable for any of BAI's capital
stock or other securities, (b) options, warrants or other rights to
purchase or subscribe to capital stock or other securities of BAI or
securities which are convertible into or exchangeable for capital stock
or other securities of BAI, or (c) except for this Agreement and the
Group Facilities Agreement, contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance, sale
or transfer of any capital stock or other equity securities of BAI or any
such convertible or exchangeable securities or any such options, warrants
or other rights.
(i) The authorized capital stock of Mustang America Inc.
consists entirely of 3,000 shares of common stock, no par value. No
shares of such capital stock are issued or outstanding except for 3
shares of common stock of Mustang America Inc. which are owned of
record and beneficially by BAI. All such shares of capital stock of
Mustang America Inc. are validly issued, fully paid and
nonassessable. There are no (a) securities convertible into or
exchangeable for any of Mustang America, Inc.'s capital stock or
other securities, (b) options, warrants or other rights to purchase
or subscribe to capital stock or other securities of Mustang
America, Inc. or securities which are convertible into or
exchangeable for capital stock or other securities of Mustang
America, Inc., or (c) except for the Group Facilities Agreement,
contracts, commitments, agreements, understandings or arrangements
of any kind relating to the issuance, sale or transfer of any
capital stock or other equity securities of Mustang America Inc.,
any such convertible or exchangeable securities or any such options,
warrants or other rights.
(ii) The authorized capital stock of Mustang
Manufacturing Company, Inc. consists entirely of 10,000,000 shares
of common stock, par value $0.01 per share. No shares of such
capital stock are issued or outstanding except for 3,300,000 shares
of common stock of Mustang Manufacturing, Inc. all of which are
owned of record and beneficially by Mustang America. All such
shares of capital stock of Mustang Manufacturing Company, Inc. are
validly issued, fully paid and nonassessable. There are no (a)
securities convertible into or exchangeable for any of Mustang
Manufacturing Company, Inc.'s capital stock or other securities, (b)
options, warrants or other rights to purchase or subscribe to
capital stock or other securities of Mustang Manufacturing Company,
Inc. or securities which are convertible into or exchangeable for
capital stock or other securities of Mustang Manufacturing Company,
Inc., or (c) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale or transfer
of any capital stock or other equity securities of Mustang
Manufacturing Company, Inc., any such convertible or exchangeable
securities or any such options, warrants or other rights.
(iii) The authorized capital stock of Mustang
Finance, Inc. consists entirely of 100,000 shares of common stock,
par value $$0.01 per share. No shares of such capital stock are
issued or outstanding except for 1,000 shares of common stock of
Mustang Finance, Inc. all of which are owned of record and
beneficially by Mustang Manufacturing Company, Inc. All such shares
of capital stock of Mustang Finance, Inc. are validly issued, fully
paid and nonassessable. There are no (a) securities convertible
into or exchangeable for any of Mustang Finance, Inc.'s capital
stock or other securities, (b) options, warrants or other rights to
purchase or subscribe to capital stock or other securities of
Mustang Finance, Inc. or securities which are convertible into or
exchangeable for capital stock or other securities of Mustang
Finance, Inc., or (c) contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance,
sale or transfer of any capital stock or other equity securities of
Mustang Finance, Inc., any such convertible or exchangeable
securities or any such options, warrants or other rights.
(iv) The authorized capital stock of Mustang
International, Inc. consists entirely of an unlimited number of
shares of one class designated as common shares, par value $1.00 per
share. No shares of such capital stock are issued or outstanding
except for one common share of Mustang International, Inc. which is
owned of record and beneficially by Mustang Manufacturing Company,
Inc.. All such shares of capital stock of Mustang International,
Inc. are validly issued, fully paid and nonassessable. There are no
(a) securities convertible into or exchangeable for any of Mustang
International, Inc.'s capital stock or other securities, (b)
options, warrants or other rights to purchase or subscribe to
capital stock or other securities of Mustang International, Inc. or
securities which are convertible into or exchangeable for capital
stock or other securities of Mustang International, Inc., or (c)
contracts, commitments, agreements, understandings or arrangements
of any kind relating to the issuance, sale or transfer of any
capital stock or other equity securities of Mustang International,
Inc., any such convertible or exchangeable securities or any such
options, warrants or other rights.
3.1.(g) Former Subsidiaries. Seller has delivered to Buyer a
corporate history and disclosure statement for each Former Subsidiary
("Former Subsidiary Disclosure Schedule") which has been executed by
Seller and refers to this Section 3.1.(g). The Former Subsidiary
Disclosure is true, accurate and complete in all material respects.
3.1.(h) Group Facilities Agreement. Schedule 3.1.(h) contains a
true and correct summary of the provisions of the Group Facilities
Agreement which are relevant to this Agreement and includes as an
attachment the consent and undertaking of the lenders under the Group
Facilities Agreement.
3.2. Seller.
3.2.(a) Power. Subject to approval of its shareholders' meeting,
Seller has full power, legal right and authority to enter into, execute
and deliver this Agreement and the other agreements, instruments and
documents contemplated hereby (such other documents sometimes referred to
herein as "Ancillary Instruments"), and to carry out the transactions
contemplated hereby.
3.2.(b) Authorization. The execution and delivery of this
Agreement and the Ancillary Instruments, and full performance thereunder,
have been duly authorized by the board of directors of Seller, and no
other or further corporate act on the part of Seller is necessary
therefor, except approval by its shareholders' meeting.
3.2.(c) Validity. This Agreement has been duly and validly
executed and delivered by Seller and (subject to approval by its
shareholders' meeting) is, and when executed and delivered each
Ancillary Instrument will be, the legal, valid and binding obligation of
Seller, enforceable in accordance with its terms, except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
3.2.(d) Title. At Closing Seller will have, and Buyer will receive,
good and marketable title to the Shares to be sold by Seller hereunder as
well as all of the outstanding common stock of the Mustang Subsidiaries,
and the capital stock of each Mustang Subsidiary will be held by its
current parent, in each case free and clear of all Liens (as defined in
Section 3.12) including, without limitation, any pledge or security
interest pursuant to the Group Facilities Agreement, voting trusts or
agreements, proxies, marital or community property interests.
3.3. No Violation. Except as set forth on Schedule 3.3, neither the
execution and delivery of this Agreement or the Ancillary Instruments nor the
consummation by Seller of the transactions contemplated hereby and thereby (a)
will violate any statute, law, ordinance, rule or regulation (collectively,
"Laws") or any order, writ, injunction, judgment or decree (collectively,
"Orders") of any court, arbitrator, department, commission, board, bureau,
agency, authority, instrumentality or other body, whether federal, state,
municipal, foreign or other (collectively, "Government Entities"), (b) except
for applicable requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"), will require any authorization, consent,
approval, exemption or other action by or notice to any Government Entity
(including, without limitation, under any "plant-closing" or similar law), or
(c) subject to obtaining the consents referred to in Schedule 3.3, will
violate or conflict with, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or will
result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the assets of BAI or any
Mustang Subsidiary (or the Shares) under, any term or provision of the
Articles or Certificate of Incorporation, as the case may be, or By-Laws of
BAI or any Mustang Subsidiary or Former Subsidiary or of any contract,
commitment, understanding, arrangement, agreement or restriction of any kind
or character to which Seller, BAI, or any Mustang Subsidiary or Former
Subsidiary is a party or by which Seller, BAI, or any Mustang Subsidiary or
Former Subsidiary or any of its or their assets or properties may be bound or
affected.
3.4. Financial Statements. Seller has previously delivered to Buyer true
and complete copies of the consolidated financial statements of Mustang
Manufacturing Company, Inc. and subsidiaries consisting of (i) balance sheets
of Mustang Manufacturing Company, Inc. and subsidiaries as of June 30, 1996,
1995, 1994 and 1993, and the related statements of income and cash flows for
the years then ended (including the notes contained therein or annexed
thereto), which financial statements have been reported on, and are
accompanied by, the signed, unqualified opinions of Price Waterhouse LLP,
independent auditors for Mustang Manufacturing Company, Inc. for such years,
and (ii) an audited balance sheet of Mustang Manufacturing Company, Inc. and
its subsidiaries as of June 30, 1997 (the "Recent Balance Sheet"), and the
related audited statements of income and cash flows for the fiscal year. All
of such financial statements (including all notes and schedules contained
therein or annexed thereto) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, have been
prepared in accordance with the books and records of Mustang Manufacturing
Company, Inc. and its subsidiaries and present fairly, in all material
respects, in accordance with generally accepted accounting principles, the
financial position, the results of operations and cash flows of Mustang
Manufacturing Company, Inc. and subsidiaries as of the dates and for the years
and periods indicated. Seller has also provided Buyer with unaudited
consolidated financial statements for BAI and Subsidiaries consisting of a
consolidated balance sheet for BAI and Subsidiaries as of June 30, 1997 and
the related statements of income for the year then ended, which financial
statements have been reviewed by Price Waterhouse LLP. Such consolidated
financial statements for BAI and Subsidiaries and present fairly in all
material respects the financial position of BAI and Subsidiaries as of
June 30, 1997 and the results of operations for the year then ended in
accordance with generally accepted accounting principles consistently applied.
To the knowledge of the directors and officers of Seller and Mustang
Manufacturing Company, Inc., the management prepared estimated unaudited
consolidated balance sheet of BAI and Mustang Subsidiaries as of the Closing
Date fairly presents the estimated financial position of BAI and Mustang
Subsidiaries as of the Closing Date.
3.5. Tax Matters.
3.5.(a) Provision for Taxes. The provision made for taxes on the
Recent Balance Sheet is sufficient for the payment of all federal, state,
foreign, county, local and other income, ad valorem, excise, profits,
franchise, occupation, property, payroll, sales, use, gross receipts and
other taxes (and any interest and penalties) whether or not disputed and
regardless of when assessed, for all years and periods ending on or prior
to the date of the Recent Balance Sheet with respect to BAI and
Subsidiaries and Former Subsidiaries (for periods prior to and including
the date of such Former Subsidiaries' disposition by BAI). Since the
date of the Recent Balance Sheet, BAI and Subsidiaries have not incurred
any taxes other than taxes incurred in the ordinary course of business
consistent in type and amount with past practices. At Closing the Net
Operating Loss carryforward for U.S. federal income tax purposes
("N.O.L.") of BAI and Mustang Subsidiaries is estimated, but not
warranted, to be $2,400,000. (This estimate is after taking into account
the allocation hereinbelow referred to being made to Wadkin, Spooner and
Cameron.) Seller does represent that in no event will the N.O.L. of BAI
and the Mustang Subsidiaries be less than $1,500,000 at Closing after
taking into account any subsequent adjustments or assessments
attributable to periods ending on or prior to the Closing Date. Seller
further represents that it has not, and will not, take any action that
will reduce the N.O.L. of BAI and Mustang Subsidiaries at the Closing
which is estimated to be $2,400,000 (but not warranted) below that
estimated number. Seller separately represents and warrants that there
will not be any reduction in the N.O.L. at June 30, 1997 as a result of
subsequent adjustments or assessments attributable to Former Subsidiaries
for periods ending on or prior to the Closing Date, or transactions
involving Former Subsidiaries between the Recent Balance Sheet and the
Closing, except for an allocation of the N.O.L. in the amount of $467,781
to Wadkin and in the amount of $156,965 to Spooner and Cameron in
connection with their departure from the consolidated return group. In
the event there should be adjustments or assessments attributable to
Former Subsidiaries which serve to reduce the N.O.L. at June 30, 1997,
the amount which Seller shall be obligated to pay to Buyer (in addition
to interest and penalties) shall be calculated by multiplying the amount
of the reduction in the N.O.L. by 35% unless Buyer's effective federal
tax rate (at the time the N.O.L. is used) should increase in which case
the higher rate shall apply. Seller agrees that it will consent to any
permissible election or treatment, if requested by Buyer within 6 months
of Closing, which allows BAI to retain the N.O.L. being allocated to
Wadkin, Spooner and Cameron. Schedule 3.5 sets forth the manner in which
the net operating loss carryforward will be calculated as of the
Effective Time for purposes of this representation.
3.5.(b) Tax Returns Filed. Except as set forth on Schedule
3.5.(b), all federal, state, foreign, county, local and other tax returns
required to be filed by or on behalf of BAI and Subsidiaries and Former
Subsidiaries (for periods prior to and including the date of such Former
Subsidiaries' disposition by BAI) have been timely filed and when filed
were true and correct in all material respects, and the taxes shown as
due thereon were paid or adequately accrued. True and complete copies of
all federal and state tax returns or reports filed by BAI and each
Subsidiary for each of its three most recent fiscal years to June 30,
1996 have been delivered to Buyer. BAI and Subsidiaries and Former
Subsidiaries (for periods through the date of such Former Subsidiaries'
disposition by BAI) have duly withheld and paid all taxes which they were
required to withhold and pay relating to salaries and other compensation
heretofore paid to the employees of BAI and Subsidiaries and Former
Subsidiaries.
3.5.(c) Tax Audits. The federal and state income tax returns of
BAI and each Subsidiary and each Former Subsidiary have been audited by
the Internal Revenue Service and appropriate state taxing authorities for
the periods and to the extent set forth in Schedule 3.5.(c), and BAI and
Subsidiaries and Former Subsidiaries (for periods prior to and including
the date of such Former Subsidiaries' disposition by BAI) have not
received from the Internal Revenue Service or from the tax authorities of
any state, county, local or other jurisdiction any notice of underpayment
of taxes or other deficiency which has not been paid nor any objection to
any return or report filed by BAI or any Subsidiary or Former Subsidiary.
There are outstanding no agreements or waivers extending the statutory
period of limitations applicable to any tax return or report of BAI or
any Subsidiary or Former Subsidiary. Buyer will incur no cost or
expense, including taxes, penalties and interest and accountants' or
attorneys' fees, in connection with any audit of (or assessment relating
to) the tax returns of BAI and Subsidiaries, the Non-Mustang
Subsidiaries, the Mustang Subsidiaries and the Former Subsidiaries for
any tax period which ends on or prior to the Closing Date.
3.5.(d) Consolidated Group. Schedule 3.5.(d) lists every year
BAI or any Subsidiary or Former Subsidiary was a member of an affiliated
group of corporations that filed a consolidated a tax return on which the
statute of limitations does not bar a federal tax assessment, and each
corporation that has been part of such group. Except as shown in such
Schedule, no affiliated group of corporations of which BAI or a
Subsidiary or Former Subsidiary has been a member has discontinued filing
consolidated returns during the past five years.
3.5.(e) Other. Except as set forth in Schedule 3.5.(e), BAI and
Subsidiaries and Former Subsidiaries have not (i) filed any consent or
agreement under Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) applied for any tax ruling, (iii) entered into
a closing agreement with any taxing authority, (iv) filed an election
under Section 338(g) or Section 338(h)(10) of the Code (nor has a deemed
election under Section 338(e) of the Code occurred), (v) made any
payments, or been a party to an agreement including this Agreement) that
under any circumstances could obligate it to make payments that will not
be deductible because of Section 280G of the Code, or (vi) been a party
to any tax allocation or tax sharing agreement. Neither BAI nor any
Subsidiary is a "United States real property holding company" within the
meaning of Section 897 of the Code.
3.5.(f) Cooperation and Response After Closing Date. Buyer will
cause Mustang Manufacturing Company, Inc. and its employees to cooperate
with Seller in connection with all tax compliance matters for which
Seller has responsibility after the Closing Date (including any exposure
for indemnification under this Agreement); and shall cause BAI and the
Mustang Subsidiaries to promptly respond to notices or inquiries by the
Internal Revenue service and other taxing authorities after consultation
with Seller regarding such matters.
3.6. Accounts Receivable. All accounts receivable reflected on the
Recent Balance Sheet represent arm's length sales actually made in the
ordinary course of business. Schedule 3.6 contains an aged schedule of
accounts receivable included in the Recent Balance Sheet. The reserve for
doubtful accounts contained in the Recent Balance Sheet is adequate taking
into account information known through the date hereof.
3.7. Inventory. Except as set forth in Schedule 3.7, all inventory of
the Mustang Subsidiaries is located at the Facilities of the Mustang
Subsidiaries.
3.8. Absence of Certain Changes. Except as and to the extent set forth
in Schedule 3.8, since June 30, 1997 there has not been:
3.8.(a) No Material Adverse Change. Any material adverse change
in the business or financial condition of BAI or any Mustang Subsidiary;
3.8.(b) No Damage. Any material loss, damage or destruction,
whether covered by insurance or not, affecting BAI's or any Mustang
Subsidiary's business or properties;
3.8.(c) No Increase in Compensation. Any increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of BAI or any Mustang Subsidiary (including, without
limitation, any increase or change pursuant to any bonus, pension, profit
sharing, retirement or other plan or commitment), or any bonus or other
employee benefit granted, made or accrued, except for normal wage and
salary increases consistent with past practice;
3.8.(d) No Labor Disputes. Any labor dispute or disturbance,
other than routine individual grievances which are not material to the
business, financial condition or results of operations of BAI or any
Mustang Subsidiary.
3.8.(e) No Commitments. Any commitment or transaction by BAI or
any Mustang Subsidiary (including, without limitation, any borrowing or
capital expenditure) other than in the ordinary course of business
consistent with past practice and the transactions contemplated by this
Agreement;
3.8.(f) No Dividends. Except as set forth in Schedule 3.8 (f),
any declaration, setting aside, or payment of any dividend or any other
distribution in respect of BAI's or any Mustang Subsidiary's or Former
Subsidiary's capital stock; any redemption, purchase or other acquisition
by BAI or any Mustang Subsidiary of any capital stock of BAI or any
Mustang Subsidiary, or any security relating thereto; or any other
payment to Seller or any Mustang Subsidiary or any Former Subsidiary (but
management fees at the rate of $20,000 per month in the aggregate have
and will continue through September to be paid to Seller by BAI and the
Mustang Subsidiaries consistent with past practice);
3.8.(g) No Disposition of Property. Any sale, lease or other
transfer or disposition of any properties or assets of BAI or any Mustang
Subsidiary, except in the ordinary course of business or in connection
with the transactions contemplated by this Agreement;
3.8.(h) No Indebtedness. Any indebtedness for borrowed money
incurred, assumed or guaranteed by BAI or any Mustang Subsidiary except
for additional advances in the ordinary course and consistent with past
practices pursuant to loan agreements existing on June 30, 1997;
3.8.(i) No Liens. Any mortgage, pledge, lien or encumbrance made
on any of the properties or assets of BAI or any Mustang Subsidiary,
except (i) liens for current property taxes not yet due and payable, (ii)
liens imposed by law and incurred in the ordinary course of business for
obligations not yet due to carriers, warehousemen, laborers, materialmen
and the like, (iii) liens in respect of pledges or deposits under
workers' compensation laws, or (iv) liens created in the ordinary course
of business;
3.8.(j) No Amendment of Contracts. Any entering into, amendment
or termination by BAI or any Mustang Subsidiary of any contract, or any
waiver of material rights thereunder, other than in the ordinary course
of business;
3.8.(k) Loans and Advances. Except for the extension of credit to
customers in the ordinary course of business consistent with past
practice, any loan or advance (other than advances to employees in the
ordinary course of business for travel and entertainment in accordance
with past practice) by BAI or any Mustang Subsidiary to any person
including, but not limited to, any Affiliate (for purposes of this
Agreement, the term "Affiliate" shall mean and include Seller, directors
and officers of BAI, any Mustang Subsidiary or Former Subsidiary; the
spouse of any such person; any person who would be the heir or descendant
of any such person if he or she were not living; and any entity in which
any of the foregoing has a direct or indirect interest, except through
ownership of less than 5% of the outstanding shares of any entity whose
securities are listed on a national securities exchange or traded in the
national over-the-counter market);
3.8.(l) Credit. Any grant of credit to any customer or
distributor of BAI or any Mustang Subsidiary on terms or in amounts more
favorable than those which have been extended to such customer or
distributor in the past, any other change in the terms of any credit
heretofore extended, or any other change of BAI's or any Mustang
Subsidiary's policies or practices with respect to the granting of
credit; or
3.8.(m) No Unusual Events. Any other material event or condition
not in the ordinary course of business of BAI or any Mustang Subsidiary.
3.9. Absence of Undisclosed Liabilities. Except as and to the extent
specifically disclosed in the Recent Balance Sheet, or in Schedule 3.9, BAI
and Mustang Subsidiaries do not have any liabilities, commitments or
obligations (secured or unsecured, and whether accrued, absolute, contingent,
direct, indirect or otherwise), including such which are attributable to
Former Subsidiaries, other than commercial liabilities and obligations
incurred since the date of the Recent Balance Sheet in the ordinary course of
business and consistent with past practice and none of which has or will have
a material adverse effect on the business, financial condition or results of
operations of BAI and Subsidiaries. Except as and to the extent described in
the Recent Balance Sheet or in Schedule 3.9, neither BAI nor any Mustang
Subsidiary nor Seller have knowledge of (i) any factual basis for the
assertion against BAI or any Mustang Subsidiary or any Former Subsidiary of
any liability or (ii) circumstances, conditions, happenings, events or
arrangements, contractual or otherwise, which may give rise to liabilities,
including such which relate to Former Subsidiaries, except commercial
liabilities and obligations incurred in the ordinary course of BAI's and
Mustang Subsidiaries' business and consistent with past practice.
3.10. No Litigation. Except as set forth in Schedule 3.10, there is
no action, suit, arbitration, proceeding, investigation or inquiry, whether
civil, criminal or administrative ("Litigation"), pending or, to the knowledge
of Seller, threatened against BAI or any Mustang Subsidiary, their directors
(in such capacity), their business or any of their assets; nor does Seller
know, or have grounds to know, of any basis for any Litigation. Schedule 3.10
also identifies all Litigation to which BAI or any of its Mustang Subsidiaries
or any of its directors (in such capacity) have been parties since 1992.
Except as set forth in Schedule 3.10, neither BAI nor any Mustang Subsidiary
nor their business or assets are subject to any order of any Government
Entity. Schedule 3.10 contains an accurate description of all product
liability claims and similar litigation relating to products manufactured or
sold, or services rendered, which are presently pending or which to Seller's
knowledge are threatened, or which have been asserted or commenced against BAI
or any Mustang Subsidiary (or their predecessors in interest) within the last
ten (10) years, in which a party thereto either requests injunctive relief or
alleges damages in excess of $10,000 (whether or not covered by insurance).
3.11. Compliance With Laws and Orders.
3.11.(a) Compliance. Except as set forth in Schedule 3.11.(a), to
the knowledge of Seller, BAI and Mustang Subsidiaries are in compliance
with all applicable Laws and Orders, including, without limitation, those
applicable to discrimination in employment, occupational safety and
health, trade practices, competition and pricing, product warranties,
zoning, building and sanitation, employment, retirement and labor
relations, product advertising and the Environmental Laws as hereinafter
defined. Except as set forth in Schedule 3.11.(a), BAI and Mustang
Subsidiaries have not received notice of any violation or alleged
violation of, and to Seller's knowledge are subject to no liability for
past or continuing violation of, any Laws or Orders. All reports and
returns required to be filed by BAI or any Mustang Subsidiary with any
Government Entity have been filed, and were accurate and complete in all
material respects when filed. Without limiting the generality of the
foregoing:
(i) BAI and Mustang Subsidiaries have made all required
payments to their unemployment compensation reserve accounts with
the appropriate governmental departments of the states where they
are required to maintain such accounts, and each of such accounts
has a positive balance.
(ii) BAI and Mustang Subsidiaries have delivered
to Buyer copies of all reports of BAI and Mustang Subsidiaries for
the past five (5) years required under the federal Occupational
Safety and Health Act of 1970, as amended, and under all other
applicable health and safety laws and regulations. The
deficiencies, if any, noted on such reports have been corrected.
3.11.(b) Licenses and Permits. BAI and Mustang Subsidiaries have
all licenses, permits, approvals, authorizations and consents of all
Government Entities and all certification organizations required for the
conduct of their business (as presently conducted). All such licenses,
permits, approvals, authorizations and consents are described in Schedule
3.11.(b), are in full force and effect and will not be affected or made
subject to loss, limitation or any obligation to reapply as a result of
the transactions contemplated hereby. Except as set forth in Schedule
3.11.(b), BAI and Mustang Subsidiaries are and have been in compliance
with all such material permits and licenses, approvals, authorizations
and consents. The foregoing notwithstanding, the failure to have a
particular license, permit, approval, authorization or consent or the
failure to comply with the same shall not be deemed to be a breach of the
representation in this Section 3.11.(b) if the failure has no material
adverse consequence.
3.11.(c) Environmental Matters. The applicable Laws relating to
pollution or protection of the environment, including Laws relating to
emissions, discharges, generation, storage, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic,
hazardous or petroleum or petroleum-based substances or wastes ("Waste")
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Waste including, without
limitation, the Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), as amended, and their state and local counterparts are herein
collectively referred to as the "Environmental Laws". Without limiting
the generality of the foregoing provisions of this Section 3.11, BAI and
Mustang Subsidiaries are to the best of Seller's knowledge in full
compliance with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulations,
code, plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder. Except as set forth
in Schedule 3.11.(c), to the best of Seller's knowledge there is no
Litigation nor any demand, claim, hearing or notice of violation pending
or threatened against BAI or any Mustang Subsidiary relating in any way
to the Environmental Laws or any Order issued, entered, promulgated or
approved thereunder. Except as set forth in Schedule 3.11.(c), to the
best of Seller's knowledge, there are no past or present events,
conditions, circumstances, activities, practices, incidents, actions or
omissions related to the operation of BAI and Mustang Subsidiaries or the
condition of the Real Property which may (as to the BAI and Mustang
Subsidiaries) interfere with or prevent compliance or continued
compliance with the Environmental Laws or with any Order issued, entered,
promulgated or approved thereunder, or which may give rise to any
liability for BAI or Mustang Subsidiaries, including, without limitation,
liability under CERCLA or similar state or local Laws, or otherwise form
the basis of any Litigation, hearing, notice of violation or
investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling,
or the emission, discharge, release or threatened release into the
environment, of any Waste.
3.11.(d) Environmental Liability With Respect to Property Other
Than the Real Property. Notwithstanding Section 3.11.(c) or any other
provision of this Section 3, BAI and the Mustang Subsidiaries will incur
no liability, loss, cost, expense (including attorneys' fees) or other
obligations under any Environmental Laws for investigation, cleanup or
remediation of any property other than the Real Property as a result of
past or present events, conditions, circumstances, activities, practices,
incidents, actions or omissions prior to the Closing Date.
3.12. Title to and Condition of Properties.
3.12.(a) Marketable Title. BAI and Mustang Subsidiaries have good
and marketable title to all of their assets, business and properties,
including, without limitation, all such properties (tangible and
intangible) reflected in the Recent Balance Sheet, except for assets and
property disposed of in the ordinary course of business since June 30,
1997, free and clear of all mortgages, liens, (statutory or otherwise)
security interests, claims, pledges, licenses, equities, options,
conditional sales contracts, assessments, levies, charges or encumbrances
of any nature whatsoever (collectively, "Liens"), except: (i) those Liens
described in Schedule 3.12, (ii) in the case of Real Property, Liens for
taxes not yet due or which are being contested in good faith by
appropriate proceedings (and which have been sufficiently accrued or
reserved against in the Recent Balance Sheet), municipal and zoning
ordinances and easements for public utilities, none of which interfere
with the use of the Real Property as currently utilized, and liens
imposed by law and incurred in the ordinary course of business for
obligations not yet due or delinquent, and (iii) with respect to other
property, Liens described in Schedule 3.12 arising in connection with
existing bank lines of credit and the Group Facilities Agreement.
3.12.(b) Condition. Except as disclosed in Schedule 3.12.(b), (i)
the equipment and other tangible assets (excepting buildings) used by
Mustang Subsidiaries in the conduct of their business are, in all
material respects, adequate and suitable for the purposes for which they
are currently being used, and (ii) the Real Estate is in good operating
condition and repair, ordinary wear and tear excepted (and taking into
account their age), and has no material structural defects or material
defects affecting the plumbing, electrical, sewerage, or heating,
ventilating or air conditioning systems.
3.12.(c) Real Property. Schedule 3.12.(c) sets forth all real
property owned, used or occupied by BAI and Mustang Subsidiaries (the
"Real Property"), including a description of all land, and all
encumbrances, easements or rights of way of record (or, if not of record,
of which BAI and Subsidiaries have notice or knowledge) granted on or
appurtenant to or otherwise affecting such Real Property, the zoning
classification thereof, and all plants, buildings or other structures
located thereon. To the extent required under state or local law, there
are in effect duly issued certificates of occupancy permitting the Real
Property and improvements located thereon to be legally used and occupied
as the same are now constituted. No public improvements have been
commenced and to Seller's knowledge none are planned which in either case
may result in special assessments against any Real Property owned by
Mustang Subsidiaries. Seller has no notice or knowledge of any (i)
planned or proposed increase in assessed valuations of any Real Property,
(ii) order requiring repair, alteration, or correction of any existing
condition affecting any Real Property or the systems or improvements
thereat, (iii) underground storage tanks on any Real Property or (iv)
work that has been done or labor or materials that has or have been
furnished to any Real Property during the period of six (6) months
immediately preceding the date of this Agreement for which liens could be
filed against any of the Real Property.
3.12.(d) No Condemnation or Expropriation. Neither the whole nor
any portion of the property or any other assets of BAI or Mustang
Subsidiaries is subject to any Order to be sold or is being condemned,
expropriated or otherwise taken by any Government Entity with or without
payment of compensation therefor, nor to the best of Seller's knowledge
has any such condemnation, expropriation or taking been proposed.
3.13. Insurance. Set forth in Schedule 3.13 is a complete and
accurate list and description of all policies of fire, liability, product
liability, workers compensation, health and other forms of insurance presently
in effect with respect to the business and properties of BAI and Mustang
Subsidiaries, true and correct copies of which have heretofore been delivered
to Buyer. Schedule 3.13 includes the carrier, the description of coverage,
the limits of coverage, retention or deductible amounts, amount of annual
premiums, date of expiration and the date through which premiums have been
paid with respect to each such policy, and any pending claims in excess of
$10,000. Except as set forth in Schedule 3.13, no such policy (nor any
previous policy) provides for or is subject to any currently enforceable
retroactive rate or premium adjustment, loss sharing arrangement or other
actual or contingent liability arising wholly or partially out of events
arising prior to the date hereof. Schedule 3.13 indicates each policy as to
which (a) the coverage limit has been reached or (b) the total incurred losses
to date equal 75% or more of the coverage limit. No notice of cancellation or
termination has been received with respect to any such policy, and Seller has
no knowledge of any act or omission of BAI or any Mustang Subsidiary which
could result in cancellation of any such policy prior to its scheduled
expiration date. BAI and Mustang Subsidiaries have not been refused any
insurance with respect to any aspect of the operations of the business nor has
their coverage been limited by any insurance carrier to which they have
applied for insurance or with which they have carried insurance during the
last three years. Except as set forth on Schedule 3.13, since 1987 all
products liability and general liability policies maintained by or for the
benefit of BAI or the Mustang Subsidiaries have been "occurrence" policies and
not "claims made" policies. There is no claim by BAI or the Mustang
Subsidiaries, pending under any such policies as to which coverage has been
denied or disputed by the underwriters of such policies. BAI and the Mustang
Subsidiaries have not received any written notice from or on behalf of any
insurance carrier issuing any such policy that insurance rates therefor will
hereafter be substantially increased (except to the extent that insurance
rates may be increased for all similarly situated risks) or that there will
hereafter be a cancellation or an increase in a deductible (or an increase in
premiums in order to maintain an existing deductible) or nonrenewal of any
such policy. All of such insurance policies are in full force and effect.
Neither Seller, nor BAI nor Mustang Subsidiaries are in default with respect
to their obligations under any such insurance policies.
3.14. Contracts and Commitments.
3.14.(a) Real Property Leases. Except as set forth in Schedule
3.12.(c), BAI and Mustang Subsidiaries have no leases of real property.
3.14.(b) Personal Property Leases. Except as set forth in
Schedule 3.14.(b), BAI and Mustang Subsidiaries have no leases of
personal property other than automobile leases involving consideration or
other expenditure in excess of $10,000 or involving performance over a
period of more than 24 months. Schedule 3.14.(b) includes a list of
vehicle leases.
3.14.(c) Purchase Commitments. Except as set forth in Schedule
3.14.(c), BAI and Mustang Subsidiaries have no purchase commitments for
inventory items or supplies that individually exceed $50,000.
3.14.(d) Sales Commitments. BAI and Mustang Subsidiaries have no
sales accepted open orders to customers or distributors which aggregate
in excess of $500,000 to any one customer or distributor (or group of
affiliated customers or distributors). BAI and Mustang Subsidiaries have
no sales contracts or commitments except those made in the ordinary
course of business, at arm's length.
3.14.(e) Contracts With Affiliates and Certain Others. Except as
set forth on Schedule 3.14(e), BAI and Mustang Subsidiaries have no
agreement, understanding, contract or commitment (written or oral) with
any Affiliate or any employee, agent, consultant, distributor, dealer or
franchisee that is not cancelable by BAI or Mustang Subsidiaries on
notice of not longer than 30 days without liability, penalty or premium
of any nature or kind whatsoever.
3.14.(f) Powers of Attorney. Except as set forth in Schedule
3.14.(f), BAI and Mustang Subsidiaries have not given a power of
attorney, which is currently in effect, to any person, firm or
corporation for any purpose whatsoever, except to customs brokers in the
ordinary course of business.
3.14.(g) Collective Bargaining Agreements. Except as set forth in
Schedule 3.14.(g), BAI and Mustang Subsidiaries are not a party to any
collective bargaining agreements with any unions, guilds, shop committees
or other collective bargaining groups. Copies of all such agreements
have heretofore been delivered to Buyer.
3.14.(h) Loan Agreements. Except as set forth in Schedule
3.14.(h), BAI and Mustang Subsidiaries are not obligated under any loan
agreement, promissory note, letter of credit, or other evidence of
indebtedness as a signatory, guarantor or otherwise.
3.14.(i) Guarantees. Except as disclosed on Schedule 3.14.(i),
BAI and Mustang Subsidiaries have not guaranteed the payment or
performance of any person, firm or corporation, agreed to indemnify any
person or act as a surety, or otherwise agreed to be contingently or
secondarily liable for the obligations of any person.
3.14.(j) Contracts Subject to Renegotiation. BAI and Mustang
Subsidiaries are not a party to any contract with any governmental body
which is subject to renegotiation.
3.14.(k) Burdensome or Restrictive Agreements. BAI and Mustang
Subsidiaries are not a party to nor are they bound by any agreement,
deed, lease or other instrument which is so burdensome as to materially
affect or impair the operation of BAI or any Subsidiary. Without
limiting the generality of the foregoing, BAI and Mustang Subsidiaries
are not a party to nor are they bound by any agreement requiring BAI or
Mustang Subsidiaries to assign any interest in any trade secret or
proprietary information, or prohibiting or restricting BAI or Mustang
Subsidiaries from competing in any business or geographical area or
soliciting customers or otherwise restricting it from carrying on its
business anywhere in the world, except as disclosed in Schedule 3.14(k).
3.14.(1) Other Material Contracts. BAI and Mustang Subsidiaries
have no lease, contract or commitment of any nature involving
consideration or other expenditure in excess of $50,000, or involving
performance over a period of more than 12 months, or which is otherwise
individually material to the operations of BAI or Mustang Subsidiaries,
except as described in Schedule 3.14.(1) or in any other Schedule. This
section shall not be read to require disclosure of a contract or
commitment specifically covered by another section below the dollar
amount provided for disclosure in such other section.
3.14.(m) No Default. To the best of Seller's knowledge, BAI and
Mustang Subsidiaries are not in material default under any lease,
contract or commitment, nor has any event or omission occurred which
through the passage of time or the giving of notice, or both, would
constitute a default thereunder or cause the acceleration of any of BAI's
or Mustang Subsidiaries' material obligations or results in the creation
of any Lien on any of the assets owned, used or occupied by BAI or
Mustang Subsidiaries. To the best of Seller's knowledge, no third party
is in default under any material lease, contract or commitment to which
BAI or any Mustang Subsidiary is a party, nor has any event or omission
occurred which, through the passage of time or the giving of notice, or
both, would constitute a default thereunder or give rise to an automatic
termination, or the right of discretionary termination, thereof.
3.15. Labor Matters. Except as set forth in Schedule 3.15, within
the last five years BAI and Mustang Subsidiaries have not experienced any
labor disputes, union organization attempts or any work stoppage due to labor
disagreements in connection with its business. Except to the extent set forth
in Schedule 3.15, to the best of Seller's knowledge: (a) BAI and Mustang
Subsidiaries are in compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice; (b) there is no unfair
labor practice charge or complaint against BAI or Mustang Subsidiaries pending
or threatened; (c) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending or threatened against
BAI or Mustang Subsidiaries or affecting nor any secondary boycott with
respect to products of BAI or Mustang Subsidiaries; (d) no question concerning
representation has been raised or is threatened respecting the employees of
BAI or Mustang Subsidiaries; (e) no grievance which might have a material
adverse effect on BAI or Mustang Subsidiaries, nor any arbitration proceeding
arising out of or under collective bargaining agreements, is pending and no
such claim therefor exists; and (f) there are no administrative charges or
court complaints against BAI or any Mustang Subsidiary concerning alleged
employment discrimination or other employment related matters pending or
threatened before the U.S. Equal Employment Opportunity Commission or any
Government Entity.
3.16 Employee Benefit Plans.
3.16.(a) Disclosure. Schedule 3.16.(a) sets forth all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other
bonus, medical, dental, life, accident insurance, benefit, employee
welfare, disability, group insurance, stock purchase, stock option, stock
appreciation, stock bonus, executive or deferred compensation,
hospitalization and other similar fringe or employee benefit plans,
programs and arrangements, and any employment or consulting contracts,
"golden parachutes," collective bargaining agreements, severance
agreements or plans, vacation and sick leave plans, programs,
arrangements and policies, including, without limitation, all "employee
benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee manuals,
and all written or binding oral statements of policies, practices or
understandings relating to employment, which are provided to, for the
benefit of, or relate to, any persons ("Company Employees") employed by
BAI or any Mustang Subsidiary. The items described in the foregoing
sentence are hereinafter sometimes referred to collectively as "Employee
Plans/Agreements," and each individually as an "Employee Plan/Agreement."
True and correct copies of all the Employee Plans/Agreements, including
all amendments thereto, have heretofore been provided to Buyer. Each of
the Employee Plans/Agreements is identified on Schedule 3.16.(a), to the
extent applicable, as one or more of the following: an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA), a "defined benefit
plan" (as defined in Section 414 of the Internal Revenue Code of 1986, as
amended (the "Code")), an "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA), and/or as a plan intended to be qualified under
Section 401 of the Code. No Employee Plan/Agreement is a "multiemployer
plan" (as defined in Section 4001 of ERISA), nor a plan subject to the
provisions of Title IV of ERISA, and BAI, Former Subsidiaries, Mustang
Subsidiaries, and any entity listed in Schedule 3.16 (d) have never
contributed nor been obligated to contribute to any such plan.
3.16.(b) Prohibited Transactions, etc. There have been no
"prohibited transactions" within the meaning of Section 406 or 407 of
ERISA or Section 4975 of the Code for which a statutory or administrative
exemption does not exist with respect to any Employee Plan/Agreement, and
no event or omission has occurred in connection with which BAI or any
Mustang Subsidiary or any of their assets or any Employee Plan/Agreement,
directly or indirectly, could be subject to any material liability under
ERISA, the Code or any other Law or order applicable to any Employee
Plan/Agreement, or under any agreement, instrument, Law or Order pursuant
to or under which BAI or any Mustang Subsidiary has agreed to indemnify
or is required to indemnify any person against liability incurred under
any such Law or Order.
3.16.(c) Full Funding. The funds available under each Employee
Plan/Agreement which is intended to be a funded plan exceed the amounts
required to be paid, or which would be required to be paid if such
Employee Plan/Agreement were terminated, on account of rights vested or
accrued as of the Closing Date (using the actuarial methods and
assumptions then used by BAI's and Mustang Subsidiaries' actuaries in
connection with the funding of such Employee Plan/Agreement).
3.16.(d) Controlled Group; Affiliated Service Group; Leased
Employees. Except as described in Schedule 3.16.(d), BAI and Mustang
Subsidiaries have not and never have been a member of a controlled group
of corporations as defined in Section 414(b) of the Code or in common
control with any unincorporated trade or business as determined under
Section 414(c) of the Code. BAI and Mustang Subsidiaries are not and
never have been a member of an "affiliated service group" within the
meaning of Section 414(m) of the Code. There are not and never have been
any leased employees within the meaning of Section 414(n) of the Code who
perform services for BAI or any Mustang Subsidiary, and no individual"
are expected to become leased employees with the passage of time.
3.16.(e) Payments and Compliance. With respect to each Employee
Plan/Agreement, in all material respects, (i) all payments due from BAI
or any Mustang Subsidiary to date have been made and all amounts properly
accrued to date as liabilities of BAI or any Mustang Subsidiary which
have not been paid have been properly recorded on the books of BAI and
Mustang Subsidiaries and are reflected in the Recent Balance Sheet; (ii)
BAI and Mustang Subsidiaries have complied with, and each such Employee
Plan/Agreement conforms in form and operation to, all applicable laws and
regulations, including but not limited to ERISA and the Code, in all
material respects and all reports and information relating to such
Employee Plan/Agreement required to be filed with any governmental entity
have been timely filed; (iii) all reports and information relating to
each such Employee Plan/Agreement required to be disclosed or provided to
participants or their beneficiaries have been timely disclosed or
provided; (iv) each such Employee Plan/Agreement which is intended to
qualify under Section 401 of the Code has received a favorable
determination letter from the Internal Revenue Service with respect to
such qualification, its related trust has been determined to be exempt
from taxation under Section 501(a) of the Code, and nothing has occurred
since the date of such letter that has or is likely to adversely affect
such qualification or exemption; (iv) there are no actions, suits or
claims pending (other than routine claims for benefits) or threatened
with respect to such Employee Plan/Agreement or against the assets of
such Employee Plan/Agreement; and (v) no Employee Plan/Agreement is a
plan which is established and maintained outside the United States
primarily for the benefit of individuals substantially all of whom are
nonresident aliens.
3.16.(f) Post-Retirement Benefits. No Employee Plan/Agreement
provides benefits, including, without limitation, death or medical
benefits (whether or not insured) with respect to current or former
employees of BAI or any Mustang Subsidiary beyond their retirement or
other termination of service other than (i) coverage mandated by
applicable law, (ii) death or retirement benefits under any Employee
Plan/Agreement that is an employee pension benefit plan, (iii) deferred
compensation benefits accrued as liabilities on the books of BAI or any
Mustang Subsidiary (including the Recent Balance Sheet), (iv) disability
benefits under any Employee Plan/Agreement that is an employee welfare
benefit plan and which have been fully provided for by insurance or
otherwise or (v) benefits in the nature of severance pay.
3.16.(g) No Triggering of Obligations. Except as set forth on
Schedule 3.16(g), the consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee of BAI
or any Mustang Subsidiary to severance pay, unemployment compensation or
any other payment, except as expressly provided in this Agreement, (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee or former employee or (iii) result
in any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available.
3.16.(h) Delivery of Documents. There has been delivered to
Buyer, with respect to each Employee Plan/Agreement:
(i) a copy of the annual report, if required under ERISA,
with respect to each such Employee Plan/Agreement for the last two
years;
(ii) a copy of the summary plan description,
together with each summary of material modifications, required under
ERISA with respect to such Employee Plan/Agreement, all material
employee communications relating to such Employee Plan/Agreement,
and, unless the Employee Plan/Agreement is embodied entirely in an
insurance policy to which BAI or any Mustang Subsidiary is a party,
a true and complete copy of such Employee Plan/Agreement;
(iii) if the Employee Plan/Agreement is funded
through a trust or any third party funding vehicle (other than an
insurance policy), a copy of the trust or other funding agreement
and the latest financial statements thereof; and
(iv) the most recent determination letter
received from the Internal Revenue Service with respect to each
Employee Plan/Agreement that is intended to be a "qualified plan"
under Section 401 of the Code.
With respect to each Employee Plan/Agreement for which an annual
report has been filed and delivered to Buyer pursuant to clause (i)
of this Section 3.16.(h), no material adverse change has occurred
with respect to the matters covered by the latest such annual report
since the date thereof.
3.16.(i) Future Commitments. BAI and Mustang Subsidiaries have no
announced plan or legally binding commitment to create any additional
Employee Plans/Agreements or to amend or modify any existing Employee
Plan/Agreement.
3.17. Employment Compensation. Schedule 3.17 contains a true and
correct list of all employees to whom BAI or any Mustang Subsidiary is paying
compensation, including bonuses and incentives, at an annual rate in excess of
Forty-Five Thousand ($45,000) Dollars for services rendered or otherwise; and
in the case of salaried employees such list identifies the current annual rate
of compensation for each employee and in the case of hourly or commission
employees identifies certain reasonable ranges of rates and the number of
employees falling within each such range. There are no agreements or
understandings with employees of BAI and Subsidiaries which would entitle such
employees to bonuses or other forms of additional compensation as a result of
the completion of the transactions provided for herein ("success bonus"),
except for such that are identified in Schedule 3.17 which Seller hereby
agrees to assume and discharge without any cost or expense to BAI or the
Mustang Subsidiaries. Seller will assume no liability for payments pursuant
to agreements with key employees specifically identified in Schedule 3.17
(other than Don Kalkman) that require a specified prior notice be given before
the employment of such persons can be terminated. Seller shall be responsible
for all termination pay obligations to Don Kalkman.
3.18. Trade Rights. Schedule 3.18 lists all Trade Rights of the
type described in items (i), (iii), (iv) and (vi) (as defined below) in which
BAI or any Mustang Subsidiary now has any interest, specifying whether such
Trade Rights are owned, controlled, used or held (under license or otherwise)
by BAI or any Mustang Subsidiary, and also indicating which of such Trade
Rights are registered. To Seller's knowledge, all Trade Rights shown as
registered in Schedule 3.18 have been duly registered and all registrations
and applications noted as pending have been duly filed. To the best of
Seller's knowledge, all annuity, maintenance, renewal and other fees relating
to Trade Rights registrations or applications are current. To the best of
Seller's knowledge, BAI and the Mustang Subsidiaries are not infringing and
have not infringed any Trade Rights of another in the operation of BAI's and
the Mustang Subsidiaries' business, nor is there any litigation, pending or
threatened to challenge BAI's or any Mustang Subsidiaries' right, title and
interest in any Trade Rights. To the best of Seller's knowledge, no other
person is infringing the Trade Rights of BAI or the Mustang Subsidiaries, nor
is there any litigation, pending or threatened to preclude others from
infringing any Trade Rights to BAI and the Mustang Subsidiaries. BAI and
Mustang Subsidiaries do not pay any royalties or other consideration for the
right to use any Trade Rights of others. As used herein, the term "Trade
Rights" shall mean and include: (i) all trademark rights, business
identifiers, trade dress, service marks, trade names and brand names, all
registrations thereof and applications therefor and all goodwill associated
with the foregoing; (ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the foregoing and the
underlying works of authorship; (iii) all patents and patent applications, and
all international proprietary rights associated therewith; (iv) all contracts
or agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; (v) all inventions, mask
works and mask work registrations, know-how, discoveries, improvements,
designs, trade secrets, shop and royalty rights, employee covenants and
agreements respecting intellectual property and non-competition; and (vi) all
claims for infringement or breach of any of the foregoing.
3.19. Major Customers and Suppliers.
3.19.(a) Major Customers. Schedule 3.19.(a) contains a list of
the ten (10) largest customers, including dealers and distributors, of
BAI and Mustang Subsidiaries for each of the two (2) most recent fiscal
years (determined on the basis of the total dollar amount of net sales)
showing the total dollar amount of net sales to each such customer during
each such year. Schedule 3.19.(a) also identifies any dealers or
distributors who have given notice that they intend to terminate their
dealer or distributor agreement.
3.19.(b) Major Suppliers. Schedule 3.19.(b) contains a list of
the ten (10) largest suppliers to BAI and Mustang Subsidiaries for each
of the two (2) most recent fiscal years (determined on the basis of the
total dollar amount of purchases) showing the total dollar amount of
purchases from each such supplier during each such year.
3.19.(c) Dealers and Distributors. Schedule 3.19.(c) contains a
list by product line of all sales representatives, dealers, distributors
and franchisees of BAI and Mustang Subsidiaries, together with
representative copies of all sales representative, dealer, distributor
and franchise contracts and policy statements, and a description of all
substantial modifications or exceptions.
3.20. Product Warranty and Product Liability. Schedule 3.20
contains a true, correct and complete copy of BAI's and Mustang Subsidiaries'
standard warranty or warranties for sales of Products (as defined below) and,
except as stated therein, there are no presently outstanding warranties,
commitments or obligations with customers with respect to the return, repair
or replacement of Products. Schedule 3.20 sets forth the estimated aggregate
annual cost to BAI and Subsidiaries of performing warranty obligations for
customers for each of the three (3) preceding fiscal years and the current
fiscal year to the date of the Recent Balance Sheet. Except as disclosed in
Schedule 3.20, none of the Products has been the subject of any replacement,
field fix, retrofit, modification or recall campaign (collectively "recall
campaign") related to safety considerations. To Seller's knowledge, no facts
or conditions exist which could reasonably be expected to result in a Product
recall campaign related to safety considerations. To Seller's knowledge, no
facts or conditions exist which could result in a Product recall campaign for
reasons other than safety considerations where the costs associated with any
single recall campaign by model or feature will exceed Two Hundred Seventy-
Five Thousand ($275,000) Dollars. For this purpose, this representation shall
be deemed to be breached if such a recall campaign for non-safety
considerations is required and the costs associated with such recall campaign
exceed Two Hundred Seventy-Five Thousand ($275,000) Dollars. The Products
currently manufactured by Mustang Manufacturing Company, Inc. have been
designed and manufactured so as to meet and comply with those governmental
standards and specifications currently in effect which are identified in
Schedule 3.11.(b). As used in this Section 3.20, the term "Products" means
any and all products currently or at any time during the previous eight (8)
years manufactured, distributed or sold by BAI or any Mustang Subsidiary under
any brand name or mark. The phrase "facts and conditions" as used in this
Section 3.20 shall mean a history of inquiries, failures or other problems
which present a risk of a product recall of such magnitude that Seller could
reasonably be expected to have disclosed the same. The parties have a
separate agreement which is set forth in Section 5.15 on Model 2040 on the
issue of boom cracking.
3.21. Bank Accounts. Schedule 3.21 sets forth the names and
location" of all banks, trust companies, savings and loan associations and
other financial institutions at which BAI or any Mustang Subsidiary maintains
a safe deposit box, lock box or checking, savings, custodial or other account
of any nature, the type and number of each such account and the signatories
therefore, a description of any compensating balance arrangements, and the
names of all persons authorized to draw thereon, make withdrawals therefrom or
have access thereto.
3.22. Affiliates' Relationships to BAI and Mustang Subsidiaries.
3.22.(a) Contracts With Affiliates. All leases, contracts,
agreements or other arrangements between BAI or any Subsidiary and any
Affiliate are described on Schedule 3.22.(a).
3.22.(b) No Adverse Interests. No Affiliate has any direct or
indirect interest in (i) any entity which does business with BAI or any
Mustang Subsidiary or is competitive with their business, or (ii) any
property, asset or right which is used by BAI or any Mustang Subsidiary
in the conduct of its business.
3.22.(c) Obligations. All obligations of any Affiliate to BAI or
any Subsidiary, and all obligations of BAI or any Subsidiary to any
Affiliate, are listed on Schedule 3.22.(c). All obligations of BAI and
Subsidiaries to Seller or its affiliates shall be contributed to capital
on or prior to the Closing Date.
3.23. No Brokers or Finders. Neither BAI nor any Mustang
Subsidiary nor any of their directors, officers, employees, Seller or agents
have retained, employed or used any broker or finder in connection with the
transaction provided for herein or in connection with the negotiation thereof.
3.24. Liabilities and Claims With Respect to Former Subsidiaries.
Buyer, BAI and Mustang Subsidiaries will incur no liability, cost, expense or
obligation of any nature whatsoever, including attorneys' fees, other than
liabilities recorded on the Recent Balance Sheet, with respect to any
liability, obligation or claim of any nature whatsoever related to a Former
Subsidiary, including such as relate to the operation of the business of a
Former Subsidiary, the property of a Former Subsidiary, the operations of a
Former Subsidiary as they relate to compliance with laws and regulations
(including Environmental Laws) or the tax obligations of a Former Subsidiary.
The intention of this provision is to provide Buyer with total indemnification
without conditions, limitations or qualifications of any kind, and
notwithstanding any disclosure made in the Disclosure Schedule or otherwise,
for liabilities, costs and expenses, and obligations of any kind or nature
which are attributable to a Former Subsidiary.
3.25. Disclosure. No representation or warranty by Seller in this
Agreement, nor any statement, certificate, schedule, document or exhibit
hereto furnished or to be furnished by or on behalf of Seller pursuant to this
Agreement or in connection with transactions contemplated hereby, contains or
shall contain any untrue statement of material fact or omits or shall omit a
material fact necessary to make the statements contained therein not
misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Seller, each
of which is true and correct on the date hereof, shall remain true and correct
to and including the Closing Date, shall be unaffected by any investigation
heretofore or hereafter made by Seller or any notice to Seller, and shall
survive the Closing of the transactions provided for herein.
4.1. Corporate.
4.1.(a) Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Wisconsin.
4.1.(b) Corporate Power. Buyer has all requisite corporate power
to enter into this Agreement and the other documents and instruments to
be executed and delivered by Buyer and to carry out the transactions
contemplated hereby and thereby.
4.2. Authority. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Buyer pursuant
hereto and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of Buyer. No
other corporate act or proceeding on the part of Buyer or its shareholders is
necessary to authorize this Agreement or the other documents and instruments
to be executed and delivered by Buyer pursuant hereto or the consummation of
the transactions contemplated hereby and thereby. This Agreement constitutes,
and when executed and delivered, the other documents and instruments to be
executed and delivered by Buyer pursuant hereto will constitute, valid and
binding agreements of Buyer, enforceable in accordance with their respective
terms, except as such may be limited by bankruptcy, insolvency, reorganization
or other laws affecting creditors' rights generally, and by general equitable
principles.
4.3. No Brokers or Finders. Neither Buyer nor any of its directors,
officers, employees or agents have retained, employed or used any broker or
finder in connection with the transaction provided for herein or in connection
with the negotiation thereof.
4.4. Disclosure. No representation or warranty by Buyer in this
Agreement, nor any statement, certificate, schedule, document or exhibit
hereto furnished or to be furnished by or on behalf of Buyer pursuant to this
Agreement or in connection with transactions contemplated hereby, contains or
shall contain any untrue statement of material fact or omits or shall omit a
material fact necessary to make the statements contained therein not
misleading.
4.5. Investment Intent. The Shares are being acquired by Buyer for
investment only and not with the view to resale or other distribution.
4.6 No Wilful Withholding of Information by Buyer. Buyer has not
wilfully withheld information from Seller that a representation or warranty
made by Seller in this Agreement is untrue or incorrect in a material respect,
with the intent to later make a claim against Seller for indemnification based
upon a breach of such representation or warranty.
5. COVENANTS
5.1. Title Insurance. Not less than two days prior to the Closing,
Seller, at Buyer's expense, shall provide to Buyer a title insurance
commitment, issued by a title insurance company or companies satisfactory to
Buyer, agreeing to issue to Mustang Manufacturing Company, Inc. standard form
owner's policy of title insurance with respect to the Real Property, together
with a copy of each document to which reference is made in such commitment.
Such policy shall be standard ALTA Form 1992 owner's policy in the value of
$2,500,000, insuring good and marketable title thereto (expressly including
all easements and other appurtenances). The policy shall insure title in full
accordance with the representations and warranties set forth herein and shall
be subject only to such conditions and exceptions as shall be reasonably
acceptable to Buyer, and shall contain such endorsements as Buyer shall
reasonably request (including, but not limited to, an endorsement over rights
of creditors, if requested by Buyer). It is understood for this purpose that
the roadway easement identified in Book 118 page 75 must be addressed to
Buyer's reasonable satisfaction.
5.2. Survey. Not less than two days prior to the Closing, Seller, at
Buyer's expense, shall provide to Buyer an occurrence survey of the Real
Property, prepared in accordance with the 1992 minimum standard detail
requirements, ALTA/ASCM standards, including all Table A items, and pursuant
to the accuracy standards of an urban class survey, and detailing the legal
description, the perimeter boundaries, all improvements located thereon, all
easements and encroachments affecting the Real Property and such other matters
as may be reasonably requested by Buyer or the title insurance company,
containing a surveyor certificate reasonably acceptable to Buyer and the title
insurance company, and prepared by a registered land surveyor satisfactory to
Buyer. Such survey shall not disclose any encumbrances which have a material
adverse affect on the use or marketability of the Real Property, exclusive of
encumbrances other than the roadway easement which were noted in the
preliminary title commitment of Chicago Title Insurance Company dated prior to
Closing.
5.3. Environmental Remediation. At Seller's sole cost and expense,
Mustang Manufacturing Company, Inc. shall investigate, excavate and properly
dispose of contaminated soil in the following areas identified in the Eder and
Associates Report dated September, 1997, and any other areas where hazardous
substances are identified during such investigation or excavation ("Impacted
Areas"):
a. the area near GP-1 through GP-3;
b. the area near GP-6; and
c. the area near GP-7A.
All work will be performed in accordance with applicable laws and regulations,
which shall include obtaining written assurance, without adverse conditions or
restrictions on use or maintenance of the Real Property, from the Minnesota
Pollution Control Agency that the Impacted Areas have been fully remediated
and that no further action will be required. The consultant used shall be
reasonably acceptable to both parties. As to work performed prior to Closing:
(i) Seller will provide reasonable advance notice to Buyer of its activities
pursuant to this paragraph, and will allow Buyer's representatives access to
the site to observe such activities, (ii) Seller will consult with Buyer or
Buyer's counsel as investigation and remediation plans or reports are
developed, and (iii) Seller will provide Buyer with complete copies of all
drafts and final reports, notices, correspondence and other communications
with any governmental or regulatory authority regarding the matters addressed
in this Section. As to work performed after Closing, Buyer shall have the
same responsibilities as are assigned to Seller in (i), (ii) and (iii) above.
Seller shall promptly pay all costs and expenses related to actions
contemplated by this Section 5.3 within 30 days of receipt of notice of the
same from Mustang Manufacturing Company, Inc. or Buyer. The foregoing
notwithstanding, if the costs incurred by Seller pursuant to this Section
should exceed Seventy-Five Thousand ($75,000) Dollars, Buyer shall be
responsible for fifty percent (50%) of the costs in excess of Seventy-Five
Thousand ($75,000) Dollars.
5.4. Noncompetition; Confidentiality. Subject to the Closing, and as an
inducement to Buyer to execute this Agreement and complete the transactions
contemplated hereby, and in order to preserve the goodwill associated with the
business of BAI and Mustang Subsidiaries being acquired pursuant to this
Agreement, Seller hereby covenants and agrees as follows:
5.4.(a) Covenant Not to Compete. For a period of five years from
the Closing Date, Seller will not directly or indirectly:
(i) engage in, continue in or carry on any business which
competes with the Business or is substantially similar thereto,
including owning or controlling any financial interest in any
corporation, partnership, firm or other form of business
organization which is so engaged;
(ii) consult with, advise or assist in any way,
whether or not for consideration, any corporation, partnership, firm
or other business organization which is now or becomes a competitor
of BAI and Mustang Subsidiaries or Buyer in any aspect with respect
to the Business, including, but not limited to, advertising or
otherwise endorsing the products of any such competitor; soliciting
customers or otherwise serving as an intermediary for any such
competitor; loaning money or rendering any other form of financial
assistance to or engaging in any form of business transaction on
other than an arm's length basis with any such competitor;
(iii) offer employment to an employee of BAI or
Mustang Subsidiaries, other than Donald A. Kalkman, without the
prior written consent of Buyer; or
(iv) engage in any practice the purpose of which
is to evade the provisions of this covenant not to compete or to
commit any act which adversely affects the Business;
provided, however, that the foregoing shall not prohibit Seller's
Affiliates in South Africa from continuing to sell JCB skid steer
loaders and attachments therefor in Angola, Namibia, the Republic of
South Africa including Lesotho and Swaziland, Botswana, Malawi and
Madagascar or the ownership of securities of corporations which are
listed on a national securities exchange or traded in the national
over-the-counter market in an amount which shall not exceed 5% of
the outstanding shares of any such corporation. The parties agree
that the geographic scope of this covenant not to compete shall
extend worldwide. The parties agree that Buyer may sell, assign or
otherwise transfer this covenant not to compete, in whole or in
part, to any person, corporation, firm or entity that purchases all
or part of the business of BAI or any Subsidiary. In the event a
court of competent jurisdiction determines that the provisions of
this covenant not to compete are excessively broad as to duration,
geographical scope or activity, it is expressly agreed that this
covenant not to compete shall be construed so that the remaining
provisions shall not be affected, but shall remain in full force and
effect, and any such over broad provisions shall be deemed, without
further action on the part of any person, to be modified, amended
and/or limited, but only to the extent necessary to render the same
valid and enforceable in such jurisdiction.
5.4.(b) Covenant of Confidentiality. Seller shall not at any
time subsequent to the Closing, except as explicitly requested by Buyer
use or disclose any confidential information of or regarding BAI or
Mustang Subsidiaries or the Business in any manner or context that would
be potentially detrimental to BAI, Mustang Subsidiaries, the Business or
Buyer, except that without Buyer's permission or the permission of BAI or
any Mustang Subsidiary, Seller may use and disclose such information as
reasonably required in connection with Seller's accounting and stock
exchange requirements, its obligations to Governmental Entities and to
the Former Subsidiaries, with respect to Taxes, and in performance of its
obligations under this Agreement. For purposes hereof, "confidential
information" shall mean and include, without limitation, all Trade Rights
in which BAI or any Subsidiary has an interest, all customer lists and
customer information, and all other information concerning BAI's or
Subsidiaries' processes, apparatus, equipment, packaging, products,
marketing and distribution methods, not previously disclosed to the
public directly by BAI or any Subsidiary.
5.4.(c) Equitable Relief for Violations. Seller agree that the
provisions and restrictions contained in this Section 5.4 are necessary
to protect the legitimate continuing interests of Buyer in acquiring the
Shares, and that any violation or breach of these provisions will result
in irreparable injury to Buyer for which a remedy at law would be
inadequate and that, in addition to any relief at law which may be
available to Buyer for such violation or breach and regardless of any
other provision contained in this Agreement, Buyer shall be entitled to
seek such injunctive and other equitable relief as a court may grant
after considering the intent of this Section 5.4.
5.5. General Releases. At the Closing, Seller shall deliver, and shall
cause any Former Subsidiary still affiliated with Seller to deliver, general
releases to Buyer, in form and substance satisfactory to Buyer and its
counsel, releasing BAI and the directors, officers, agents and employees of
BAI from all claims Seller or such Former Subsidiaries as are still owned
directly or indirectly by Seller may have against BAI and the Mustang
Subsidiaries arising prior to the Closing Date.
5.6. Access to Information and Records. During the period prior to the
Closing, Seller shall cause BAI and Mustang Subsidiaries to give Buyer, its
counsel, accountants and other representatives (i) reasonable access during
normal business hours to all of the properties, books, records, contracts and
documents of BAI and Mustang Subsidiaries for the purpose of such inspection,
investigation and testing as Buyer deems appropriate (and they shall furnish
or cause to be furnished to Buyer and its representatives all information with
respect to the business and affairs of BAI and Mustang Subsidiaries as Buyer
may request); and (ii) with the prior consent of BAI and Mustang Subsidiaries
in each instance (which consent shall not be unreasonably withheld),
reasonable access to vendors, customers, manufacturers of its machinery and
equipment, and others having business dealings with BAI and Mustang
Subsidiaries.
5.7. Conduct of Business Pending the Closing. From the date hereof until
the Closing, except as otherwise approved in writing by the Buyer, Seller
covenants and agrees that it shall cause each of the following to occur:
5.7.(a) No Changes. BAI and Mustang Subsidiaries will carry on
their business diligently and in the same manner as heretofore and will
not make or institute any changes in their methods of purchase, sale,
management, accounting or operation.
5.7.(b) Maintain Organization. BAI and Mustang Subsidiaries will
take such action as may be necessary to maintain, preserve, renew and
keep in favor and effect the existence, rights and franchises of BAI and
Mustang Subsidiaries and will endeavor to preserve the business
organization of BAI and Mustang Subsidiaries intact, to keep available to
BAI and Mustang Subsidiaries the present officers and employees (but
without entering into any legally binding contracts with any such
persons), and, to the extent reasonably possible, to preserve for BAI and
Mustang Subsidiaries their present relationships with suppliers and
customers and others having business relationships with BAI and Mustang
Subsidiaries.
5.7.(c) No Breach. BAI and Seller will not do or omit any act,
or permit any omission to act, which may cause a breach of any material
contract, commitment or obligation, or any breach of any representation,
warranty, covenant or agreement made by Seller herein, or which would
have required disclosure on Schedule 3.8 had it occurred after June 30,
1997, and prior to the date of this Agreement.
5.7.(d) No Material Contracts. No contract or commitment will be
entered into or modified in any material respect, and no purchase of raw
materials or supplies and no sale of goods or services (real, personal,
or mixed, tangible or intangible) will be made, by or on behalf of BAI or
any Mustang Subsidiary, except contracts, commitments, purchases or sales
which are in the ordinary course of business and consistent with past
practice, are not material to BAI or any Mustang Subsidiary (individually
or in the aggregate) and would not have been required to be disclosed in
the Disclosure Schedule had they been in existence on the date of this
Agreement. In the case of capital expenditures, no capital expenditures
or commitments in excess of $10,000 shall be made without Buyer's written
approval.
5.7.(e) No Corporate Changes. BAI and Mustang Subsidiaries shall
not amend their Articles or Certificate of Incorporation or By-Laws or
make any changes in authorized or issued capital stock.
5.7.(f) Maintenance of Insurance. BAI and Mustang Subsidiaries
shall maintain all of the insurance in effect as of the date hereof.
5.7.(g) Maintenance of Property. BAI and Mustang Subsidiaries
shall use, operate, maintain and repair all of their property in a normal
business manner.
5.7.(h) No Transfer of Shares. Seller shall not transfer or
attempt to transfer any of the Shares except to Buyer pursuant hereto.
5.7.(i) Monthly Statements. Seller shall cause monthly financial
statements for Mustang Manufacturing Company, Inc., prepared in
accordance with historical practices for monthly statements, to be
promptly provided to Buyer following the end of each month until the
Closing Date, it being understood, however, that no July financial
statements are produced for July.
5.8. Consents. Seller will endeavor prior to Closing to obtain all
consent necessary for the consummation of the transactions contemplated
hereby. Without limiting the foregoing, Seller shall, promptly after
execution of this Agreement, call and hold a shareholders' meeting in
accordance with the rules of the London Stock Exchange to obtain the approval
of its shareholders for the transactions contemplated by this Agreement.
5.9. Other Action. Seller shall endeavor to cause the fulfillment at
the earliest practicable date of all of the conditions to the Seller's
obligations to consummate the transactions contemplated in this Agreement.
5.10. Disclosure Schedule. Seller shall have a continuing
obligation to promptly notify Buyer in writing with respect to any matter
hereafter arising or discovered which, if existing or known at the date of
this Agreement, would have been required to be set forth or described in the
Disclosure Schedule, but no such disclosure shall cure any breach of any
representation or warranty which is inaccurate.
5.11. Buyer's Right of Access Prior to Closing Date. Buyer shall
be allowed full access to the Facilities and the employees of the Mustang
Subsidiaries prior to Closing on a "getting to know" basis in the areas of
production, procurement, personnel, marketing and engineering, however it is
understood that Buyer will not issue any directives or make expressions of
intent regarding future business decisions.
5.12. Change of BAI Corporate Name. Within ninety (90) days after
the Closing, Buyer shall amend the Certificate of Incorporation of BAI to
adopt a name that does not include "Brunel," and thereafter shall cease all
use of the name "Brunel America Inc." or any name including "Brunel."
5.13. Access to Books and Records. For a period of at least six
years after the Closing, Buyer will cause BAI and Mustang Subsidiaries to
maintain their books and records, and shall grant Seller reasonable access to
such books and records during regular business hours and the right to make
copies to enable Seller to obtain such information as it may need in
connection with tax and regulatory matters, financial reporting, and any
Claims, whether or not Buyer is entitled to indemnification with respect
thereto.
5.14. Mitigation. Buyer recognizes an obligation to endeavor in good
faith, where reasonably possible, to mitigate its losses and expenses related
to Claims which it has under Section 8.
5.15. Product Warranty on Model 2040. Seller shall be obligated to
pay and shall promptly reimburse Buyer or Mustang Manufacturing for fifty
percent (50%) of all costs associated with a product recall (as defined in
Section 3.20) within one-year of Closing which relates to the cracking boom
problem on Model 2040.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
6.1. Representations and Warranties True of the Closing Date. Each of
the representations and warranties made by Seller in this Agreement, and the
statements contained in the Disclosure Schedule or in any instrument, list,
certificate or writing delivered by Seller pursuant to this Agreement, shall
be true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing
Date, except for any changes permitted by the terms of this Agreement or
consented to in writing by Buyer.
6.2. Compliance With Agreement. Seller shall have in all material
respects performed and complied with all of its agreements and obligations
under this Agreement which are to be performed or complied with by it prior to
or on the Closing Date, including the delivery of the closing documents
specified in Section 9.1.
6.3. Absence of Litigation. No Litigation shall have been commenced or
threatened, and no investigation by any Government Entity shall have been
commenced, against Buyer, BAI or any of the Mustang Subsidiaries, or the
officers or directors of any of them, with respect to the transactions
contemplated hereby.
6.4. Consents and Approvals. (a) All approvals, consents and waivers
that are required to effect the transactions contemplated hereby shall have
been received, and executed counterparts thereof shall have been delivered to
Buyer not less than two business days prior to the Closing; and (b) the
approval of Seller's shareholders as provided for in Section 7.5 shall have
been obtained.
6.5. Title Insurance. Buyer shall have obtained good and valid title
insurance policies or, in final form, irrevocable title insurance binders,
conforming to the specifications set forth in Section 5.1 hereof.
6.6. Hart-Scott-Rodino Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
6.7. Section 1445 Affidavit. BAI shall have delivered to Buyer an
affidavit, in form satisfactory to Buyer, to the effect that BAI is not a
"foreign person," "foreign corporation," "foreign partnership," "foreign
trust," or "foreign estate" under Section 1445 of the Code, and containing all
such other information as is required to comply with the requirements of such
Section.
6.8. Bank Guarantee. Seller's obligations under this Agreement shall be
protected by a bank guaranty in the form of Schedule 6.8 which shall remain in
effect for a period of three (3) years and shall continue to apply to all
claims for which notice is given during such three-year period until the
claims have been finally resolved.
6.9. Environmental Remediation. Seller shall have started to comply with
its obligations under Section 5.3, and the scope and nature of the
environmental remediation required with regard to the Real Property as
outlined in the report of Eder & Associates dated September, 1997 shall not
have changed in a material adverse manner in Buyer's reasonable judgment as a
result of conditions or events discovered between the date of the Eder &
Associates report and the Closing Date. Alternatively, this condition shall
be deemed to have been satisfied if Seller, on a basis reasonably acceptable
to Buyer, accepts full responsibility for expanding its remediation
undertaking to cover the conditions or events so discovered and establishes an
escrow fund for such purpose.
6.10. Actions by Seller's Banks. Seller shall have delivered to
Buyer a full and complete release in the form of Schedule 6.10 hereto from the
lenders under the Group Facilities Agreement of their Liens on the Shares and
the shares of any Mustang Subsidiary and from any guaranty or similar
undertaking made by BAI or the Mustang Subsidiaries.
7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Each and every obligation of Seller to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the
following conditions:
7.1. Representations and Warranties True on the Closing Date. Each of
the representations and warranties made by Buyer in this Agreement shall be
true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing
Date.
7.2. Compliance With Agreement. Buyer shall have in all material
respects performed and complied with all of Buyer's agreements and obligations
under this Agreement which are to be performed or complied with by Buyer prior
to or on the Closing Date, including the delivery of the closing documents
specified in Section 9.2.
7.3. Absence of Litigation. No Litigation shall have been commenced or
threatened, and no investigation by any Government Entity shall have been
commenced, against Buyer, BAI or any Mustang Subsidiary, or any officers or
directors of any of them, with respect to the transactions contemplated
hereby.
7.4. Hart-Scott-Rodino Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
7.5. Approval of Seller's Shareholders. Seller shall have called and
held a shareholders' meeting in accordance with the rules of the London Stock
Exchange, and obtained the approval of its shareholders for the transactions
contemplated by this Agreement.
8. INDEMNIFICATION
8.1. By Seller. Subject to the terms and conditions of this Section 8,
Seller hereby agrees to indemnify, defend and hold harmless Buyer and BAI or
any Mustang Subsidiary from and against all Claims asserted against, resulting
to, imposed upon, or incurred by Buyer, BAI or any Mustang Subsidiary,
directly or indirectly, by reason of, arising out of or resulting from (a) the
inaccuracy or breach of any representation or warranty of Seller contained in
or made pursuant to this Agreement (regardless of whether such breach is
deemed "material" for purposes of Section 6.1), or any claim based upon a
circumstance (whether or not disclosed) which without disclosure in Schedule
3.11.(c) would constitute a breach of any warranty or representation set forth
in Section 3.11.(c) (for purposes hereof any such claim shall sometimes be
referred to as a "Deemed Environmental Breach") or, (b) the breach of any
covenant of Seller in or made pursuant to this Agreement. As used in this
Article 8, the term "Claim" shall include (i) all debts, liabilities and
obligations; (ii) all losses, damages, judgments, awards, settlements, costs
and expenses (including, without limitation, interest (including prejudgment
interest in any litigated matter), penalties, court costs and attorneys' fees
and expenses); and (iii) all demands, claims, suits, actions, costs of
investigation, causes of action, proceedings and assessments, whether or not
ultimately determined to be valid.
8.2. By Buyer. Subject to the terms and conditions of this Article 8,
Buyer hereby agrees to indemnify, defend and hold harmless Seller from and
against all Claims asserted against, resulting, to imposed upon or incurred by
Seller, directly or indirectly, by reason of or resulting from (a) the
inaccuracy or breach of any representation or warranty of Buyer contained in
or made pursuant to this Agreement (regardless of whether such breach is
deemed "material" for purposes of Section 7.1), or (b) the breach of any
covenant of Buyer contained in this Agreement.
8.3. Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other under this Article 8 with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
8.3.(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will give the
party from whom indemnification is sought (the "Indemnifying Party")
prompt written notice of any such Claim, and the Indemnifying Party will
undertake the defense thereof by representatives chosen by it. Failure
to give such notice shall not affect the Indemnifying Party's duty or
obligations under this Article 8, except to the extent the Indemnifying
Party is prejudiced thereby. So long as the Indemnifying Party is
defending any such Claim actively and in good faith and can demonstrate
the financial ability to pay or otherwise resolve the Claim, the
Indemnified Party shall not settle such Claim. The Indemnified Party
shall make available to the Indemnifying Party or its representatives all
records and other materials required by them and in the possession or
under the control of the Indemnified Party, for the use of the
Indemnifying Party and its representatives in defending any such Claim,
and shall in other respects give reasonable cooperation in such defense.
8.3.(b) Failure to Defend. If the Indemnifying Party, within a
reasonable time after notice of any such Claim, fails to defend such
Claim actively and in good faith, the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise or
settlement of such Claim or consent to the entry of a judgment with
respect to such Claim, on behalf of and for the account and risk of the
Indemnifying Party, and the Indemnifying Party shall thereafter have no
right to challenge the Indemnified Party's defense, compromise,
settlement or consent to judgment therein.
8.3.(c) Indemnified Party's Rights. Anything in this Section 8.3
to the contrary notwithstanding, (i) if there is a reasonable probability
that a Claim may materially and adversely affect the Indemnified Party
other than as a result of money damages or other money payments, the
Indemnified Party, after first giving notice to the Indemnifying Party,
shall have the right to defend, compromise or settle such Claim, and (ii)
the Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Claim or consent to the entry
of any judgment which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party of a
release from all Liability in respect of such Claim.
8.4. Payment. The Indemnifying Party shall promptly pay the Indemnified
Party any amount under this Article 8. Upon judgment, determination,
settlement or compromise of any third-party Claim, the Indemnifying Party
shall pay promptly on behalf of the Indemnified Party, and/or to the
Indemnified Party in reimbursement of any amount theretofore required to be
paid by it, the amount so determined by judgment, determination, settlement or
compromise and all other Claims of the Indemnified Party with respect thereto,
unless in the case of a judgment an appeal is made from the judgment. If the
Indemnifying Party desires to appeal from an adverse judgment, then the
Indemnifying Party shall post and pay the cost of the security or bond to stay
execution of the judgment pending appeal. Upon the payment in full by the
Indemnifying Party of such amount, the Indemnifying Party shall succeed to the
rights of such Indemnified Party, to the extent not waived in settlement,
against the third party who made such third-party Claim.
8.5. Limitations on Indemnification.
8.5.(a) Time Limitation. No claim or action shall be brought
under this Article 8 for breach of a representation or warranty after the
lapse of two (2) years following the Closing. Regardless of the
foregoing, however, or any other provision of this Agreement:
(i) There shall be no time limitation on claims or actions
brought for breach of any representation or warranty made by Seller
in or pursuant to Sections 3.24 and 3.2.(d) and Seller hereby waives
all applicable statutory limitation periods with respect thereto but
only as between Buyer and Seller.
(ii) Any claim or action brought for breach of
any representation or warranty made by Seller in or pursuant to
Section 3.5 may be brought at any time until the underlying tax
obligation is barred by the applicable period of limitation under
federal and state laws relating thereto (as such period may be
extended by waiver).
(iii) Any claim or action brought for a breach of
the representation or warranty made by Seller in or pursuant to
Section 3.11.(c) may be brought until the lapse of five (5) years
following the Closing and any claim or action brought for a breach
of the representation or warranty made by Seller in or pursuant to
Section 3.11.(d) may be brought until the lapse of four (4) years
from the date of Closing.
(iv) Any claim based upon a wilful or knowing
breach or misrepresentation may be brought until the lapse of six
(6) years from the date of Closing.
(v) This Section shall not apply to the breach or non-
performance of a covenant.
(vi) Any claim made by a party hereunder for
breach of a representation or warranty prior to the termination of
the survival period for such claim shall be preserved despite the
subsequent termination of such survival period.
(vii) If any act, omission, disclosure or failure
to disclosure shall form the basis for a claim for breach of more
than one representation or warranty, and such claims have different
periods of survival hereunder, the termination of the survival
period of one claim shall not affect a party's right to make a claim
based on the breach of representation or warranty still surviving.
8.5.(b) Dollar Limitations. The total amounts payable by the
Seller under the indemnification contained in this Section 8 shall be
limited in the aggregate to Twenty Million ($20,000,000) Dollars,
calculated without regard to Claims related to Former Subsidiaries for
which there is no Cap. The balance of this Section 8.5.(b) shall not
apply to claims or actions brought for breach or nonperformance of any
covenant of Seller or for the breach of any representation or warranty
made in or pursuant to certain Excluded Sections as defined below. No
claims shall be payable by the Seller under this Section 8.1 unless and
until the aggregate amount of all such claims equals or exceeds the
amount of Two Hundred Thousand ($200,000) Dollars (herein referred to as
the "Aggregate Claim Threshold"). At such time, the Seller shall be
liable for all claims hereunder in excess of such aggregate amount of Two
Hundred Thousand ($200,000) Dollars. In addition to the Aggregate Claim
Threshold set forth above, no individual claims shall be payable by
Seller unless the amount of the claim exceeds Fifteen Thousand ($15,000)
Dollars (herein referred to as the "Individual Claim Threshold"). For
purposes of the Individual Claim Threshold, claims which arise out of the
same occurrence, event or circumstance as well as claims of the same type
or nature shall be considered a single claim. There shall be no
limitation on, and Seller shall be fully liable for, any indemnification
hereunder without regard to the Aggregate Claim Threshold or Individual
Claim Threshold to the extent the claim is based upon a representation or
warranty contained in an Excluded Section, the breach or nonperformance
of a covenant of Seller in this Agreement or the wilful or knowing breach
of a representation or warranty. For this purpose, the following
Sections shall constitute Excluded Sections:
Excluded Sections
Section Subject Matter
3.1.(c)(vii) Maximum aggregate cost
associated with failure
to qualify
3.2.(d) Title to shares and stock
of Mustang Subsidiaries
3.5 Tax Matters
3.8.(f) No dividends
3.11.(c) and 3.11.(d) Environmental
3.12.(b)(ii) Condition of Real Estate
3.17 As to "success bonuses"
3.20 Product Warranty claims
involving recall claims
for non-safety
considerations costing in
excess of $275,000
3.24 Former Subsidiaries
9. CLOSING
The closing of this transaction ("the Closing") shall take place at the
offices of Foley & Lardner, Milwaukee, Wisconsin, at 9:00 A.M. on October 2,
1997, or at such other time and place as the parties hereto shall agree upon.
Such date is referred to in this Agreement as the "Closing Date".
9.1. Documents to be Delivered by Company and Seller. At the Closing,
Seller shall deliver to Buyer the following documents, in each case duly
executed or otherwise in proper form:
9.1.(a) Stock Certificate(s). A stock certificate or certificates
representing the Shares, duly endorsed for transfer or with duly executed
stock powers attached. Stock record books for BAI and the Mustang
Subsidiaries and all outstanding stock certificates of the Mustang
Subsidiaries.
9.1.(b) Compliance Certificate. A certificate signed by Seller
that each of the representations and warranties made by Seller in this
Agreement is true and correct in all material respects on and as of the
Closing Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date (except
for any changes permitted by the terms of this Agreement or consented to
in writing by Buyer), and that Seller has performed and complied with all
of Seller's obligations under this Agreement which are to be performed or
complied with on or prior to the Closing Date.
9.1.(c) Opinion of Counsel. The written opinions of Dorsey &
Whitney LLP, Ashurst, Morris, Crisp and Allen & Overy dated as of the
Closing Date, addressed to Buyer, substantially in the form of Exhibits
9.1.(c)-I, II and III hereto.
9.1.(d) Bank Guaranty. A bank guaranty in the form of Schedule 6.8
hereto.
9.1.(e) Certified Resolutions. Certified copies of the resolutions
of the Board of Directors and shareholders of Seller authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
9.1.(f) Articles; By-Laws. A copy of the By-Laws of BAI and each
Subsidiary certified by the secretary of BAI, and a copy of the Articles
or Certificate of Incorporation, as the case may be, of BAI and each
Mustang Subsidiary certified by the Secretary of State of the state of
incorporation of each such corporation.
9.1.(g) Incumbency Certificate. Incumbency certificates relating
to each person executing (as a corporate officer or otherwise on behalf
of another person) any document executed and delivered to Buyer pursuant
to the terms hereof.
9.1.(h) General Releases. The General Releases referred to in
Section 5.5, duly executed by the persons referred to in such Section.
9.1.(i) Resignations. The resignations of all officers and
directors of BAI and Mustang Subsidiaries, effective as of the Closing
Date and in form satisfactory to Buyer's counsel. This does not mean
their resignation as employees.
9.1.(j) Affidavit. An affidavit from BAI in form and substance
satisfactory to Buyer complying with Section 1445(b)(3) of the Code.
9.1.(k) Release Under General Facilities Agreement. Release in the
Form of Schedule 6.10.
9.1.(l) Other Documents. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing
pursuant to this Agreement and such other certificates of authority,
corporate records and documents as Buyer may reasonably request.
9.2. Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver to Seller the following documents, in each case duly executed or
otherwise in proper form:
9.2.(a) Cash Purchase Price. To Seller, the wire transfer required
by Section 2.2.(a) hereof.
9.2.(b) Compliance Certificate. A certificate signed by the chief
executive officer of Buyer that the representations and warranties made
by Buyer in this Agreement are true and correct on and as of the Closing
Date with the same effect as though such representations and warranties
had been made or given on and as of the Closing Date (except for any
changes permitted by the terms of this Agreement or consented to in
writing by Seller), and that Buyer has performed and complied with all of
Buyer's obligations under this Agreement which are to be performed or
complied with on or prior to the Closing Date.
9.2.(c) Opinion of Counsel. A written opinion of Foley & Lardner,
counsel to Buyer, dated as of the Closing Date, addressed to Seller, in
substantially the form of Exhibit 9.2.(c) hereto.
9.2.(d) Certified Resolutions. A certified copy of the resolutions
of the Board of Directors of Buyer authorizing and approving this
Agreement and the consummation of the transactions contemplated by this
Agreement.
9.2.(e) Incumbency Certificate. Incumbency certificates relating
to each person executing any document executed and delivered to Seller by
Buyer pursuant to the terms hereof.
9.2.(f) Other Documents. All other documents, instruments or
writings required to be delivered to Seller at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Seller may reasonably request.
10. TERMINATION
10.1. Right of Termination Without Breach. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
10.1.(a) by mutual written agreement of Buyer and Seller, or
10.1.(b) by either Buyer or Seller if the Closing shall not have
occurred on or before October 31, 1997, provided the terminating party
has not, through breach of a representation, warranty or covenant,
prevented the Closing from occurring on or before such date, it being
agreed that the failure of Seller to obtain approval by it bankers or by
its shareholders (after having promptly called and held a shareholders'
meeting), shall not be a breach of a covenant by Seller.
10.2. Termination for Breach.
10.2.(a) Termination by Buyer. If (i) there has been a material
violation or breach by Seller of any of the agreements, representations
or warranties contained in this Agreement which has not been waived in
writing by Buyer, or (ii) there has been a failure of satisfaction of a
condition to the obligations of Buyer which has not been so waived, then
Buyer may, by written notice to Seller at any time prior to the Closing
that such violation, breach or failure is continuing, terminate this
Agreement with the effect set forth in Section 10.2.(c) hereof.
10.2.(b) Termination by Seller. If (i) there has been a material
violation or breach by Buyer of any of the agreements, representations or
warranties contained in this Agreement which has not been waived in
writing by Seller, or (ii) there has been a failure of satisfaction of a
condition to the obligations of Seller which has not been so waived, then
Seller may, by written notice to Buyer at any time prior to the Closing
that such violation, breach or failure is continuing, terminate this
Agreement with the effect set forth in Section 10.2.(c) hereof.
10.2.(c) Effect of Termination. In the event of termination of this
Agreement by either Buyer or Seller as provided in Section 10.1 or 10.2,
this Agreement shall become void and, except as provided in Section 12.5
or with respect to wilful breaches of this Agreement prior to the time of
such termination, there shall be no liability on the part of either Buyer
or Seller, or their respective stockholders, officers, or directors. The
foregoing notwithstanding, Section 12.3 hereof shall survive until the
Date provided for in said section, and Section 12.5 shall survive until
Seller has complied with its obligations, if any, thereunder.
11. RESOLUTION OF DISPUTES
11.1. Arbitration. Any dispute, controversy or claim arising out of
or relating to this Agreement or any contract or agreement entered into
pursuant hereto or the performance by the parties of its or their terms shall
be settled by binding arbitration held in Minneapolis, Minnesota in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
then in effect, except as specifically otherwise provided in this Article 11.
Notwithstanding the foregoing, Buyer may, in its discretion, apply to a court
of competent jurisdiction for equitable relief from any violation or
threatened violation of the covenants of Seller under Section 5.6 of this
Agreement, or any covenants not to compete contained in any Noncompetition
Agreement delivered pursuant to Section 5.5 hereof.
11.2. Arbitrators. If the matter in controversy (exclusive of
attorney fees and expenses) shall appear, at the time of the demand for
arbitration, to exceed $250,000, then the panel to be appointed shall consist
of three neutral arbitrators; otherwise, one neutral arbitrator.
11.3. Procedures; No Appeal. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the circumstances
and shall resolve the dispute as expeditiously as practicable, and if
reasonably practicable, within 120 days after the selection of the
arbitrator(s). The arbitrator(s) shall give the parties written notice of the
decision, with the reasons therefor set out, and shall have 30 days thereafter
to reconsider and modify such decision if any party so requests within 10 days
after the decision. Thereafter, the decision of the arbitrator(s) shall be
final, binding, and nonappealable with respect to all persons, including
(without limitation) persons who have failed or refused to participate in the
arbitration process.
11.4. Authority. The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or preliminary
relief, and to allocate responsibility for the costs of the arbitration and to
award recovery of attorneys fees and expenses in such manner as is determined
to be appropriate by the arbitrator(s).
11.5. Entry of Judgment. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject
matter jurisdiction. Buyer and Seller hereby submit to the in personam
jurisdiction of the Federal and State courts in Minnesota, for the purpose of
confirming any such award and entering judgment thereon.
11.6. Confidentiality. All arbitration proceedings under this
Article 11, and all evidence given or discovered pursuant hereto, shall be
maintained in confidence by all parties, absent a legal or regulatory
obligation to disclose.
11.7. Tolling. All applicable statutes of limitation shall be tolled
while the procedures specified in this Article 11 are pending. The parties
will take such action, if any, required to effectuate such tolling.
12. MISCELLANEOUS
12.1. Disclosure Schedule. The Schedules have been compiled in a
bound volume (the "Disclosure Schedule"), executed by Seller and dated and
delivered to Buyer on the date of this agreement.
12.2. Further Assurance. From time to time, at either party's
request and without further consideration, the other party will execute and
deliver such documents and take such other action as may be reasonably
requested in order to consummate more effectively the transactions
contemplated hereby.
12.3. No Negotiations or Discussions. If Seller's shareholders fail
to approve this Agreement at the meeting called for that purpose, or if no
shareholders' meeting takes place, provided Buyer notifies Seller within
fourteen (14) days after October 2, 1997, of its desire to negotiate a new
agreement, Seller agrees not to directly or indirectly (through a
representative or otherwise) solicit or furnish any information to any
prospective buyer, commence, or conduct ongoing negotiations or discussions
with any other party, or enter into any agreement with any other party
concerning the sale of BAI or any Mustang Subsidiary, their assets or business
or any part thereof or any equity securities of BAI or any Mustang Subsidiary
(an "acquisition proposal"), until the expiration of seventy (70) days from
October 2, 1997 and during such period to negotiate exclusively with Buyer.
12.4. Preparation of Tax Returns Due Subsequent to the Closing Date.
(a) The parties agree to cooperate in connection with tax returns which BAI,
the Mustang Subsidiaries and the Non-Mustang Subsidiaries are required to file
for the period ending June 30, 1997 and for any short period between June 30,
1997 and the Closing Date. Seller shall cause the Minneapolis office of Price
Waterhouse LLP or another preparer acceptable to Buyer to prepare (i) the
federal and state tax returns due for the period ended June 30, 1997, and (ii)
the federal and state tax returns due for any short period between June 30,
1997 and the Closing Date, in each case with such review and oversight by
Buyer's representatives as Buyer may reasonably request. The cost of
preparing the June 30, 1997 returns shall be borne by BAI and the Mustang
Subsidiaries up to the amount of the accrued return preparation fees reflected
in the BAI June 30, 1997 financial statement but otherwise shall be the
responsibility of Seller. The cost of preparing the short period returns for
periods ending on or prior to the Closing Date shall be paid directly by
Seller. Any provision of this Agreement or any tax allocation or tax sharing
agreement notwithstanding, Seller shall pay to the appropriate taxing
authority or to Buyer any taxes owed by a Non-Mustang Subsidiary when
calculated on a separate return basis for the short period between June 30,
1997 and the Closing Date. Seller shall provide Buyer with a full
indemnification and warranty with respect to such June 30, 1997 and short
period. Full indemnification means that Seller shall be responsible for all
taxes due with respect to June 30, 1997 returns in excess of the related
accruals and for all taxes due for the short period returns up to the amount
of taxes which would be (or are) payable by the Non-Mustang Subsidiaries on a
separate return basis. Seller shall also be responsible for all liabilities,
costs or expenses associated with an inaccuracy or alleged inaccuracy,
including fines, penalties, assessments and legal and accounting fees.
(b) Cooperation and Response After Closing Date. Buyer will cause
Mustang Manufacturing Company, Inc. and its employees to cooperate with Seller
in connection with the compliance matters for which Seller has responsibility
after the Closing Date (including any exposure for indemnification) under this
Agreement, and shall cause BAI and the Mustang Subsidiaries to promptly
respond to notices or inquiries by the Internal Revenue Service and other
taxing authorities after consultation with Seller regarding such matters.
12.5. Break-Up Fee Due Buyer Under Certain Circumstances. All other
provisions of this Agreement to the contrary notwithstanding, in the event
that Seller's shareholders do not vote to approve this transaction prior to
October 31, 1997 in the manner contemplated by Section 7.5, Seller shall
promptly pay to Buyer:
(i) An amount equal to Buyer's out-of-pocket expenses incurred in
connection with this transaction through the date of Seller's
shareholders meeting including legal, accounting and investment banking
fees, fees and expenses associated with environmental and other due
diligence investigations, and all disbursements and costs in connection
with the above, subject to a cap of Three Hundred Thousand ($300,000)
Dollars; and
(ii) If within six (6) months of the end of the seventy (70) day
period provided for in Section 12.3, Seller enters into an agreement to
sell the stock or assets of BAI and/or the Mustang Subsidiaries, then
Seller shall promptly pay to Buyer an additional sum equal to fifty
percent (50%) of the purchase price received by Seller in such subsequent
sale above the Purchase Price provided for herein, but not more than One
Million Five Hundred Thousand ($1,500,000) Dollars. For purposes of this
subsection (ii), Seller agrees not to take actions such as making
abnormal distributions prior to a sale or selling assets outside the
ordinary course of business or excluding assets from a sale for the
purpose of eliminating or reducing the fee otherwise payable to Buyer.
If Seller should take any of the actions described in the preceding
sentence, the break-up fee shall be calculated by adding back the
abnormal distribution, proceeds of a separate sale or retained assets.
12.6. Audit of BAI Consolidated June 30, 1997 Financial Statements.
Seller shall have the responsibility for causing Price Waterhouse-Minneapolis
to audit the June 30, 1997 consolidated financial statements of BAI and
Subsidiaries on a timely basis and shall pay the associated costs and
expenses.
12.7. Escrow Agreement for Bank Guarantee. The Bank Guarantee
attached as Schedule 6.8 envisions the establishment of an escrow under
certain circumstances where claims remain outstanding at a time when the
Guarantee would otherwise expire. In the event it should be necessary to
enter into an escrow arrangement, the parties agree to use a document
substantially in the form attached as part of Schedule 6.8 and to cooperate in
good faith to implement the escrow arrangement including agreeing on an escrow
agent.
12.8. Disclosures and Announcements. Announcements concerning the
transactions provided for in this Agreement by Buyer or Seller shall be
subject to the approval of the other party in all essential respects, except
that approval of the other party shall not be required as to any statements
and other information which must be provided in accordance with applicable
rules and regulations of Government Entities, stock exchanges or securities
trading organizations.
12.9. Assignment; Parties in Interest.
12.9.(a) Assignment. Except as expressly provided herein, the
rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the other
parties. Notwithstanding the foregoing, Buyer may, without consent of
any other party, cause one or more subsidiaries of Buyer to carry out all
or part of the transactions contemplated hereby; provided, however, that
Buyer shall, nevertheless, remain liable for all of its obligations, and
those of any such subsidiary, to Seller hereunder.
12.9.(b) Parties in Interest. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the respective successors
and permitted assigns of the parties hereto. Nothing contained herein
shall be deemed to confer upon any other person any right or remedy under
or by reason of this Agreement.
12.10. Law Governing Agreement. This Agreement may not be modified or
terminated orally, and shall be construed and interpreted according to the
internal laws of the State of Wisconsin, excluding any choice of law rules
that may direct the application of the laws of another jurisdiction.
12.11. Amendment and Modification. Buyer and Seller may amend, modify
and supplement this Agreement in such manner as may be agreed upon in writing
between Buyer and Seller.
12.12. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a)
personally delivered; tb) sent by telecopier, facsimile transmission or other
electronic means of transmitting written documents; or (c) sent to the parties
at their respective addresses indicated herein by registered U.S. mail, return
receipt requested and postage prepaid, or by private overnight mail courier
service. The respective addresses to be used for all such notices, demands or
requests are as follows:
(a) If to Buyer, to:
Gehl Company
143 Water Street
West Bend, WI 53095-0179
Attention: Michael J. Mulcahy, Esq.
Facsimile: (414) 334-6603
(with a copy to)
Ronald L. Walter
Foley & Lardner
777 E. Wisconsin Avenue
Milwaukee, WI 53202-5367
Facsimile: (414) 297-4900
or to such other person or address as Buyer shall designate in the manner set
forth below.
(b) If to Seller, to:
Cliff Walker
Chief Executive
Brunel Holdings, plc
Brunel House
14 Avon Reach
Chippenham
Wiltshire SN15 1EE
United Kingdom
Facsimile: 011-44-1249-447911
(with a copy to)
Michael Prichard
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, MN 55402-1498
Facsimile: (612) 340-8738
or to such other person or address as Seller shall designate in the manner set
forth below.
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent
by overnight courier pursuant to this paragraph, such communication shall be
deemed delivered upon receipt; and if sent by U.S. mail pursuant to this
paragraph, such communication shall be deemed delivered as of the date of
delivery indicated on the receipt issued by the relevant postal service, or,
if the addressee fails or refuses to accept delivery, as of the date of such
failure or refusal. Any party to this Agreement may change its address or the
person to whom notice is given for purposes of this Agreement by giving notice
thereof in accordance with this Section, making reference to this Agreement.
12.13. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
12.13.(a) Brokerage. Seller and Buyer each represent and warrant
to each other that there is no broker involved or in any way connected
with the transfer provided for herein on their behalf respectively (and
Seller represent" and warrants that there is no broker involved on behalf
of BAI) and each agrees to hold the other harmless from and against all
other claims for brokerage commissions or finder's fees in connection
with the execution of this Agreement or the transactions provided for
herein.
12.13.(b) Other. Each of the parties shall bear the fees and
expenses incurred by it, including the fees of their respective counsel,
brokers, attorney's, accountants, investment bankers and other experts
incident to the negotiation and consummation of the transactions
contemplated by this Agreement.
12.14. Entire Agreement. This instrument embodies the entire
agreement between the parties hereto with respect to the transactions
contemplated herein, and there have been and are no agreements,
representations or warranties between the parties other than those set forth
or provided for herein.
12.15. Counterpart. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.16. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
12.17. Glossary of Terms. The following sets forth the location of
definitions of capitalized terms defined in the body of this Agreement:
"Affiliate" - Section 3.8.(k)
"Ancillary Instruments" - Section 3.2.(a)
"Business" - Recital A
"CERCLA" - Section 3.11.(c)
"Closing" - Preamble to Article 9
"Closing Date" - Section 9
"Code" - Section 3.16.(a)
"Company Employees" - Section 3.16.(a)
"Employee Plans/Agreement(s)" - Section 3.16.(a)
"Environmental Laws" - Section 3.11.(c)
"ERISA" - Section 3.16.(a)
"Facilities" - Recital C
"Former Subsidiary" - Introduction to Article 3
"Government Entities" - Section 3.3
"Group Facilities Agreement" - Section 3.1(d)
"HSR Act" - Section 3.3
"Laws" - Section 3.3
"Liens" - Section 3.12.(a)
"Litigation" - Section 3.10
"Mustang Subsidiaries" - Recital A
"Non-Mustang Subsidiaries" - Recital B
"Orders" - Section 3.3
"Products" - Section 3.20
"Purchase Price" - Section 2.1
"Real Property" - Section 3.12.(c)
"Trade Rights" - Section 3.18
"Recent Balance Sheet" - Section 3.4
"Waste" - Section 3.11.(c)
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
GEHL COMPANY
By:____________________
BRUNEL HOLDINGS, plc
By:____________________
AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Amendment is hereby made to the Amended and Restated Loan and
Security Agreement dated the 1st day of October, 1994, as amended,
("Agreement") by and between Deutsche Financial Services Corporation ("DFS"),
Deutsche Financial Services, a division of Deutsche Bank Canada, successor-in-
interest to Deutsche Financial Services Canada Corporation ("DFSC") (DFS and
DFSC being herein collectively referred to as "DFS"), GEHL Company ("GEHL"),
Hedlund Martin, Inc. ("Hedlund") and Gehl Power Products, Inc. ("Gehl Power
Products") (GEHL, Hedlund Martin and Gehl Power Products being herein
collectively referred to as "GEHL").
WHEREAS, GEHL is purchasing all of the issued and outstanding stock of
Mustang Manufacturing Company, Inc., a Minnesota corporation with its
principal place of business located at County Road #45 North, Owatonna,
Minnesota 55060 ("Mustang Manufacturing"); and
WHEREAS, Mustang Manufacturing obtains inventory financing from DFS, and
Mustang and its wholly-owned subsidiary, Mustang Finance, Inc., a Minnesota
corporation with its principal place of business located at County Road #45
North, Owatonna, Minnesota 55060 ("Mustang Finance"), sell accounts receivable
to DFS: and
WHEREAS, GEHL wishes to consolidate all of the inventory borrowings by
GEHL and Mustang Manufacturing from DFS under the Agreement; and
WHEREAS, GEHL wishes Mustang Manufacturing and Mustang Finance to finance
their accounts receivable with DFS under the Agreement rather than selling
such accounts receivable to DFS.
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration, DFS, GEHL, Mustang Manufacturing and Mustang Finance
hereby agree as follows:
The Agreement is amended to add Mustang Manufacturing and Mustang
Finance as parties to the Agreement.
By signing this Amendment, Mustang Manufacturing and Mustang Finance
each agree: (a) to be a party to the Agreement and to be bound and obligated
to all of the terms of the Agreement, which includes, but is not limited to,
the grant of a security interest to DFS in all Collateral of Mustang
Manufacturing and Mustang Finance, and (b) to perform all of the duties under
the Agreement to the same extent as if each had been one of the original
parties to the Agreement.
Mustang Manufacturing and Mustang Finance acknowledge receipt of a true
and complete copy of such Agreement and all amendments thereto.
This Amendment may be signed in any number of counterparts, all of which
taken together will constitute but one and the same Amendment.
IN WITNESS WHEREOF, the authorized representatives of the parties have
executed this Amendment to Amended and Restated Loan and Security Agreement as
of the 2nd day of October, 1997.
ATTEST: MUSTANG MANUFACTURING, INC.
By:
Secretary
Title:
ATTEST: MUSTANG FINANCE, INC.
By:
Secretary
Title:
GEHL COMPANY HEDLUND MARTIN, INC.
By: By:
Title: Title:
GEHL POWER PRODUCTS, INC. DEUTSCHE FINANCIAL SERVICES CORPORATION
By: By:
Title: Title:
DEUTSCHE FINANCIAL SERVICES,
A Division of Deutsche Bank Canada
(Successor-in-Interest to Deutsche Financial Services
Canada Corporation)
By: By:
Title: Title:
