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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): February 6, 1995
(January 23, 1995)
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DeVlieg-Bullard, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-18198 62-1270573
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
One Gorham Island, Westport, CT 06880
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 221-8201
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Item 2. Acquisition of Assets
On January 23, 1995, DeVlieg-Bullard, Inc. (the "Company"), in accordance with
the terms of the Asset Purchase Agreement (the "Agreement") dated January 23,
1995, by and between the Company, Mideastern, Inc., a Pennsylvania corporation
("Seller") and James A. Gouker, Stanley L. Harbold, Gerald R. Paradis and James
F. Harnish (collectively, the "Shareholders") consummated the acquisition of
substantially all of the assets, properties, rights and business of Seller
relating to or used or employed in connection with Seller's business (the
"Purchased Assets"). Mideastern, Inc., headquartered in Abbottstown,
Pennsylvania, manufactures, markets, rebuilds and services New Britain Machine
brand machine tools and parts therefor.
In addition to the Purchased Assets, the Company assumed all obligations and
liabilities of Seller of any kind, character and description, whether accrued,
absolute, contingent or otherwise (collectively, the "Assumed Liabilities"),
other than any liabilities or obligations of Seller (i) not relating to the
business of Seller, (ii) certain income tax liabilities relating to Seller's
business or the Purchased Assets for any period ending on or before January 1,
1995, the effective date of the closing, (iii) liabilities of Seller to any of
the Shareholders, and (iv) liabilities relating to any untrue representation,
misrepresentation, breach of warranty or nonfulfillment of any covenant,
agreement or obligation by or of Seller or any of the Shareholders contained in
the Agreement.
The aggregate purchase price for the Purchased Assets was $3,700,000 plus the
Assumed Liabilities. The Company paid $3,100,000 in cash on January 23, 1995
and delivered to Seller a promissory note (the "Earnout Note") in the original
principal amount of $600,000. The cash consideration was funded through
available borrowings under the Company's revolving credit agreement with its
senior lender. The Earnout Note is subordinated to the Company's indebtedness
to its senior lender. The Earnout Note bears interest at an annual rate of
eight percent (8%) which is payable monthly in arrears commencing February 15,
1995; provided, however, that no monthly installments of interest are payable
following any January 31 in which an installment of principal is not due and
payable. In such event, interest is not due and payable until January 31, 1998,
when interest shall be due and payable in an aggregate amount on the principal
actually due and payable under the Earnout Note. The principal is due and
payable in annual installments of $200,000 contingent upon the attainment of
certain earnings objectives.
In conjunction with the acquisition, the Company granted stock options (the
"Options") to the Shareholders which allow the Shareholders to acquire an
aggregate of 100,000 shares of the Company's common stock at an exercise price
of $1.50 per share. The Options are exercisable at any time, in whole or in
part, after January 27, 1995 and expire January 27, 2000. The Options contain a
contingent redemption feature which provides that the Company will pay the
Shareholders, at the option of the Shareholders, $1.50 per share (an aggregate
of $150,000) if the Company's common stock price is not at least $3.50 per
share on January 27, 1998.
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In connection with the acquisition, the Shareholders entered into employment
agreements with the Company which are for three year terms.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired:
Report of Independent Accountants
Balance Sheets of Mideastern, Inc. as of December 31, 1994 and 1993
Statements of Operations and Retained Earnings of Mideastern, Inc. for
the years ended December 31, 1994 and 1993
Statements of Cash Flows of Mideastern, Inc. for the years ended
December 31, 1994 and 1993
Notes to Financial Statements
The foregoing financial information is not being filed at this time. The
Company anticipates filing this information under cover of Form 8-K/A on or
before March 23, 1995.
(b) Pro Forma Financial Information:
Pro Forma consolidated balance sheet giving effect to the acquisition
of Mideastern, Inc. as of October 31, 1994 (unaudited)
Pro Forma consolidated statements of operations giving effect to the
acquisition of Mideastern, Inc. for the year ended July 31, 1994
(unaudited) and for the three months ended October 31, 1994 (unaudited)
The foregoing financial information is not being filed at this time. The
Company anticipates filing this information under cover of Form 8-K/A on or
before March 23, 1995.
(c) Exhibits:
(2.1) Asset Purchase Agreement dated January 23, 1995, by and between
DeVlieg-Bullard, Inc., Mideastern, Inc., and the shareholders of
Mideastern, Inc. (Pursuant to Item 601(b)(2) of Regulation S-K,
the schedules to this agreement are omitted but will be provided
supplementally to the Commission upon request.)
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(10.1) Earnout Note dated January 23, 1995 in the principal amount of
$600,000 issued by DeVlieg-Bullard, Inc. to Mideastern, Inc.
(10.2) Form of Stock Option Agreement dated January 27, 1995 by
DeVlieg-Bullard, Inc. and James F. Harnish (Pursuant to Item 601 of
Regulation S-K, sustantially identical agreements with each of James
A. Gouker, Stanley L. Harbold and Gerald R. Paradis have been omitted
but will be provided supplementally to the Commission upon request.)
(10.3) Form of Employment Agreement dated January 23, 1995 by
DeVlieg-Bullard, Inc. and James F. Harnish (Pursuant to Item 601 of
Regulation S-K, sustantially identical agreements with each of James
A. Gouker, Stanley L. Harbold and Gerald R. Paradis have been omitted
but will be provided supplementally to the Commission upon request.)
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DEVLIEG-BULLARD, INC.
By: /s/ Lawrence M. Murray
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Name: Lawrence M. Murray
Title: Vice President and
Chief Financial Officer
Date: February 6, 1995
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
2.1 Asset Purchase Agreement
10.1 Earnout Note
10.2 Stock Option Agreement
10.3 Employment Agreement
</TABLE>
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Exhibit (2.1)
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made this 23rd day
of January, 1995, by and between DeVlieg-Bullard, Inc., a Delaware corporation
("Buyer"), Mideastern, Inc., a Pennsylvania corporation ("Seller") and the
individual shareholders signatory to this Agreement (the "Shareholders").
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer substantially all of the assets, properties, rights and business
of Seller relating to or used or employed in connection with Seller's business,
(as more fully described in Section 1.1 hereof), upon and subject to the terms
and conditions contained in this Agreement; and
WHEREAS, it is a condition to Buyer's agreement to enter into this
Agreement that the Shareholders are a party hereto.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, the parties agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF ASSETS
1.1. PURCHASE AND SALE OF ASSETS. Subject to and upon the terms
and conditions of this Agreement, Seller hereby sells, transfers, conveys,
assigns and delivers to Buyer, and Buyer purchases and acquires from Seller all
right, title and interest of Seller in and to the properties, assets and rights
of every nature, kind and description, tangible and intangible (including
goodwill) primarily related to or used or held for use or sale by Seller in
connection with the business of Seller (the "Business") as they exist on the
Closing Date (as that term is defined in Section 3.1 hereof) (collectively, the
"Assets"), including, without limitation, all items in the following categories
that conform to the definition of the term Assets:
(a) all machinery, equipment, tools, vehicles, furniture,
furnishings, leasehold improvements, and similar property;
(b) all accounts and notes receivable;
(c) all cash on hand and in banks;
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(d) all inventories of raw materials, work in process,
finished products, goods, spare parts, replacement and component
parts, and office and other supplies, wherever held or stored, of
every sort and medium;
(e) all real estate and real property interests;
(f) all prepaid rent, prepaid property taxes, prepaid
supplies, advances and other prepaid expenses and all deposits and
deferred charges attributable to any contracts, commitments,
understandings, leases or agreements of Seller;
(g) all of Seller's right under all contracts,
commitments, understandings, leases and agreements, including Seller's
right to receive payment for products sold, pursuant to, and to
receive goods and services pursuant to, such contracts and to assert
claims and take other rightful actions to enforce such contracts,
commitments, understandings, leases or agreements;
(h) to the extent permitted by law, all governmental
licenses, permits, approvals, applications or registrations;
(i) any patent, trademarks, service marks or trade names
(including the name "Mideastern") and copyrights of Seller, together
with all related applications or registrations;
(j) all formulas, blueprints, drawings, design and
manufacturing engineering drawings, manufacturing and quality control
written standards, plans, trade secrets, processes, procedures,
research records and manufacturing know-how wherever located;
(k) all operating data, books, records, advertising
materials, customer lists, credit information, cost and pricing
information, supplier lists, business plans, catalogs, computer
programs and software, sales and promotional data and other materials
related to the Assets and the operation of Seller's business; and
(l) all other assets, properties and rights of every kind
and nature owned or held by the Seller and used in or relating to its
business, known or unknown, fixed or unfixed, choate or inchoate,
accrued, absolute, contingent or otherwise, whether or not
specifically referred to in this Agreement.
1.2. EXCLUDED ASSETS. Anything in Article 1 hereof to the contrary
notwithstanding, there shall be excluded from the Assets those items listed on
Schedule 1.2 attached hereto and made a part hereof.
1.3. ASSUMPTION OF LIABILITIES. Except as otherwise provided in
Section 1.4 hereof, on and as of the Closing Date, Buyer will assume all
obligations and liabilities of Seller of any
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kind, character and description, whether accrued, absolute, contingent or
otherwise (collectively, the "Assumed Liabilities").
1.4. LIABILITIES NOT ASSUMED BY BUYER. Anything in this Agreement
to the contrary notwithstanding, the Buyer shall not assume, or in any way be
liable for or responsible for, any liabilities or obligations of the Seller,
(i) set forth on Schedule 1.4 hereto, (ii) not relating to the business of
Seller, (iii) income tax liabilities (except as otherwise provided in Section
6.3 hereof) relating to Seller's business or the Assets for any period ending
on or before the Closing Date, (iv) liabilities of Seller to any of the
Shareholders, and (v) liabilities relating to any untrue representation,
misrepresentation, breach of warranty or nonfulfillment of any covenant,
agreement or obligation by or of Seller or any Shareholder contained herein,
any Schedule hereto or in any certificate, document or instrument delivered to
Buyer pursuant hereto.
1.5. ALLOCATION OF PURCHASE PRICE. Buyer shall prepare an
allocation of the Purchase Price for the Assets for financial, accounting and
tax purposes and shall provide such allocation to Seller within 60 days
following the Closing.
1.6. ASSIGNMENT OF CONTRACTS. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign, and the Assets shall not include, any claim, contract, instrument,
agreement, license, lease, commitment, sales order, purchase order or any claim
or right, or any benefit arising thereunder or resulting therefrom, if an
attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach thereof or in any way affect the rights of Buyer or
Seller thereunder. If such consent is not obtained, or if an attempted
assignment thereof would be ineffective or would affect such rights, Seller
will cooperate with Buyer, at no cost to Buyer, in any arrangement designed to
provide for Buyer the benefits under any such claims, contracts, instruments,
agreements, licenses, leases, commitments, sales orders or purchase orders,
including, without limitation, enforcement for the benefit of Buyer of any and
all rights of Buyer or Seller against a third party thereto arising out of a
breach or cancellation by such third party or otherwise; and any transfer or
assignment to Buyer of any property or property rights or any contract or
agreement which shall require the consent or approval of any third party shall
be made subject to such consent or approval being obtained.
ARTICLE 2.
CONSIDERATION
2.1. PURCHASE PRICE. The aggregate purchase price for the Assets
shall be $3,700,000, plus the Assumed Liabilities (the "Purchase Price").
2.2. PAYMENT OF PURCHASE PRICE. On the date hereof, Buyer shall
deliver to Seller (i) a certified or cashiers check or wire transfer of Federal
or other immediately available funds in the amount of $3,100,000, and (ii)
Buyer's earnout note in the original principal amount of
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$600,000, which earnout note shall be in substantially the form attached hereto
as Schedule 2.2 (the "Note").
ARTICLE 3.
CLOSING; OBLIGATIONS OF THE PARTIES
3.1. CLOSING DATE; EFFECTIVE DATE. The closing (the "Closing")
shall take place and be effective for all purposes at 10:00 a.m., local time,
on January 23, 1995 (the "Closing Date") at the offices of Keith Nonemaker in
Hanover, Pennsylvania. The Closing shall be effective for all purposes as of
January 1, 1995.
3.2. OBLIGATIONS OF THE PARTIES AT THE CLOSING.
(a) At the Closing, Buyer shall deliver to Seller (or
Seller's agent):
(i) the consideration as specified in
Section 2.1;
(ii) copy of resolutions of the Board of
Directors of Buyer, certified by Buyer's Secretary,
authorizing the execution, delivery and performance of this
Agreement and the other documents referred to herein to be
executed by Buyer, and the consummation of the transactions
contemplated hereby;
(iii) the opinion of Bass, Berry & Sims,
legal counsel for Buyer, the terms of which are substantially
as set forth in Section 8.4;
(iv) one or more executed counterparts of
the Employment Agreements in accordance with Section 8.5
hereof;
(v) one or more executed counterparts of
the stock option agreements in accordance with Section 8.7
hereof; and
(vi) an assumption agreement in the form of
Schedule 3.2(a)(vi) hereof.
(b) At the Closing, Seller will deliver to Buyer:
(i) such deeds, bills of sale,
endorsements, assignments, motor vehicle titles and other good
and sufficient instruments of conveyance and transfer, in form
and substance reasonably satisfactory to Buyer, as shall be
effective to vest in Buyer all of Seller's title to and
interest in the Assets, all of Seller's contracts and
commitments, books, records and other data relating to its
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assets, businesses and operations (except minute and
stock books and similar corporate records and any other
documents and records which Seller is required by law to
retain in its possession), and, simultaneously with such
delivery, will take such steps as may be necessary to put
Buyer in actual possession and operating control of the
Assets and such businesses;
(ii) copy of resolutions of the Board of
Directors and Shareholders of Seller, certified by Seller's
secretary, authorizing the execution, delivery and performance
of this Agreement and the other documents referred to herein
to be executed by Seller, and a consummation of the
transactions contemplated hereby;
(iii) the opinion of Keith Nonemaker, legal
counsel for Seller, the terms of which are substantially as
set forth in Section 7.4 hereof;
(iv) one or more executed counterparts of
the Employment Agreements in accordance with Section 8.5
hereof; and
(v) an owner's title insurance policy
issued by a title insurance company reasonably acceptable to
Buyer; and
(vi) such other certificates and documents
as Buyer or its counsel may reasonably request.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES BY SELLER AND SHAREHOLDERS
Seller and the Shareholders hereby jointly and severally represent and
warrant to Buyer as follows:
4.1. AUTHORIZATION. Seller has full corporate power and authority
to enter into this Agreement and perform its obligations hereunder and carry
out the transactions contemplated hereby. The Board of Directors and
Shareholders of Seller have taken all action required by law, its Articles of
Incorporation, its By-laws and otherwise to authorize the execution and
delivery by Seller and Shareholders of this Agreement and the consummation by
Seller of the transactions contemplated hereby. This Agreement constitutes the
valid and binding agreement of Seller and the Shareholders, enforceable against
each of them in accordance with its terms.
4.2. ORGANIZATION, GOOD STANDING AND QUALIFICATION. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Pennsylvania. Seller has full corporate power and
authority to carry on its business as now conducted and possesses all
governmental and other permits, licenses and other authorizations to own, lease
or
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operate its assets and properties as now owned, leased and operated and to
carry on its business as presently conducted. Seller is duly licensed or
qualified to do business as a foreign corporation and is in good standing in
each state wherein the business transacted by Seller makes such licensing or
qualification to do business as a foreign corporation necessary, and no other
jurisdiction has demanded, requested or otherwise indicated that (or inquired
whether) Seller is required so to qualify.
4.3. SUBSIDIARIES. Seller neither owns nor has an interest in,
directly or indirectly, any other corporation, partnership, joint venture or
other business organization.
4.4. NO VIOLATION. The execution and delivery of this Agreement by
Seller and the Shareholders does not, and the consummation of the transactions
contemplated hereby will not, (a) violate any provision of the Articles of
Incorporation or Bylaws of Seller; (b) violate any order, arbitration award,
judgment, writ, injunction, decree, statute, rule or regulation applicable to
Seller or the Shareholders; or (c) violate any other contractual or legal
obligation or restriction to which Seller or the Shareholders are subject.
4.5. FINANCIAL STATEMENTS. Seller has delivered to Buyer balance
sheets of Seller for the fiscal years 1992 and 1993, and the related statements
of income, changes in stockholders' equity and changes in financial position
for each of the fiscal years then ended, including the notes thereto, together
with the report thereon of Miller & Co., independent certified public
accountants, and an interim balance sheet as of November 30, 1994 and the
related statements of income for the 11 months then ended (collectively, the
"Financial Statements"). The Financial Statements fairly present the assets,
liabilities, financial condition and results of operations of Seller as at the
respective dates thereof and for the periods therein referred to, all in
accordance with GAAP. The Financial Statements reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements.
4.6. ASSETS. Schedule 4.6 attached hereto and made a part hereof
contains an accurate and complete description of the Assets including, without
limitation, improvements to leased property and real property (including the
approximate acreage of each parcel of such property, the location thereof, the
nature of any improvements thereon, the identity of the record owner and
lessee, if any, and a summary of encumbrances thereon), plants and structures
located thereon, equipment located therein, vehicles and all personal property
relating to Seller and its business and properties. All such plants,
structures, machinery and equipment are in good working condition and repair,
normal wear and tear excepted, and are adequate for the uses for which they are
intended. All such plants, structures, machinery and equipment conform in all
material respects to applicable health, sanitation, fire, environmental
(including air and water pollution laws and regulations), safety, labor, zoning
and building laws and ordinances; and Seller has not received any notification
within the last five years of any violation of any applicable ordinance or
regulation of building, zoning or other law, in respect of its plants,
structures, properties or operations. None of such real property is currently
the subject of any eminent domain, condemnation or similar proceeding and to
the best of Seller's knowledge, no
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such proceeding is threatened. Seller is now in possession of each parcel of
such real property, there is no adverse claim against such real property and
there are no pending or, to Seller's knowledge, threatened proceedings which
might interfere with Buyer's quiet enjoyment of such real property.
4.7. TITLE TO PROPERTIES; ENCUMBRANCES. Seller has good, valid and
marketable title to the Assets, including, without limitation, the properties
and assets reflected in the Financial Statements (except for inventory sold
since the date thereof in the ordinary course of business and consistent with
past practice). None of the Assets are subject to any mortgage, pledge, lien,
security interest, conditional sale agreement, encumbrance or charge of any
kind, except (a) liens shown on the Financial Statements as securing specified
liabilities (with respect to which no default exists), (b) liens for current
taxes not yet due, and (c) minor imperfections of title and encumbrances, if
any, which are not substantial in amount, do not detract from the value of the
property subject thereto and do not impair the use of the property subject
thereto or impair the operations of Seller.
4.8. INTELLECTUAL PROPERTY. Schedule 4.8 attached hereto and made
a part hereof is an accurate and complete list of all patents, trademarks,
trade names, trademark registrations, service names, service marks, copyrights,
formulas, blueprints, drawings, design and manufacturing engineering drawings,
and manufacturing and quality control written standards owned by Seller or used
or required by Seller in the operation of Seller's business, title to all of
which is held by Seller free and clear of all adverse claims, liens, security
agreements, restrictions or other encumbrances. There is no infringement
action, lawsuit, claim or complaint which asserts that Seller's operations
violate or infringe the patent rights or the trademarks, trade names, trademark
registration, service names, service marks or copyrights of others with respect
to any apparatus or method of Seller or any adversely held patent, trademark,
trade name, trademark registration, service names, service marks or copyrights,
and, except as disclosed on Schedule 4.8, Seller is not in any way making use
of any confidential information or trade secrets of any person except with the
consent of such person. To the best knowledge of Seller, Seller has possession
of all design and manufacturing engineering drawings in the possession of third
party vendors. To the best knowledge of Seller, none of such third party
vendors is or, during the three (3) years prior to the date of this Agreement,
has used any such design and manufacturing engineering drawings for any purpose
not expressly authorized by Seller.
4.9. NO UNDISCLOSED LIABILITY. Except as and to the extent of the
amounts specifically reflected or reserved against in the Financial Statements
or set forth on Schedule 4.9 hereto, Seller does not have any liabilities or
obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due (including, without
limitation, liabilities for taxes and interest, penalties and other charges
payable with respect thereto). The reserves reflected in the Financial
Statements are adequate, appropriate and reasonable in accordance with GAAP
applied on a consistent basis.
4.10. ABSENCE OF CERTAIN CHANGES. Except as and to the extent set
forth on Schedule 4.10, since December 31, 1993, Seller has not:
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(a) suffered any material adverse change in its working
capital, financial condition, assets, liabilities, business or
prospects, or suffered any material casualty loss (whether or not
insured);
(b) made any change in its business or operations or in
the manner of conducting its business other than changes in the
ordinary course of business;
(c) incurred any obligations or liabilities (whether
absolute, accrued, contingent or otherwise and whether due or to
become due), except items incurred in the ordinary course of business
and consistent with past practice, or experienced any change in any
assumptions underlying or methods of calculating any bad debt,
contingency or other reserves;
(d) paid, discharged or satisfied any claim, lien,
encumbrance or liability (whether absolute, accrued, contingent or
otherwise and whether due or to become due), other than claims,
encumbrances or liabilities which are reflected or reserved against in
the Financial Statements and which were paid, discharged or satisfied
since the date thereof in the ordinary course of business and
consistent with past practice;
(e) written down the value of any inventory, or written
off as uncollectible any notes or accounts receivable or any portion
thereof, except for immaterial write-downs and write-offs made in the
ordinary course of business, consistent with past practice and at a
rate no greater than during Seller's last fiscal year;
(f) canceled any other debts or claims, or waived any
rights, of substantial value;
(g) sold, transferred or conveyed any of its properties
or assets (whether real, personal or mixed, tangible or intangible),
except in the ordinary course of business and consistent with past
practice;
(h) disposed of or permitted to lapse, or otherwise
failed to preserve the exclusive rights of Seller to use any patents,
trademarks, trade name, service name, service mark or copyright or any
such application, or disposed of or permitted to lapse any license,
permit or other form of authorization, or disposed of or disclosed to
any person any trade secret, blueprint, drawing, design, formula,
process or know-how;
(i) made any change in any method of accounting or
accounting practice;
(j) paid, loaned or advanced any amount to or in respect
of, or sold, transferred or leased any properties or assets (real,
personal or mixed, tangible or intangible) to, or entered into any
agreement, arrangement or transaction with any officers or directors
of Seller, any affiliates or associates of Seller or any of their
respective officers or directors, or any business or entity in which
any of such persons
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has any direct or material indirect interest, except for
compensation to the officers and employees of Seller at rates not
exceeding the rates of compensation in effect during Seller's last
fiscal year and advances to employees in the ordinary course of
business for travel and expense disbursements in accordance with past
practice, but not in excess of $1,000 at any one time outstanding;
(k) declared, paid or make or set aside for payment or
making, any dividend or other distribution in respect of its capital
stock; or
(l) agreed, whether in writing or otherwise, to take any
action described in this Section 4.10.
4.11. TAX MATTERS. Seller has duly filed all tax reports and
returns required to be filed by it and has duly paid all taxes and other
charges due or claimed to be due from it by federal, state or local taxing
authorities (including without limitation, those due in respect of its
properties, income, franchises, excise taxes and duties, licenses, sales and
payrolls); and true and correct copies of all tax reports and returns relating
to such taxes and other charges for the most recent three years have been
heretofore delivered to Buyer. Since December 31, 1993, Seller has not
incurred any tax liabilities other than in the ordinary course of business;
there are no tax liens (other than liens for current taxes not yet due) upon
any properties or assets of Seller (whether real, personal or mixed, tangible
or intangible), and, except as reflected on Schedule 4.11, there are no pending
or threatened questions or examinations relating to, or claims asserted for,
taxes or assessments against Seller, and there is no basis for any such
question or claim. Seller has not granted or been requested to grant any
extension of the limitation period applicable to any claim for taxes or
assessments with respect to taxes.
4.12. COMPLIANCE WITH APPLICABLE LAW. Seller has during the five
year period prior to the date hereof complied and is presently duly complying,
in the conduct of the Business and the ownership of the Assets with all
applicable laws (including without limitation those pertaining to occupational
safety and health practices, fair labor practices and standards, equal
opportunity practices, and water and air pollution and other environmental
matters), whether statutory or otherwise, rules, regulations, orders,
ordinances, judgments and decrees of all federal, state, local or other
governmental authorities (collectively, "Laws"). Seller has not received any
order, notice, or other communication from any federal, state or local
governmental agency, including but not limited to those administering or
enforcing the Occupational Safety and Health Act of 1970, as amended, of any
investigation of or a possible violation of any applicable Laws, or any other
Law or requirement relating to or affecting the operations or properties of
Seller.
4.13. ABSENCE OF QUESTIONABLE PAYMENTS. Neither Seller nor any of
its directors, officers, employees or affiliates has at any time used funds for
any illegal purpose, including without limitation, the making of any improper
political contribution, bribe or kickback.
4.14. LITIGATION. Except as set forth on Schedule 4.14 attached
hereto and made a part hereof, since its incorporation, there have been, and as
of the date of the Agreement there are,
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no claims, actions, suits, proceedings or investigations pending or, to the
knowledge of Seller, threatened by or against, or otherwise affecting Seller at
law or in equity or before or by any federal, state, municipal or other
governmental department, commission, board, agency, instrumentality or
authority. Seller does not know or have any reason to know of any basis for
any such claim, action, suit, proceeding or investigation.
4.15. INSURANCE. Schedule 4.15 attached hereto and made a part
hereof sets forth a complete and accurate list and a brief description
(including policy numbers, deductibles, carriers and effective and termination
dates) of all policies of fire, liability, workmen's compensation, health,
title and other forms of insurance presently in effect with respect to Seller
(collectively, the "Policies"). Seller has not been refused any insurance, nor
has its coverage been limited, by any insurance carrier to which it has applied
for insurance or with which it has carried insurance during the last five
years. Schedule 4.15 also contains an accurate and complete description of any
provision contained in the Policies which provides for retrospective premium
adjustment and identifies all risks which Seller has designated as being
self-insured and the amount of reserve set aside by Seller to cover such risk.
4.16. PRODUCT AND SERVICE WARRANTIES. Except as described on
Schedule 4.16 attached hereto and made a part hereof, Seller has not given or
made any warranties to third parties with respect to any products supplied or
services performed by it which may still be in effect at any time after the
Closing Date, except for warranties imposed by law. Except as described on
Schedule 4.16, there have been no claims or investigations made with respect to
any product or service warranties which have not been fully settled and
resolved or any unresolved warranty claims which have not been adequately
reserved against on the Financial Statements. Seller does not know or have any
reason to know of any basis for any other claim or investigation.
4.17. EMPLOYEE BENEFIT PLANS.
(a) Except as disclosed on Schedule 4.17 hereto and made a part
hereof, Seller does not maintain any retirement or deferred compensation plan,
savings, incentive, stock option or stock purchase plan, unemployment
compensation plan, vacation pay, severance pay, bonus or benefit arrangement,
group medical plan, insurance or hospitalization program or any other fringe
benefit arrangements, including all "employee benefit plans" as defined by
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (referred to collectively hereinafter as the "Plans") for any
employee, consultant or agent of Seller, whether pursuant to contract,
arrangement, custom or informal understanding.
(b) Except as disclosed on Schedule 4.17, Seller does not have any
commitment, whether formal or informal and whether legally binding or not, (i)
to create any additional such agreement, plan, arrangement or practice; (ii) to
modify or change any such agreement, plan, arrangement or practice; or (iii) to
maintain for any period of time any such agreement, plan, arrangement or
practice. Schedule 4.17 contains an accurate and complete description of the
funding policies (and commitments, if any) of Seller with respect to each such
existing plan, arrangement or practice.
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(c) None of the Plans listed on Schedule 4.17 provide for
continuing benefits or coverage after termination or retirement from
employment, except with respect to any "group health plan" as defined in
Internal Revenue Code Section 4980B(g) and ERISA Section 607. With respect to
any Plan which is a "group health plan," as so defined, Seller warrants that in
all "qualified events" (including those resulting from the transaction
contemplated by this Agreement) occurring prior to or on the Closing Date,
Seller has or will cause to be offered to Seller's eligible employees and their
"qualified beneficiaries" the opportunity to elect continuation coverage under
ERISA Section 602 to the extent required by ERISA Sections 601-607 and will
provide that coverage, if elected, at no expense to Buyer or Seller.
(d) Neither Seller nor any "affiliate" of Seller (as defined in
ERISA) has ever participated in or withdrawn from a multi-employer plan as
defined in Section 4001(a)(3) of Title IV of ERISA, and Seller has not incurred
and does not owe any liability as a result of any partial or complete
withdrawal by any employer from such a multi-employer plan as described under
Sections 4201, 4203, or 4205 of ERISA.
(e) Except as disclosed on Schedule 4.17, (i) Seller has no
unfunded past service liability in respect of any of its employee benefit
plans; (ii) the actuarially computed value of vested benefits under any
employee benefit plan of Seller does not exceed the fair market value of the
fund assets relating to such plan; (iii) neither Seller nor any plan nor any
trustee, administrator, fiduciary or sponsor of any plan has engaged in any
prohibited transactions as defined in the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or the Internal Revenue Code of 1986, as
amended (the "Code"); (iv) all filings and reports as to such plans required to
have been made on or prior to the Closing Date to the Internal Revenue Service,
the United States Department of Labor or other governmental agencies have been
or will be made on or prior to the Closing Date; (v) there is no material
litigation, disputed claim, governmental proceeding or investigation pending or
threatened with respect to any of such plans, the related trusts, or any
fiduciary, trustee, administrator or sponsor of such plans; (vi) such plans
have been established, maintained and administered in all material respects in
accordance with their governing documents and applicable provisions of ERISA
and the Code and Treasury Regulations promulgated thereunder; and (vii) there
has been no "Reportable Event" as defined in Section 4043 of ERISA with respect
to any Employee Benefit Plan subject to Subtitle B of Title IV of ERISA that
has not been waived by the Pension Benefit Guaranty Corporation.
(f) Seller has complied in all material respects with all
applicable federal, state and local laws, rules and regulations relating to
employees' employment and/or employment relationships, including, without
limitation, wage related laws, anti-discrimination laws and employee safety
laws.
(g) Except as disclosed on Schedule 4.17 or otherwise set forth in
the Agreement, Seller is not a party to any contract or agreement or
requirement of law which would require Buyer to hire, or subject Buyer to
liability if it did not hire, any employee of Seller or which would require
Buyer to pay or provide, or subject Buyer to liability if it did not pay or
provide,
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any employee benefits to any employee of Seller for periods prior to or after
the Closing Date (including any and all employee benefits and any compensatory,
over-time, vacation, sick or holiday pay).
4.18. ENVIRONMENTAL MATTERS.
(a) As used herein the following terms shall have the
indicated meanings:
(i) "Hazardous Material" is any material or
substance that is prohibited or regulated by any Environmental
Law or that has been designated by any Governmental Authority
to be radioactive, toxic, hazardous or otherwise a danger to
health, reproduction or the environment.
(ii) "Governmental Authority" is any local, state,
provincial, federal, or international governmental authority
or agency which has had or now has jurisdiction over any
portion of the subject of this Agreement or any Business
Facility of Seller.
(iii) "Business Facility" is the real property
including the land, the improvements thereon, and the ground
water and surface water thereof, that Seller has at any time
owned, operated, occupied, controlled or leased.
(iv) "Disposal Site" is a landfill, disposal
agent, waste hauler or recycler of Hazardous Materials.
(v) "Environmental Laws" are all laws, rules,
regulations, orders, treaties, statutes, and codes promulgated
by any Governmental Authority which prohibit, regulate or
control any Hazardous Material or any Hazardous Materials
Activity, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, the Resource Recovery and Conservation Act of 1976, the
Federal Water Pollution Control Act, the Clean Air Act, the
Hazardous Materials Transportation Act, the Clean Water Act,
comparable laws, rules, regulations, orders, treaties,
statutes, and codes of other Governmental Authorities, the
regulations and publications promulgated pursuant to any of
the foregoing, and all amendments and modifications of any of
the foregoing now or hereafter enacted.
(vi) "Hazardous Material Activity" is the
transportation, transfer, recycling, storage, use, treatment,
manufacture, investigation, removal, remediation, release,
exposure of others to, sale, or distribution of any Hazardous
Material or any product containing a Hazardous Material.
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(vii) "Environmental Permit" is any approval,
permit, license, clearance or consent required to be obtained
from any private person or any Governmental Authority with
respect to a Hazardous Materials Activity which is or was
conducted by Seller.
(b) Environmental Representations: Except as set forth
in Schedule 4.18, Seller hereby represents and warrants as to any
Business Facility not currently occupied by Seller and hereby
represents and warrants, to the best of Seller's knowledge, as to any
Business Facility currently occupied by Seller that:
(i) Condition of Property: As of the Closing, no
Hazardous Material is present on any Business Facility and no
reasonable likelihood exists that any Hazardous Material
present on other property will come to be present on a
Business Facility. Except as set forth in Schedule 4.18,
there are no underground storage tanks, asbestos or PCBs
present on any Business Facility.
(ii) Hazardous Materials Activities: Seller has
conducted all Hazardous Material Activities relating to Seller
in compliance with all applicable Environmental Laws. The
Hazardous Materials Activities of Seller prior to the Closing
have not resulted in the exposure of any person to a Hazardous
Material in a manner which has or will cause an adverse health
effect to said person.
(iii) Permits: Schedule 4.18 accurately describes
all of the Environmental Permits currently held by Seller and
relating to the Business and the Environmental Permits listed
on Schedule 4.18 are all of the Environmental Permits
necessary for the continued conduct of any Hazardous Material
Activity of Seller as such activities are currently being
conducted. All such Environmental Permits are valid, in full
force and effect, and will survive the Closing without
modification. Seller has complied in all material respects
with all covenants and conditions of any Environmental Permit
which is or has been in force with respect to Seller's
Hazardous Materials Activities. To the best knowledge of
Seller, no circumstances exist which could cause any
Environmental Permit to be revoked, modified, or rendered
non-renewable upon payment of the permit fee or which could
impose upon Seller the obligation to obtain any additional
Environmental Permit. All Environmental Permits and all other
consents and clearances required by any Environmental Law or
any agreement to which Seller is bound as a condition to the
performance and enforce of this Agreement, including without
limitation, all so-called "RCRA" environmental clearances
required by any Governmental Authority have been obtained or
will be obtained prior to the Closing at no cost to Buyer.
(iv) Environmental Litigation: Except as
disclosed on Schedule 4.18, no action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is
pending, or to the best of Seller's knowledge threatened,
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concerning or relating to any Business Facility, any
Environmental Permit or any Hazardous Materials Activity of
Seller.
(v) Offsite Hazardous Material Disposal: During
the last five years, Seller has transferred or released
Hazardous Materials only to those Disposal Sites described on
Schedule 4.18; and no action, proceeding, liability or claim
exists or, to the best knowledge of Seller is threatened,
against any Disposal Site or against Seller with respect to
any transfer or release of Hazardous Materials relating to
Seller to a Disposal Site.
(vi) Environmental Liabilities: Seller is not
aware of any fact or circumstance which could involve Seller
in any environmental litigation or impose upon the Buyer any
environmental liability which could have a material adverse
effect on the business or financial status of Seller.
(vii) Reports and Records: Seller has delivered to
Buyer or made available for inspections by Buyer and its
agents and employees all records concerning the Hazardous
Material Activities of Seller and all environmental audits and
environmental assessments of any Business Facility conducted
at the request of, or otherwise available to, Seller. Seller
has complied with all environmental disclosure obligations
imposed upon Seller with respect to this transaction by
applicable law.
4.19. CONTRACTS AND COMMITMENTS. Except as set forth in Schedule
4.19 attached hereto and made a part hereof:
(a) Seller does not have any contracts, commitments,
arrangements or understandings which may involve the expenditure by
Seller after the Closing of more than $10,000 for any individual
contract, commitment, arrangement or understanding or which was not
entered into in the ordinary course of business. The legal
enforceability after the Closing of the rights of Seller under any of
its contracts will not be affected in any manner by the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(b) Seller has no sales or purchase commitments which are
in excess of the normal, ordinary and usual capacity or requirements
of its business or which are not terminable on thirty (30) days'
notice.
(c) Seller is not a party to any licensing agreement,
either as licensor or licensee.
(d) Seller is not restricted or purported to be
restricted by agreement or otherwise from carrying on its business
anywhere in the world.
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4.20. ACCOUNTS RECEIVABLE. All accounts and notes receivable of
Seller, whether reflected in the Financial Statements or otherwise, represent
sales actually made in the ordinary course of business; none of such
receivables is subject to any counterclaim or set-off other than normal sales
adjustments or allowances consistent with past practice; and all such
receivables are current and collectible in accordance with their respective
terms, net of any reserve reflected in the Financial Statements.
4.21. ORDERS, COMMITMENTS AND RETURNS. The aggregate of all
accepted and unfilled orders for the sale of goods entered into by Seller does
not exceed an amount which can reasonably be expected to be filled in the
ordinary course of business on a schedule which will maintain satisfactory
customer relationships, and the aggregate of all contracts or commitments for
the purchase of products by Seller does not exceed an amount which is
reasonable for its anticipated volumes of business (all of which orders,
contracts and commitments were made in the ordinary course of business). As of
the date of this Agreement, there are no asserted, or if unasserted,
sustainable, claims to return goods of Seller by reason of alleged
overshipments, defective goods, breach of warranty or otherwise. There are no
goods in the hands of customers under any understanding that such goods are
returnable other than pursuant to the standard returns policy set forth in
Seller's contracts. Seller does not know or have reason to believe that either
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby will result in any cancellations or
withdrawals of accepted and unfilled orders for the sale of Seller's goods.
4.22. CUSTOMERS AND SUPPLIERS. Schedule 4.22 attached hereto and
made a part hereof contains an accurate and complete list of (i) the names and
addresses of the twenty (20) largest suppliers from whom Seller has purchased
supplies during the past two fiscal years and (ii) the names, addresses and the
corresponding sales volume of the twenty (20) largest customers for the past
two (2) fiscal years. Seller has not received any indication from any customer
or supplier whose name appears on such list (or otherwise has any reason to
believe) that such customer or supplier will not continue as a customer or
supplier of Buyer after the Closing.
4.23. LABOR MATTERS. There are no collective bargaining agreements
in effect between Seller and labor unions or organizations representing any of
Seller's employees. During the past five (5) years, there has been no request
for collective bargaining or for an employee election from any employee, union
or the National Labor Relations Board. Except as and to the extent set forth
in Schedule 4.23: (i) Seller is in compliance with all federal, state and local
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor
practice; (ii) there is no unfair labor practice complaint against Seller
pending or threatened before the National Labor Relations Board or the United
States Department of Labor; (iii) there is no labor strike, dispute, slowdown
or stoppage in progress or threatened against or involving Seller; (iv) no
question concerning representation has been raised or is threatened respecting
the employees of Seller; (v) no grievance or arbitration proceeding is pending
and no claim therefor exists; (vi) no private agreement restricts Seller from
relocating, closing or terminating any of its operations or
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facilities; and (vii) Seller has not in the past five (5) years experienced any
labor strike, dispute, slowdown, stoppage or other labor difficulty.
4.24. NO BREACH. Each arrangement (whether evidenced by a written
document or otherwise and of whatever type) referred to in this Agreement or in
any Schedule hereto under which Seller has any right, interest or obligation is
in full force and effect; there have been no threatened cancellations thereof
nor outstanding disputes thereunder, and Seller has not breached any provision
of, nor does there exist any default in any material respect under, or event
(including the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby) which is, or with the giving of notice or
the passage of time or both would become, a breach or default in any material
respect under the terms of any such arrangement.
4.25. INVENTORY. All inventory of Seller, whether reflected in the
Financial Statements or otherwise, is of good and merchantable quality and is
usable and saleable in the ordinary course of business, except for items of
obsolete materials and materials of below standard quality, all of which have
been written down in the Financial Statements to realizable market value or for
which adequate reserves have been provided therein. The present quantities of
all inventory of Seller are reasonable in the present circumstances of its
business. Seller is not under any liability or obligation with respect to the
return of inventory or goods in the possession of wholesalers, retailers or
other customers.
4.26. PROFESSIONAL FEES. Neither Seller nor the Shareholders have
done anything to cause or incur any liability or obligation for investment
banking, brokerage, finders, agents or other fees, commissions, expenses or
charges in connection with the negotiation, preparation, execution or
performance of this Agreement or the consummation of the transactions
contemplated hereby, and Seller does not know of any claim by anyone for such a
fee, commission, expense or charge.
4.27. CONSENTS AND APPROVALS. Seller has obtained all consents,
approvals, authorizations or orders of third parties, including governmental
authorities, necessary for the authorization, execution and performance of this
Agreement by Seller.
4.28. FULL DISCLOSURE. Neither this Agreement, nor any Schedule,
exhibit, list, certificate or other instrument and document furnished or to be
furnished by Seller to Buyer pursuant to this Agreement, contains any untrue
statement of a material fact or omits to state any material fact required to be
stated herein or therein or necessary to make the statements and information
contained herein or therein not misleading. Seller has not withheld from Buyer
disclosure of any event, condition or fact which such Seller knows, or has
reasonable grounds to know, may materially adversely affect Seller's assets,
prospects or condition (financial or otherwise).
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ARTICLE 5.
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer hereby represents and warrants to Seller and the Shareholders as
follows:
5.1. ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby.
5.2. AUTHORIZATION. The Board of Directors of Buyer has taken all
action required by law, its Articles of Incorporation, its Bylaws and otherwise
to authorize the execution and delivery by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby.
5.3. VALID AND BINDING AGREEMENT. This Agreement constitutes a
valid and binding agreement of Buyer, enforceable against Buyer in accordance
with its terms.
5.4. NO VIOLATION. The execution and delivery of this Agreement by
Buyer does not, and the consummation of the transactions contemplated hereby
will not: (a) violate any provision, or result in the creation of any lien or
security interest under, any agreement, indenture, instrument, lease, security
agreement, mortgage or lien to which Buyer is a party or by which it is bound;
(b) violate any provision of Buyer's Articles of Incorporation or Bylaws; (c)
violate any order, arbitration award, judgment, writ, injunction, decree,
statute, rule or regulation applicable to Buyer; or (d) violate any other
contractual or legal obligation or restriction to which Buyer is subject.
5.5. CONSENTS AND APPROVALS. Buyer has obtained all consents,
approvals, authorizations or orders of third parties, including governmental
authorities, necessary for the authorization, execution and performance of this
Agreement by Buyer.
ARTICLE 6.
COVENANTS AND AGREEMENTS OF BUYER
Buyer agrees that following the Closing, unless otherwise consented to
by Seller in writing, it will fulfill the following covenants and agreements:
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6.1. OPERATION OF COMPANY FACILITIES. Buyer will maintain the
operation of Seller's facility located in Abbottstown, Pennsylvania for a
period ending December 31, 1997 provided that the earnings before interest and
taxes from the Abbottstown facility (such calculation to be made prior to
including any bonuses paid to the Shareholders in accordance with the
Employment Agreements contemplated in Section 8.5 hereof) during each of the
years ended December 31, 1995 and 1996 is at least $300,000.
6.2. EMPLOYEE BENEFITS. Buyer shall maintain for the officers of
Seller retained by Buyer those medical insurance and life insurance programs
presently maintained by Seller and shall provide a maximum of $500 per officer
for a self insured eye and dental program and offset to Blue Cross deductible.
6.3. TAXES AND PROFESSIONAL FEES. Buyer shall pay the federal and
state taxes of Seller incurred in connection with the transactions contemplated
hereby in an amount equal to the difference between the taxes actually incurred
and those that would have been incurred if the transactions contemplated hereby
had been structured as an acquisition of all of the outstanding capital stock
of Seller. Buyer shall reimburse Seller for such difference promptly following
receipt from Seller of a detailed accounting thereof. Buyer shall also
reimburse Seller for the reasonable and accountable professional fees incurred
by Seller in connection with the liquidation of Seller following the Closing.
6.4. RECORDS. Following the Closing, Buyer will provide to the
Shareholders or their designated agent such financial information on a monthly
basis as is reasonably necessary to determine the calculation of payments due
to the Shareholders pursuant to the Employment Agreements contemplated by
Section 8.5 hereof. Promptly following notice to the Shareholders of the
calculation of any such bonuses, Buyer shall provide to the Shareholders
information reasonably requested by the Shareholders necessary to confirm the
accuracy of Buyer's calculation.
6.5. AGREEMENTS WITH SALES REPRESENTATIVES. Buyer shall honor the
terms of Seller's agreements with each of Maurie Grothe and Al Martin in
accordance with the provisions of the correspondence between Seller and such
individuals set forth on Schedule 6.5 hereto.
ARTICLE 7.
CONDITIONS TO BUYER'S OBLIGATIONS
All obligations of Buyer hereunder are subject to the fulfillment,
prior to or at the Closing, of each of the following conditions:
7.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Seller and the Shareholders in this Agreement and the
statements contained in the Schedules
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attached hereto or in any instrument, list, certificate or writing delivered by
Seller pursuant to this Agreement shall be true at and as of the time of the
Closing.
7.2. PERFORMANCE BY SELLER AND THE SHAREHOLDERS. Seller and the
Shareholders shall have performed and complied with all covenants, agreements,
obligations and conditions required by this Agreement to be so complied with or
performed.
7.3. CERTIFICATES OF SELLER AND THE SHAREHOLDERS. Seller and the
Shareholders shall have delivered to Buyer a certificate, dated the Closing
Date, certifying as to the fulfillment of the conditions specified in Sections
7.1 and 7.2 hereof.
7.4. OPINION OF COUNSEL FOR SELLER AND THE SHAREHOLDERS. Buyer
shall have received an opinion of Seller's and the Shareholders' counsel, Keith
Nonemaker, dated the Closing Date, in form and substance satisfactory to
Buyer's counsel, Bass, Berry & Sims, to the effect set forth on Schedule 7.4
hereto.
7.5. CONSENTS AND APPROVALS. Buyer shall have received from the
Seller executed counterparts of the consents referred to in Section 4.27 hereof
and all other consents required, for the consummation of the transactions
contemplated hereby, all of which consents shall be in form and substance
satisfactory to Buyer.
7.6. LITIGATION. On the date of the Closing, neither Seller nor
any Shareholder shall be a party to, nor will there otherwise be pending or
threatened, any judicial, administrative, or other action, proceeding or
investigation which, if adversely determined might, in the opinion of Buyer,
have a material adverse effect upon Seller, Buyer or the transactions
contemplated hereby.
ARTICLE 8.
CONDITIONS TO SELLER'S AND THE SHAREHOLDERS' OBLIGATIONS
All obligations of Seller and the Shareholders under this Agreement
are subject to the fulfillment, prior to or at the Closing, of each of the
following conditions:
8.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Buyer in this Agreement shall be true when made and at
and as of the time of the Closing.
8.2. PERFORMANCE. Buyer shall have performed and complied with all
agreements, obligations and conditions required by this Agreement to be so
complied with or performed.
8.3. OFFICER'S CERTIFICATE. Buyer shall have delivered to Seller a
Certificate of the President of Buyer, dated the Closing Date, certifying as to
the fulfillment of the conditions specified in Sections 8.1 and 8.2 hereof.
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8.4. OPINION OF COUNSEL FOR BUYER. Seller shall have received an
opinion of Buyer's counsel, Bass, Berry & Sims, dated the Closing Date, in form
and substance satisfactory to Seller's counsel, Keith Nonemaker, to the effect
set forth on Schedule 8.4 hereto.
8.5. EMPLOYMENT AGREEMENTS. Buyer shall have entered into an
employment agreement with each Shareholder and William Hooper in substantially
the forms of Schedule 8.5(i) and Schedule 8.5(ii) attached hereto,
respectively.
8.6. RELEASE OF PERSONAL GUARANTEES. The Shareholders shall be
released from those personal guarantees of the liabilities, obligations and
debts of Seller as described on Schedule 8.6 attached hereto and made a part
hereof.
8.7. GRANTING OF STOCK OPTIONS. Buyer will grant to the
Shareholders options to purchase an aggregate of 100,000 shares of Buyer's
Common Stock subject to the terms and conditions as set forth in the Stock
Option Agreement in substantially the form of Schedule 8.7 attached hereto and
made a part hereof.
8.8. DISTRIBUTION. The Shareholders shall have received from
Seller a distribution of $25,000 plus an amount sufficient to satisfy the
Shareholders' federal income tax liability resulting from income earned by
Seller for periods prior to the Closing and sufficient to satisfy the
Shareholders' federal income tax liability resulting from the delivery of the
Stock Option Agreements contemplated by Section 8.7.
ARTICLE 9.
INDEMNIFICATION
9.1. INDEMNIFICATION BY SELLER AND THE SHAREHOLDERS. Seller and
the Shareholders hereby agree, jointly and severally, to defend, indemnify and
hold harmless Buyer, each fiduciary of Buyer's employee benefit plans and each
of Buyer's shareholders, affiliates, officers, directors, employees, agents,
successors and assigns ("Buyer's Indemnified Persons") and shall reimburse
Buyer's Indemnified Persons for, from and against each claim, loss, liability,
cost and expense (including without limitation, interest, penalties, costs of
preparation and investigation, and the reasonable fees, disbursements and
expenses of attorneys, accountants and other professional advisors)
(collectively, "Losses"), directly or indirectly relating to, resulting from or
arising out of:
(a) Any untrue representation, misrepresentation, breach
of warranty or nonfulfillment of any covenant, agreement or other
obligation by or of Seller or any Shareholder contained herein, any
Schedule hereto or in any certificate, document or instrument
delivered to Buyer pursuant hereto.
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(b) Any tax liability of Seller not previously paid, or
for which adequate reserves have not been established in the Financial
Statements which may at any time be asserted or assessed against it
for any event or period prior to the Closing Date (except as
contemplated by Section 6.3 hereof).
(c) Any cost, expense or liability incurred by Buyer in
connection with any pollution of the soil or ground water of, or
originating from, any parcel of real property owned, leased or used by
Seller which exists on the Closing Date (regardless of whether the
possibility of such cost or expense shall have been disclosed to Buyer
at or prior to the Closing Date). The term pollution shall include
any substance subject to any federal, state, local or other law, rule,
regulation or governmental regulation of any kind, and the rules,
regulations and orders promulgated thereunder or any other substance
which constitutes a nuisance or hazard to the environment or to the
public health, safety or welfare.
(d) Any and all liabilities or obligations of any
Shareholder to Seller arising outside of this Agreement.
(e) Any liability or cost incurred by Buyer for refunds
to customers, in excess of $10,000 annually, because of defective
returned goods or warranty claims in connection with goods sold by
Seller.
(f) Any other Loss incidental to any of the foregoing.
9.2. INDEMNIFICATION BY BUYER. Buyer hereby agrees to defend,
indemnify and hold harmless Seller, and shall reimburse Seller for, from and
against Losses directly or indirectly relating to, resulting from or arising
out of:
(a) Any untrue representation, misrepresentation, breach
of warranty or nonfulfillment of any covenant, agreement or other
obligation by Buyer contained herein or in any certificate, document
or instrument delivered to Seller pursuant hereto.
(b) Any other Loss incidental to the foregoing.
9.3. PROCEDURE.
(a) The indemnified party shall promptly notify the
indemnifying party of any claim, demand, action or proceeding for
which indemnification will be sought under Section 9.1 or 9.2 of this
Agreement, and, if such claim, demand, action or proceeding is a third
party claim, demand, action or proceeding, the indemnifying party will
have the right at its expense to assume the defense thereof using
counsel reasonably acceptable to the indemnified party. The
indemnified party shall have the right to participate, at its own
expense, with respect to any such third party claim, demand, action or
proceeding; provided, however, that the employment of such separate
counsel shall be at the expense
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of the indemnifying party if (i) employment of such counsel shall have
been authorized in writing by the indemnifying party in connection
with the defense of such action or (ii) the indemnified party shall
have reasonably concluded that there may be defenses available to it
which are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying party
shall not have the right to direct such action on behalf of the
indemnified party). In connection with any such third party claim,
demand, action or proceeding, Buyer and the Seller shall cooperate
with each other and provide each other with access to relevant books
and records in their possession. No such third party claim, demand,
action or proceeding shall be settled without the prior written
consent of the indemnified party. If a firm written offer is made to
settle any such third party claim, demand, action or proceeding and
the indemnifying party proposes to accept such settlement and the
indemnified party refuses to consent to such settlement, then (i) the
indemnifying party shall be excused from, and the indemnified party
shall be solely responsible for, all further defense of such third
party claim, demand, action or proceeding; and (ii) the maximum
liability of the indemnifying party relating to such third party
claim, demand, action or proceedings shall be the amount of the
proposed settlement if the amount thereafter recovered from the
indemnified party on such third party claim, demand, action or
proceeding is greater than the amount of the proposed settlement.
(b) Any claim of indemnity of Buyer against Seller or the
Shareholders with respect to Section 9.1 hereof may in Buyer's
discretion be charged or applied pro rata by way of setoff against the
principal balance of the Note.
(c) The indemnification required of Seller and the
Shareholders pursuant to Section 9.1 shall survive for a period of two
years following the Closing Date; provided, that the indemnification
required pursuant to Section 9.1(b) shall survive for the applicable
statute of limitations.
ARTICLE 10.
SURVIVAL OF REPRESENTATIONS
10.1. SURVIVAL OF REPRESENTATIONS. All representations, warranties,
covenants and agreements by the parties contained in this Agreement shall
survive the Closing and any investigation at any time made by or on behalf of
any party hereto.
10.2. STATEMENTS AS REPRESENTATIONS. All statements contained in
any certificate, Schedule, list, document or other writing delivered pursuant
hereto or in connection with the transactions contemplated hereby shall be
deemed representations and warranties for all purposes of this Agreement.
22
<PAGE> 23
10.3. REMEDIES CUMULATIVE. The remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereto of any
other rights or the seeking of any other remedies against the other party
hereto.
ARTICLE 11.
MISCELLANEOUS
11.1. EXPENSES. All fees and expenses incurred by Seller and the
Shareholders, including without limitation legal fees and expenses, in
connection with this Agreement will be borne by the Shareholders and all fees
and expenses incurred by Buyer, including without limitation, legal fees and
expenses, in connection with this Agreement will be borne by Buyer.
11.2. ASSIGNABILITY; PARTIES IN INTEREST.
(a) Buyer may assign any or all of its rights hereunder
to any affiliate or any direct or indirect subsidiary of Buyer, and
Buyer shall advise Seller of any such assignment and shall designate
such party as the assignee and transferee of the securities purchased.
Any such assignee shall assume all of Buyer's duties, obligations and
undertakings hereunder, but the assignor shall remain liable
thereunder.
(b) Seller may not assign, transfer or otherwise dispose
of any of its rights hereunder other than to the Shareholders without
the prior written consent of Buyer.
(c) All the terms and provisions of this Agreement shall
be binding upon, shall inure to the benefit of and shall be
enforceable by the respective heirs, successors, assigns and legal or
personal representatives of the parties hereto.
11.3. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, including the
exhibits, schedules, lists and other documents and writings referred to herein
or delivered pursuant hereto, which form a part hereof, contains the entire
understanding of the parties with respect to its subject matter. There are no
restrictions, agreements, promises, warranties, covenants or undertakings other
than those expressly set forth herein or therein. This Agreement supersedes
all prior agreements and understandings between the parties with respect to its
subject matter. This Agreement may be amended only by a written instrument
duly executed by all parties or their respective heirs, successors, assigns or
legal personal representatives. Any condition to a party's obligations
hereunder may be waived but only by a written instrument signed by the party
entitled to the benefits thereof. The failure or delay of any party at any
time or times to require performance of any provision or to exercise its rights
with respect to any provision hereof, shall in no manner operate as a waiver of
or affect such party's right at a later time to enforce the same.
23
<PAGE> 24
11.4. HEADINGS. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretations of this Agreement.
11.5. SEVERABILITY. The invalidity of any term or terms of this
Agreement shall not affect any other term of this Agreement, which shall remain
in full force and effect.
11.6. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed (registered or certified mail, postage
prepaid, return receipt requested) as follows:
If to Seller:
Mideastern, Inc.
301 Pleasant Street
P.O. Box 12
Abbottstown, PA 17301
Attn: James E. Gouker
with a copy to:
Darryl A. Noble
Miller & Company
211 Carlisle Street
Hanover, PA 17331
If to the Shareholders:
301 Pleasant Street
P.O. Box 12
Abbottstown, PA 17301
Attn: James E. Gouker
If to Buyer:
DeVlieg-Bullard, Inc.
One Gorham Island
Westport, Connecticut 06880
Attn: William O. Thomas
24
<PAGE> 25
with a copy to:
Bass, Berry & Sims
2700 First American Center
Nashville, Tennessee 37238
Attn: J. Page Davidson
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
11.7. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
Pennsylvania, without regard to its conflict of laws rules.
11.8. COUNTERPARTS. This Agreement may be executed simultaneously
in one or more counterparts, with the same effect as if the signatories
executing the several counterparts had executed one counterpart, provided,
however, that the several executed counterparts shall together have been signed
by Buyer, Seller and the Shareholders. All such executed counterparts shall
together constitute one and the same instrument.
25
<PAGE> 26
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by Buyer, Seller and the Shareholders on the date first above
written.
BUYER:
DEVLIEG-BULLARD, INC.
By: /s/ William O. Thomas
---------------------------------------
Title: President
------------------------------------
SELLER:
MIDEASTERN, INC.
By: /s/ James F. Harnish
---------------------------------------
Title: President
------------------------------------
SHAREHOLDERS:
/s/ James E. Gouker
------------------------------------------
James E. Gouker
/s/ James F. Harnish
------------------------------------------
James F. Harnish
/s/ Stanley Harbold
------------------------------------------
Stanley Harbold
/s/ Gerald R. Paradis
------------------------------------------
Gerald R. Paradis
26
<PAGE> 1
Exhibit (10.1)
THIS INSTRUMENT AND THE INDEBTEDNESS EVIDENCED HEREBY IS SUBORDINATE
TO THE INDEBTEDNESS OF THE MAKER TO SHAWMUT BANK
CONNECTICUT, N.A., IN THE MANNER AND TO THE EXTENT
SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT DATED
THE DATE HEREOF MADE BY THE MAKER,
PAYEE AND SHAWMUT BANK CONNECTICUT, N.A.
EARNOUT NOTE
$ 600,000 HANOVER, PENNSYLVANIA
JANUARY 23, 1995
FOR VALUE RECEIVED, DeVlieg-Bullard, Inc., a Delaware corporation (the
"Maker"), promises to pay to Mideastern, Inc., a Pennsylvania corporation (the
"Payee"), the principal sum of Six Hundred Thousand Dollars and No/100ths
($600,000), subject to adjustment as described below, together with interest on
the outstanding principal balance from date hereof at an annual rate of eight
percent (8%); provided that in no event shall the rate of interest payable in
respect of the indebtedness evidenced hereby exceed the maximum rate of
interest from time to time allowed to be charged by applicable law.
Interest on the outstanding principal balance hereof shall be due and
payable monthly in arrears, with the first installment payable on February 15,
1995 and subsequent installments payable on the 15th day of each succeeding
month until the indebtedness evidenced hereby has been paid in full; provided,
however, that no monthly installments of interest shall be payable following
any January 31 in which an installment of principal is not due and payable. In
such event, interest shall not be due and payable until January 31, 1998, at
which time interest shall be due and payable in an aggregate amount equal to
the interest Payee would have received if Payee had received monthly
installments of interest during the term of this Note on the principal amount
actually due and payable hereunder.
Principal shall be due and payable in installments as follows:
1. Two Hundred Thousand and No/100ths Dollars ($200,000) on
January 31, 1996, if the earnings before interest income,
interest expense, taxes and employee incentive compensation
payable pursuant to employment agreements ("EBIT") directly
attributable to the business presently conducted by Payee at
the facility located at 301 Pleasant Street, Abbottstown,
Pennsylvania or at such other location if Maker shall relocate
all or any part of such business after the date hereof (the
"Business") for the year ended December 31, 1995 is at least
$200,000.
2. Two Hundred Thousand and No/100ths Dollars ($200,000) on
January 31, 1997, if the EBIT directly attributable to the
Business for the year ended December 31,
<PAGE> 2
1996 is at least $200,000; provided, that in the event no
payment of principal was due and payable under paragraph (1)
above, the principal amount due and payable pursuant to this
paragraph (2) shall be Four Hundred Thousand and No/100ths
Dollars ($400,000) if the aggregate EBIT directly attributable
to the Business for the years ended December 31, 1995 and 1996
is at least $400,000.
3. Two Hundred Thousand and No/100ths Dollars ($200,000) on
January 31, 1998, if the EBIT directly attributable to the
Business for the year ended December 31, 1997 is at least
$200,000; provided, that in the event no payment of principal
was due and payable under paragraphs (1) or (2) above, the
principal amount due and payable pursuant to this paragraph
(3) shall be Six Hundred Thousand and No/100ths Dollars
($600,000) less any payment of principal paid pursuant to
paragraphs (1) or (2) above if the aggregate EBIT directly
attributable to the Business for the years ended December 31,
1995, 1996 and 1997 is at least $600,000.
Amounts due under this note are payable to the Payee at 301 Pleasant
Street, Abbottstown, Pennsylvania, or at such other place as Payee may
designate in writing from time to time, in lawful money of the United States of
America.
Prepayments, in whole or in part, may be made at any time at the sole
discretion of the Maker, without premium or penalty.
The Maker, for itself, its successors and assigns, hereby waives
demand, presentment, protest, notice of dishonor, suit and any other condition
precedent to action against the undersigned for the collection thereof. This
note may not be changed orally, but only by a written instrument signed by
Maker and Payee.
It is expressly understood and agreed by both Maker and Payee that if
it is necessary to enforce payment of this note through an attorney or by suit,
the prevailing party in such litigation shall pay reasonable attorney fees,
court costs and all other reasonable costs incurred by the non-prevailing
party.
This note is non-negotiable and Payee (and any successor as consented
to hereunder) may not assign its rights or delegate its duties hereunder
without the prior written consent of the Maker; provided, however, that without
Maker's consent, this Note may be transferred to the shareholders of Payee,
provided that the assignees shall be subject to all of the terms and conditions
of this Note including the limitation on assignment contained herein. Upon
surrender of this Note for assignment at the office of Maker, Maker shall
execute and deliver in the name of the designated assignee(s) a new Note or
Notes in a principal amount or amounts equal, in the aggregate, to the unpaid
principal amount of the Note surrendered. Maker may not assign its rights or
delegate its duties hereunder without the prior written consent of the Payee
(or any
2
<PAGE> 3
successors as consented to hereunder). Any prohibited assignment or delegation
hereof shall be deemed null and void.
This note is not a "security" as defined in the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended.
This note is subject to certain rights of set-off by Maker pursuant to
Article IX of the Asset Purchase Agreement dated the date hereof among Maker
and Payee and pursuant to Section 9 of the Employment Agreements between Maker
and each of the shareholders of Payee.
This note is intended as a Pennsylvania contract and is to be so
construed.
IN WITNESS WHEREOF, this note has been duly executed by the
undersigned on the date set forth above.
DEVLIEG-BULLARD, INC.
By: /s/ William O. Thomas
-----------------------------------
Title: President
-------------------------------
3
<PAGE> 1
Exhibit (10.2)
STOCK OPTION AGREEMENT
OPTION granted this 27th day of January, 1995 by DeVlieg-Bullard,
Inc., a Delaware corporation (the "Company"), to James F. Harnish (the
"Optionee").
1. Stock Option. The Company hereby grants to the Optionee an
option (the "Option") to purchase up to 25,000 shares of the common stock of the
Company, par value $.01 per share, to be issued upon the exercise of the
Option, in the manner hereafter set forth, fully paid and nonassessable.
2. Definitions.
(a) "Disability" shall have the meaning set forth in the
Employment Agreement between Optionee and the Company dated as of the date
hereof.
(b) "Cause" shall have the meaning set forth in the
Employment Agreement between Optionee and the Company dated as of the date
hereof.
(c) "Early Retirement" means retirement from active
employment with the Company or any subsidiary or affiliate thereof on or after
Optionee attains age 55.
(d) "Fair Market Value" means, as of any given date, the
reported closing price of the Company's common stock on the National
Association of Securities Dealers, Inc. - National Market System.
(e) "Normal Retirement" means retirement from active
employment with the Company or any subsidiary or affiliate thereof on or after
Optionee attains age 65.
3. Time of Exercise. This Option shall be exercisable as follows:
(a) This Option shall expire on January 27, 2000.
(b) This Option shall be exercisable, in whole or in
part, at any time but not later than the date of expiration or termination of
the Option.
(c) (i) In the event that the Optionee dies while
this Option is exercisable by him, this Option may be exercised within
a period of one (1) year after the date of death, but no later than
the date of expiration or termination of the Option, by the executors
or administrators of the Optionee or the person or persons acquiring
this Option by bequest or inheritance.
(ii) In the event that the Optionee's employment
with the Company, or one of its subsidiaries, is terminated by reason
of Disability, this Option may be exercised within a period of one (1)
year after the date of such termination, but no later
<PAGE> 2
than the date of expiration or termination of this Option. If
the Optionee dies during such one year period, this Option shall
be exercisable as described in paragraph (i) above.
(iii) In the event that the Optionee's employment
is terminated with the Company, or one of its subsidiaries, by reason
of Normal or Early Retirement, this Option may be exercised within a
period of sixty (60) days after the date of such termination, but no
later than the date of expiration or termination of this Option. If
the Optionee dies during such sixty (60) day period, this Option shall
be exercisable as described in (i) above.
(iv) In the event that the Optionee's employment
with the Company, or one of its subsidiaries, is terminated by reason
other than death, Disability or Normal or Early Retirement, this
Option shall terminate, except that in the event the Optionee is
involuntarily terminated without Cause, this Option may be exercised
within a period of sixty (60) days after the date of such termination,
the date of expiration or termination of this Option.
4. Method of Exercise. This Option shall be exercised by written
notice delivered to the Company, which notice shall state the number of shares
with respect to which the Option is being exercised and shall specify a date
(not less than five (5) nor more than ten (10) days after the date of such
notice) on which the shares will be taken up and payment made therefor at the
principal office of the Company in cash, by certified or official bank check.
If any law or regulation of any stock exchange or governmental authority
requires the Company to take any action with respect to the shares specified in
such notice, then the date for the delivery of such shares against payment
therefor shall be extended for the period necessary to take such action. In
the event of any failure to take up and pay for the number of shares specified
in such notice on the date set forth in such notice, as the same may be
extended as provided above, this Option shall terminate with respect to such
number of shares but shall continue with respect to the remaining shares
covered by this Option and not yet acquired pursuant hereto.
5. Purchase Price. The purchase price per share shall be $1.50.
6. Non-Transferability of Option Rights. This Option shall not
be transferable by the Optionee except by will or by the laws of descent and
distribution, and, during the life of the Optionee, shall be exercisable only
by the Optionee.
7. Rights as a Stockholder. The Optionee shall have no rights as
a shareholder with respect to any shares covered by this Option until the
Optionee has given written notice of exercise and has paid in full for such
shares. No adjustment shall be made for dividends for which the record date is
prior to the date of issuance of such stock certificate.
2
<PAGE> 3
8. Adjustment Provisions. If prior to the expiration of the
Option there shall occur any of the following changes in the capitalization of
the Company, the shares covered by this Option and the purchase price payable
therefor shall in each instance be adjusted as follows:
(a) If a stock dividend is declared on the common stock
of the Company, there shall be added to the shares under this Option the number
of shares which would have been issuable to the Optionee had he been the holder
of record of the number of shares then under option but not theretofore
purchased and issued hereunder on the record date of such dividend. Such
additional shares resulting from such stock dividend shall be delivered
proportionately, from time to time, without additional cost, upon the exercise
of this Option. Any distribution to the holders of the common stock of the
Company, other than a distribution of cash as a dividend out of surplus or net
profits or a distribution by way of the granting of rights to subscribe, shall
be treated as a stock dividend.
(b) If an increase has been effected in the number of
outstanding shares of common stock by reason of a subdivision of such shares,
the number of additional shares which may thereafter be purchased under this
Option shall be the number of shares which would have been received by the
Optionee on the date of such subdivision had he been the holder of record of
the number of shares then under option but not theretofore purchased and issued
hereunder on the record date of such subdivision of shares. In such event, the
price per share under this Option shall be proportionately reduced.
(c) If there is any consolidation or merger of the
Company with any other corporation or corporations in which the Company is not
the surviving corporation, or the sale or distribution of all or substantially
all of the Company's property and assets, adequate provision shall be made by
the Company so that there shall remain and be substituted under this Option the
shares, securities, or assets which would have been issuable or payable to the
Optionee had he been the holder of record of the number of shares then under
option and not theretofore purchased and issued hereunder on the applicable
record date. Any shares so substituted under this Option shall be subject to
adjustment as provided in this Section 8 in the same manner and to the same
extent as the shares covered by this Option.
9. Redemption. If, on January 27, 1998, the Fair Market Value of
the shares covered by this Option is not at least $3.50 per share (which amount
shall be subject to adjustment pursuant to Section 8 hereof), Optionee may
elect to either (i) retain the Option until the date of expiration or (ii)
cause the Company to redeem the Option for $37,500 in cash, payable in the form
of a certified or official bank check. If Optionee elects to have the Option
redeemed, Optionee shall deliver written notice to the Company, which notice
shall state the Optionee is electing to have the Option redeemed and shall
specify a date for payment (not less than five (5) nor more than thirty (30)
days after the delivery date of such notice).
3
<PAGE> 4
10. Investment Covenant. Optionee by his acceptance hereof
covenants that this Option is, and any stock issued hereunder will be, acquired
for his own account for investment purposes, and that the Optionee will not
distribute the same in violation of any state or federal law or regulation.
11. Sale of Option or Shares. Neither this Option nor the shares
of common stock of the Company issuable upon exercise of the Option have been
registered under the Securities Act of 1933, as amended, or under the
securities laws of any state. Neither this Option nor any shares when issued
may be sold, assigned, transferred, pledged or hypothecated or otherwise
disposed of in the absence of (i) an effective registration statement for the
shares under the Securities Act of 1933, as amended, and such registration or
qualification as may be necessary under the securities laws of any state, or
(ii) an opinion of counsel reasonably satisfactory to the Company that such
registration or qualification is not required. The Company shall cause a
certificate or certificates evidencing all or any of the shares issued upon
exercise of the Option prior to said registration and qualification of such
shares to bear the following legend: "The shares evidenced by this certificate
have not been registered under the Securities Act of 1933, as amended, or under
the securities laws of any state. The shares may not be sold, assigned,
transferred, pledged or hypothecated or otherwise disposed of in the absence of
an effective registration statement under the Securities act of 1933, as
amended, and such registration or qualification as may be necessary under the
securities laws of any state, or an opinion of counsel satisfactory to the
Company that such registration or qualification is not required."
DeVLIEG-BULLARD, INC.
Attest: By: /s/ William O. Thomas
-------------------- ---------------------------------
Title: President
---------------------------------
4
<PAGE> 1
Exhibit (10.3)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 23rd day of January,
1995, by and between DeVlieg-Bullard, Inc., a Delaware corporation (the
"Company"), and James F. Harnish (the "Employee").
WHEREAS, pursuant to an Asset Purchase Agreement dated the date hereof
(the "Asset Purchase Agreement"), the Company has agreed to buy substantially
all of the assets of Mideastern, Inc.;
WHEREAS, Employee is currently an employee and shareholder of
Mideastern, Inc.;
WHEREAS, the Company desires, on the terms and conditions stated
herein, to employ Employee; and
WHEREAS, the Employee desires, on the terms and conditions stated
herein, to be employed by the Company.
NOW, THEREFORE, in consideration of the promises hereof and of the
mutual promises and agreements contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Employment and Term of Employment. The Company hereby agrees
to employ the Employee, and the Employee hereby agrees to serve the Company, on
the terms and conditions set forth herein for the period commencing on the date
hereof and expiring on January 23, 1998 (the "Expiration Date"), unless sooner
terminated as hereinafter set forth.
2. Positions and Duties. The Employee shall have such powers and
duties as shall be designated by the President of the Services Group of the
Company from time to time. Employee shall devote substantially all his working
time and efforts to the business and affairs of the Company, shall use his best
efforts to advance the best interests of the Company, and shall not engage in
outside business activities which interfere with the performance of his duties
hereunder.
3. Compensation.
(a) Base Salary. The Employee shall receive a base
salary at the rate of $80,000 per annum ("Base Salary"), payable in
substantially equal periodic payments, which shall be made no less frequently
than semi-monthly during the period of the Employee's employment hereunder.
The Base Salary shall be subject to periodic review and revision by the Board
of Directors of the Company but shall not be decreased during the term of
employment hereunder.
<PAGE> 2
(b) Incentive Compensation. In addition to Base Salary,
the Employee shall be entitled to receive annually (based upon a calendar year
calculation) the following incentive compensation:
(i) An escalating bonus based upon the Company's
sales of New Britain Parts (excluding rebuild items and customer parts repair)
("New Britain Parts") in excess of 93% of the Company's prior years' sales of
New Britain Parts ("Base Level Sales"). The Company's sales for purposes of
1994 shall be deemed to include those of Mideastern, Inc. and are as set forth
on Exhibit A hereto. Such bonus shall be calculated as follows: 2.5% of Base
Level Sales up to $100,000; 3.75% of Base Level Sales between $100,001 and
$200,000; 5.0% of Base Level Sales between $200,001 and $300,000; 6.25% of Base
Level Sales between $300,001 and $400,000; and 10.0% of Base Level Sales in
excess of $400,000. Notwithstanding the foregoing, the Base Level Sales bonus
shall not exceed $40,000, annually. In the event Base Level Sales in any
calendar year shall exceed $400,000, the amount of such excess shall be
included in Base Level Sales in the following calendar year for purposes of
calculating the Base Level Sales bonus for such year.
(ii) For any calendar year covered by this
Agreement within which the earnings (other than earnings relating to the sale
of New Britain Parts) before interest income, interest expense, taxes and
employee incentive compensation payable pursuant to employment agreements
directly attributable to the business conducted by the Company at its facility
located at 301 Pleasant Street, Abbottstown, Pennsylvania or at such other
location if the Company relocates all or any part of such business after the
date hereof exceeds $300,000, a bonus equal to 35% of Base Salary, as set forth
on Exhibit B hereto.
(c) Expenses. During the term of his employment
hereunder, the Employee shall be entitled to be reimbursed in accordance with
the policies and procedures established by the Company for all reasonable
expenses incurred by him in performing services hereunder; provided, that the
Employee properly accounts therefor in accordance with such Company policies
and procedures.
(d) Participation in Benefit Plans. The Employee shall
be entitled to participate in or receive benefits under all the Company's
employee benefit plans and arrangements in effect on the date hereof or made
available in the future to employees of the Company as the Board of Directors
of the Company shall, in its sole discretion, determine.
(e) Additional Benefits. The Employee shall be entitled
to receive those additional benefits ("Additional Benefits") set forth on
Exhibit C hereto.
4. Termination
(a) Disability. If, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from his duties hereunder on a full time basis for one hundred eighty
(180) consecutive days, the Company may terminate its obligations
2
<PAGE> 3
hereunder, except for those obligations provided for in the second sentence of
Section 5(a) hereof.
(b) Termination Upon Death. If the Employee should die
during the term of this Agreement, the Company's obligations under this
Agreement shall cease, except for those obligations set forth in Section 5(b)
hereof, and the Employee's employment shall be terminated.
(c) Termination by the Company. The Company may
terminate the Employee's employment hereunder at any time for Cause or for any
other reason. For the purposes of this Agreement, "Cause" shall mean any act
that is materially inimical to the best interests of the Company and that
constitutes on the part of the Employee personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform the duties required of Employee hereunder, willful violation
of any law, governmental rule or regulation (other than traffic violations or
similar offenses) or final cease and desist order, or material breach of this
Agreement.
(d) Determination of Disability. For purposes of
Sections 4(a) hereof, the determination of whether the Employee is disabled due
to physical or mental illness, or whether his health is impaired to an extent
that makes the continued performance of his duties hereunder hazardous to his
physical or mental health, shall be made by a licensed physician satisfactory
to the Employee and to the Company.
(e) Notice of Termination. Any termination by the
Company pursuant to Sections 4(a) and 4(c) hereof shall be communicated by
written notice of termination to the other party hereto.
5. Compensation Upon Termination or During Disability.
(a) During any period in which the Employee fails to
perform his duties hereunder as a result of disability due to physical or
mental illness, the Employee shall receive an amount which, when added to any
disability benefits provided for by the Company, equals his Base Salary until
the compensation and benefits received by the Employee pursuant to this
Agreement are terminated pursuant to Section 4(a) hereof. Following
termination due to disability, the Employee shall receive such benefits and be
paid such amounts as he is entitled to receive under the Company's disability
and other benefit plans then in effect.
(b) If the Employee's employment shall be terminated for
Cause or if the Employee dies or if the Employee terminates his employment for
any reason other than as a result of the Company's breach of its covenants and
agreements contained in Section 6.1 of the Asset Purchase Agreement, the
Company shall pay the Employee his Base Salary earned through the date on which
his employment is terminated. The Company shall then have no further
obligations to the Employee under this Agreement; provided, however, the
Company shall cause to be paid to the Employee, his estate or beneficiaries, as
the case may be, the benefits to which
3
<PAGE> 4
the Employee is eligible under the Company's employee benefit plans and
incentive and deferred compensation arrangements.
(c) If the Company shall terminate the Employee's
employment under this Agreement for any reason other than pursuant to Section
4(a) hereof or for Cause pursuant to Section 4(c) hereof or in the event the
Employee terminates his employment as a result of the Company's breach of its
covenants and agreements contained in Section 6.1 of the Asset Purchase
Agreement, then, subject to the compliance by the Employee with the provisions
of Sections 7 and 8 hereof, the Company shall pay the Employee, as liquidated
damages or severance or both, (i) his Base Salary payable in substantially
equal periodic payments no less frequently than monthly for a period ending on
the Expiration Date and (ii) Incentive Compensation on an annual basis.
6. Binding Agreement. This Agreement and all obligations of the
Company hereunder shall be binding upon the successors and assigns of the
Company. This Agreement and all rights of the Employee hereunder shall inure
to the benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
7. Non-Competition. For so long as the Company is obligated to
compensate the Employee pursuant to Sections 3 or 5 of this Agreement and for a
period of three years thereafter, the Employee will not directly or indirectly
own, manage, operate, control or participate in the ownership, management,
operation or control of, or be connected as an officer, employee, partner,
director or otherwise with, or have any financial interest in, or aid or assist
anyone else in the conduct of, any business which is in substantial competition
with the principal business conducted by the Company or any subsidiary of the
Company in any area where such business is being conducted at the time of such
termination (provided that ownership of five percent (5%) or less of the voting
stock of any publicly held corporation shall not constitute a violation
hereof).
8. Unauthorized Disclosure
(a) During the period of his employment hereunder and for
a period of three years thereafter, the Employee shall not, without the prior
written consent of the Company, disclose to any person, other than a person to
whom disclosure is necessary or appropriate in connection with the performance
by the Employee of his duties hereunder, any confidential information obtained
by him while in the employ of the Company with respect to any of the Company's
products, improvements, designs, formulas, blueprints, drawings, design and
manufacturing engineering drawings, manufacturing and quality control written
standards, trade secrets, manufacturing know-how, processes, customers,
suppliers, methods of marketing or distribution, systems, procedures, plans,
proposals, or policies the disclosure of which he knows, or should have reason
to know, could be damaging to the Company or its subsidiaries or affiliates;
provided, that confidential information shall not include any information known
generally to the public (other than as a result of unauthorized disclosure by
the Employee) or
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any information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted by the
Company. Following the termination of employment hereunder, the Employee shall
not disclose any confidential information of the type described above except as
may be required in the opinion of the Employee's counsel in connection with any
judicial or administrative proceeding or inquiry.
(b) The foregoing provision of this Section 8 shall be
binding upon the Employee's heirs, successors and legal representatives.
9. Remedies Upon Breach. The Employee acknowledges and agrees
that, in the event of a breach of Section 7 or Section 8 hereof by the
Employee, the Company would be irreparably harmed and that monetary damages
would be an inadequate remedy in favor of the Company. Accordingly, the
Employee and the Company agree that in the event of such a breach, the Company
shall be entitled to injunctive relief against the Employee. In addition, in
the event the Employee (i) breaches Section 7 or Section 8 hereof, (ii)
terminates his employment hereunder for any reason other than by Death,
Disability or as a result of the Company's breach of its covenants and
agreements hereunder or in Section 6.1 of the Agreement or (iii) is terminated
for Cause, the Employee shall not be entitled to any payment and no payment
shall be due and payable to Employee in respect of Employee's pro rata share of
the Earnout Note dated the date hereof and delivered pursuant to the Agreement.
10. Notice. For the purposes of this Agreement, notices, and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Employee:
James F. Harnish
301 Pleasant Street
P.O. Box 12
Abbottstown, PA 17301
If to the Company:
DeVlieg-Bullard, Inc.
One Gorham Island
Westport, CT 06880
Attn: William O. Thomas
or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
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11. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or government regulation or ruling.
12. Enforcement of Agreement. The costs and expenses (including
court costs and reasonable attorney's fees) incurred by the prevailing party in
connection with any litigation seeking to enforce its rights under this
Agreement shall be paid by the non-prevailing in such litigation.
13. Governing Law. This Agreement shall be construed according to
the laws of Pennsylvania, without giving effect to the principles of conflicts
of laws of such State.
14. Amendment; Modification; Waiver. This Agreement may be
amended only by the written agreement of the parties hereto. No provisions of
this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by Employee and the
Company. This Agreement will be reviewed on an annual basis by the parties
hereto and the term of this Agreement may be extended by mutual agreement of
the parties. No waiver by either party hereto at any time of any breach by the
other party hereto or compliance with any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
15. Binding Effect.
(a) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights obligations hereunder except as expressly
provided for herein. Without limiting the generality of the foregoing,
Employee's right to receive payments hereunder shall not be assignable,
transferable or delegable, whether by pledge, creation of a security interest
otherwise, other than by a transfer by his will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer contrary
to this paragraph, the Company shall have no liability to pay any amount so
attempted to be assigned, transferred or delegated.
(b) The Company and Employee recognize that each party
will have no adequate remedy at law for breach by the other of any of the
agreements contained herein and, in the event of any such breach, the Company
and Employee hereby agree and consent that the other shall be entitled to a
decree of specific performance, mandamus or other appropriate remedy to enforce
performance of this Agreement.
16. Entire Contract. This Agreement constitutes the entire
agreement and supersedes all other prior agreements, employment contracts and
understandings, both written and oral, express or implied with respect to the
subject matter of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DEVLIEG-BULLARD, INC.
By: /s/ William O. Thomas
-----------------------------
Title: President
-----------------------------
/s/ James F. Harnish
-------------------------------------
James F. Harnish
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