<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM__________________TO_______________________
COMMISSION FILE NUMBER 1-11442
CHART INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 34-1712937
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
5885 LANDERBROOK DR., CLEVELAND, OHIO 44124
(Address of Principal Executive Offices) (ZIP Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (440) 753-1490
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No____
At March 31, 1999, there were 23,745,872 outstanding shares of the Company's
Common Stock, $0.01 par value per share.
Page 1 of 14 sequentially numbered pages.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The information required by Rule 10-01 of Regulation S-X is set
forth on pages 3 through 8 of this Report on Form 10-Q.
2
<PAGE>
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---- ----
(Unaudited)
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,493 $ 2,169
Accounts receivable, net 39,223 37,336
Inventories, net 32,912 29,803
Other current assets 7,596 6,803
-------- --------
Total Current Assets 82,224 76,111
Property, plant & equipment, net 40,966 40,536
Goodwill, net 34,054 31,568
Other intangible assets, net 10,032 9,990
-------- --------
TOTAL ASSETS $167,276 $158,205
-------- --------
-------- --------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 12,632 $ 11,540
Customer advances 16,569 13,011
Billings in excess of contract revenue 1,715 2,194
Accrued expenses and other liabilities 24,200 25,783
Current portion of long-term debt 474 431
-------- --------
Total Current Liabilities 55,590 52,959
Long-term debt 15,497 10,894
Deferred income taxes 1,153 1,198
Shareholders' Equity
Preferred stock, 1,000,000 shares authorized, none
issued or outstanding
Common stock, par value $.01 per share - 30,000,000
shares authorized, 24,423,927 and 24,321,917 shares
issued at March 31, 1999 and December 31, 1998,
respectively 244 243
Additional paid-in capital 43,911 43,367
Retained earnings 58,071 56,352
Accumulated other comprehensive income (930) (358)
Treasury stock, at cost, 678,055 and 732,452
shares at March 31, 1999 and December 31, 1998,
respectively (6,260) (6,450)
-------- --------
95,036 93,154
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $167,276 $ 158,205
-------- --------
-------- --------
</TABLE>
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Sales $44,588 $56,104
Cost of products sold 32,271 35,544
------- -------
Gross profit 12,317 20,560
Selling, general & administrative expense 7,592 8,341
------- -------
Operating income 4,725 12,219
Interest income (expense) - net (328) 190
------- -------
Income before income taxes 4,397 12,409
Income taxes 1,495 4,467
------- -------
Net income $ 2,902 $ 7,942
------- -------
------- -------
Net income per share $ 0.12 $ 0.33
------- -------
------- -------
Net income per share - assuming dilution $ 0.12 $ 0.32
------- -------
------- -------
Shares used in per share calculations 23,644 24,222
Shares used in per share calculations - assuming dilution 23,841 24,624
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,902 $ 7,942
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,779 1,297
Deferred income taxes (203)
Contribution of stock to employee benefit plans 367 577
Increase (decrease) in cash resulting from changes
in operating assets and liabilities:
Accounts receivable (1,095) (228)
Inventory and other current assets (3,046) (191)
Accounts payable and other current liabilities (889) 701
Billings in excess of contract revenue and
customer advances 3,243 (2,183)
-------- --------
Net Cash Provided By Operating Activities 3,058 7,915
INVESTING ACTIVITIES
Capital expenditures (1,775) (4,832)
Acquisition of Northcoast Cryogenics,
net of cash acquired (2,995)
Acquisition of Chart Marston (35,324)
Other investing activities (308) 12
-------- --------
Net Cash Used In Investing Activities (5,078) (40,144)
FINANCING ACTIVITIES
Borrowings on credit facility 23,250 18,471
Repayments on credit facility (18,500)
Principal payments on long-term debt (1,270) (101)
Treasury stock and stock option transactions (354) (1,098)
Dividends paid to shareholders (1,183) (1,212)
-------- --------
Net Cash Provided By Financing Activities 1,943 16,060
-------- --------
Net decrease in cash and cash equivalents (77) (16,169)
Effect of exchange rate changes on cash 401
Cash and cash equivalents at beginning of period 2,169 22,095
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,493 $ 5,926
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 1999
NOTE A - BASIS OF PREPARATION
The accompanying unaudited condensed consolidated financial statements of
Chart Industries, Inc. ("Chart" or the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month period
ended March 31, 1999 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Chart Industries, Inc. and Subsidiaries' Annual Report on Form 10-K
for the year ended December 31, 1998.
NOTE B - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies $15,370 $14,785
Work in process 16,664 13,955
Finished goods 1,088 1,273
LIFO reserve (210) (210)
------- -------
$32,912 $29,803
------- -------
------- -------
</TABLE>
NOTE C - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1999 1998
---- ----
(DOLLARS AND SHARES
IN THOUSANDS,EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Numerator:
Net income: $ 2,902 $ 7,942
Denominator:
Denominator for basic earnings per share -
weighted average shares 23,644 24,222
Effect of dilutive securities:
Employee stock options and warrants 197 402
------- -------
Dilutive potential common shares 23,841 24,624
------- -------
------- -------
Net income per share $ 0.12 $ 0.33
------- -------
------- -------
Net income per share - assuming dilution $ 0.12 $ 0.32
------- -------
------- -------
</TABLE>
6
<PAGE>
NOTE D - REVENUE RECOGNITION
For the majority of the Company's contracts, revenue is recognized when
products are completed or shipped. For certain significant contracts, the
Company uses the percentage of completion method of accounting. Earned
revenue is based on the percentage that incurred costs to date bear to total
estimated costs at completion after giving effect to the most current
estimates. The cumulative impact of revisions in total cost estimates during
the progress of work is reflected in the period in which these changes become
known. Earned revenue reflects the original contract price adjusted for
agreed upon claims and change orders, if any. Losses expected to be incurred
on contracts in process, after consideration of estimated minimum recoveries
from claims and change orders, are charged to income as soon as such losses
are known.
NOTE E - ACQUISITIONS
On March 15, 1999, the Company acquired a group of privately held companies,
collectively known as Northcoast Cryogenics, for approximately $3.0 million
in cash and $720,000 in Chart Common Stock. Additional contingent
consideration will be issued in an amount equal to three percent of the net
sales of Northcoast Cryogenics, as defined in the purchase agreement, with
respect to each fiscal year or partial fiscal year during the three-year
period beginning March 15, 1999, subject to possible extension for one
additional year. The preliminary allocation of the purchase price included in
the March 31, 1999 condensed consolidated balance sheet is based upon
management's best estimates and may be subject to further revisions.
On March 27, 1998, the Company, through its wholly-owned subsidiary Chart
Marston Limited ("Chart Marston"), acquired the net assets of the industrial
heat exchanger division of IMI Marston Limited, a wholly-owned subsidiary of
IMI plc., for 21 million Pounds Sterling (approximately U.S. $35.3 million).
The Company borrowed 11 million Pounds Sterling (approximately U.S. $18.5
million) to fund the acquisition.
NOTE F - COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income." Statement 130
establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of Statement 130 had no impact on
the Company's net income or shareholders' equity. Statement 130 requires
foreign currency translation adjustments to be included in other
comprehensive income.
The Company did not incur any foreign currency translation adjustments prior
to its acquisition of Chart Marston on March 27, 1998. As a result, total
comprehensive income for the three months ended March 31, 1999 and 1998 was
$2,330 and $8,016, respectively.
NOTE G - OPERATING SEGMENTS
The Company has three reportable segments: Process Systems and Equipment
("PS&E"), Distribution, Storage and Applications ("DS&A")and Special
Products. The Company's reportable segments are business units that offer
different products. The reportable segments are each managed separately
because they manufacture and distribute distinct products with different
production processes. The PS&E segment consists of three operating units that
sell brazed aluminum heat exchangers and coldboxes to industrial gas, natural
gas and petrochemical processing companies who use them for the liquefaction
and separation of industrial and natural gases. The DS&A segment consists of
four operating units that sell cryogenic tanks, trailers, intermodal
containers, railcars, pumps, valves and vacuum jacketed piping systems to
various companies for the storage and transportation of both industrial and
natural gases.
7
<PAGE>
NOTE G - OPERATING SEGMENTS (CONTINUED)
The Special Products segment consists of two operating units that sell
thermal vacuum systems, space simulation systems used to test satellites and
large vacuum chambers for telescope mirror aluminizing to the aerospace
industry, government agencies, universities and national research facilities,
and one operating unit that sells small diameter stainless steel tubing to
distributors requiring quick delivery. Due to the nature of the products that
each operating segment sells, there are no intersegment revenues.
The Company evaluates performance and allocates resources based on profit or
loss from operations before interest expense and income taxes.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
-------------------------------------------------------------------------
SPECIAL
PS&E DS&A PRODUCTS HEADQUARTERS TOTALS
------------ -------------- ------------- ------------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues from external customers. . . . . $25,364 $12,240 $6,984 $44,588
Operating income (loss) before interest
expense and income taxes . .. . . . . . 3,259 833 1,045 $(412) 4,725
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
-------------------------------------------------------------------------
SPECIAL
PS&E DS&A PRODUCTS HEADQUARTERS TOTALS
------------ -------------- ------------- ------------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues from external customers. . . . . $28,313 $16,754 $11,037 $56,104
Operating income (loss) before interest
expense and income taxes. . . . . . . . 8,139 3,101 1,684 $(705) 12,219
</TABLE>
NOTE H - SUBSEQUENT EVENT
On April 12, 1999, the Company completed its acquisition of MVE Holdings,
Inc.("MVE"). Under the terms of the merger agreement, a wholly owned Chart
subsidiary paid approximately $240 million in cash to purchase all of MVE's
common and preferred stock, to pay off existing debt instruments, and to
complete the tender offer and consent solicitation for the 12-1/2 percent
senior secured notes due 2002 issued by MVE, Inc. The Company negotiated a
$300 million senior secured credit facility (the "Senior Credit Facility") with
Chase Manhattan Bank to fund the acquisition. The Senior Credit Facility
bears interest at a rate based on LIBOR and contains certain restrictive
covenants.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The Company's performance this quarter continued to reflect the adverse
effects of the worldwide slowdown for new plant construction in the
industrial gas market. As previously reported, business conditions were very
competitive, particularly in the PS&E segment, and have resulted in lower
prices and operating margins. With backlog and current order intake down for
heat exchangers and coldboxes, the Company has taken steps to reduce
throughput for the first six to nine months of this year. Based upon past
cycles in the industrial gas new construction market and current customer
input, the Company expects, but provides no assurance that, some improvement
in order intake for the PS&E segment will occur in the second half of 1999.
In the meantime, the Company is aggressively pursuing and winning the
majority of orders being placed by its customers.
8
<PAGE>
The DS&A segment remained stable during this past quarter. Although sales
from this segment were down quarter over quarter, orders increased and
backlog strengthened. These stabilizing characteristics bode well for Chart
going forward, since the Company's recent acquisitions of MVE and Northcoast
Cryogenics will add significantly to the sales of this segment and Chart's
opportunity for growth. The Company believes that several of the newly
acquired product lines have significant potential for growth, particularly in
Europe.
Sales for the first quarter of 1999 were $44.6 million versus $56.1 million
for the first quarter of 1998, a decrease of $11.5 million, or 20.5 percent.
Sales from the PS&E segment, which accounted for 56.9 percent of total sales
in the first quarter of 1999, decreased $2.9 million from the first quarter
of 1998. Sales from the DS&A segment and the Special Products segment
decreased $4.5 million and $4.1 million, respectively, compared with the
year-ago quarter.
Gross profit for the first quarter of 1999 was $12.3 million versus $20.6
million for the first quarter of 1998, a decline of $8.2 million, or 40.1
percent. Gross profit margin for the first quarter of 1999 was 27.6 percent
versus 36.6 percent for the first quarter of 1998. The decline in gross
profit margin occurred primarily in the PS&E segment, where the margin
decrease was greater than 14 percentage points, reflecting low margin orders
received in 1998. The Asian economic situation, softness in the industrial
gas market, and a strong U.S. dollar compared to the Japanese yen adversely
affected pricing and order volume.
Selling, general and administrative ("SG&A") expense for the first quarter of
1999 was $7.6 million, a decrease of $750,000 from the first quarter of 1998.
The first quarter of 1999 includes $1.5 million of SG&A expense for Chart
Marston, which was not included in the Company's results of operations for
the first quarter of 1998. The decrease from the first quarter of 1998 is
primarily a result of the sales decline. SG&A expense as a percentage of
sales increased to 17.0 percent for the first quarter of 1999 from 14.9
percent for the first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations for the first quarter of 1999 was $3.1 million
compared with $7.9 million in the first quarter of 1998. The Company's 1999
first-quarter operating cash flow primarily represents current earnings plus
depreciation and amortization, and is down due to the $5.0 million decrease
in net income from the first quarter of 1998.
Capital expenditures for the first quarter of 1999 were $1.8 million compared
with $4.8 million in the first quarter of 1998, which included $3.5 million
for the purchase of previously leased land and buildings at the Cryenco
facility.
On March 15, 1999, the Company completed its acquisition of a group of
privately held companies, collectively known as Northcoast Cryogenics, for
approximate $3.0 million in cash and $720,000 in Chart Common Stock. The
preliminary allocation of the purchase price included in the March 31, 1999
condensed consolidated balance sheet is based upon management's best
estimates and may be subject to further revisions.
Net interest expense for the first quarter of 1999 was $330,000 versus net
interest income of $190,000 for the first quarter of 1998. As of March 31,
1999, the Company had borrowings of $12.0 million on its $45 million credit
facility. This credit facility was retired in April 1999 when the Company
entered into the Senior Credit Facility.
9
<PAGE>
BACKLOG
Chart's consolidated firm order backlog at March 31, 1999 was $87.7 million,
a decrease of $8.5 million from $96.1 million at December 31, 1998. MVE added
approximately $22 million to Chart's backlog effective April 12, 1999. Orders
for the first quarter of 1999 totaled $34.9 million, compared with orders of
$47.3 million for the fourth quarter of 1998.
PS&E backlog at March 31, 1999, was $50.6 million, down from $63.7 million at
December 31, 1998. Orders for the first quarter of 1999 totaled $12.3
million, compared with $24.6 million in the fourth quarter of 1998. Chart
continues to win the majority of new orders placed in this worldwide market.
However, overall order activity remains sluggish compared to historical
levels.
DS&A backlog at March 31, 1999, was $30.8 million, compared with $25.2
million at December 31, 1998. Northcoast Cryogenics added $1.2 million to the
DS&A backlog at March 31, 1999. Orders for the first quarter of 1999 totaled
$16.7 million, compared with $15.7 million for the fourth quarter of 1998.
The largely domestic market for DS&A equipment continues to remain strong.
The acquisition of MVE will enhance the Company's presence in this area and
lessen its exposure to the more cyclical PS&E business.
Special Products backlog at March 31, 1999, was $6.2 million, down from $7.3
million at December 31, 1998. Orders for the first quarter of 1999 totaled
$5.9 million, compared with $6.9 million for the fourth quarter of 1998.
RECENT EVENTS
On April 12, 1999, the Company completed its acquisition of MVE Holdings,
Inc. Under the terms of the merger agreement, a wholly owned Chart subsidiary
paid approximately $240 million in cash to purchase all of MVE's common and
preferred stock, to pay off existing debt instruments, and to complete the
tender offer and consent solicitation for the 12-1/2 percent senior secured
notes due 2002 issued by MVE, Inc.
To finance the acquisition, the Company negotiated a $300 million senior
secured credit facility with Chase Manhattan Bank. The Senior Credit Facility
bears interest at a rate based on LIBOR and contains certain restrictive
covenants. The Company forecasts sufficient cash flow from operations and
available borrowings to fund the increased principal and interest payments as
a result of the acquisition, as well as dividends and capital expenditures.
In conjunction with the purchase of MVE, Chart expects to record, in the
second quarter of 1999, a non-cash charge of approximately $22 million for
the write-off of acquired in-process research and development and a charge of
approximately $6 million, net of taxes, as an extraordinary item for the
early extinguishment of the MVE 12-1/2 percent senior secured notes due 2002.
As previously announced, the acquisition of MVE provides considerable
opportunities for consolidation and restructuring of Chart's industrial tank
business. Senior managers from MVE, Chart's Process Engineering ("PEI") and
CVI divisions, and Chart's wholly owned subsidiary Cryenco are working to
finalize consolidation and restructuring plans in order to achieve the
desired synergies of the acquisition. Chart expects these restructuring and
consolidation decisions to be completed within the next 60 days. Final
determination of these additional cash and non-cash restructuring charges
will be announced and taken in the second and third quarters of 1999.
10
<PAGE>
YEAR 2000 READINESS DISCLOSURE
The Year 2000 Problem is the result of the inability of hardware, software
and control systems to properly recognize and process two-digit references to
specific years, beginning with the year 2000. The Year 2000 problem could
result in system failures or miscalculations causing disruptions of the
operations of the Company, its suppliers and its customers.
In 1997, the Company completed a preliminary assessment of its critical
software systems and determined that all of these systems could be made
compliant. In June 1998, the Company initiated a formal assessment plan for
all non-critical software systems by identifying a lead person at each of its
locations to be responsible for ensuring that the location will be compliant.
The first phase of the formal assessment plan, which was completed in the
third quarter of 1998, included an inventory of all information technology
systems and control systems with embedded chip technology. Results of the
inventory indicated that all information technology systems are or should be
compliant by the year 2000, primarily because none of these systems involve
internally developed software and compliant versions are readily available.
The Company produces a limited number of products utilizing control systems
with embedded chip technology, and is contacting the vendors who provide
these embedded chips to determine compliance. This project will be completed
in the second quarter of 1999. Based upon the Company's review of systems
using embedded chip technology within its existing facilities, the Company is
reasonably sure that its facilities are materially year 2000 compliant. The
Company believes that the third parties whose Year 2000 Problems pose the
greatest risks for the Company include its banks that maintain depository
accounts, its payroll processing company, its suppliers of the major
materials used in production processes, its utility providers and its
providers of freight services. The Company has communicated with these third
parties to determine if they have an effective plan in place to address the
Year 2000 Problem, and has received positive responses from the majority of
these third parties. However, the Company provides no assurance that these
third parties will be year 2000 compliant or that their noncompliance will
not have a material adverse effect on the Company.
The Company currently estimates that it will spend less than $1 million to
ensure that its information technology systems are compliant, of which more
than half has been committed or spent through March 31, 1999. Accordingly,
the Company expects cash flow from operations and available borrowings to be
sufficient to fund these expenditures.
Based upon the results of year 2000 compliance efforts underway, the Company
believes that all critical information technology systems and control systems
with embedded chip technology will be compliant and will allow the Company to
continue to operate beyond the year 2000 without a material adverse effect on
its results of operations or financial position. However, unanticipated
problems which may be identified in the ongoing year 2000 preparation program
could result in an undetermined financial risk. Based upon the Company's
assessment of its year 2000 compliance and the indicated compliance of the
third parties it has contacted to date, the Company is developing contingency
plans as deemed necessary.
FORWARD-LOOKING STATEMENTS
The Company is making this statement in order to satisfy the "safe harbor"
provisions contained in the Private Securities Litigation Reform Act of 1995.
This Quarterly Report on Form 10-Q includes forward-looking statements
relating to the business of the Company. Forward-looking statements contained
herein or in other statements made by the Company are made based on
management's expectations and beliefs concerning future events impacting the
Company and are subject to
11
<PAGE>
uncertainties and factors relating to the Company's operations and business
environment, all of which are difficult to predict and many of which are
beyond the control of the Company, that could cause actual results of the
Company to differ materially from those matters expressed or implied by
forward-looking statements. The Company believes that the following factors,
among others, could affect its future performance and cause actual results of
the Company to differ materially from those expressed or implied by
forward-looking statements made by or on behalf of the Company: (a) general
economic, business and market conditions; (b) competition; (c) decreases in
spending by its industrial customers; (d) the loss of a major customer or
customers; (e) ability of the Company to identify, consummate and integrate
the operations of suitable acquisition targets; (f) ability of the Company to
manage its fixed-price contract exposure; (g) the Company's relations with
its employees; (h) the extent of product liability claims asserted against
the Company; (i) variability in the Company's operating results; (j) the
ability of the Company to attract and retain key personnel; (k) the costs of
compliance with environmental matters (l) the ability of the Company to
protect its proprietary information; and (m) disruption of the Company's
business or operations resulting from the Year 2000 Problem.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
RECENT SALES OF UNREGISTERED SECURITIES
On March 5, 1999, the Company issued a total of 47,734 shares of Common Stock
under its Voluntary Deferred Compensation Plan to certain employees of the
Company in consideration of salary amounts foregone by the employees in an
approximate aggregate amount of $356,000. The transactions were exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to Section 4(2) of the Securities Act.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See the Exhibit Index on page 14 of this Form 10-Q.
(b) Reports on Form 8-K.
During the quarter ended March 31, 1999, the Company filed a
Current Report on Form 8-K dated February 17, 1999 to report the
issuance of a news release announcing the signing of a
definitive merger agreement to acquire MVE Holdings, Inc. and a
Current Report on Form 8-K dated February 25, 1999 to report the
issuance of a news release announcing the results of operations
for the quarter and year ended December 31, 1998.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Chart Industries, Inc.
(Registrant)
Date: May 14, 1999 /s/ DON A. BAINES
------------------- -------------------------------------
Don A. Baines
Chief Financial Officer and
Treasurer
13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- ------------------------
<S> <C>
10.1 Agreement and Plan of Merger, dated as of March 15,
1999, by and among Chart Industries, Inc., NCI
Acquisition Corp., NCI Sales and Leasing, Inc., Mark A.
Bauman and Patrick J. Flynn
10.2 Asset Purchase Agreement, dated as of March 15, 1999,
by and among Northcoast of Texas Cryogenics, Inc.,
Northcoast of Kansas Cryogenics, Inc., Mark A. Bauman
and Patrick J. Flynn and Northcoast Acquisition Corp
10.3 Stock Purchase Agreement, dated as of March 15, 1999,
by and between Mark A. Bauman and Northcoast
Acquisition Corp
10.4 Employment Agreement, dated as of March 15, 1999, by
and between Northcoast Acquisition Corp. and Mark A.
Bauman
27 Financial Data Schedule
</TABLE>
14
<PAGE>
EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
by and among
CHART INDUSTRIES, INC.,
("Chart")
NCI ACQUISITION CORP.,
("Merger Sub")
NCI SALES AND LEASING, INC.,
(the "Company")
MARK A. BAUMAN and PATRICK J. FLYNN
("Shareholders")
March 15, 1999
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TABLE OF CONTENTS
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ARTICLE 1 THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Code of Regulations.. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.5 Effective Time; Effective Date. . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE 2 STATUS AND CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . .3
2.1 Merger Sub Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.2 Company Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.3 Certain Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.4 Estimated Merger Consideration. . . . . . . . . . . . . . . . . . . . . . .5
2.5 Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.5.1 Closing Balance Sheet Preparation. . . . . . . . . . . . . . . . . .6
2.5.2 Closing Balance Sheet Review . . . . . . . . . . . . . . . . . . . .6
2.5.3 Closing Balance Sheet Dispute. . . . . . . . . . . . . . . . . . . .6
2.5.4 Post-Closing Delivery of Chart Common Stock. . . . . . . . . . . . .7
ARTICLE 3 SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES CONCERNING THE
TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.1 Authority and Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.2 Authorized and Issued Stock . . . . . . . . . . . . . . . . . . . . . . . .8
3.3 Title to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 Execution and Delivery; Enforceability. . . . . . . . . . . . . . . . . . .9
3.5 Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.6 Brokerage.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.7 Investment Intent; Restricted Securities. . . . . . . . . . . . . . . . . .9
ARTICLE 4 SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES CONCERNING THE
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . . 10
4.1.2 Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1.3 Other Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1.4 {Intentionally omitted.} . . . . . . . . . . . . . . . . . . . . . 11
4.2 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2.1 {Intentionally omitted.} . . . . . . . . . . . . . . . . . . . . . 11
4.2.2 {Intentionally omitted.} . . . . . . . . . . . . . . . . . . . . . 11
4.2.3 Consents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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4.2.4 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.1 Financial Records. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.2 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3.3 No Changes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4.1 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 13
4.4.2 Product and Service Warranties . . . . . . . . . . . . . . . . . . 13
4.4.3 Product Liability. . . . . . . . . . . . . . . . . . . . . . . . . 14
4.4.4 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5 Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5.1 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5.2 Employment Termination.. . . . . . . . . . . . . . . . . . . . . . 15
4.5.3 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.5.4 Compliance with Contracts. . . . . . . . . . . . . . . . . . . . . 16
4.5.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5.6 Customers and Suppliers. . . . . . . . . . . . . . . . . . . . . . 17
4.5.7 Purchases and Sales. . . . . . . . . . . . . . . . . . . . . . . . 17
4.5.8 Prepayments and Deposits . . . . . . . . . . . . . . . . . . . . . 17
4.5.9 Capital Projects.. . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7.1 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7.2 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7.3 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7.4 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 19
4.7.5 Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.7.6 Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.7.7 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 19
4.7.8 Extent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.8 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.9 Additional Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.9.1 Conflicts of Interest. . . . . . . . . . . . . . . . . . . . . . . 21
4.9.2 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF CHART AND MERGER SUB. . . . . . . . . 21
5.1 Organization and Power. . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2.1 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2.2 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3 SEC Documents; Absence of Certain Changes . . . . . . . . . . . . . . . . 22
5.4 Chart Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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ARTICLE 6 CLOSING; CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.2 Conditions to Chart's and Merger Sub's Obligation . . . . . . . . . . . . 23
6.3 Conditions to Shareholders' and Company's Obligations . . . . . . . . . . 26
ARTICLE 7 ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1.1 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 27
7.1.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1.3 Interim Financial Statements . . . . . . . . . . . . . . . . . . . 28
7.1.4 Supplemental Disclosure. . . . . . . . . . . . . . . . . . . . . . 28
7.1.5 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . 29
7.1.6 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Nondisclosure, Noncompetition and Noninterference . . . . . . . . . . . . 29
7.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 Expenses; Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 {Intentionally omitted.}. . . . . . . . . . . . . . . . . . . . . . . . . 30
7.6 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.7 Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.8 {Intentionally omitted.}. . . . . . . . . . . . . . . . . . . . . . . . . 31
7.9 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.10 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . 31
7.11 Further Assurances and Assistance. . . . . . . . . . . . . . . . . . . . 31
7.12 {Intentionally omitted.} . . . . . . . . . . . . . . . . . . . . . . . . 31
7.13 Certain Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 8 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1 Indemnification by Shareholders . . . . . . . . . . . . . . . . . . . . . 33
8.2 Indemnification by Chart and Merger Sub . . . . . . . . . . . . . . . . . 33
8.3 Notification of and Participation in Claims . . . . . . . . . . . . . . . 33
8.4 Survival; Limitations on Indemnification. . . . . . . . . . . . . . . . . 34
ARTICLE 9 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.3 Inclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.4 {Intentionally omitted.}. . . . . . . . . . . . . . . . . . . . . . . . . 36
9.5 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.6 Execution in Counterparts; Signature Pages. . . . . . . . . . . . . . . . 36
9.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.8 Amendments, Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.9 No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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9.11 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.12 Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.13 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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LIST OF SCHEDULES:
Schedule 4.1.2 (Qualification)
Schedule 4.2.3 (Consents)
Schedule 4.2.4 (Conflicts)
Schedule 4.3.1(a) (Financial Statements)
Schedule 4.3.1(b) (Exceptions from GAAP)
Schedule 4.3.2 (Liabilities)
Schedule 4.4.1 (Compliance with Laws)
Schedule 4.4.2 (Product and Service Warranties)
Schedule 4.4.3 (Product Liability)
Schedule 4.4.4 (Litigation)
Schedule 4.5.1 (Employment)
Schedule 4.5.2 (Employment Termination)
Schedule 4.5.3 (Contracts)
Schedule 4.5.5 (Insurance)
Schedule 4.5.8 (Prepayments and Deposits)
Schedule 4.5.9 (Capital Projects)
Schedule 4.6 (Employee Benefits)
Schedule 4.7.1 (Title)
Schedule 4.7.2 (Receivables)
Schedule 4.7.6 (Location of Assets)
Schedule 4.7.7 (Intellectual Property)
Schedule 4.8 (Real Property)
Schedule 4.9.1 (Conflicts of Interest)
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INDEX OF DEFINED TERMS
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Where
Term Defined
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Acquisition Balance Sheet . . . . . . . . . . . . . . . . Section 4.3.1(a)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Asset Purchase Agreement. . . . . . . . . . . . . . . . . Section 6.2(n)
Automobile Note . . . . . . . . . . . . . . . . . . . . . Section 6.2(p)
Certificate of Merger . . . . . . . . . . . . . . . . . . Section 1.5
Chart . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Chart Common Stock. . . . . . . . . . . . . . . . . . . . Section 2.2
Chart SEC Documents . . . . . . . . . . . . . . . . . . . Section 5.3
Closing . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1
Closing Date. . . . . . . . . . . . . . . . . . . . . . . Section 6.1
Closing Working Capital . . . . . . . . . . . . . . . . . Section 2.3(b)
Code . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Company . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Company Share AND Company Shares. . . . . . . . . . . . . Section 3.2
Contracts . . . . . . . . . . . . . . . . . . . . . . . . Section 4.5.3
Definitive Merger Consideration . . . . . . . . . . . . . Section 2.4
Effective Date. . . . . . . . . . . . . . . . . . . . . . Section 1.5
Effective Time. . . . . . . . . . . . . . . . . . . . . . Section 1.5
Estimated Merger Consideration. . . . . . . . . . . . . . Section 2.4
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . Section 8.1
Final Closing Balance Sheet . . . . . . . . . . . . . . . Section 2.5.2 OR
Section 2.5.3
Final Post-Closing Merger Consideration Adjustment. . . . Section 2.5.2 OR
Section 2.5.3
Hazardous Substances. . . . . . . . . . . . . . . . . . . Section 4.7.4
Hazardous Waste . . . . . . . . . . . . . . . . . . . . . Section 4.7.4
Independent Accountants . . . . . . . . . . . . . . . . . Section 2.5.3
Intellectual Property Rights. . . . . . . . . . . . . . . Section 4.7.7
Liability . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3.1(b)
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.3
Losses. . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.1
Merger. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Merger Sub. . . . . . . . . . . . . . . . . . . . . . . . Page 1
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Where
Term Defined
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Net Closing Indebtedness. . . . . . . . . . . . . . . . . Section 2.3(a)
Net Worth Differential. . . . . . . . . . . . . . . . . . Section 2.3(c)
Northcoast/America. . . . . . . . . . . . . . . . . . . . Section 6.2(n)
Northcoast/Kansas . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
Northcoast/Texas. . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
OGCL . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Per-Share Merger Consideration. . . . . . . . . . . . . . Section 2.2
Post-Closing Merger Consideration Adjustment. . . . . . . Section 2.4
Preliminary Closing Balance Sheet . . . . . . . . . . . . Section 2.5.1
Preliminary Post-Closing Merger Consideration Adjustment. Section 2.5.1
Pre-Closing Inventory . . . . . . . . . . . . . . . . . . Section 2.5.1
Pre-Closing Taxes . . . . . . . . . . . . . . . . . . . . Section 7.13(a)
Product Liability Claim . . . . . . . . . . . . . . . . . Section 4.4.3
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.3
Shareholder AND Shareholders. . . . . . . . . . . . . . . Page 1
Stock Purchase Agreement. . . . . . . . . . . . . . . . . Section 6.2(n)
Surviving Corporation . . . . . . . . . . . . . . . . . . Section 1.1
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . Section 4.3.4
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3.4
1933 Act. . . . . . . . . . . . . . . . . . . . . . . . . Section 3.7
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into on this 15th day of March, 1999, by and among NCI SALES AND
LEASING, INC., an Ohio corporation (hereinafter referred to alternatively as
the "Company" or the "Surviving Corporation"), MARK A. BAUMAN and PATRICK J.
FLYNN (each, a "Shareholder"), NCI ACQUISITION CORP., an Ohio corporation
(hereinafter referred to as "Merger Sub"), and CHART INDUSTRIES, INC., a
Delaware corporation (hereinafter referred to as "Chart"). As used in this
Agreement, the term "Shareholders" shall mean and include Mark A. Bauman
individually, Patrick J. Flynn individually, and both of them collectively.
WITNESSETH:
WHEREAS, the authorized capital stock of the Company consists of 850
Common Shares, without par value, of which a total of 20 are issued and
outstanding (as more particularly defined in Section 3.2 hereof, the "Company
Shares"), and all 20 of such Company Shares are owned by the Shareholders;
WHEREAS, the authorized capital stock of Merger Sub consists of 850
Common Shares, without par value, of which a total of 20 are issued and
outstanding, and all 20 of the issued and outstanding shares of Merger Sub
are owned by Chart;
WHEREAS, the Board of Directors of each of the Company, of Merger Sub
and of Chart deems it advisable and generally to its and its respective
shareholders' welfare and advantage to merge Merger Sub with and into the
Company under and pursuant to Section 1701.78 of the Ohio General Corporation
Law (the "OGCL"), subject to and in accordance with the terms and conditions
of this Agreement, and has approved this Agreement in accordance with the
requirements of the OGCL;
WHEREAS, the shareholders of each of the Company and of Merger Sub
have approved and adopted this Agreement in accordance with the requirements
of the OGCL; and
WHEREAS, the parties intend that the merger of Merger Sub with and
into the Company hereunder shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code");
NOW, THEREFORE, in consideration of and in reliance upon the mutual
covenants, agreements, representations and warranties set forth in this
Agreement, the Company, Shareholders, Merger Sub and Chart hereby adopt the
following plan of merger and agree as follows:
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ARTICLE 1
THE MERGER
1.1 THE MERGER.
Effective at the Effective Time (as defined in Section 1.5),
Merger Sub shall be merged with and into the Company (the "Merger"). The
Company shall be the surviving corporation in the Merger (the "Surviving
Corporation"). At the Effective Time, the separate corporate existence of
Merger Sub shall cease, and the Surviving Corporation, to the extent
permitted by applicable law, shall succeed to all of the business,
properties, assets, and liabilities of Merger Sub and shall continue as the
surviving corporation under the laws of the State of Ohio and with the name
"NCI Sales and Leasing, Inc."
1.2 ARTICLES OF INCORPORATION.
The Articles of Incorporation of the Company as in effect
immediately prior to the Effective Time shall continue in effect following
the Merger and shall be the Articles of Incorporation of the Surviving
Corporation, subject to amendment from time to time after the Merger in
accordance with the terms thereof and with applicable law.
1.3 CODE OF REGULATIONS.
The Code of Regulations of the Company as in effect immediately
prior to the Effective Time shall continue in effect following the Merger and
shall be the Code of Regulations of the Surviving Corporation, subject to
amendment from time to time after the Merger in accordance with the terms
thereof, the Articles of Incorporation of the Surviving Corporation, as
amended, and applicable law.
1.4 DIRECTORS AND OFFICERS.
Each director and each officer of the Company holding office at
the Effective Time shall at the Effective Time be removed from office, and
the directors and the officers of Merger Sub holding office immediately prior
to the Effective Time shall at the Effective Time become the directors and
the officers, respectively, of the Company, and shall continue in office
following the Merger until they shall have resigned or been removed or
replaced in accordance with the Articles of Incorporation and the Code of
Regulations of the Surviving Corporation, each as amended, or otherwise in
accordance with applicable law.
1.5 EFFECTIVE TIME; EFFECTIVE DATE.
The Merger shall become effective at and as of the time at
which an appropriate certificate of merger with respect to the Merger (the
"Certificate of Merger") shall have been duly filed in the office of the
Secretary of State of Ohio in accordance with Section 1701.81 of the OGCL
(the "Effective Time"). The date on which the Effective Time occurs is
herein referred to as the "Effective Date." At the Closing (as hereinafter
defined), subject to the
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satisfaction of the conditions set forth in this Agreement, the Company and
Merger Sub shall each execute and cause the Certificate of Merger to be so
filed.
ARTICLE 2
STATUS AND CONVERSION OF SHARES
The terms of the Merger and the mode of carrying them into effect, and
the manner and basis of converting the outstanding shares of the capital
stock of the Company and of Merger Sub, shall be as follows:
2.1 MERGER SUB SHARES.
Each one (1) Common Share, without par value, of Merger Sub
which is issued and outstanding immediately prior to the Effective Time shall
at the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof or any other person, be changed and converted into
one (1) issued and outstanding Common Share, without par value, of the
Company.
2.2 COMPANY SHARES.
Each one (1) Company Share which is issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof or any other person, be
canceled, extinguished and converted at the Effective Time into the right to
receive from Chart, in accordance with the terms and conditions of this
Agreement, that number of shares of Common Stock, $.01 par value, of Chart
("Chart Common Stock") that is determined by reference to the following
formula (the "Per-Share Merger Consideration"):
PSMC = ( ( $723,000 - Excess Debt - Working Capital Shortfall - NWD )
DIVIDED BY 20 ) DIVIDED BY CTI
where: (a) "PSMC" is the number of shares of Chart Common Stock
constituting the Per-Share Merger Consideration;
(b) "EXCESS DEBT" means the amount, if any, by which the Net
Closing Indebtedness (as defined below) exceeds
$196,139.00;
(c) "WORKING CAPITAL SHORTFALL" means the amount, if any, by
which $29,930.00 exceeds the Closing Working Capital (as
defined below);
(d) "NWD" means the amount of the Net Worth Differential (as
defined below); and
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(e) "CTI" equals $7.0875, which is the average of the closing
prices of the Chart Common Stock on the New York Stock
Exchange on each of the five (5) trading days beginning
Friday, March 5, 1999, and ending Thursday, March 11, 1999.
The preceding sentence notwithstanding, Chart shall not be required to issue,
and no holder of Company Shares shall be entitled to receive, any fractional
share of Chart Common Stock by virtue of the Merger. If a holder of Company
Shares would otherwise be entitled to receive a fractional interest in a
share of Chart Common Stock by virtue of the Merger, in lieu thereof such
holder shall be entitled to receive from Chart, as part of the Per-Share
Merger Consideration payable to such holder in accordance with this
Agreement, an amount in cash equal to the fair value of such fractional
interest, at the rate per share equal to the value of a share of Chart Common
Stock as determined in accordance with paragraph 2.2(d) above. Neither Chart
nor the Surviving Corporation shall have any obligation to recognize the
claim of any holder of Company Shares who was not the holder of record
thereof as of the Effective Time. No interest shall accrue or be paid on the
Per-Share Merger Consideration. No holder of Company Shares shall be
entitled to receive any part of the Per-Share Merger Consideration in respect
of his Company Shares unless and until all certificate representing the same
shall have been delivered to Chart in accordance with Section 2.4 hereof and
the Final Post-Closing Merger Consideration Adjustment shall have been
finally determined in accordance with Section 2.5 hereof. If any certificate
representing Company Shares is lost, stolen or destroyed, Chart shall
determine the amount of the bond, if any, and the type of additional
documents, information or assurances as shall be reasonably required to
protect Chart from other claimants with respect to the Company Shares
represented thereby in conformity with applicable law.
2.3 CERTAIN DEFINITIONS.
(a) "Net Closing Indebtedness" means an amount equal to (i)
the sum of all of the Company's indebtedness for borrowed money (including
obligations in respect of principal, accrued interest, and any applicable
prepayment charges or premiums), MINUS (ii) the sum of all cash and cash
equivalents held by the Company (not including checks or drafts issued but
not yet cleared), all as reflected on the Final Closing Balance Sheet (as
defined below). On the Closing Date, Shareholders will cause the Company to
estimate in good faith the amount of the Net Closing Indebtedness in
accordance with the preceding sentence, and will deliver to Chart a
certificate signed by Shareholders and the Company's chief financial officer
setting forth such estimate (the "Debt Certificate"), together with such
supporting detail and lender confirmations as Chart may request.
(b) "Closing Working Capital" means the difference between
(i) the Company's current assets MINUS (ii) the Company's current
liabilities, all as reflected on the Final Closing Balance Sheet; PROVIDED,
HOWEVER, that for purposes of such calculation, the Company's current assets
will not include any accounts or notes receivable from Northcoast/America,
Northcoast/Texas or Northcoast/Kansas, and the Company's current liabilities
will not include any accounts or notes payable to Northcoast/America,
Northcoast/Texas or Northcoast/Kansas and will not include any indebtedness
for borrowed
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money (including obligations in respect of principal, accrued interest, and
any applicable prepayment charges or premiums) taken into account in
determining Net Closing Indebtedness.
(c) "Net Worth Differential" means the difference between
(i) the net worth of the Company (I.E., all assets, net of depreciation and
amortization, less all liabilities) as actually reflected on the Final
Closing Balance Sheet, allowing for the variances from generally accepted
accounting principles identified on Schedule 4.3.1(b) hereto, MINUS (ii) the
net worth of the Company (I.E., all assets, net of depreciation and
amortization, less all liabilities) as it would be reflected on the Final
Closing Balance Sheet if the same were prepared without allowance for any of
the variances from generally accepted accounting principles identified on
Schedule 4.3.1(b) hereto.
2.4 ESTIMATED MERGER CONSIDERATION.
Upon the surrender and delivery by each Shareholder to Chart at
the Closing, or following the Closing at Chart's principal executive office
in Mayfield Heights, Ohio, of all certificates representing the Company
Shares held by such Shareholder, duly endorsed to Chart or in blank and
otherwise in proper form for transfer to Chart, Chart shall cause to be
issued in the name of such Shareholder, and dated as of the date of such
surrender and delivery, a certificate for the number of shares of Chart
Common Stock that would be issuable in respect of all of such Shareholder's
Company Shares pursuant to Section 2.2 hereof if the Net Closing Indebtedness
were exactly as set forth in the Debt Certificate and if the Working Capital
Shortfall and the Net Worth Differential were both zero ($0) (as to each
Shareholder, his "Estimated Merger Consideration"). Chart shall retain
possession of each such certificate until the Final Post-Closing Merger
Consideration Adjustment has been determined in accordance with Section 2.5.
Pending such determination, the shares of Chart Common Stock represented by
each certificate so issued and retained shall be issued and outstanding for
all purposes and owned of record by the Shareholder in whose name such
certificate is registered, and such Shareholder shall be entitled to exercise
all voting and other consensual rights pertaining to the shares of Chart
Common Stock represented thereby, and shall be entitled to receive all
dividends and other distributions, if any, that shall be paid upon such
shares from the date of issuance thereof to the date of delivery thereof to
such Shareholder hereunder. If the number of shares of Chart Common Stock
issuable to a Shareholder pursuant to Section 2.2, as finally determined in
accordance with Section 2.5 hereof (as to each Shareholder, his "Definitive
Merger Consideration"), is less than his Estimated Merger Consideration, then
Chart shall cancel the certificate representing his Estimated Merger
Consideration and shall issue in the name of such Shareholder and deliver to
him a certificate representing his Definitive Merger Consideration in
accordance with Section 2.5.4 (the "Post-Closing Merger Consideration
Adjustment").
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2.5 ADJUSTMENT.
2.5.1 CLOSING BALANCE SHEET PREPARATION.
Promptly after the Closing, the Shareholders will prepare a
balance sheet of the Company as of the Closing ("Preliminary Closing Balance
Sheet"). The Preliminary Closing Balance Sheet will be prepared in
accordance with generally accepted accounting principles and, to the extent
permitted thereby, on a basis consistent with the past practices of the
Company; PROVIDED, HOWEVER, that the preparation of the Closing Balance Sheet
may vary from generally accepted accounting principles by not taking into
account the accruals and adjustments identified as "GAAP Adjustments" on
Schedule 4.3.1(b) hereto. Seller caused the Company to conduct a physical
inventory as of March 7, 1999 (the "Pre-Closing Inventory"), the results of
which shall be accurately reflected in the Preliminary Closing Balance Sheet.
Based on the Preliminary Closing Balance Sheet, Shareholders will prepare a
written calculation of the Net Closing Indebtedness in accordance with the
provisions of Section 2.3(a), a written calculation of the Closing Working
Capital in accordance with the provisions of Section 2.3(b), and a written
calculation of the Net Worth Differential in accordance with the provisions
of Section 2.3(c), and based thereon, a calculation of the Post-Closing
Merger Consideration Adjustment in accordance with the provisions of Section
2.4 (the "Preliminary Post-Closing Merger Consideration Adjustment").
2.5.2 CLOSING BALANCE SHEET REVIEW.
Not later than forty-five (45) days after the Closing Date, the
Shareholders will deliver to Chart the Preliminary Closing Balance Sheet and
the Shareholders' calculation of the Preliminary Post-Closing Merger
Consideration Adjustment. All work papers, documents and records used or
generated by the Shareholders and their accountants and other representatives
in connection with the preparation of its Preliminary Closing Balance Sheet
and the calculation of the Preliminary Post-Closing Merger Consideration
Adjustment will be made available to Chart. Unless Chart gives the
Shareholders a written objection by the thirtieth (30th) day after Chart's
receipt of the Preliminary Closing Balance Sheet and the Preliminary
Post-Closing Merger Consideration Adjustment, the Preliminary Closing Balance
Sheet and the Preliminary Post-Closing Merger Consideration Adjustment will
become final and binding on the parties and shall be deemed to be the "Final
Closing Balance Sheet" and the "Final Post-Closing Merger Consideration
Adjustment," respectively.
2.5.3 CLOSING BALANCE SHEET DISPUTE.
If Chart objects to the Preliminary Closing Balance Sheet or to
the Preliminary Post-Closing Merger Consideration Adjustment and Chart and
the Shareholders are able to resolve their dispute within fifteen (15) days
after Chart's objection, the Preliminary Closing Balance Sheet and the
Preliminary Post-Closing Merger Consideration Adjustment (each as adjusted to
reflect such resolution) will become final and binding on the parties and
shall be deemed to be the "Final Closing Balance Sheet" and the "Final
Post-Closing Merger Consideration Adjustment," respectively. If Chart
objects to the Preliminary Closing Balance
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Sheet or to the Preliminary Post-Closing Merger Consideration Adjustment and
Chart and the Shareholders are unable to resolve their dispute within fifteen
(15) days after Chart's objection, the dispute will be resolved in accordance
with the terms of this Agreement by the firm of Arthur Andersen LLP (the
"Independent Accountants"). The Independent Accountants will be instructed to
perform their services as expeditiously as possible. The resolution of the
Independent Accountants shall be presented in a "Final Closing Balance Sheet"
with respect to the Company and a "Final Post-Closing Merger Consideration
Adjustment" with respect to the Company, each prepared by the Independent
Accountants, which shall be final and binding on the parties. The fees and
expenses of the Independent Accountants for the resolution of any dispute
shall be paid by Chart and Shareholders in inverse proportion to the
respective amounts of the disputed matters which are resolved in their favor.
For example, if:
(a) Chart claims that the Final Post-Closing Merger Consideration
Adjustment should be $100;
(b) Shareholders claim that the Final Post-Closing Merger
Consideration Adjustment should be $20; and
(c) the Independent Accountants determine that the Final Post-Closing
Merger Consideration Adjustment is $40;
then the fees and expenses of the Independent Accountants would be paid 25%
by Shareholders (i.e., 20 DIVIDED BY 80), and 75% (i.e., 60 DIVIDED BY 80) by
Chart.
2.5.4 POST-CLOSING DELIVERY OF CHART COMMON STOCK.
(a) If, after giving effect to the Final Post-Closing Merger
Consideration Adjustment, a Shareholder's Definitive Merger Consideration
equals his Estimated Merger Consideration, then Chart will deliver to such
Shareholder, not more than seven (7) days after the Preliminary Post-Closing
Merger Consideration Adjustment becomes the Final Post-Closing Merger
Consideration Adjustment, the certificate representing his Estimated Merger
Consideration, together with any stock power deposited by such Shareholder
with Chart at the Closing for purposes of Section 2.5.4(b) hereof.
(b) If, after giving effect to the Final Post-Closing Merger
Consideration Adjustment, a Shareholder's Definitive Merger Consideration is
less than his Estimated Merger Consideration, then Chart will cancel the
certificate representing the Estimated Merger Consideration and, not more
than seven (7) days after the Preliminary Post-Closing Merger Consideration
Adjustment becomes the Final Post-Closing Merger Consideration Adjustment,
will issue and deliver to such Shareholder a new certificate representing his
Definitive Merger Consideration, which shall be dated as of the same date as
the certificate representing his Estimated Merger Consideration.
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ARTICLE 3
SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
The Company and each Shareholder jointly and severally represent and
warrant to Chart and to Merger Sub as follows:
3.1 AUTHORITY AND CAPACITY.
Each Shareholder possesses all requisite legal right, power,
authority and capacity to execute, deliver and perform this Agreement,
including the authority and capacity to sell and transfer his Company Shares
to Chart as provided by this Agreement. The Merger and this Agreement have
been duly authorized, approved and adopted by the Board of Directors of the
Company and by the shareholders of the Company in accordance with all
applicable requirements of the OGCL (including Section 1701.78 thereof), the
Articles of Incorporation of the Company, as amended, and the Code of
Regulations of the Company, as amended.
3.2 AUTHORIZED AND ISSUED STOCK.
The total authorized capital stock of the Company consists of
850 shares, all of which are Common Shares, without par value. Of such
authorized shares, a total of twenty (20) are issued and outstanding (each, a
"Company Share," and collectively, the "Company Shares"). Ten (10) of the
Company Shares are owned of record and beneficially by Mark A. Bauman
exclusively, and ten (10) of the Company Shares are owned of record and
beneficially by Patrick J. Flynn exclusively. All of the Company Shares have
been duly authorized and validly issued, are fully paid and nonassessable,
and have been issued in compliance with (and since issuance, have not been
transferred except in compliance with) all applicable federal and state
securities laws and any preemptive rights, rights of first refusal, or
similar rights of any person. There does not exist any right or security
granted or issued by the Company, either Shareholder or any other person to
cause the Company or either Shareholder to issue or sell any shares of
capital stock of the Company to any person (including, without limitation,
any stock option, warrant, convertible debt obligation, subscription for
stock or securities convertible into stock of the Company, or any other
similar right, security, instrument or agreement). Neither the Company nor
any Shareholder is a party to, and none of the Company Shares is subject to,
any close corporation agreement, voting trust agreement, buy-sell agreement,
or other similar agreement relating in any way to the voting or the transfer
of any Company Shares.
3.3 TITLE TO SHARES.
Each Shareholder owns all of the Company Shares that are issued
and outstanding in his name free and clear of all liens, charges, covenants,
conditions, adverse claims, demands, encumbrances, limitations, security
interests or other title defects or restrictions of any kind (collectively,
"Liens").
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3.4 EXECUTION AND DELIVERY; ENFORCEABILITY.
This Agreement has been, and each other document, instrument or
agreement to be executed and delivered by the Company and each Shareholder in
connection herewith will upon such delivery be, duly executed and delivered
by the Company and such Shareholder, and constitutes, or will upon such
delivery constitute, the legal, valid and binding obligation of the Company
and each Shareholder, respectively, enforceable in accordance with its terms.
3.5 NONCONTRAVENTION.
Neither the Company nor either Shareholder is required to
submit any notice, report or other filing with any governmental authority in
connection with the execution, delivery or performance by the Company or
either Shareholder of this Agreement or any other document, instrument or
agreement to be executed and delivered by the Company or by either
Shareholder in connection herewith, and such execution, delivery and
performance will not violate any statute, rule, regulation, ordinance,
arbitration award, judgment, order or decree (each, a "Law") by which the
Company or either Shareholder is bound or any agreement to which the Company
or either Shareholder is a party. No consent, approval or authorization of
any governmental authority or any other person is required to be obtained by
the Company or either Shareholder in connection with the execution, delivery
and performance by the Company or either Shareholder of this Agreement or any
other document, instrument or agreement to be executed and delivered by the
Company or either Shareholder in connection herewith.
3.6 BROKERAGE.
No person is or will become entitled, by reason of any
agreement or arrangement entered into or made by or on behalf of the Company
or either Shareholder, to receive any commission, brokerage, finder's fee or
other similar compensation in connection with the consummation of any of the
transactions contemplated by this Agreement.
3.7 INVESTMENT INTENT; RESTRICTED SECURITIES.
Each Shareholder is acquiring the shares of Chart Common Stock
issuable to him in the Merger solely for his own account, for investment
purposes only, and not with a view to, or with any present intention of, any
resale or distribution of such shares. Each Shareholder understands and
acknowledges that none of the shares of Chart Common Stock issuable to him in
the Merger will be registered under the federal Securities Act of 1933, as
amended (the "1933 Act"), or qualified under the securities laws of any
state, in reliance upon specific exemptions thereunder for transactions not
involving any public offering; that all of such shares will constitute
"restricted securities" as defined in Rule 144 under the 1933 Act; and that,
as a result, all of such shares will generally be non-transferable for a
period of one year after the Closing. Each Shareholder understands and
acknowledges that: (i) such shares may not be transferred unless they become
registered under the 1933 Act, or unless it is established to Chart's
satisfaction that an exemption from such registration is available;
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(ii) Chart will have no obligation to provide any such registration under the
1933 Act or to take such steps as are necessary to permit sale of any such
shares without such registration pursuant to Rule 144 or otherwise; (iii) all
certificates representing such shares will bear an appropriate legend
concerning the foregoing restrictions on transfer; and (iv) Chart's stock
transfer agent and registrar will be advised of the foregoing restrictions on
transfer and will be instructed to notify Chart of any attempted transfer of
such shares in violation of such restrictions. Each Shareholder acknowledges
that he has received the Chart SEC Documents (as defined below), and has been
given the opportunity to ask questions of and receive answers from Chart's
officers concerning Chart, its business and the risks associated with an
investment in the Chart Common Stock, and the terms and conditions of this
Agreement. All such questions have been answered to each Shareholder's
satisfaction, and each Shareholder has been supplied with all additional
information and documents requested and deemed necessary by him to make an
informed investment decision with respect to the Chart Common Stock being
acquired by him pursuant to this Agreement. Each Shareholder, either by
reason of his net worth, his income, or both, is an "accredited investor" as
defined in Rule 501(a) of Regulation D under the 1933 Act, or, either alone
or with a purchaser representative, has extensive knowledge and experience in
financial and business matters and is capable of evaluating the merits and
risks of investing in and holding the Chart Common Stock, and has the ability
to bear the economic risks of his investment in the Chart Common Stock.
ARTICLE 4
SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Company and Shareholders jointly and severally represent
and warrant to Chart and to Merger Sub as follows.
4.1 ORGANIZATION.
4.1.1 ORGANIZATION AND POWER.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Ohio. The Company has
full corporate power to own, lease and operate its assets and carry on its
business as and where such assets are now owned or leased and as such
business is presently being conducted.
4.1.2 QUALIFICATION.
Schedule 4.1.2 lists each state or foreign country in which the
Company (i) owns or leases real property, (ii) has employees or sales agents,
or (iii) maintains inventory. The Company is qualified to do business as a
foreign corporation in each of the states and foreign countries listed in
Schedule 4.1.2. The Company is not required to be qualified to do business
in any other state or foreign country where the failure to be so qualified
would have a material adverse effect on the Company.
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4.1.3 OTHER VENTURES.
The Company does not have any ownership interest in any other
business entity, is not a member of any partnership, joint venture or limited
liability company, and has never operated as a subsidiary or division of any
other corporation or other business entity.
4.1.4 {Intentionally omitted.}
4.2 AGREEMENTS.
4.2.1 {Intentionally omitted.}
4.2.2 {Intentionally omitted.}
4.2.3 CONSENTS.
Except as set forth on Schedule 4.2.3, no approval or consent
of, or filing with, any person, entity or governmental authority is required
to be obtained by the Company in connection with the transactions
contemplated hereby or the execution, delivery or performance by the Company
or Shareholders of this Agreement or any other agreement or document
delivered or to be delivered by or on behalf of Shareholders or the Company.
4.2.4 NO CONFLICTS.
Except as set forth on Schedule 4.2.4, no action taken by or on
behalf of Shareholders or the Company in connection herewith, including but
not limited to the execution, delivery and performance of this Agreement by
Shareholders and the Company and each other agreement and document to be
delivered by Shareholders or the Company in connection herewith, (i) gives
rise to a right of termination or acceleration or the loss or impairment of
any material right or benefit under any Contract by which the Company or any
of its assets is bound, (ii) disrupts or impairs any business relationship
which the Company has with any dealer, distributor, sales representative,
supplier or customer, (iii) conflicts with or violates any law, the Company's
Articles of Incorporation, the Company's Code of Regulations, any Contract by
which the Company or a Shareholder is bound, or any order, arbitration award,
judgment, decree or other similar restriction to which the Company or a
Shareholder is subject, or (iv) constitutes an event which, after notice or
lapse of time or both, could result in any of the foregoing.
4.3 FINANCIAL.
4.3.1 FINANCIAL RECORDS.
(a) Schedule 4.3.1(a) consists of (i) the balance sheets of
the Company as of December 31, 1997, 1996 and 1995 and the related statements
of income and retained earnings for the twelve-month periods then ended, and
(ii) the balance sheet of the Company as of
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November 30, 1998, and the related income statement for the 11-month period
then ended, and (iii) the balance sheet of the Company as of January 31, 1999
(the "Acquisition Balance Sheet"), all as prepared by the Company.
(b) Except as expressly disclosed in Schedule 4.3.1(b), all
such financial statements were prepared from the Company's books of account
in accordance with generally accepted accounting principles, consistently
applied, are accurate and complete, and present fairly the financial position
and results of operations of the Company at the dates and for the periods
indicated, except, in the case of the Acquisition Balance Sheet and related
income statement, for customary year-end adjustments of a normal recurring
type which would not be material in the aggregate and the absence of
footnotes. The books of account of the Company accurately reflect all items
of income and expense (including, but not limited to, accruals) and all
assets and Liabilities of the Company in accordance with normal accrual
accounting practices, subject to customary year-end adjustments of a normal,
recurring type which would not be material in the aggregate.
As used in this Agreement, the term "Liability" means and
includes any responsibility, obligation, duty, commitment, claim or
liability, whether known or unknown, accrued, absolute, contingent or
otherwise.
4.3.2 LIABILITIES.
The Company has no Liabilities except (i) to the extent
provided for or reserved against on the Acquisition Balance Sheet, (ii)
current Liabilities which have arisen in the ordinary course of business
consistent with past practice since the date of the Acquisition Balance Sheet
(all of which have been recorded on the Company's books), or (iii) as listed
on Schedule 4.3.2. Since the date of the Acquisition Balance Sheet, there has
not been any incurrence (whether discharged or not) of any Liability by the
Company other than current Liabilities incurred in the ordinary course of
business consistent with past practice.
4.3.3 NO CHANGES.
Since the date of the Acquisition Balance Sheet, the Company
has been operated only in the ordinary course, consistent with past practice.
Since that date, there has not been any adverse change, or event or
circumstance which might reasonably be expected to result in an adverse
change, in the Company's assets, Liabilities, operating performance, business
relationships or prospects. Since the date of the Acquisition Balance Sheet,
there has been no change in any accounting policy or practice of the Company,
including practices with respect to the payment of accounts payable or the
collection of accounts receivable. Since the date of the Acquisition Balance
Sheet, the Company has not paid any dividend (whether in cash or in property)
or engaged in any transaction that has resulted in any shareholder of the
Company, any relative of a shareholder of the Company, or any entity
affiliated with any such shareholder or relative receiving any direct or
indirect economic benefit, other than payments of normal wages, salaries or
rents, and reimbursement of deductible business expenses actually incurred in
the ordinary course of business.
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4.3.4 TAXES.
All tax returns, reports and declarations (collectively, "Tax
Returns") required by any governmental authority to be filed in connection
with the properties, business, income, expenses, net worth or franchises of
the Company have been timely filed, and all such Tax Returns are correct and
complete. Shareholders have delivered to Chart copies of each of the
Company's most recent federal, state and local Tax Returns. All governmental
taxes, charges or assessments and related deficiencies, interest and
penalties (collectively, "Taxes") due in connection with the properties,
business, income, expenses, net worth or franchises of the Company have been
paid. There are no Tax claims, audits or proceedings pending in connection
with the properties, business, income, expenses, net worth or franchises of
the Company, and, to the best knowledge of Shareholders and the Company,
there are no such threatened claims, audits or proceedings.
4.4 LEGAL.
4.4.1 COMPLIANCE WITH LAWS.
The Company is not in violation of (i) any outstanding
arbitration award, judgment, order or decree, or (ii) any law, regulation or
ordinance (each, a "law"), including any law relating to discrimination,
employment practices, protection of the environment, occupational health or
safety, working conditions, payroll withholding, pensions, zoning, or Taxes.
Except as disclosed on Schedule 4.4.1, there have been no allegations of or
inquiries concerning any violations of any law by the Company within the past
three years. Neither Shareholders nor the Company have received any notice or
allegation from any governmental authority of any jurisdiction to the effect
that the Company is or might be required to acquire or modify any asset or
change any aspect of its business operations in order to comply with any
applicable law. Except as listed on Schedule 4.4.1, no permits, licenses,
approvals or authorizations of any governmental authority are required to
conduct the Company's business. All such permits, licenses, approvals and
authorizations have been legally obtained and maintained by the Company and
are in full force and effect. No proceeding is pending to revoke or limit
any of them or otherwise to impose any conditions or obligations on the
possession or transfer of any of them. In addition, there is no state of
facts or event which could reasonably be expected to form the basis for any
revocation or limitation of them or other imposition of conditions or
obligations on the possession or transfer of any of them. In the past three
years, there have been no claims, notices, orders or directives issued by any
governmental authority with respect to the business of the Company or any of
the Company's assets. The Company is not required to make, and has no
reasonable expectation that it will be required to make in order to operate
its business after the Closing, any expenditures to achieve or maintain
compliance with any law, except in amounts similar to those reflected in the
financial statements contained on Schedule 4.3.1.
4.4.2 PRODUCT AND SERVICE WARRANTIES.
Except as set forth on Schedule 4.4.2, there have been no product
warranty or service warranty claims made by customers of the Company in the past
three years and there
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are no product warranties or service warranties outstanding or currently
being offered to customers of the Company.
4.4.3 PRODUCT LIABILITY.
Except as set forth on Schedule 4.4.3, no claims alleging
bodily injury or property damage as a result of any defect in the design or
manufacture of any product or the breach of any duty to warn, test, inspect
or instruct of dangers therein (each a "Product Liability Claim"), have been
made or threatened against the Company within the past three years. There
are no defects in the design or manufacture of products manufactured or sold
by the Company which defects could result in a Product Liability Claim, and
there has not been any failure by the Company to warn, test, inspect or
instruct of dangers which could form the basis for a product recall or any
Product Liability Claim against the Company.
4.4.4 LITIGATION.
Except as set forth on Schedule 4.4.4, no claim, litigation,
investigation or proceeding is pending or, to the knowledge of Shareholders
and the Company, threatened against the Company or involving the Company has
been concluded in the past three years, and there is no state of facts or
event which could reasonably be expected to form the basis for such a claim,
litigation, investigation or proceeding. No arbitration award, judgment,
order, decree or similar restriction is outstanding against or relating to
the Company or its assets, business or products.
4.5 BUSINESS.
4.5.1 EMPLOYMENT.
The Company employs a total of not more than five (5)
employees. The Company does not use any leased or temporary employees.
Schedule 4.5.1 lists the names, current annual compensation rates and other
compensation arrangements of all of the Company's employees whose
compensation paid or accrued during 1998 exceeded $50,000.00 on an annualized
basis. The Company has paid in full to all employees, or made appropriate
accruals for on its books of account, all wages, commissions, bonuses and
other direct compensation for all services performed by its employees. The
Company has withheld or collected from each payment made to each of its
employees the amount of all Taxes required to be withheld or collected
therefrom, and the Company has paid the same when due to the proper
governmental authorities. Except as set forth on Schedule 4.5.1, during the
past three years there have been no controversies, grievances or claims by
any of the employees, former employees or beneficiaries of any employees of
the Company with respect to their employment or employment benefits,
including but not limited to any discrimination claims, sexual harassment
claims or workers' compensation claims. There is no union representation of
any of the Company's employees and, to the knowledge of Shareholders and the
Company, there has never been any attempt by a labor organization to organize
the Company's employees into a collective bargaining unit. Since the date of
the Acquisition Balance Sheet, there has not
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been any general increase made or promised in the level or rate of salaries
or other compensation of any of the Company's employees.
4.5.2 EMPLOYMENT TERMINATION.
Except as set forth on Schedule 4.5.2, upon the termination of
employment of any of the Company's employees, the Company will not by reason
of anything done prior to or at the Closing be liable to any of its employees
for so-called "severance pay" or any other payments. To the knowledge of
Shareholders and the Company, none of the employees of the Company intends to
resign or seek other employment as a result of the transactions contemplated
hereby or otherwise.
4.5.3 CONTRACTS.
As used in this Agreement, the term "Contracts" means and
includes all agreements, contracts, leases, licenses, purchase or sales
orders, commitments, promises and similar arrangements evidencing or creating
any obligation, whether written or oral. Schedule 4.5.3 contains a complete
and accurate list of:
(a) all Contracts to which the Company is a party or by
which it is bound, involving amounts in excess of $50,000.00 or which are
cancelable by the Company only after giving at least 30 days' notice;
(b) all loan, financing, security, credit or other Contracts
evidencing or relating to indebtedness, guarantees or Liens;
(c) all Contracts with distributors, dealers or sales
representatives;
(d) all management, employment, consulting, or agency
Contracts and all collective bargaining Contracts;
(e) all Contracts providing employee benefits;
(f) all Contracts which contain an obligation of
confidentiality with respect to information furnished by the Company to a
third party or received by the Company from a third party;
(g) all Contracts containing covenants limiting the freedom
of the Company to compete in any line of business or with any person or in
any geographic area or market;
(h) all Contracts relating to patents, trademarks, trade
names or copyrights or applications for any of the foregoing, inventions,
trade secrets or other proprietary information;
(i) all Contracts relating to the past or present disposal
of waste;
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(j) all Contracts pursuant to which the Company leases or
subleases any real property, or any interest therein, from or to any person;
(k) all Contracts pursuant to which the Company leases or
subleases any personal property, or any interest therein, from or to any
person;
(l) all Contracts with any shareholder, officer, director,
consultant or employee of the Company, or any relative of any of the
foregoing, or any corporation, partnership, limited liability company or
other entity directly or indirectly owned or controlled by a Shareholder, or
one or more of his relatives; and
(m) all other Contracts entered into other than in the
ordinary course of business consistent with past practice, including but not
limited to Contracts (i) with suppliers for the purchase of goods or services
in excess of normal requirements or at prices in excess of the current market
price, (ii) for the sale by the Company of goods or services at prices not
reasonably calculated to produce gross profit margins consistent with those
achieved by the Company during its three prior fiscal years, or (iii) which
contain terms or conditions which the Company cannot reasonably expect to
fulfill in their entirety.
Shareholders have delivered to Chart accurate and complete copies of each
such written Contract, and an accurate and complete written description of
each such oral Contract, in each case with all modifications and amendments
thereto. Since the date of the last year-end balance sheet included in the
financial statements on Schedule 4.3.1, there has been no modification or
termination of any Contract under circumstances which might have an adverse
effect on the Company.
4.5.4 COMPLIANCE WITH CONTRACTS.
With respect to each Contract which is required to be disclosed
on any Schedule to this Agreement, (i) the Company is not in default under or
in violation thereof, and (ii) no event has occurred which, with notice or
lapse of time or both, would constitute such a default or violation. There
have been no discussions or correspondence concerning the breach by the
Company of, or the termination of, any of such Contracts. To the knowledge
of Shareholders and the Company, there is no default under or violation of
any such Contract by any other party thereto.
4.5.5 INSURANCE.
Schedule 4.5.5 lists all insurance policies maintained by the
Company and identifies for each such policy the following information:
underwriter, policy number, coverage type, premium, expiration date, coverage
amount and deductible. All such policies are in full force and effect, and
all premiums have been paid. The Company is not, and has not been at any
time, subject to Liability as a self-insurer. Schedule 4.5.5 also sets forth
a description of all claims pending under such insurance policies.
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4.5.6 CUSTOMERS AND SUPPLIERS.
No customer or supplier which has accounted for more than two
percent (2%) of the Company's sales or purchases in the past year and no
other customer or supplier material to the Company's business (including any
supplier which is the Company's sole source of supply of any product or
service) has terminated, or threatened to terminate, its relationship with
the Company or has during the past year decreased or delayed materially, or
threatened to decrease or delay materially, its purchases from the Company or
its sale of services or supplies to the Company, and there is no state of
facts or event which could reasonably be expected to form the basis for such
a decrease or delay. To the knowledge of Shareholders and the Company, the
transactions contemplated by this Agreement will not adversely affect the
relationship of the Company with any customer or supplier. The Company is
not required, in the ordinary course of business, to provide any bonding or
any other financial security arrangements in connection with transactions
with any supplier.
4.5.7 PURCHASES AND SALES.
Since the date of the most recent year-end balance sheet
included in the financial statements on Schedule 4.3.1, the Company has not
made any purchase commitments in excess of its normal business requirements
and there has not been any reduction in the aggregate dollar volume of the
Company's backlog of sales orders.
4.5.8 PREPAYMENTS AND DEPOSITS.
Except as disclosed on Schedule 4.5.8, the Company has not
received any prepayments or deposits from customers for products to be
shipped, or for services to be performed, after the Closing.
4.5.9 CAPITAL PROJECTS.
Schedule 4.5.9 contains a description of all capital projects
committed for or authorized by the Company involving the expenditure of
$10,000.00 or more. Except as disclosed on Schedule 4.5.9, the estimated
aggregate cost of completing all capital projects does not exceed $50,000.00.
4.6 EMPLOYEE BENEFITS.
Except as otherwise set forth on Schedule 4.6, the Company does
not maintain and is not required to contribute to any employee benefit plan,
welfare benefit plan or pension plan. Shareholders have delivered to Chart
accurate and complete copies of each such written plan, and an accurate and
complete written description of each such oral plan, in each case with all
modifications and amendments thereto. Each employee benefit plan, welfare
benefit plan or pension plan maintained by the Company has been operated in
accordance with its terms and all applicable laws. The Company has not
engaged in any prohibited transaction with respect to any employee benefit
plan which it maintains or to which it contributes. The Company has the
right to amend or terminate, without the consent of any other person or
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entity, any employee benefit plan which it maintains, except as otherwise
prohibited by law. No welfare benefit plan maintained by the Company is
funded by a trust or fails to satisfy any applicable requirement for
tax-favored treatment. There are no unfunded benefit liabilities or
accumulated funding deficiencies under any pension plan maintained by the
Company. The Company is not required, nor has it ever been required, to
contribute to or with respect to any multiemployer plan.
4.7 ASSETS.
4.7.1 TITLE.
Except as set forth on Schedule 4.7.1, the Company owns, with
good title, and in every case free and clear of all Liens, all of the
properties and assets which it purports to own (whether real, personal or
mixed, and whether tangible or intangible), including all properties and
assets reflected on the Acquisition Balance Sheet (other than assets disposed
of in the ordinary course of business since the date of the Acquisition
Balance Sheet).
4.7.2 RECEIVABLES.
All of the Company's accounts receivable represent valid
obligations arising from sales actually made or services actually performed.
None of the Company's accounts receivable is subject to any set-off or
counterclaim, and, to the knowledge of Shareholders and the Company, all of
the Company's accounts receivable are collectible to the extent included on
the Final Closing Balance Sheet. Schedule 4.7.2 sets forth a 30/60/90 day
aging summary of the Company's accounts receivable as of January 31, 1999.
Shareholders have delivered to Chart the Company's complete aging schedule of
accounts receivables as of such date.
4.7.3 INVENTORIES.
All inventory has been valued on the Acquisition Balance Sheet
and on the Company's records and books of account at the lower of cost
(determined on a first-in, first-out basis) or market value on a basis
consistent with that reflected in the annual financial statements included on
Schedule 4.3.1. Obsolete inventory and inventory of below-standard quality
has been written down to amounts not in excess of net realizable value. All
of the Company's finished goods inventories are currently salable in the
ordinary course of business consistent with past practice at gross profit
margins consistent with the levels reflected in the annual financial
statements included on Schedule 4.3.1. All of the Company's work-in-process,
raw materials and supplies inventories can be used or consumed in the usual
and ordinary course of business as now conducted and are not in amounts in
excess of normal requirements. The Pre-Closing Inventory was conducted in
accordance with the Company's past practices and will be accurately reflected
in the Preliminary Closing Balance Sheet. The Company's actual inventories
as of the Closing will be the same as reflected in the Pre-Closing Inventory
except for sales or purchases of inventory in the ordinary course of business
during the period from March 7, 1999, to the Closing.
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4.7.4 ENVIRONMENTAL MATTERS.
The Company has not generated, used, treated, released, stored
or disposed of any Hazardous Substances or any Hazardous Waste (as such terms
are hereinafter defined) in a manner that has caused or could cause the
Company or Chart to incur any Liability under any applicable laws. The
Company has complied in all respects with all federal, state and local
environmental laws, rules and regulations applicable to the Company and its
operations. To the knowledge of Shareholders and the Company, there are no
underground storage tanks located on (nor, to the knowledge of Shareholders
and the Company, have any underground storage tanks been removed from) any
real property currently owned or leased by the Company or formerly owned or
leased by the Company. For purposes of this Agreement, the term "Hazardous
Substances" shall have the meaning set forth in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
and the regulations thereunder, or as defined by any similar law of any
jurisdiction where the Company has conducted business or has generated, used,
treated, released, stored or disposed of any Hazardous Substances, and also
shall include petroleum products, asbestos, urea formaldehyde and
polychlorinated biphenyls. For purposes of this Agreement, the term
"Hazardous Waste" shall have the meaning set forth in the Resource
Conversation and Recovery Act, as amended, and the regulations thereunder, or
as defined by any similar law of any jurisdiction where the Company has
conducted business or has generated, used, treated, released, stored or
disposed of any Hazardous Waste. To the knowledge of Shareholders and the
Company, there has not been any release of Hazardous Substances or Hazardous
Waste at or from any properties adjacent to any current or former facilities
of the Company. To the knowledge of Shareholders and the Company, there are
no materials containing asbestos or urea formaldehyde incorporated into the
building or interior improvements that are part of the Company's owned or
leased facilities, and there is no equipment or fixture containing any
polychlorinated biphenyls located at any of the Company's owned or leased
facilities.
4.7.5 CONDITION.
All of the Company's tangible assets, and all of the tangible
assets leased by the Company, are in good operating condition, normal wear
and tear excepted, neither require nor are reasonably expected to require any
special or extraordinary expenditures to remain in such condition beyond
maintenance and repairs necessary in the ordinary course of business, and are
capable of being used for their intended purpose in the ordinary course of
business consistent with past practice.
4.7.6 LOCATION.
All of the Company's assets are located at the address or
addresses set forth on Schedule 4.7.6.
4.7.7 INTELLECTUAL PROPERTY.
Schedule 4.7.7 lists all Intellectual Property Rights (as
defined below) owned by the Company or in which (as noted on such Schedule)
the Company has any rights or licenses.
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To the knowledge of Shareholders and the Company, there has not been any
infringement or alleged infringement by others of any such Intellectual
Property Rights. Except as set forth on Schedule 4.7.7, the Company is not a
party to any Contract, whether as licensor, licensee, franchisor, franchisee,
dealer, distributor or otherwise, with respect to any Intellectual Property
Rights. The Company has the right to use all Intellectual Property Rights as
are necessary to enable the Company to conduct, and to continue to conduct
after the Closing, all phases of its business in the manner presently
conducted by the Company, and that use has not conflicted with, infringed
upon or otherwise violated any rights of any person or entity. The
Intellectual Property Rights listed on Schedule 4.7.7 are valid and in full
force and effect and are not subject to any Taxes, maintenance fees, or
actions falling due within the next three months. Except as set forth on
Schedule 4.7.7, there have been no interference actions or other judicial,
arbitration or other adversary proceedings concerning the Intellectual
Property Rights listed on Schedule 4.7.7. The Company has not infringed any
intellectual property right or other right of any other person or entity. To
the knowledge of Shareholders and the Company, none of the Intellectual
Property Rights has been used, divulged or appropriated for the benefit of
any past or present employees of the Company or any other person or entity,
or to the detriment of the Company. The Company has not disposed of or
permitted to lapse, or otherwise failed to preserve the Company's right to
use, any rights referenced in this Section 4.7.7.
"Intellectual Property Rights" means and includes all
intellectual property, including trade names, trademarks and service marks
and all registrations and applications therefor, together with the goodwill
of the business symbolized or represented by the foregoing, mask works, works
of authorship and all copyrights related thereto and all registrations and
applications therefor, inventions, discoveries, designs, industrial models
and all patent rights relating thereto and all applications therefor and all
reissues, divisions, continuations and extensions thereof, know-how, trade
secrets, processes, technology, discoveries, formulae and procedures.
4.7.8 EXTENT.
The Company owns, or has a valid and subsisting interest as a
lessee or licensee in, and in any case has the right to hold and to use, all
assets (whether real, personal or mixed, and whether tangible or intangible)
which have been used to conduct its business in the ordinary course as such
business is presently being conducted. Since the date of the most recent
fiscal year-end balance sheet included on Schedule 4.3.1, there has not been
any damage to or disposition (except for the sale of inventory in the
ordinary course of business consistent with past practice) or loss of
(whether or not covered by insurance) any asset of the Company. Over the
period covered by the financial statements included on Schedule 4.3.1, no
aspect of the business of the Company was conducted by any affiliate of the
Company or any affiliate of a Shareholder or any former shareholder of the
Company.
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4.8 REAL PROPERTY.
Complete and accurate legal descriptions of all real property
owned or leased by the Company are set forth on Schedule 4.8. There is no
state of facts or event which could reasonably be expected to form the basis
for any condemnation proceedings which could effect such real property or any
future improvements by any public authority, any part of the cost of which
could be assessed against such real property. In the past three years, the
Company has not experienced any interruption in the delivery of adequate
utilities required in the operation of its business. The roof and foundation
of the real property owned or leased by the Company are watertight and free
of leaks, seepages and moisture.
4.9 ADDITIONAL MATTERS.
4.9.1 CONFLICTS OF INTEREST.
Except as set forth on Schedule 4.9.1, no shareholder, director
or employee of the Company, nor any relative of any shareholder, director or
employee of the Company, nor any affiliate of any of the foregoing, (i) owns,
directly or indirectly, any interest in, or is an employee or agent of, any
entity which is a competitor, lessor, lessee, customer or supplier of the
Company, (ii) owns, directly or indirectly, any interest in any tangible or
intangible property, asset or right which the Company uses in its business,
(iii) has any cause of action or claim against, owes any amount to, or is
owed any amount by the Company other than salary and reimbursement of
deductible business expenses in the ordinary course of business, or (iv) is a
party to any Contract with the Company.
4.9.2 FULL DISCLOSURE.
No representation or warranty by Shareholders or the Company in
this Agreement, and no statement contained in any Schedule to this Agreement,
contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not misleading. To the knowledge
of Shareholders and the Company, there is no event or circumstance which
Shareholders or the Company have not disclosed to Chart in writing which
adversely affects or could reasonably be expected to adversely affect the
business, prospects, or condition (financial or otherwise) of the Company or
the ability of the Company or Shareholders to perform this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CHART AND MERGER SUB
Chart and Merger Sub jointly and severally represent and
warrant to Shareholders and the Company as follows:
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5.1 ORGANIZATION AND POWER.
Chart is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Merger Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio. Each of Chart and Merger Sub has full corporate
power to execute, deliver and perform this Agreement and all other agreements
and documents to be executed and delivered by it in connection herewith.
5.2 AGREEMENTS.
5.2.1 ENFORCEABILITY.
All requisite corporate action to approve, execute, deliver and
perform this Agreement and each other agreement and document delivered or to
be delivered by Chart or Merger Sub in connection herewith has been taken by
Chart and Merger Sub, respectively. This Agreement and every other agreement
and document delivered or to be delivered by Chart or Merger Sub in
connection herewith has been, or upon delivery will be, duly executed and
delivered by Chart and Merger Sub, respectively, and constitutes a binding
obligation of Chart and Merger Sub, respectively, enforceable in accordance
with its terms.
5.2.2 CONSENTS.
No approval or consent of, or filing with, any person, entity
or governmental authority is required in connection with the transactions
contemplated hereby or the execution, delivery or performance by Chart or
Merger Sub of this Agreement or any other agreement or document delivered or
to be delivered by or on behalf of Chart or Merger Sub in connection
herewith, except for filings required to be made by Chart or its affiliates
under the Securities Exchange Act of 1934, as amended, and the regulations
thereunder.
5.2.3 NO CONFLICTS.
No action taken by or on behalf of Chart or Merger Sub in
connection herewith, including, but not limited to, the execution, delivery
and performance of this Agreement and each other agreement and document
delivered or to be delivered by it in connection herewith, (i) conflicts with
or violates any law, Chart's Certificate of Incorporation and By-Laws, each
as amended, Merger Sub's Articles of Incorporation or Code of Regulations,
each as amended, or any Contract by which Chart or Merger Sub is bound, or
(ii) constitutes an event which, after notice or lapse of time or both, could
result in any of the foregoing.
5.3 SEC DOCUMENTS; ABSENCE OF CERTAIN CHANGES.
Chart has delivered to Shareholders complete and accurate
copies of Chart's (i) Annual Report to Stockholders for the fiscal year ended
December 31, 1997, (ii) Annual Reports on Form 10-K as filed with the United
States Securities and Exchange Commission (the "SEC") with respect to the
fiscal years ended December 31, 1997 and 1998, (iii) Proxy Statement dated
March 31, 1998, with respect to Chart's 1998 annual meeting of stockholders,
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(iv) Quarterly Reports on Form 10-Q as filed with the SEC with respect to the
quarters ended March 31, June 30 and September 30, 1998, and (v) Current
Reports on Form 8-K dated February 16, 1999, April 27, 1998, March 30, 1998,
and March 27, 1998 (collectively, the "Chart SEC Documents"). The Chart SEC
Documents were true and complete in all material respects as at their
respective dates, and did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances in
which they were made, not misleading. Since the filing of its Quarterly
Report on Form 10-Q with respect to the quarter ended September 30, 1998,
there has not been any material adverse change in Chart's business condition
(financial or otherwise), results of operations or liabilities not reflected
in the Chart SEC Documents.
5.4 CHART COMMON STOCK.
Each share of Chart Common Stock issuable to Shareholders by
virtue of the Merger pursuant to Section 2.2 hereof shall upon issuance
thereof, and against delivery to Chart of the Company Shares in accordance
with the terms hereof, be duly authorized, validly issued, fully paid and
nonassessable.
ARTICLE 6
CLOSING; CLOSING CONDITIONS
6.1 CLOSING.
The consummation of the purchase and sale of the Shares and the
other transactions contemplated hereby (the "Closing") shall take place
simultaneously with the execution and delivery of this Agreement on the date
hereof, or on such other date as Chart and the Company may agree in writing,
and in any event simultaneously with the filing of the Certificate of Merger
pursuant to Section 1.5, at the offices of Calfee, Halter & Griswold LLP at
800 Superior Avenue, Suite 1400, Cleveland, Ohio 44114, or at such other
place as Chart and the Company may agree in writing. The date on which the
Closing occurs is referred to herein as the "Closing Date." The transfers
and deliveries described in this Article 6 shall be mutually interdependent
and shall be regarded as occurring simultaneously, and, notwithstanding any
other provision of this Agreement, no such transfer or delivery shall become
effective or shall be deemed to have occurred until all of the other
transfers and deliveries provided for in this Article 6 shall also have
occurred or have been waived. Such transfers and deliveries shall be deemed
to have occurred and the Closing shall be effective as of the commencement of
business of the Company on the Closing Date.
6.2 CONDITIONS TO CHART'S AND MERGER SUB'S OBLIGATION.
The obligation of Chart and of Merger Sub to perform this
Agreement is subject to satisfaction of the following conditions at or before
the Closing:
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(a) AGREEMENTS PERFORMED. Shareholders and the Company
shall have performed all of the obligations under this Agreement to be
performed by them at or before the Closing;
(b) REPRESENTATIONS AND WARRANTIES ACCURATE. The
representations and warranties of Shareholders and the Company contained
herein shall continue to be accurate in all material respects just as if made
at and as of the Closing;
(c) CERTIFICATE OF SHAREHOLDERS AND COMPANY. Chart and
Merger Sub shall have received a certificate from Shareholders and the
Company certifying as to the fulfillment of the conditions set forth in
Sections 6.2(a) and 6.2(b), signed by Shareholders and the Company by its
chief executive officer;
(d) FILINGS. All applicable governmental filings necessary
to consummate the Merger in accordance with the OGCL and any other applicable
laws, including the filing of the Certificate of Merger with the Secretary of
State of Ohio, shall have been duly executed and made.
(e) GOOD STANDING. Chart and Merger Sub shall have received
a certificate as to the Company's good standing, dated no more than 10 days
prior to the Closing Date, from the secretary of state of Ohio and of each
other state in which the Company is qualified to do business as a foreign
corporation;
(f) NO CHANGE. There shall not have occurred any material
adverse change, or any event, fact or circumstance which might reasonably be
expected to result in a material adverse change, in the financial condition,
results of operations, assets, business or prospects of the Company;
(g) LEGAL ACTION. There shall be no pending or threatened
legal action or inquiry which challenges the validity or legality of or seeks
to or could reasonably be expected to prevent, delay or impose conditions on
the consummation of the transaction contemplated by this Agreement;
(h) MINUTE AND STOCK RECORD BOOKS. Shareholders and the
Company shall have delivered to Chart and Merger Sub the complete originals
of all existing corporate minute books and stock record books of the Company;
(i) SHARE CERTIFICATES. Shareholders shall have delivered
to Chart all certificates evidencing or representing all of the Company
Shares, in each case duly endorsed for transfer to Chart or in blank, or
accompanied by a stock power duly endorsed to Chart or in blank, and
otherwise in proper form for transfer to Chart, free and clear of all Liens;
(j) CONSENTS. Chart and Merger Sub shall have received all
consents, approvals, permits, licenses and registrations of all persons,
entities, and governmental authorities necessary for Chart, Merger Sub,
Shareholders and the Company to execute,
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deliver and perform this Agreement and for the Company to continue operate
its business as heretofore conducted;
(k) STOCK POWERS. Each Shareholder shall have delivered to
Chart a stock power, duly executed by such Shareholder in blank, with respect
to the certificate representing his Estimated Merger Consideration, to be
held by Chart with such certificate for purposes of Section 2.5.4(b) hereof
or returned to such Shareholder pursuant to Section 2.5.4(a) hereof;
(l) RELEASE OF GUARANTY. The Company shall have received an
unconditional release of its obligations under that certain Commercial
Guaranty, dated September 3, 1998, by the Company in favor of Heller
Financial, Inc., and evidence of such release shall have been given to Chart;
(m) {Intentionally omitted.}
(n) OTHER CLOSINGS. The "Closing," as defined in that
certain Asset Purchase Agreement, dated as of the date of this Agreement (the
"Asset Purchase Agreement"), by and among Northcoast Acquisition Corp., an
Ohio corporation ("Northcoast Acquisition"), Northcoast of Texas Cryogenics,
Inc. ("Northcoast/Texas"), Northcoast of Kansas Cryogenics, Inc.
("Northcoast/Kansas"), and Shareholders with respect to substantially all of
the assets of Northcoast/Texas and Northcoast/Kansas, shall have occurred;
and the "Closing," as defined in that certain Stock Purchase Agreement, dated
as of the date of this Agreement (the "Stock Purchase Agreement"), by and
between Northcoast Acquisition and Mark A. Bauman with respect to all of the
outstanding capital stock of Northcoast of America Cryogenic Inc., an Ohio
corporation ("Northcoast/America"), shall have occurred;
(o) AFFILIATE RECEIVABLES. All accounts receivable of and
notes payable to the Company from Shareholders or from any entity directly or
indirectly controlled by a Shareholder (other than Northcoast/Texas,
Northcoast/Kansas, or Northcoast/America) shall have been repaid to the
Company in full, and Shareholders shall have delivered evidence of such
repayment to Chart and Merger Sub;
(p) VEHICLE. Shareholders shall have purchased or caused to
have been purchased from the Company the 1995 Dodge Stealth automobile
referenced in that certain Simple Interest Note and Security Agreement, dated
January 27, 1996, between the Company and Fifth Third Bank of Northwest Ohio,
N.A. (the "Automobile Note"), for cash at a price equal to the unpaid
principal amount and all accrued but unpaid interest (including prepayment
premiums, if any) on the Automobile Note, all measured as of November 30,
1998, and Shareholders shall have delivered evidence of such purchase to
Chart and Merger Sub;
(q) SHAREHOLDER PAYABLE. The Company shall have been
released and discharged of all liability for and under a certain note payable
by the Company to Patrick J. Flynn in the amount of $2,500.00 as reflected on
the balance sheet of the Company as of November 30, 1998, and Shareholders
shall have delivered evidence of such forgiveness to Chart.
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(r) RESIGNATIONS AND RELEASES. Chart shall have received
the written resignations of all Directors and officers of the Company from
their respective directorships and offices as of the Closing, and shall have
received from each Shareholder a duly executed general release of claims
against the Company;
(s) OTHER. Chart and Merger Sub shall have received each
other document required to be delivered to them hereunder.
Any agreement or document to be delivered to Chart or Merger Sub pursuant to
this Section 6.2, the form of which is not attached to this Agreement as an
exhibit, shall be in form and substance satisfactory to Chart and Merger Sub.
6.3 CONDITIONS TO SHAREHOLDERS' AND COMPANY'S OBLIGATIONS.
The obligations of Shareholders and the Company to perform this
Agreement are subject to satisfaction of the following conditions at or
before the Closing:
(a) AGREEMENTS PERFORMED. Chart and Merger Sub shall have
performed all of the obligations under this Agreement to be performed by them
at or before the Closing;
(b) REPRESENTATIONS ACCURATE. The representations and
warranties of Chart and Merger Sub contained herein shall continue to be
accurate in all material respects just as if made at and as of the Closing;
(c) CERTIFICATE OF CHART AND MERGER SUB. Shareholders and
the Company shall have received a certificate from Chart and Merger Sub
certifying as to the fulfillment of the conditions set forth in Sections
6.3(a) and 6.3.(b), signed by the chief executive officer of each of Chart
and Merger Sub;
(d) LEGAL ACTION. There shall be no pending or threatened
legal action or inquiry which challenges the validity or legality of or seeks
to or could reasonably be expected to prevent, delay or impose conditions on
the consummation of the transactions contemplated by this Agreement;
(e) CHART COMMON STOCK. Chart shall have caused to be
issued and registered to each Shareholder on its books the shares of Chart
Common Stock constituting such Shareholder's Estimated Merger Consideration
in accordance with Section 2.4 hereof;
(f) {Intentionally omitted.}
(g) {Intentionally omitted.}
(h) OTHER CLOSINGS. The "Closing," as defined in the Stock
Purchase Agreement, shall have occurred; and the "Closing," as defined in the
Asset Purchase Agreement, shall have occurred;
(i) {Intentionally omitted.}
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(j) OTHER. Shareholders and the Company shall have received
each other document required to be delivered to them hereunder.
ARTICLE 7
ADDITIONAL COVENANTS
7.1 PRE-CLOSING COVENANTS.
7.1.1 CONDUCT OF BUSINESS.
From the date hereof until the Closing, except to the extent
that Chart otherwise consents in writing, Shareholders will cause the Company
to operate its business substantially as presently operated and only in the
ordinary course. Shareholders will, and will cause the Company to, use their
respective best efforts to preserve intact the present business organization
and the relationships with persons having business dealings with the Company.
Without limiting the generality of the foregoing, Shareholders will cause the
Company not to:
(i) purchase or lease (or commit to purchase or lease)
any assets (other than inventory) in excess of
$10,000.00 individually or $50,000.00 in the
aggregate, except as otherwise expressly
contemplated by Section 4.5.9 hereof;
(ii) create, incur or assume any debt; assume, guarantee,
endorse or otherwise become liable or responsible
for the obligation of any other person or entity; or
make any loans, advances or capital contributions
to, or investments in, any other person or entity;
(iii) increase in any manner the rate of compensation of
any of its employees, other than normal increases
using standards consistent with past practice or as
required by any collective bargaining agreement; or
pay or agree to pay any bonus, pension, retirement
allowance, severance or other employee benefit not
required by any existing employee benefit plan;
(iv) permit any of its assets to be subjected to any
Lien;
(v) enter into any Contract, except in the ordinary
course of business consistent with past practice, or
modify or terminate any Contract under circumstances
which might adversely affect the condition
(financial or otherwise) or prospects of the
Company's business;
(vi) sell or dispose of any assets other than inventory
in the ordinary course of business;
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(vii) engage in any unusual or novel method of transacting
business, or change any accounting procedures or
practices, including practices with respect to the
payment of accounts payable or the collection of
accounts receivable, or change its financial
structure; or
(viii) take any action the taking of which, or omit to take
any action the omission of which, would cause any of
the representations and warranties herein to fail to
be true and correct in all respects as of the date
of such action or omission as though made at and as
of the date of such action or omission, except as
otherwise specifically contemplated by this
Agreement.
7.1.2 ACCESS.
From the date hereof until the Closing, Shareholders will cause
the Company to provide Chart, its lenders and their representatives full
access to the Company's personnel, facilities and all books and records and
such other information and persons relating to the Company as Chart may
request. In addition, Shareholders will cause the Company to permit Chart to
perform engineering, environmental and workplace condition surveys and such
other physical inspections as Chart deems necessary. If the transactions
contemplated by this Agreement are not consummated for any reason, Chart
agrees to return to Shareholders all materials obtained from Shareholders or
the Company and not to use for its own benefit any information not available
to Chart from a source other than Shareholders or the Company and not to
disclose any information contained in the materials except information
available to Chart from a source other than Shareholders or the Company or
required to be disclosed by law.
7.1.3 INTERIM FINANCIAL STATEMENTS.
Within 15 days after the end of each calendar month, if any,
prior to the Closing, Shareholders will deliver to Chart unaudited balance
sheets of the Company and the related statements of income for the months
then ended and for that portion of such fiscal year ended with the last day
of such monthly accounting period, in each case certified by Shareholders to
fairly present the financial position and results of operations of the
Company as at or for the periods indicated on a basis consistent with past
practice.
7.1.4 SUPPLEMENTAL DISCLOSURE.
Shareholders will immediately notify Chart of any event or
circumstance which makes it necessary to correct any representation and
warranty contained in Article 3 or Article 4 which has been rendered
inaccurate thereby; or arises hereafter and which, had it existed on or prior
to the date hereof, would have resulted in an inaccuracy in a representation
and warranty contained in Article 3 or Article 4.
28
<PAGE>
7.1.5 SATISFACTION OF CONDITIONS.
Shareholders and the Company will use their respective best
efforts to cause each of the conditions set forth in Section 6.2 to Chart's
and Merger Sub's proceeding with the Closing to be satisfied at or before the
Closing. Chart and Merger Sub shall use their respective best efforts to
cause each of the conditions set forth in Section 6.3 to Shareholders' and
the Company's proceeding with the Closing to be satisfied at or before the
Closing.
7.1.6 TERMINATION.
This Agreement may be terminated (i) by the written agreement
of Chart, Merger Sub and the Company, or (ii) by Chart, Merger Sub or the
Company at any time after March 23, 1999, if the Closing shall not have taken
place on or before such date. If this Agreement is terminated pursuant to
clause (i) of the preceding sentence, all provisions of this Agreement except
Sections 7.3, 7.4 and 8 shall become void without any liability on the part
of any party. If this Agreement is terminated pursuant to clause (ii) of the
first sentence of this Section 7.1.6, all rights and remedies of each party
hereunder and all other provisions hereof related thereto shall survive
termination to the extent required so that any party responsible for any
breach or nonperformance of its obligations hereunder prior to termination
shall remain liable for the damages resulting therefrom.
7.2 NONDISCLOSURE, NONCOMPETITION AND NONINTERFERENCE.
Each Shareholder (i) shall at all times hold in strictest
confidence any and all confidential data and other confidential information
concerning the products, services, businesses, suppliers and customers of the
Company, (ii) for a period of five (5) years following the Closing Date,
shall not, without the prior written consent of Chart, either directly or
indirectly operate or perform any advisory or consulting services for, invest
in (other than publicly traded stock constituting less than 5% of the equity
of a publicly held corporation), or otherwise operate or become associated in
any capacity with, any corporation, partnership, organization, proprietorship
or other business entity or association which sells or performs services then
in competition with the Company at any place within the United States of
America, and (iii) for a period of five (5) years following the Closing Date,
shall not, without the prior written consent of Chart, directly or indirectly
induce or attempt to induce any employee, agent or other representative or
associate of the Company to terminate his or its relationship with the
Company, or in any way knowingly interfere with such a relationship or a
relationship between the Company and any of its suppliers or customers. Each
Shareholder acknowledges that compliance with his covenants in this Section
7.2 is necessary to protect Chart's and the Company's legitimate business
interests and that any breach of any such covenant will result in irreparable
and continuing damage to Chart and the Company for which money damages alone
will not provide an adequate remedy, and that in the event of any such breach
or threatened breach of any such covenant, Chart and the Company and their
respective successors and assigns shall be entitled to injunctive relief,
without having to post any bond, and to such other and further relief at law
or in equity as is proper under the circumstances.
29
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7.3 PUBLICITY.
Neither Chart, Merger Sub, Shareholders nor the Company will
make any public announcement relating to this Agreement or the transactions
contemplated hereby without the written consent of the other parties, unless
and except to the extent otherwise required by law. If public disclosure or
notice is required by law, the disclosing party will use his or its best
efforts to give the other parties prior written notice of the disclosure to
be made.
7.4 EXPENSES; TRANSFER TAXES.
Except to the extent otherwise specifically provided herein,
Chart and Merger Sub shall pay all of the expenses incident to the
transactions contemplated by this Agreement which are incurred by Chart,
Merger Sub or their respective representatives, and Shareholders shall pay
all of the expenses incident to the transactions contemplated by this
Agreement which are incurred by the Company or by Shareholders or by their
respective representatives. Shareholders shall pay all sales or other
transfer Taxes, if any, which may be payable in connection with the
transactions contemplated by this Agreement.
7.5 {Intentionally omitted.}
7.6 RECEIVABLES.
Chart shall cause the Company to use all reasonable efforts to
collect the accounts receivable reflected on the Final Closing Balance Sheet
but neither Chart nor the Company shall be required to take or threaten legal
action to collect any such accounts receivable. At the option of Chart,
Shareholders agree to purchase from the Company, for an amount equal to the
unpaid balance thereof, less any allowance for doubtful accounts reflected on
the Final Closing Balance Sheet, all or any part of the accounts receivable
included thereon which shall not have been paid within ninety (90) days after
the Closing Date (other than accounts receivable from Northcoast/Texas,
Northcoast/Kansas or Northcoast/America), it being understood that Chart
shall exercise such option at any time after such date up to the first
anniversary of the Closing Date without waiving any rights hereunder.
Shareholders shall have the right to verify the existence of the unpaid
balance of any accounts receivable.
7.7 EMPLOYMENT.
Shareholders shall pay the cost of any compensation, severance
or other benefits which may be payable to any employees of the Company or to
such other persons as shall claim compensation, severance or other benefits
in connection with the consummation of the transactions contemplated by this
Agreement. Subject to Sections 6.2(m) and 6.3(i), nothing in this Agreement
shall be deemed to require the Company to retain after the Closing any of its
employees for any period of time or at any particular compensation rate or in
any particular position.
30
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7.8 {Intentionally omitted.}
7.9 NO ASSIGNMENT.
Without the consent of Shareholders, Chart may assign all or
any part of this Agreement and all or any part of its rights and obligations
hereunder to any affiliate of Chart, to any of Chart's lenders, and to any
person or entity which purchases from Chart substantially all of Chart's
business, in which event Shareholders shall execute and deliver any documents
reasonably requested by the assignee in connection with such assignment.
Except as provided in the preceding sentence, no assignment by any party of
this Agreement or any right or obligation hereunder may be made without the
prior written consent of all other parties, and any assignment attempted
without such consent will be void.
7.10 CONSENT TO JURISDICTION.
Any action or proceeding brought by a party against any other
party in connection with this Agreement may be commenced in any federal or
state court located in Cuyahoga County, Ohio, or Lucas County, Ohio, and all
objections to personal jurisdiction and venue in any action or proceeding so
commenced are hereby waived. So long as service and process is by notice as
provided in Section 9.1 of this Agreement or as required by any such court,
all objections to improper service of process are hereby waived.
7.11 FURTHER ASSURANCES AND ASSISTANCE.
The parties agree that each will execute and deliver any and
all documents in addition to those expressly provided for herein that may be
necessary or appropriate to effect or give evidence to the provisions of this
Agreement and each of the other agreements and instruments delivered by them
in connection herewith and the consummation of the transactions contemplated
hereby. Each Shareholder further agrees that at any time and from time to
time after the Closing, he will execute and deliver to Chart such further
conveyances, assignments or other written assurances as Chart may reasonably
request to perfect and protect Chart's title to the Company Shares.
7.12 {Intentionally omitted.}
7.13 CERTAIN TAX MATTERS.
(a) After the Closing, Chart, the Company and Shareholders
will coordinate the preparation of all necessary Tax Returns relating to the
Company with respect to periods ending on or before the Closing Date. Each
party agrees to timely furnish to the other parties any records and other
information reasonably requested by it in connection therewith.
Notwithstanding any other provision of this Agreement or any disclosure to
Chart hereunder or otherwise, Shareholders shall be responsible for the
payment of, and shall pay, any and all federal, state and local income taxes
(including interest and penalties, if any) payable by the Company with
respect to all periods ending on or before the Closing Date (collectively,
"Pre-Closing Taxes"), and will promptly reimburse Chart or the Company upon
demand for any
31
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payments of Pre-Closing Taxes which either Chart or the Company or any of
their affiliates may make after the Closing.
(b) It is the intent of the parties that the Merger qualify
as a tax-free reorganization under Section 368 of the Code. Chart and Merger
Sub will use commercially reasonable efforts to consummate the Merger in such
fashion, but neither Chart nor Merger Sub makes any representation or
warranty as to the treatment of the Estimated Merger Consideration or the
Definitive Merger Consideration for any Tax purposes. Chart, Merger Sub, the
Company and Shareholders agree to reasonably cooperate with each other,
provided that there shall be no requirement to incur any loss, cost or
expense as a result of such cooperation, in order to comply with the
requirements of Code Section 368(a)(2)(E) and the regulations and rulings
thereunder, including the requirement of continuity of interest and the
requirement of continuity of business enterprise. Notwithstanding any other
provision in this Agreement, Shareholders will remain solely liable for any
Tax consequences to them as a result of the Merger.
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<PAGE>
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY SHAREHOLDERS.
Shareholders shall jointly and severally indemnify Chart and
the Company against and hold Chart and the Company harmless from (i) any and
all loss, damage, liability or deficiency (collectively, "Losses") resulting
from or arising out of any inaccuracy in or breach of any representation,
warranty, covenant or obligation made or incurred by Shareholders herein or
in any other agreement, instrument or document delivered by or on behalf of
Shareholders in connection herewith; and (ii) any and all costs and expenses
(including reasonable legal and accounting fees) (collectively, "Expenses")
related to any of the foregoing. In addition, and notwithstanding any
disclosure to Buyer hereunder or otherwise, Seller shall indemnify Buyer and
the Company and their respective Affiliates against and hold them harmless
from any and all Losses resulting from or arising out of: (i) the death of
the Company's employee Hillard Mitchell Jr. in or about September 1998, and
any and all Expenses related thereto, including in any present or future
litigation relating thereto; and (ii) any matters alleged by plaintiffs in
the pending litigation captioned ANDREW WILBORN AND DEMETRIUS WILBORN VS.
NORTHCOAST OF TEXAS CRYOGENIC, INC. [sic], Case No. 98-42541 in the 151st
Judicial District, Harris County, Texas, or in the pending litigation
captioned ANDREW WILBORN AND DEMETRIUS WILBORN V. NORTHCOAST CRYOGENIC, INC.
[sic], Case No. 2:98-CV-296 PG in the United States District Court for the
Southern District of Mississippi, Hattiesburg Division, and any and all
Expenses related thereto, including in any other present or future litigation
relating to such matters; and (iii) any matters alleged in or arising out of
the pending litigation captioned MILWAUKEE PRECISION CASTING, INC. VS.
NORTHCOAST OF AMERICA CRYOGENIC, INC., Case No. 98CV009914 in the Circuit
Court of Milwaukee County, Wisconsin, and any and all Expenses related
thereto, including in any other present or future litigation relating to such
matters.
8.2 INDEMNIFICATION BY CHART AND MERGER SUB.
Chart and Merger Sub shall jointly and severally indemnify
Shareholders against and hold Shareholders harmless from (i) any and all
Losses resulting from or arising out of any inaccuracy in or breach of any
representation, warranty, covenant or obligation made or incurred by Chart or
Merger Sub herein or in any other agreement, instrument or document delivered
by or on behalf of Chart or Merger Sub in connection herewith; and (ii) any
and all Expenses related to any of the foregoing.
8.3 NOTIFICATION OF AND PARTICIPATION IN CLAIMS.
No claim for indemnification will arise until notice thereof is
given to the party from whom indemnity is sought. In the event that any
legal proceedings shall be instituted or any claim or demand be asserted by
any third party in respect of which Shareholders on the one hand, or Chart or
Merger Sub on the other hand, may have an obligation to indemnify the other,
the party asserting such right to indemnity shall give or cause to be given
to the party
33
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from whom indemnity may be sought written notice thereof, and such party
shall have the right, at its option and expense, to be present at the defense
of such proceeding, claim or demand, but not to control the defense,
negotiation or settlement thereof, which control shall at all times rest with
the party asserting such right to indemnity, unless the party from whom
indemnity may be sought irrevocably acknowledges full and complete
responsibility for indemnification of the party asserting such right to
indemnity, in which case such party may assume such control through counsel
of its choice. The parties agree to cooperate fully with each other in
connection with the defense, negotiation or settlement of any such third
party legal proceeding, claim or demand.
8.4 SURVIVAL; LIMITATIONS ON INDEMNIFICATION.
The representations, warranties, covenants and agreements of
the parties contained herein or in any other agreements or documents executed
in connection herewith shall survive the Closing. Notwithstanding the
foregoing, the indemnification of Chart and the Company provided under
Section 8.1 shall be limited in certain respects as follows: any claim for
indemnification relating to any inaccuracy in or breach of any representation
or warranty of Shareholders must be made within eighteen (18) months after
the Closing Date, except that (i) there shall be no limits on the time for
making a claim for indemnification relating to the representations and
warranties contained in Article 3 ("Shareholders' Representations and
Warranties Concerning the Transaction"), Sections 4.1.1 ("Organization and
Power"), or 4.7.1 ("Title"), (ii) any claim for indemnification relating to
the representations and warranties contained in Section 4.3.4 ("Taxes") may
be made until the expiration of the applicable statute of limitations for
either the assessment or collection of Taxes for the periods referred to
therein, and (iii) any claim for indemnification relating to the
representations and warranties contained in Sections 4.6 ("Employee
Benefits") or 4.7.4 ("Environmental Matters") may be made until the second
(2nd) anniversary of the Closing Date. There shall be no limits on the time
for making a claim for indemnification relating to the undertakings of
Shareholders set forth in Section 7.13 hereof or in the second sentence of
Section 8.1 hereof.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 NOTICES.
All notices and other communications required by this Agreement
shall be in writing and shall be deemed given if delivered by hand or mailed
by registered or certified mail to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
34
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(a) If to Chart or
Merger Sub, to: Chart Industries, Inc.
5885 Landerbrook Drive, Suite 150
Mayfield Heights, Ohio 44124
Attention: James R. Sadowski
With a copy to: Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Thomas F. McKee, Esq.
(b) If to Mark A. Bauman, to: Mark A. Bauman
8106 Beck Road
Ottawa Lake, Michigan 49267
If to Patrick J. Flynn, to: Patrick J. Flynn
9478 Douglas Road
Temperance, Michigan 48182
If to the Company prior to the Closing, to the Company in
care of both Mark A. Bauman and Patrick J. Flynn at their
respective addresses as provided herein.
In each case,
with a copy to: Wasserman, Bryan, Landry & Honold
300 Inns of Court Building
405 North Huron Street
Toledo, Ohio 43604
Attention: David L. Honold, Esq.
9.2 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
9.3 INCLUSION.
In every place where it is used in this Agreement, the word
"including" is intended and shall be construed to mean "including, without
limitation".
35
<PAGE>
9.4 {Intentionally omitted.}
9.5 HEADINGS.
The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
9.6 EXECUTION IN COUNTERPARTS; SIGNATURE PAGES.
This Agreement may be executed and delivered in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. This Agreement may be
executed and delivered with separate signature pages with the same effect as
though all parties had executed and delivered the same signature page.
9.7 SEVERABILITY.
In the event any part of Section 7.2 of this Agreement shall be
found by a court of competent jurisdiction to be invalid or unenforceable for
any reason, each Shareholder hereby grants to such court full authority and
discretion, and hereby authorizes and requests such court to exercise all
such authority and discretion as it may possess hereunder or under applicable
law, to reform such provision to the end that such Shareholder shall be
subject to nondisclosure, noncompetition and noninterference covenants that
are reasonable under the circumstances and enforceable by Chart and the
Company. In the event any other provision of this Agreement shall be held
unenforceable or invalid to any extent for any reason, such provision shall
remain in force and effect to the maximum extent permitted, and the
enforceability or validity of the remaining provisions of this Agreement
shall not be affected thereby.
9.8 AMENDMENTS, WAIVERS.
No amendment to or waiver of any of the provisions of this
Agreement, including this Section 9.8, shall be valid or enforceable unless
such amendment or waiver is set forth in writing and signed by the party
against whom enforcement of such amendment or waiver is sought or such
party's authorized representative. Unless otherwise expressly stated
therein, each such amendment or waiver shall be effective only with respect
to the specific instance in which it is given, and no such amendment or
waiver shall constitute a waiver of any other provision hereof (whether or
not similar), or a continuing waiver.
9.9 NO THIRD-PARTY RIGHTS.
Nothing expressed or implied in this Agreement is intended or
shall be construed to confer on any person, other than the parties hereto and
their respective successors and permitted assigns, any rights under this
Agreement.
36
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9.10 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents to be
delivered hereunder constitute the entire agreement among the parties
pertaining to the subject matter hereof and supersede all prior and
contemporaneous negotiations, agreements and understandings of the parties.
There are no warranties, representations or other agreements among the
parties in connection with the subject matter hereof except as specifically
set forth herein or in the agreements or instruments delivered in connection
herewith, and no supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party sought to
be bound thereby.
9.11 SCHEDULES AND EXHIBITS.
The schedules and exhibits referenced in this Agreement
constitute an integral part of this Agreement as if fully rewritten herein.
All references in this document to "this Agreement" and the terms "herein,"
"hereof," "hereunder" and the like shall be deemed to include all of such
schedules and exhibits.
9.12 TIME PERIODS.
Any action required hereunder to be taken within a certain
number of days shall, except as may otherwise be expressly provided herein,
be taken within that number of calendar days; PROVIDED, HOWEVER, that if the
last day for taking such action falls on a Saturday, a Sunday, or a day which
shall be in Cleveland, Ohio, or New York, New York, a legal holiday or a day
on which banking institutions therein are authorized by law to close, then
the period during which such action may be taken shall automatically be
extended to the next business day.
9.13 GOVERNING LAW.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Ohio, without giving effect to the
choice-of-laws or conflict-of-laws provisions thereof.
{The remainder of this page is intentionally left blank.}
37
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IN WITNESS WHEREOF, Chart, Merger Sub, the Company and
Shareholders have executed and delivered this Agreement and Plan of Merger as
of the date first written above.
/s/ Mark A. Bauman
------------------------------
MARK A. BAUMAN
/s/ Patrick J. Flynn
------------------------------
PATRICK J. FLYNN
NCI ACQUISITION CORP.
By: /s/ James R. Sadowski
---------------------------
James R. Sadowski,
President and Chief Operating Officer
CHART INDUSTRIES, INC.
By: /s/ James R. Sadowski
---------------------------
James R. Sadowski,
President and Chief Operating Officer
38
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EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
by and among
NORTHCOAST OF TEXAS CRYOGENICS, INC.,
(a "Seller")
NORTHCOAST OF KANSAS CRYOGENICS, INC.,
(a "Seller")
MARK A. BAUMAN and PATRICK J. FLYNN
("Shareholders")
and
NORTHCOAST ACQUISITION CORP.
("Buyer")
March 15, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 SALE AND PURCHASE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Purchased Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Retained Assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE 2 ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . .4
2.1 Assumed Liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.2 Retained Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.3 Satisfaction of Liabilities by Seller.. . . . . . . . . . . . . . . . . . .5
ARTICLE 3 PURCHASE PRICE; PAYMENT; ADJUSTMENT . . . . . . . . . . . . . . . . . . .6
3.1 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.2 Estimated Purchase Price Payment at Closing.. . . . . . . . . . . . . . . .7
3.3 Adjustments.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.3.1 Closing Balance Sheet Preparation. . . . . . . . . . . . . . . . . .8
3.3.2 Closing Balance Sheet Review.. . . . . . . . . . . . . . . . . . . .8
3.3.3 Closing Balance Sheet Dispute. . . . . . . . . . . . . . . . . . . .8
3.4 Post-Closing Refund.. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.5 Allocation of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS . . . . . . . 10
4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1.1 Organization and Power.. . . . . . . . . . . . . . . . . . . . . . 10
4.1.2 Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1.3 Other Ventures.. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1.4 Ownership of Seller. . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2.1 Seller Enforceability. . . . . . . . . . . . . . . . . . . . . . . 10
4.2.2 Shareholder Enforceability.. . . . . . . . . . . . . . . . . . . . 11
4.2.3 Consents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2.4 No Conflicts.. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Financial.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.1 Financial Records. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.2 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3.3 No Changes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Legal.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4.1 Compliance with Laws.. . . . . . . . . . . . . . . . . . . . . . . 13
ii
<PAGE>
4.4.2 Product and Service Warranties.. . . . . . . . . . . . . . . . . . 13
4.4.3 Product Liability. . . . . . . . . . . . . . . . . . . . . . . . . 14
4.4.4 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5 Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5.1 Employment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5.2 Employment Termination.. . . . . . . . . . . . . . . . . . . . . . 15
4.5.3 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.5.4 Compliance with Contracts. . . . . . . . . . . . . . . . . . . . . 16
4.5.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5.6 Customers and Suppliers. . . . . . . . . . . . . . . . . . . . . . 16
4.5.7 Purchases and Sales. . . . . . . . . . . . . . . . . . . . . . . . 17
4.5.8 Prepayments and Deposits.. . . . . . . . . . . . . . . . . . . . . 17
4.5.9 Capital Projects.. . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 Employee Benefits.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7.1 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7.2 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7.3 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7.4 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 18
4.7.5 Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.7.6 Location.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.7.7 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 19
4.7.8 Extent.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.8 Real Property.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.9 Additional Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.9.1 Conflicts of Interest. . . . . . . . . . . . . . . . . . . . . . . 21
4.9.2 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . 21
5.1 Organization and Power. . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.1 Enforceability.. . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.2 Consents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2.3 No Conflicts.. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 6 CLOSING; CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Closing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Conditions to Buyer's Obligation. . . . . . . . . . . . . . . . . . . . . 22
6.3 Conditions to Seller's and Shareholders' Obligations. . . . . . . . . . . 25
ARTICLE 7 ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1 Pre-Closing Covenants.. . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1.1 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 26
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<PAGE>
7.1.2 Access.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1.3 Interim Financial Statements.. . . . . . . . . . . . . . . . . . . 27
7.1.4 Supplemental Disclosure. . . . . . . . . . . . . . . . . . . . . . 27
7.1.5 Satisfaction of Conditions.. . . . . . . . . . . . . . . . . . . . 28
7.1.6 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 Nondisclosure, Noncompetition and Noninterference.. . . . . . . . . . . . 28
7.3 Publicity.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Expenses; Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 Assignment of Contracts, Rights, Etc. . . . . . . . . . . . . . . . . . . 29
7.6 Receivables.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.7 Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.8 Product Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.9 No Assignment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.10 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . 31
7.11 Further Assurances and Assistance. . . . . . . . . . . . . . . . . . . . 31
ARTICLE 8 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 Indemnification by Seller and Shareholders. . . . . . . . . . . . . . . . 31
8.2 Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Notification of and Participation in Claims.. . . . . . . . . . . . . . . 32
8.4 Survival; Limitations on Indemnification. . . . . . . . . . . . . . . . . 32
ARTICLE 9 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 33
9.1 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.2 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3 Inclusion.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4 "Seller". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.5 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.6 Execution in Counterparts; Signature Pages. . . . . . . . . . . . . . . . 35
9.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.8 Amendments, Waivers.. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.9 No Third-Party Rights.. . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.10 Entire Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.11 Schedules and Exhibits.. . . . . . . . . . . . . . . . . . . . . . . . . 36
9.12 Time Periods.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.13 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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<PAGE>
LIST OF SCHEDULES:
Schedule 2.1(c) (Assumed Liabilities: Scheduled Contracts)
Schedule 3.5-1 (Allocation of Purchase Price: Northcoast/Texas)
Schedule 3.5-2 (Allocation of Purchase Price: Northcoast/Kansas)
Schedule 4.1.2-1 (Qualification: Northcoast/Texas)
Schedule 4.1.2-2 (Qualification: Northcoast/Kansas)
Schedule 4.2.3 (Consents)
Schedule 4.2.4 (Conflicts)
Schedule 4.3.1-1 (Financial Statements: Northcoast/Texas)
Schedule 4.3.1-2 (Financial Statements: Northcoast/Kansas)
Schedule 4.3.1(c) (Exceptions from GAAP)
Schedule 4.3.2 (Liabilities)
Schedule 4.4.1 (Compliance with Laws)
Schedule 4.4.2 (Product and Service Warranties)
Schedule 4.4.3 (Product Liability)
Schedule 4.4.4 (Litigation)
Schedule 4.5.1 (Employment)
Schedule 4.5.2 (Employment Termination)
Schedule 4.5.3 (Contracts)
Schedule 4.5.5 (Insurance)
Schedule 4.5.8 (Prepayments and Deposits)
Schedule 4.5.9 (Capital Projects)
Schedule 4.6 (Employee Benefits)
Schedule 4.7.1 (Title)
Schedule 4.7.2 (Receivables)
Schedule 4.7.6-1 (Location of Purchased Assets: Northcoast/Texas)
Schedule 4.7.6-2 (Location of Purchased Assets: Northcoast/Kansas)
Schedule 4.7.7 (Intellectual Property)
Schedule 4.8-1 (Real Property: Northcoast/Texas)
Schedule 4.8-2 (Real Property: Northcoast/Kansas)
Schedule 4.9.1 (Conflicts of Interest)
LIST OF EXHIBITS:
Exhibit 6.2.1 (Form of Bill of Sale and Assignment)
Exhibit 6.3(f) (Form of Assumption of Liabilities Agreement)
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<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Where
Term Defined
- --------------------------------------------------------- ------------------
<S> <C>
Acquisition Balance Sheet (Northcoast/Kansas) . . . . . . Section 4.3.1(b)
Acquisition Balance Sheet (Northcoast/Texas). . . . . . . Section 4.3.1(a)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Assumed Balance Sheet Liabilities (Northcoast/Kansas) . . Section 2.1(a)(ii)
Assumed Balance Sheet Liabilities (Northcoast/Texas). . . Section 2.1(a)(i)
Assumed Liabilities . . . . . . . . . . . . . . . . . . . Section 2.1
Business. . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(g)
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Chart . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1
Closing Date. . . . . . . . . . . . . . . . . . . . . . . Section 6.1
Closing Working Capital (Northcoast/Kansas) . . . . . . . Section 3.1(b)
Closing Working Capital (Northcoast/Texas). . . . . . . . Section 3.1(a)
Contracts . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(f)
Current Purchased Assets (Northcoast/Kansas). . . . . . . Section 3.1(b)
Current Purchased Assets (Northcoast/Texas) . . . . . . . Section 3.1(a)
Estimated Purchase Price. . . . . . . . . . . . . . . . . Section 3.2
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . Section 8.1
F&B . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(l)
Final Closing Balance Sheet . . . . . . . . . . . . . . . Section 3.3.2 OR
Section 3.3.3
Final Post-Closing Purchase Price Adjustment. . . . . . . Section 3.3.2 OR
Section 3.3.3
Hazardous Substances. . . . . . . . . . . . . . . . . . . Section 4.7.4
Hazardous Waste . . . . . . . . . . . . . . . . . . . . . Section 4.7.4
Independent Accountants . . . . . . . . . . . . . . . . . Section 3.3.3
Intellectual Property Rights. . . . . . . . . . . . . . . Section 1.1(h)
Liability . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Losses. . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.1
NCI . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
NCI Merger Agreement. . . . . . . . . . . . . . . . . . . Section 6.2(n)
Net Worth Differential. . . . . . . . . . . . . . . . . . Section 3.1(a) OR
Section 3.1(b)
Northcoast/America. . . . . . . . . . . . . . . . . . . . Section 6.2(n)
Northcoast/Kansas . . . . . . . . . . . . . . . . . . . . Page 1
Northcoast/Texas. . . . . . . . . . . . . . . . . . . . . Page 1
NREL . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(l)
Post-Closing Purchase Price Adjustment (Northcoast/Kansas) Section 3.1(b)
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<PAGE>
Where
Term Defined
- --------------------------------------------------------- ------------------
Post-Closing Purchase Price Adjustment (Northcoast/Texas) Section 3.1(a)
Preliminary Closing Balance Sheet . . . . . . . . . . . . Section 3.3.1
Preliminary Post-Closing Purchase Price Adjustment. . . . Section 3.3.1
Product Liability Claim . . . . . . . . . . . . . . . . . Section 4.4.3
Purchase Price (Northcoast/Kansas). . . . . . . . . . . . Section 3.1(b)
Purchase Price (Northcoast/Texas) . . . . . . . . . . . . Section 3.1(a)
Purchased Assets. . . . . . . . . . . . . . . . . . . . . Section 1.1
Retained Assets . . . . . . . . . . . . . . . . . . . . . Section 1.2
Retained Liabilities. . . . . . . . . . . . . . . . . . . Section 2.2
Seller. . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Shareholder AND Shareholders. . . . . . . . . . . . . . . Page 1
Stock Purchase Agreement. . . . . . . . . . . . . . . . . Section 6.2(n)
Target Working Capital (Northcoast/Kansas). . . . . . . . Section 3.1(b)
Target Working Capital (Northcoast/Texas) . . . . . . . . Section 3.1(a)
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . Section 4.3.4
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3.4
</TABLE>
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered
into as of the 15th day of March, 1999, by and among NORTHCOAST OF TEXAS
CRYOGENICS, INC., an Ohio corporation ("Northcoast/Texas"), NORTHCOAST OF
KANSAS CRYOGENICS, INC., an Ohio corporation ("Northcoast/Kansas"), MARK A.
BAUMAN and PATRICK J. FLYNN, the shareholders of Northcoast/Texas and
Northcoast/Kansas (each, a "Shareholder," and collectively, the
"Shareholders"), and NORTHCOAST ACQUISITION CORP., an Ohio corporation
("Buyer"). Northcoast/Texas and Northcoast/Kansas are each referred to
hereinafter, individually and not collectively, as a "Seller."
WITNESSETH:
WHEREAS, Seller desires to sell, and Buyer desires to purchase,
substantially all of Seller's assets upon the terms and conditions
hereinafter set forth; and
WHEREAS, Shareholders own all of the issued and outstanding
shares of capital stock of Seller and will benefit materially from the sale
of Seller's assets to Buyer hereunder;
NOW, THEREFORE, Seller, Shareholders and Buyer hereby agree as
follows:
ARTICLE 1
SALE AND PURCHASE OF ASSETS
1.1 PURCHASED ASSETS.
At the Closing (as defined in Section 6.1), Seller shall sell,
transfer, assign and deliver to Buyer, by bill of sale or other appropriate
instruments of assignment and transfer, free and clear of all liens, charges,
covenants, conditions, adverse claims, demands, encumbrances, limitations,
security interests or other title defects or restrictions of any kind
(collectively, "Liens"), and Buyer shall purchase, for the consideration
herein provided, all rights, title and interest in and to all of the assets
of Seller (whether or not reflected on Seller's books and records), except
for the Retained Assets identified in Section 1.2. The assets being
purchased hereunder are hereinafter referred to collectively, as to each
Seller, as the "Purchased Assets." With respect to each Seller, the
Purchased Assets include, but are not limited to, the following:
(a) CASH, CASH EQUIVALENTS; ETC. All cash, certificates of
deposit and other bank deposits (including payroll accounts), funds in
transit, and marketable securities;
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<PAGE>
(b) RECEIVABLES. Accounts and notes receivable (except as
provided otherwise in Section 1.2);
(c) INVENTORIES. Inventories of raw materials,
work-in-process and finished products, supplies, spare parts, shipping
containers and packaging materials;
(d) PREPAID EXPENSES AND DEPOSITS. Prepaid expenses and
deposits other than bank deposits;
(e) TANGIBLE PERSONAL PROPERTY. All tangible personal
property, including all machinery, equipment, furniture, fixtures, leasehold
improvements, tools, motor vehicles and computers;
(f) CONTRACT RIGHTS. Rights under all agreements,
contracts, leases, licenses, purchase or sales orders, commitments, promises
and similar arrangements evidencing or creating any obligation, whether
written or oral (collectively, "Contracts");
(g) AUTHORIZATIONS. All licenses, approvals, certificates
and permits issued by any governmental authority relating to or utilized in
connection with the business of manufacturing, selling and servicing
cryogenic equipment and systems and related products and services (the
"Business"), or relating to or utilized in connection with the Purchased
Assets;
(h) INTELLECTUAL PROPERTY RIGHTS. All intellectual
property, including trade names, trademarks and service marks and all
registrations and applications therefor, together with the goodwill of the
business symbolized or represented by the foregoing, mask works, works of
authorship and all copyrights related thereto and all registrations and
applications therefor, inventions, discoveries, designs, industrial models
and all patent rights relating thereto and all applications therefor and all
reissues, divisions, continuations and extensions thereof, know-how, trade
secrets, processes, technology, discoveries, formulae and procedures
(collectively hereinafter referred to, as to each Seller, as "Intellectual
Property Rights"), together with the right to sue for past infringement or
improper, unlawful or unfair use or disclosure of any of the foregoing;
(i) ARTISTIC WORKS. Literary works, pictorial, graphic and
sculptural works, audiovisual works, sound recordings, all copies of any of
the foregoing and all copyrights therein;
(j) DOCUMENTATION AND RECORDS. Technical documentation,
including patterns, plans, designs, research data, drawings and models, and
all records relating to the Business, including but not limited to property
records, production records, engineering records, purchasing and sales
records, credit records, personnel and payroll records, accounting records,
computer programs, customer and vendor lists and such other records as Buyer
may reasonably require in its conduct of the Business after the Closing;
2
<PAGE>
(k) LISTINGS AND MATERIALS. Interests in and to telephone
and telex numbers, post office boxes and all listings pertaining to Seller in
all telephone books and directories, stationery, forms, labels, shipping
material, catalogs, brochures, and advertising and promotional materials;
(l) WARRANTY RIGHTS. Rights in, to and under third party
manufacturers' warranties;
(m) SELLER'S NAME. With respect to Northcoast/Texas, the
name "Northcoast of Texas Cryogenics, Inc.," and with respect to
Northcoast/Kansas, the name "Northcoast of Kansas Cryogenics, Inc.," and with
respect to each Seller, all variations on such name, and all rights to the
use of such name and any variation thereof as a corporate name, a trade name,
a fictitious name, a trademark, or a service mark in any jurisdiction;
(n) GOODWILL. All goodwill and going concern value
associated with the Business; and
(o) OTHER. All other assets reflected on the Acquisition
Balance Sheet (as defined in Section 4.3.1), other than (i) the Retained
Assets and (ii) any assets disposed of by Seller in the ordinary course of
business since the date of the Acquisition Balance Sheet, whether or not
referenced in any paragraph above.
1.2 RETAINED ASSETS.
Seller shall not sell, transfer or assign, and Buyer shall not
purchase, the following assets of Seller (collectively, as to each Seller,
the "Retained Assets"):
(a) TREASURY SHARES. Shares of capital stock of Seller, if
any, held in Seller's treasury;
(b) TAX REFUNDS. Rights to tax refunds, including with
respect to income, personal property, sales, unemployment and workers
compensation taxes;
(c) CERTAIN RECORDS. The corporate minute book, stock
records and tax returns of Seller and other similar corporate books and
records the originals of which Seller is required to maintain under
applicable laws (provided copies of the same are included among the Purchased
Assets);and
(d) CERTAIN RECEIVABLES. Accounts and notes receivable from
NREL or F&B to Seller.
3
<PAGE>
ARTICLE 2
ASSUMPTION OF LIABILITIES
2.1 ASSUMED LIABILITIES.
Buyer agrees to assume the following obligations of Seller
existing as of the Closing (collectively, as to each Seller, the "Assumed
Liabilities"):
(a) CERTAIN BALANCE SHEET LIABILITIES.
(i) With respect to Northcoast/Texas, its Accounts
Payable-Trade, its Accrued Payroll Taxes, its Accrued Shop Labor, its Accrued
Holiday, Vacation and Sick Pay, its Accrued Utilities, and its Accrued Real
Estate Taxes, each as incurred in the ordinary course of business consistent
with its past practices, but only if and to the extent the same would be
reflected or reserved against on its Final Closing Balance Sheet (as defined
in Section 3.3) if its Final Closing Balance Sheet were prepared without
allowance for any of the exceptions from generally accepted accounting
principles identified on Schedule 4.3.1(c) hereto (collectively, its "Assumed
Balance Sheet Liabilities"); and
(ii) With respect to Northcoast/Kansas, its Accounts
Payable-Trade, its Accrued Shop Labor, its Accrued Payroll Taxes, its Accrued
Holiday, Vacation and Sick Pay, and its Accrued Utilities, each as incurred
in the ordinary course of business consistent with its past practices, but
only if and to the extent the same would be reflected or reserved against on
its Final Closing Balance Sheet (as defined in Section 3.3) if its Final
Closing Balance Sheet were prepared without allowance for any of the
exceptions from generally accepted accounting principles identified on
Schedule 4.3.1(c) (collectively, its "Assumed Balance Sheet Liabilities");
(b) PURCHASE AND SALES ORDERS. Seller's performance
obligations after the Closing under all outstanding purchase and sales orders
entered into by Seller in the ordinary course of business consistent with
past practice, but only to the extent such obligations accrue and relate
solely to the period after the Closing, and only to the extent the
corresponding benefits from such purchase and sales orders are validly
assigned to and received by Buyer; and
(c) SCHEDULED CONTRACTS. Seller's performance obligations
after the Closing under each Contract listed on Schedule 2.1(c), but only to
the extent such obligations accrue and relate solely to the period after the
Closing, and only to the extent the corresponding benefits from such Contract
are validly assigned to and received by Buyer.
Nothing in this Section 2.1 is intended or may be construed to impose upon
Buyer any Liability retained by Seller under Section 2.2.
4
<PAGE>
2.2 RETAINED LIABILITIES.
Notwithstanding anything in this Agreement to the contrary,
Buyer does not assume and will not become responsible for any responsibility,
obligation, duty, commitment, claim or liability, whether known or unknown,
accrued, absolute, contingent or otherwise (each, a "Liability"), of Seller,
except the Assumed Liabilities specifically described in Section 2.1. The
Liabilities being retained by Seller are hereinafter collectively referred
to, as to each Seller, as the "Retained Liabilities." Without limiting the
generality of the foregoing, the following are included among the Retained
Liabilities:
(a) PRODUCT LIABILITY. All Liabilities with respect to
products designed, manufactured, acquired for resale, sold or leased by
Seller, without regard to (i) the basis or theory of the claim, (ii) the
nature of the damages sought, or (iii) whether the claim is asserted before
or after the Closing;
(b) PRODUCT WARRANTY. All Liabilities to customers or other
third parties with respect to defects in goods delivered to customers or in
transit to customers prior to the Closing or placed in finished-goods
inventory prior to the Closing and shipped after the Closing;
(c) SERVICES. All Liabilities to customers or other third
parties with respect to services performed by Seller prior to the Closing;
(d) ENVIRONMENTAL. All Liabilities arising out of or
relating to any environmental contamination by Seller or any violation of
environmental laws by Seller;
(e) LITIGATION. All Liabilities with respect to any
pending, threatened or unasserted litigation, claims, demands, investigations
or proceedings;
(f) BREACHES. All Liabilities arising out of any breach or
default prior to the Closing of any obligations of Seller under any purchase
and sales orders referenced in Section 2.1(b) or under any Contracts
referenced in Section 2.1(c);
(g) EMPLOYEES. Except to the extent, if any, included in
the Assumed Balance Sheet Liabilities, all Liabilities arising out of the
employment relationship between Seller and any of its employees or former
employees, including all Liabilities arising under any employee benefit
plans; and
(h) INDEBTEDNESS FOR BORROWED MONEY. All Liabilities,
whether as a primary obligor or as a guaranty or surety, with respect to any
money borrowed by Seller or any other person from any person, including any
bank.
2.3 SATISFACTION OF LIABILITIES BY SELLER.
To preserve for Buyer the opportunity to maintain good
relations with Seller's creditors and to preclude the assertion of claims for
nonpayment against Buyer, Seller agrees to
5
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pay or otherwise satisfy and discharge promptly after the Closing, or
otherwise in accordance with their terms, all of the Retained Liabilities;
PROVIDED, HOWEVER, that nothing herein is intended to preclude Seller from
disputing in good faith with any such third party the existence or amount of
any Retained Liability.
ARTICLE 3
PURCHASE PRICE; PAYMENT; ADJUSTMENT
3.1 PURCHASE PRICE.
(a) NORTHCOAST/TEXAS. As to Northcoast/Texas, the aggregate
consideration for the Purchased Assets being sold by it shall consist of the
assumption by Buyer of the Assumed Liabilities applicable to Northcoast/Texas
pursuant to Section 2.1, and the payment by Buyer of the "Purchase Price"
applicable to Northcoast/Texas. The "Purchase Price" applicable to
Northcoast/Texas shall be One Million Ninety-Nine Thousand Dollars
($1,099,000.00), subject to adjustment as provided in this Section 3.1(a)
based on the difference between $85,197.00 (its "Target Working Capital") and
its "Closing Working Capital" (as defined below), and subject to further
adjustment as provided in this Section 3.1(a) based on its "Net Worth
Differential" (as defined below). If Northcoast/Texas' Target Working
Capital exceeds its Closing Working Capital, then its Purchase Price will be
decreased on a dollar-for-dollar basis by the amount by which its Target
Working Capital exceeds its Closing Working Capital, and if Northcoast/Texas'
Net Worth Differential exceeds $20,000.00, then its Purchase Price will be
decreased on a dollar-for-dollar basis by the amount by which its Net Worth
Differential exceeds $20,000.00. (collectively, its "Post-Closing Purchase
Price Adjustment").
Northcoast/Texas' "Closing Working Capital" shall mean the
difference between its "Current Purchased Assets" MINUS its Assumed Balance
Sheet Liabilities, each as reflected on the Final Closing Balance Sheet (as
defined in Section 3.3). Its "Current Purchased Assets" shall mean the sum
of its Purchased Assets identified in clauses (a), (b), (c) and (d) of
Section 1.1, net of applicable reserves, all as reflected on the Final
Closing Balance Sheet. Notwithstanding the foregoing provisions, for purposes
of calculating the Closing Working Capital of Northcoast/Texas, its Current
Purchased Assets will not include any accounts or notes receivable from NCI,
Northcoast/America or Northcoast/Kansas, and its Assumed Balance Sheet
Liabilities will not include any accounts or notes payable to NCI,
Northcoast/America or Northcoast/Kansas.
Northcoast/Texas' "Net Worth Differential" shall mean the
difference between (i) the excess of all of the Purchased Assets from
Northcoast/Texas (net of depreciation and amortization) over the Assumed
Balance Sheet Liabilities of Northcoast/Texas, as actually reflected on the
Final Closing Balance Sheet, allowing for the variances from generally
accepted accounting principles identified on Schedule 4.3.1(c) hereto, MINUS
(ii) the excess of all of the Purchased Assets from Northcoast/Texas (net of
depreciation and amortization) over the Assumed Balance Sheet Liabilities of
Northcoast/Texas, as it would be reflected on the
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Final Closing Balance Sheet if the same were prepared without allowance for
any of the variances from generally accepted accounting principles identified
on Schedule 4.3.1(c) hereto.
(b) NORTHCOAST/KANSAS. As to Northcoast/Kansas, the
aggregate consideration for the Purchased Assets being sold by it shall
consist of the assumption by Buyer of the Assumed Liabilities applicable to
Northcoast/Kansas pursuant to Section 2.1, and the payment by Buyer of the
"Purchase Price" applicable to Northcoast/Kansas. The "Purchase Price"
applicable to Northcoast/Kansas shall be Three Hundred Forty Thousand Dollars
($340,000.00), subject to adjustment as provided in this Section 3.1(b) based
on the difference between $130,600.00 (its "Target Working Capital") and its
"Closing Working Capital" (as defined below), and subject to further
adjustment as provided in this Section 3.1(b) based on its "Net Worth
Differential" (as defined below). If Northcoast/Kansas' Target Working
Capital exceeds its Closing Working Capital, then its Purchase Price will be
decreased on a dollar-for-dollar basis by the amount by which its Target
Working Capital exceeds its Closing Working Capital, and if
Northcoast/Kansas' Net Worth Differential exceeds zero ($0), then its
Purchase Price will be decreased on a dollar-for-dollar basis by the amount
by which its Net Worth Differential exceeds zero ($0). (collectively, its
"Post-Closing Purchase Price Adjustment").
Northcoast/Kansas' "Closing Working Capital" shall mean the
difference between its "Current Purchased Assets" MINUS its Assumed Balance
Sheet Liabilities, each as reflected on the Final Closing Balance Sheet (as
defined in Section 3.3). Its "Current Purchased Assets" shall mean the sum
of its Purchased Assets identified in clauses (a), (b), (c) and (d) of
Section 1.1, net of applicable reserves, all as reflected on the Final
Closing Balance Sheet. Notwithstanding the foregoing provisions, for purposes
of calculating the Closing Working Capital of Northcoast/Kansas, its Current
Purchased Assets will not include any accounts or notes receivable from NCI,
Northcoast/America or Northcoast/Texas, and its Assumed Balance Sheet
Liabilities will not include any accounts or notes payable to NCI,
Northcoast/America or Northcoast/Texas.
Northcoast/Kansas' "Net Worth Differential" shall mean the
difference between (i) the excess of all of the Purchased Assets from
Northcoast/Kansas (net of depreciation and amortization) over the Assumed
Balance Sheet Liabilities of Northcoast/Kansas, as actually reflected on the
Final Closing Balance Sheet, allowing for the variances from generally
accepted accounting principles identified on Schedule 4.3.1(c) hereto, MINUS
(ii) the excess of all of the Purchased Assets from Northcoast/Kansas (net of
depreciation and amortization) over the Assumed Balance Sheet Liabilities of
Northcoast/Kansas, as it would be reflected on the Final Closing Balance
Sheet if the same were prepared without allowance for any of the variances
from generally accepted accounting principles identified on Schedule 4.3.1(c)
hereto.
3.2 ESTIMATED PURCHASE PRICE PAYMENT AT CLOSING.
At the Closing, Buyer will pay to Seller the estimated amount
of the Purchase Price (i.e., $1,099,000.00 in the case of Northcoast/Texas,
and $340,000.00 in the case of Northcoast/Kansas) (as to each Seller, the
"Estimated Purchase Price"), subject to adjustment
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pursuant to Section 3.3, by means of a wire-transfer of immediately available
funds to an account designated by Seller.
3.3 ADJUSTMENTS.
3.3.1 CLOSING BALANCE SHEET PREPARATION.
Promptly after the Closing, each Seller will prepare a balance
sheet as of the Closing (as to each Seller, its "Preliminary Closing Balance
Sheet") reflecting the Purchased Assets and the Assumed Balance Sheet
Liabilities. The Preliminary Closing Balance Sheet will be prepared in
accordance with generally accepted accounting principles and, to the extent
permitted thereby, on a basis consistent with the past practices of Seller;
PROVIDED, HOWEVER, that it shall reflect only the Purchased Assets and the
Assumed Balance Sheet Liabilities and may omit footnote disclosure, and
PROVIDED, FURTHER, that the preparation of the Preliminary Closing Balance
Sheet may vary from generally accepted accounting principles by not taking
into account the accruals and adjustments identified as "GAAP Adjustments" on
Schedule 4.3.1(c) hereto. Seller conducted a physical inventory as of March
7, 1999 (the "Pre-Closing Inventory"), the results of which shall be
accurately reflected in the Preliminary Closing Balance Sheet. Based on the
Preliminary Closing Balance Sheet, each Seller will prepare a written
calculation of its Post-Closing Purchase Price Adjustment in accordance with
the provisions of Section 3.1 (as to each Seller, its "Preliminary
Post-Closing Purchase Price Adjustment").
3.3.2 CLOSING BALANCE SHEET REVIEW.
Not later than forty-five (45) days after the Closing Date,
each Seller will deliver to Buyer the Preliminary Closing Balance Sheet and
such Seller's calculation of the Preliminary Post-Closing Purchase Price
Adjustment. All work papers, documents and records used or generated by each
Seller and its accountants and other representatives in connection with the
preparation of its Preliminary Closing Balance Sheet and the calculation of
the Preliminary Post-Closing Purchase Price Adjustment will be made available
to Buyer. Unless Buyer gives a Seller a written objection by the thirtieth
(30th) day after Buyer's receipt of its Preliminary Closing Balance Sheet and
the Preliminary Post-Closing Purchase Price Adjustment, the Preliminary
Closing Balance Sheet and the Preliminary Post-Closing Purchase Price
Adjustment will become final and finding on the parties and shall be deemed
to be the "Final Closing Balance Sheet" with respect to that Seller and the
"Final Post-Closing Purchase Price Adjustment" with respect to that Seller,
respectively.
3.3.3 CLOSING BALANCE SHEET DISPUTE.
If Buyer objects to a Preliminary Closing Balance Sheet or to a
Preliminary Post-Closing Purchase Price Adjustment and Buyer and the
applicable Seller are able to resolve their dispute within fifteen (15) days
after Buyer's objection, such Preliminary Closing Balance Sheet and such
Preliminary Post-Closing Purchase Price Adjustment (each as adjusted to
reflect such resolution) will become final and binding on the parties and
shall be deemed to be the "Final Closing Balance Sheet" of that Seller and
the "Final Post-Closing Purchase Price
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Adjustment" of that Seller respectively. If Buyer objects to a Preliminary
Closing Balance Sheet or to a Preliminary Post-Closing Purchase Price
Adjustment and Buyer and the applicable Seller are unable to resolve their
dispute within fifteen (15) days after Buyer's objection, the dispute will be
resolved in accordance with the terms of this Agreement by the firm of Arthur
Andersen LLP (the "Independent Accountants"). The Independent Accountants
will be instructed to perform their services as expeditiously as possible.
The resolution of the Independent Accountants shall be presented in a "Final
Closing Balance Sheet" with respect to that Seller and a "Final Post-Closing
Purchase Price Adjustment" with respect to that Seller, each prepared by the
Independent Accountants, which shall be final and binding on the parties.
The fees and expenses of the Independent Accountants for the resolution of
any dispute shall be paid by Buyer and each Seller in inverse proportion to
the respective amounts of the disputed matters which are resolved in its
favor. For example, if:
(a) Buyer claims that the Final Post-Closing Purchase Price Adjustment
with respect to a Seller should be $100;
(b) that Seller claims that its Final Post-Closing Purchase Price
Adjustment should be $20; and
(c) the Independent Accountants determine that its Final Post-Closing
Purchase Price Adjustment is $40;
then the fees and expenses of the Independent Accountants would be paid 25%
by that Seller (i.e., 20 DIVIDED BY 80), and 75% (i.e., 60 DIVIDED BY 80) by
Buyer.
3.4 POST-CLOSING REFUND.
If, after giving effect to the Final Post-Closing Purchase
Price Adjustment, the Purchase Price applicable to a Seller is decreased,
then the applicable Seller shall refund to Buyer the amount of such decrease
by means of a wire-transfer of immediately available funds to an account
designated by Buyer. Any such post-closing refund shall be made not more
than three (3) days after the Preliminary Post-Closing Purchase Price
Adjustment of that Seller becomes the Final Post-Closing Purchase Price
Adjustment of that Seller.
3.5 ALLOCATION OF PURCHASE PRICE.
The fair market values of the Purchased Assets and the
allocation of the Purchase Price among the Purchased Assets for purposes of
Section 1060 of the Internal Revenue Code shall be as set forth on Schedule
3.5-1, in the case of Purchased Assets sold by Northcoast/Texas, and Schedule
3.5-2, in the case of Purchased Assets sold by Northcoast/Kansas. Buyer and
each Seller shall each be bound by such determinations of fair market value
and allocation of Purchase Price and shall complete and attach Internal
Revenue Service Form 8594 to their respective Tax returns accordingly.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
Seller and each Shareholder jointly and severally represent and
warrant to Buyer as follows:
4.1 ORGANIZATION.
4.1.1 ORGANIZATION AND POWER.
Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio. Seller has full corporate
power (i) to own, lease and operate its assets and carry on its business as
and where such assets are now owned or leased and as such business is
presently being conducted, and (ii) to execute, deliver and perform this
Agreement and all other agreements and documents to be executed and delivered
by it in connection herewith.
4.1.2 QUALIFICATION.
In the case of Northcoast/Texas, Schedule 4.1.2-1, and in the
case of Northcoast/Kansas, Schedule 4.1.2-2, lists each state or foreign
country in which Seller (i) owns or leases real property, (ii) has employees
or sales agents, or (iii) maintains inventory. Seller is qualified to do
business as a foreign corporation in each of the states and foreign countries
listed in Schedule 4.1.2-1 or Schedule 4.1.2-2, as applicable. Seller is not
required to be qualified to do business in any other state or foreign country
where the failure to be so qualified would have a material adverse effect on
Seller.
4.1.3 OTHER VENTURES.
Seller does not have any ownership interest in any other
business entity, is not a member of any partnership, joint venture or limited
liability company, and has never operated as a subsidiary or division of any
other corporation or other business entity.
4.1.4 OWNERSHIP OF SELLER.
All of the issued and outstanding shares of capital stock of
Seller are owned of record and beneficially by Shareholders.
4.2 AGREEMENTS.
4.2.1 SELLER ENFORCEABILITY.
All requisite corporate action to approve, execute, deliver and
perform this Agreement and every other agreement and document delivered or to
be delivered by Seller in connection herewith has been taken by Seller, its
board of directors, and its shareholders. This
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Agreement and every other agreement and document delivered or to be delivered
by Seller in connection herewith has been, or upon delivery will be, duly
executed and delivered by Seller and constitutes a binding obligation of
Seller, enforceable in accordance with its terms.
4.2.2 SHAREHOLDER ENFORCEABILITY.
Each Shareholder has full power and capacity to execute,
deliver and perform this Agreement and every other agreement and document
delivered or to be delivered by such Shareholder in connection herewith.
This Agreement and every other agreement and document delivered or to be
delivered by each Shareholder in connection herewith has been, or upon
delivery will be, duly executed and delivered by such Shareholder and
constitutes a binding obligation of such Shareholder, enforceable in
accordance with its terms.
4.2.3 CONSENTS.
Except as set forth on Schedule 4.2.3, no approval or consent
of, or filing with, any person, entity or governmental authority is required
in connection with the transactions contemplated hereby or the execution,
delivery or performance by Seller or either Shareholder of this Agreement or
any other agreement or document delivered or to be delivered by or on behalf
of Seller or either Shareholder in connection herewith.
4.2.4 NO CONFLICTS.
Except as set forth on Schedule 4.2.4, no action taken by or on
behalf of Seller or either Shareholder in connection herewith, including but
not limited to the execution, delivery and performance of this Agreement and
each other agreement and document delivered to be delivered by any of them in
connection herewith, (i) gives rise to a right of termination or acceleration
or the loss or impairment of any material right or benefit under any Contract
by which Seller or any of its assets is bound, (ii) disrupts or impairs any
business relationship which Seller has with any dealer, distributor, sales
representative, supplier or customer, (iii) conflicts with or violates any
law, Seller's Articles of Incorporation, Seller's Code of Regulations, any
Contract by which Seller or either Shareholder is bound, or any order,
arbitration award, judgment, decree or other similar restriction to which
Seller or either Shareholder is subject, or (iv) constitutes an event which,
after notice or lapse of time or both, could result in any of the foregoing.
4.3 FINANCIAL.
4.3.1 FINANCIAL RECORDS.
(a) Schedule 4.3.1-1 consists of (i) the balance sheets of
Northcoast/Texas as of December 31, 1997, 1996 and 1995 and the related
statements of income and retained earnings for the twelve-month periods then
ended, and (ii) the balance sheet of Northcoast/Texas as of November 30,
1998, and the related income statement for the 11-month period then ended,
and (iii) the balance sheet of Northcoast/Texas as of January 31, 1999 (as to
Northcoast/Texas, its "Acquisition Balance Sheet"), all as prepared by
Northcoast/Texas.
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(b) Schedule 4.3.1-2 consists of (iii) the balance sheets of
Northcoast/Kansas as of December 31, 1997 and 1996 and the related statements
of income and retained earnings for the twelve-month periods then ended, and
(iv) the balance sheet of Northcoast/Kansas as of November 30, 1998, and the
related income statement for the 11-month period then ended, and (v) the
balance sheet of Northcoast/Kansas as of January 31, 1999 (as to
Northcoast/Kansas, its "Acquisition Balance Sheet"), all as prepared by
Northcoast/Kansas.
(c) Except as expressly disclosed in Schedule 4.3.1(c), all
such financial statements were prepared from each Seller's books of account
in accordance with generally accepted accounting principles, consistently
applied, are accurate and complete, and present fairly the financial position
and results of operations of Seller at the dates and for the periods
indicated, except, in the case of the Acquisition Balance Sheet and related
income statement, for customary year-end adjustments of a normal recurring
type which would not be material in the aggregate and the absence of
footnotes. The books of account of Seller accurately reflect all items of
income and expense (including, but not limited to, accruals) and all assets
and Liabilities of Seller in accordance with normal accrual accounting
practices, subject to customary year-end adjustments of a normal, recurring
type which would not be material in the aggregate.
4.3.2 LIABILITIES.
Seller has no Liabilities except (i) to the extent provided for
or reserved against on the Acquisition Balance Sheet, (ii) current
Liabilities which have arisen in the ordinary course of business consistent
with past practice since the date of the Acquisition Balance Sheet (all of
which have been recorded on Seller's books), or (iii) as listed on Schedule
4.3.2. Since the date of the Acquisition Balance Sheet, there has not been
any incurrence (whether discharged or not) of any Liability by Seller other
than current Liabilities incurred in the ordinary course of business
consistent with past practice.
4.3.3 NO CHANGES.
Since the date of the Acquisition Balance Sheet, Seller has
been operated only in the ordinary course, consistent with past practice.
Since that date, there has not been any adverse change, or event or
circumstance which might reasonably be expected to result in an adverse
change, in Seller's assets, Liabilities, operating performance, business
relationships or prospects. Since the date of the Acquisition Balance Sheet,
there has been no change in any accounting policy or practice of Seller,
including practices with respect to the payment of accounts payable or the
collection of accounts receivable. Since the date of the Acquisition Balance
Sheet, Seller has not paid any dividend (whether in cash or in property) or
engaged in any transaction that has resulted in any shareholder of the
Company, any relative of a shareholder of the Company, or any entity
affiliated with any such shareholder or relative receiving any direct or
indirect economic benefit, other than payments of normal wages, salaries or
rents, and reimbursement of deductible business expenses actually incurred in
the ordinary course of business.
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4.3.4 TAXES.
All tax returns, reports and declarations (collectively, "Tax
Returns") required by any governmental authority to be filed in connection
with the properties, business, income, expenses, net worth or franchises of
Seller have been timely filed, and all such Tax Returns are correct and
complete. Seller has delivered to Buyer copies of each of its most recent
federal, state and local Tax Returns. All governmental taxes, charges or
assessments and related deficiencies, interest and penalties (collectively,
"Taxes") due in connection with the properties, business, income, expenses,
net worth or franchises of Seller have been paid. There are no Tax claims,
audits or proceedings pending in connection with the properties, business,
income, expenses, net worth or franchises of Seller, and, to the best
knowledge of Seller and each Shareholder, there are no such threatened
claims, audits or proceedings.
4.4 LEGAL.
4.4.1 COMPLIANCE WITH LAWS.
Seller is not in violation of (i) any outstanding arbitration
award, judgment, order or decree, or (ii) any law, regulation or ordinance
(each, a "law"), including any law relating to discrimination, employment
practices, protection of the environment, occupational health or safety,
working conditions, payroll withholding, pensions, zoning, or Taxes. Except
as disclosed on Schedule 4.4.1, there have been no allegations of or
inquiries concerning any violations of any law by Seller within the past
three years. Neither Seller nor either Shareholder has received any notice or
allegation from any governmental authority of any jurisdiction to the effect
that Seller is or might be required to acquire or modify any asset or change
any aspect of its business operations in order to comply with any applicable
law. Except as listed on Schedule 4.4.1, no permits, licenses, approvals or
authorizations of any governmental authority are required to conduct Seller's
business. All such permits, licenses, approvals and authorizations have been
legally obtained and maintained by Seller and are in full force and effect.
No proceeding is pending to revoke or limit any of them or otherwise to
impose any conditions or obligations on the possession or transfer of any of
them. In addition, there is no state of facts or event which could
reasonably be expected to form the basis for any revocation or limitation of
them or other imposition of conditions or obligations on the possession or
transfer of any of them. In the past three years, there have been no claims,
notices, orders or directives issued by any governmental authority with
respect to the Business or any of Seller's assets. Seller is not required to
make, and has no reasonable expectation that Buyer will be required to make
in order to operate the Business after the Closing, any expenditures to
achieve or maintain compliance with any law, except in amounts similar to
those reflected in the financial statements contained on Schedule 4.3.1.
4.4.2 PRODUCT AND SERVICE WARRANTIES.
Except as set forth on Schedule 4.4.2, there have been no
product warranty or service warranty claims made by customers of Seller in
the past three years and there are no product warranties or service
warranties outstanding or currently being offered to customers of Sellers.
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4.4.3 PRODUCT LIABILITY.
Except as set forth on Schedule 4.4.3, no claims alleging
bodily injury or property damage as a result of any defect in the design or
manufacture of any product or the breach of any duty to warn, test, inspect
or instruct of dangers therein (each a "Product Liability Claim"), have been
made or threatened against Seller within the past three years. There are no
defects in the design or manufacture of products manufactured or sold by
Seller which defects could result in a Product Liability Claim, and there
has not been any failure by Seller to warn, test, inspect or instruct of
dangers which could form the basis for a product recall or any Product
Liability Claim against Seller.
4.4.4 LITIGATION.
Except as set forth on Schedule 4.4.4, no claim, litigation,
investigation or proceeding is pending or, to the knowledge of Seller and
either Shareholder, threatened against Seller or involving Seller has been
concluded in the past three years, and there is no state of facts or event
which could reasonably be expected to form the basis for such a claim,
litigation, investigation or proceeding. No arbitration award, judgment,
order, decree or similar restriction is outstanding against or relating to
Seller or its assets, business or products.
4.5 BUSINESS.
4.5.1 EMPLOYMENT.
Northcoast/Texas employs a total of seventeen (17) employees.
Northcoast/Kansas employs a total of two (2) employees. Seller does not use
any leased or temporary employees. Schedule 4.5.1 lists the names, current
annual compensation rates and other compensation arrangements of all of
Seller's employees whose compensation paid or accrued during 1998 exceeded
$50,000.00 on an annualized basis. Seller has paid in full to all employees,
or made appropriate accruals for on its books of account, all wages,
commissions, bonuses and other direct compensation for all services performed
by its employees. Seller has withheld or collected from each payment made to
each of its employees the amount of all Taxes required to be withheld or
collected therefrom, and Seller has paid the same when due to the proper
governmental authorities. Except as set forth on Schedule 4.5.1, during the
past three years there have been no controversies, grievances or claims by
any of the employees, former employees or beneficiaries of any employees of
Seller with respect to their employment or employment benefits, including but
not limited to any discrimination claims, sexual harassment claims or
workers' compensation claims. There is no union representation of any of
Seller's employees and, to the knowledge of Seller and each Shareholder,
there has never been any attempt by a labor organization to organize Seller's
employees into a collective bargaining unit. Since the date of the
Acquisition Balance Sheet, there has not been any general increase made or
promised in the level or rate of salaries or other compensation of any of
Seller's employees.
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4.5.2 EMPLOYMENT TERMINATION.
Upon the termination of employment of any of Seller's
employees, Buyer will not by reason of anything done prior to or at the
Closing be liable to any of Seller's employees for so-called "severance pay"
or any other payments. To the knowledge of Seller and each Shareholder, none
of the employees of Seller intends to resign or seek other employment as a
result of the transactions contemplated hereby or otherwise.
4.5.3 CONTRACTS.
Schedule 4.5.3 contains a complete and accurate list of:
(a) all Contracts to which Seller is a party or by which it
is bound, involving amounts in excess of $50,000.00 or which are cancelable
by Seller only after giving at least 30 days' notice;
(b) all loan, financing, security, credit or other Contracts
evidencing or relating to indebtedness, guarantees or Liens;
(c) all Contracts with distributors, dealers or sales
representatives;
(d) all management, employment, consulting, or agency
Contracts and all collective bargaining Contracts;
(e) all Contracts providing employee benefits;
(f) all Contracts which contain an obligation of
confidentiality with respect to information furnished by Seller to a third
party or received by Seller from a third party;
(g) all Contracts containing covenants limiting the freedom
of Seller to compete in any line of business or with any person or in any
geographic area or market;
(h) all Contracts relating to patents, trademarks, trade
names or copyrights or applications for any of the foregoing, inventions,
trade secrets or other proprietary information;
(i) all Contracts relating to the past or present disposal
of waste;
(j) all Contracts pursuant to which Seller leases or
subleases any real property, or any interest therein, from or to any person;
(k) all Contracts pursuant to which Seller leases or
subleases any personal property, or any interest therein, from or to any
person;
(l) all Contracts with any shareholder, officer, director,
consultant or employee of Seller, or any relative of any of the foregoing, or
any corporation, partnership,
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limited liability company or other entity directly or indirectly owned or
controlled by either Shareholder, or one or more of their respective
relatives; and
(m) all other Contracts entered into other than in the
ordinary course of business consistent with past practice, including but not
limited to Contracts (i) with suppliers for the purchase of goods or services
in excess of normal requirements or at prices in excess of the current market
price, (ii) for the sale by Seller of goods or services at prices not
reasonably calculated to produce gross profit margins consistent with those
achieved by Seller during its three prior fiscal years, or (iii) which
contain terms or conditions which Seller cannot reasonably expect to fulfill
in their entirety.
Seller has delivered to Buyer accurate and complete copies of each such
written Contract, and an accurate and complete written description of each
such oral Contract, in each case with all modifications and amendments
thereto. Since the date of the last year-end balance sheet included in the
financial statements on Schedule 4.3.1, there has been no modification or
termination of any Contract under circumstances which might have an adverse
effect on Seller.
4.5.4 COMPLIANCE WITH CONTRACTS.
With respect to each Contract which is required to be disclosed
on any Schedule to this Agreement, and with respect to each Contract,
Seller's obligations under which are being assumed by Buyer hereunder, (i)
Seller is not in default under or in violation thereof, and (ii) no event has
occurred which, with notice or lapse of time or both, would constitute such a
default or violation. There have been no discussions or correspondence
concerning the breach by Seller of, or the termination of, any of such
Contracts. To the knowledge of Seller and each Shareholder, there is no
default under or violation of any such Contract by any other party thereto.
4.5.5 INSURANCE.
Schedule 4.5.5 lists all insurance policies maintained by
Seller and identifies for each such policy the following information:
underwriter, policy number, coverage type, premium, expiration date, coverage
amount and deductible. All such policies are in full force and effect, and
all premiums have been paid. Seller is not, and has not been at any time,
subject to Liability as a self-insurer. Schedule 4.5.5 also sets forth a
description of all claims pending under such insurance policies.
4.5.6 CUSTOMERS AND SUPPLIERS.
No customer or supplier which has accounted for more than two
percent (2%) of Seller's sales or purchases in the past year and no other
customer or supplier material to Seller's business (including any supplier
which is Seller's sole source of supply of any product or service) has
terminated, or threatened to terminate, its relationship with Seller or has
during the past year decreased or delayed materially, or threatened to
decrease or delay materially, its purchases from Seller or its sale of
services or supplies to Seller, and there is no state of facts or event which
could reasonably be expected to form the basis for such a decrease or delay.
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To the knowledge of Seller and each Shareholder, the transactions
contemplated by this Agreement will not adversely affect the relationship of
Seller with any customer or supplier. Seller is not required, in the
ordinary course of business, to provide any bonding or any other financial
security arrangements in connection with transactions with any supplier.
4.5.7 PURCHASES AND SALES.
Since the date of the most recent year-end balance sheet
included in the financial statements on Schedule 4.3.1, Seller has not made
any purchase commitments in excess of its normal business requirements and
there has not been any reduction in the aggregate dollar volume of Seller's
backlog of sales orders.
4.5.8 PREPAYMENTS AND DEPOSITS.
Except as disclosed on Schedule 4.5.8, Seller has not received
any prepayments or deposits from customers for products to be shipped, or for
services to be performed, after the Closing.
4.5.9 CAPITAL PROJECTS.
Schedule 4.5.9 contains a description of all capital projects
committed for or authorized by Seller involving the expenditure of $10,000.00
or more. Except as disclosed on Schedule 4.5.9, the estimated aggregate cost
of completing all capital projects does not exceed $50,000.00.
4.6 EMPLOYEE BENEFITS.
Except as otherwise set forth on Schedule 4.6, Seller does not
maintain and is not required to contribute to any employee benefit plan,
welfare benefit plan or pension plan. Seller has delivered to Buyer accurate
and complete copies of each such written plan, and an accurate and complete
written description of each such oral plan, in each case with all
modifications and amendments thereto. Each employee benefit plan, welfare
benefit plan or pension plan maintained by Seller has been operated in
accordance with its terms and all applicable laws. Seller has not engaged in
any prohibited transaction with respect to any employee benefit plan which it
maintains or to which it contributes. Seller has the right to amend or
terminate, without the consent of any other person or entity, any employee
benefit plan which it maintains, except as otherwise prohibited by law. No
welfare benefit plan maintained by Seller is funded by a trust or fails to
satisfy any applicable requirement for tax-favored treatment. There are no
unfunded benefit liabilities or accumulated funding deficiencies under any
pension plan maintained by Seller. Seller is not required, nor has it ever
been required, to contribute to or with respect to any multiemployer plan.
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4.7 ASSETS.
4.7.1 TITLE.
The Purchased Assets are free and clear of all Liens. All of
the Contracts of Seller with respect to which Buyer is acquiring any rights
hereunder are valid, are in full force and effect, and are enforceable in
accordance with their terms by Seller. There exists no condition affecting
the title to or use of any part of the Purchased Assets which would prevent
Buyer from occupying, using or enforcing its rights with respect to any part
of the Purchased Assets to the same full extent that Seller could continue to
do so if the transactions contemplated hereby did not take place.
4.7.2 RECEIVABLES.
All of Seller's accounts receivable represent valid obligations
arising from sales actually made or services actually performed. None of
Seller's accounts receivable is subject to any set-off or counterclaim, and,
to the knowledge of Seller and each Shareholder, all of Seller's accounts
receivable are collectible to the extent included in the Final Closing
Balance Sheet. Schedule 4.7.2 sets forth a 30/60/90 day aging summary of
Seller's accounts receivable as of January 31, 1999. Seller has delivered to
its Buyer its complete aging schedule of accounts receivables as of such date.
4.7.3 INVENTORIES.
All inventory has been valued on the Acquisition Balance Sheet
and on Seller's records and books of account at the lower of cost (determined
on a first-in, first-out basis) or market value on a basis consistent with
that reflected in the annual financial statements included on Schedule
4.3.1-1 or Schedule 4.3.1-2. Obsolete inventory and inventory of
below-standard quality has been written down to amounts not in excess of net
realizable value. All of Seller's finished goods inventories are currently
salable in the ordinary course of business consistent with past practice at
gross profit margins consistent with the levels reflected in the annual
financial statements included on Schedule 4.3.1-1 or Schedule 4.3.1-2. All
of Seller's work-in-process, raw materials and supplies inventories can be
used or consumed in the usual and ordinary course of business as now
conducted and are not in amounts in excess of normal requirements. The
Pre-Closing Inventory was conducted in accordance with Seller's past
practices and will be accurately reflected in the Preliminary Closing Balance
Sheet. Seller's actual inventories as of the Closing will be the same as
reflected in the Pre-Closing Inventory except for sales or purchases of
inventory in the ordinary course of business during the period from March 7,
1999, to the Closing.
4.7.4 ENVIRONMENTAL MATTERS.
Seller has not generated, used, treated, released, stored or
disposed of any Hazardous Substances or any Hazardous Waste (as such terms
are hereinafter defined) in a manner that has caused or could cause Seller or
Buyer to incur any Liability under any applicable laws. Seller has complied
in all respects with all federal, state and local
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environmental laws, rules and regulations applicable to Seller and its
operations. To the knowledge of Seller and each Shareholder, there are no
underground storage tanks located on (nor, to the knowledge of Seller and
each Shareholder, have any underground storage tanks been removed from) any
real property currently owned or leased by Seller or formerly owned or leased
by Seller. For purposes of this Agreement, the term "Hazardous Substances"
shall have the meaning set forth in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the regulations
thereunder, or as defined by any similar law of any jurisdiction where Seller
has conducted business or has generated, used, treated, released, stored or
disposed of any Hazardous Substances, and also shall include petroleum
products, asbestos, urea formaldehyde and polychlorinated biphenyls. For
purposes of this Agreement, the term "Hazardous Waste" shall have the meaning
set forth in the Resource Conversation and Recovery Act, as amended, and the
regulations thereunder, or as defined by any similar law of any jurisdiction
where Seller has conducted business or has generated, used, treated,
released, stored or disposed of any Hazardous Waste. To the knowledge of
Seller and each Shareholder, there has not been any release of Hazardous
Substances or Hazardous Waste at or from any properties adjacent to any
current or former facilities of Seller. To the knowledge of Seller and each
Shareholder, there are no materials containing asbestos or urea formaldehyde
incorporated into the building or interior improvements that are part of
Seller's owned or leased facilities, and there is no equipment or fixture
containing any polychlorinated biphenyls located at any of Seller's owned or
leased facilities.
4.7.5 CONDITION.
All of the tangible assets included among the Purchased Assets,
and all of the tangible assets covered by any Contracts listed on Schedule
2.1(c), are in good operating condition, normal wear and tear excepted,
neither require nor are reasonably expected to require any special or
extraordinary expenditures to remain in such condition beyond maintenance and
repairs necessary in the ordinary course of business, and are capable of
being used for their intended purpose in the ordinary course of business
consistent with past practice.
4.7.6 LOCATION.
All of the Purchased Assets being sold by Northcoast/Texas
hereunder are located at the address or addresses set forth on Schedule
4.7.6-1. All of the Purchased Assets being sold by Northcoast/Kansas
hereunder are located at the address or addresses set forth on Schedule
4.7.6-2.
4.7.7 INTELLECTUAL PROPERTY.
Schedule 4.7.7 lists all Intellectual Property Rights owned by
Seller or in which (as noted on such Schedule) Seller has any rights or
licenses. To the knowledge of Seller and each Shareholder, there has not
been any infringement or alleged infringement by others of any such
Intellectual Property Rights. Except as set forth on Schedule 4.7.7, Seller
is not a party to any Contract, whether as licensor, licensee, franchisor,
franchisee, dealer, distributor or otherwise, with respect to any
Intellectual Property Rights. Seller has the right to use all Intellectual
Property Rights as are necessary to enable Seller to conduct, and Buyer to
continue
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to conduct after the Closing, all phases of the Business in the manner
presently conducted by Seller, and that use has not conflicted with,
infringed upon or otherwise violated any rights of any person or entity.
Seller has the unrestricted right to sell or assign to Buyer all such
Intellectual Property Rights and all such licenses or other rights. The
Intellectual Property Rights listed on Schedule 4.7.7 are valid and in full
force and effect and are not subject to any Taxes, maintenance fees, or
actions falling due within the next three months. Except as set forth on
Schedule 4.7.7, there have been no interference actions or other judicial,
arbitration or other adversary proceedings concerning the Intellectual
Property Rights listed on Schedule 4.7.7. Seller has not infringed any
intellectual property right or other right of any other person or entity. To
the knowledge of Seller and each Shareholder, none of the Intellectual
Property Rights has been used, divulged or appropriated for the benefit of
any past or present employees of Seller or any other person or entity, or to
the detriment of Seller. Seller has not disposed of or permitted to lapse,
or otherwise failed to preserve Seller's right to use, any rights referenced
in this Section 4.7.7.
4.7.8 EXTENT.
The Purchased Assets include all assets used by Seller to
conduct the Business in the ordinary course as presently conducted, all
assets reflected on the Acquisition Balance Sheet, and all assets acquired by
Seller after the date of the Acquisition Balance Sheet, except those assets
of Seller which (i) have been disposed of prior to the Closing in the
ordinary course of business consistent with past practice, (ii) have been
disposed of with the prior written consent of Buyer, or (iii) constitute
Retained Assets. Since the date of the most recent fiscal year-end balance
sheet included on Schedule 4.3.1, there has not been any damage to or
disposition (except for the sale of inventory in the ordinary course of
business consistent with past practice) or loss of (whether or not covered by
insurance) any asset of Seller. Over the period covered by the financial
statements included on Schedule 4.3.1, no aspect of the Business was
conducted by any affiliate of Seller or any affiliate of either Shareholder
or any former shareholder of Seller.
4.8 REAL PROPERTY.
Complete and accurate legal descriptions of all real property
owned or leased by Northcoast/Texas are set forth on Schedule 4.8-1. Complete
and accurate legal descriptions of all real property owned or leased by
Northcoast/Kansas are set forth on Schedule 4.8-2. There is no state of
facts or event which could reasonably be expected to form the basis for any
condemnation proceedings which could effect such real property or any future
improvements by any public authority, any part of the cost of which could be
assessed against such real property. In the past three years, Seller has not
experienced any interruption in the delivery of adequate utilities required
in the operation of the Business. The roof and foundation of the real
property owned or leased by Seller are watertight and free of leaks, seepages
and moisture.
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4.9 ADDITIONAL MATTERS.
4.9.1 CONFLICTS OF INTEREST.
Except as set forth on Schedule 4.9.1, no shareholder, director
or employee of Seller, nor any relative of any shareholder, director or
employee of Seller, nor any affiliate of any of the foregoing, (i) owns,
directly or indirectly, any interest in, or is an employee or agent of, any
entity which is a competitor, lessor, lessee, customer or supplier of Seller,
(ii) owns, directly or indirectly, any interest in any tangible or intangible
property, asset or right which Seller uses in its business, (iii) has any
cause of action or claim against, owes any amount to, or is owed any amount
by Seller other than salary and reimbursement of deductible business expenses
in the ordinary course of business, or (iv) is a party to any Contract with
Seller.
4.9.2 FULL DISCLOSURE.
No representation or warranty by Seller or either Shareholder
in this Agreement, and no statement contained in any Schedule to this
Agreement, contains any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements contained therein, in
light of the circumstances in which they are made, not misleading. To the
knowledge of Seller and each Shareholder, there is no event or circumstance
which Seller has not disclosed to Buyer in writing which adversely affects or
could reasonably be expected to adversely affect the business, prospects, or
condition (financial or otherwise) of Seller or the ability of Seller or
either Shareholder to perform this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and Shareholders as
follows:
5.1 ORGANIZATION AND POWER.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio. Buyer has full corporate
power to execute, deliver and perform this Agreement and all other agreements
and documents to be executed and delivered by it in connection herewith.
5.2 AGREEMENTS.
5.2.1 ENFORCEABILITY.
All requisite corporate action to approve, execute, deliver and
perform this Agreement and each other agreement and document delivered or to
be delivered by Buyer in connection herewith has been taken by Buyer. This
Agreement and every other agreement and document delivered or to be delivered
by Buyer in connection herewith has been, or upon
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delivery will be, duly executed and delivered by Buyer and constitutes a
binding obligation of Buyer, enforceable in accordance with its terms.
5.2.2 CONSENTS.
No approval or consent of, or filing with, any person, entity
or governmental authority is required in connection with the transactions
contemplated hereby or the execution, delivery or performance by Buyer of
this Agreement or any other agreement or document delivered or to be
delivered by or on behalf of Buyer in connection herewith, except for filings
required to be made by Buyer or its affiliates under the Securities Exchange
Act of 1934, as amended, and the regulations thereunder.
5.2.3 NO CONFLICTS.
No action taken by or on behalf of Buyer in connection
herewith, including, but not limited to, the execution, delivery and
performance of this Agreement and each other agreement and document delivered
or to be delivered by it in connection herewith, (i) conflicts with or
violates any law, Buyer's Articles of Incorporation, Buyer's Code of
Regulations, or any Contract by which Buyer is bound, or (ii) constitutes an
event which, after notice or lapse of time or both, could result in any of
the foregoing.
ARTICLE 6
CLOSING; CLOSING CONDITIONS
6.1 CLOSING.
The consummation of the purchase and sale of the Purchased
Assets and the other transactions contemplated hereby (as to each Seller, the
"Closing") shall take place simultaneously with the execution and delivery of
this Agreement on the date hereof, or on such other date as Buyer and Seller
may agree in writing, at the offices of Calfee, Halter & Griswold LLP at 800
Superior Avenue, Suite 1400, Cleveland, Ohio 44114, or at such other place as
Buyer and Seller may agree in writing. The date on which the Closing occurs
is referred to herein, as to each Seller, as the "Closing Date." The
transfers and deliveries described in this Article 6 shall be mutually
interdependent and shall be regarded as occurring simultaneously, and,
notwithstanding any other provision of this Agreement, no such transfer or
delivery shall become effective or shall be deemed to have occurred until all
of the other transfers and deliveries provided for in this Article 6 shall
also have occurred or have been waived. Such transfers and deliveries shall
be deemed to have occurred and the Closing shall be effective as of the
commencement of business of Seller on the Closing Date.
6.2 CONDITIONS TO BUYER'S OBLIGATION.
The obligation of Buyer to perform this Agreement with respect
to EITHER Seller is subject to satisfaction of the following conditions at or
before the Closing with respect to BOTH Sellers:
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(a) AGREEMENTS PERFORMED. Seller and each Shareholder shall
have performed all of the obligations under this Agreement to be performed by
them at or before the Closing;
(b) REPRESENTATIONS AND WARRANTIES ACCURATE. The
representations and warranties of Seller and Shareholders contained herein
shall continue to be accurate in all material respects just as if made at and
as of the Closing;
(c) CERTIFICATE OF SELLER AND SHAREHOLDERS. Buyer shall
have received a certificate from Seller and each Shareholder certifying as to
the fulfillment of the conditions set forth in Sections 6.2(a) and 6.2(b),
signed by Seller's chief executive officer and each Shareholder;
(d) NAME CHANGE. Seller shall have caused to be taken all
corporate and shareholder action necessary in order to adopt an amendment to
Seller's Articles of Incorporation changing Seller's corporate name to one
not including either of the words "Northcoast" or "Cryogenics," and Seller
shall have delivered to Buyer a Certificate of Amendment with respect to such
amendment, duly executed by an authorized officer of Seller and in proper
form for filing with the Ohio Secretary of State, and all such other
documentation as may be necessary to permit Buyer to use Seller's corporate
name in the State of Ohio and in all other states in which Seller is
qualified to do business as a foreign corporation;
(e) GOOD STANDING. Buyer shall have received a certificate
as to Seller's good standing, dated no more than 10 days prior to the Closing
Date, from the secretary of state of Ohio and of each other state in which
Seller is qualified to do business as a foreign corporation;
(f) NO CHANGE. There shall not have occurred any material
adverse change, or any event, fact or circumstance which might reasonably be
expected to result in a material adverse change, in the financial condition,
results of operations, assets, business or prospects of Seller;
(g) LEGAL ACTION. There shall be no pending or threatened
legal action or inquiry which challenges the validity or legality of or seeks
to or could reasonably be expected to prevent, delay or impose conditions on
the consummation of the transaction contemplated by this Agreement;
(h) LIEN TERMINATIONS. Buyer shall have received
terminations or releases of all Liens on the Purchased Assets, including any
required Uniform Commercial Code termination statements. In order to secure
any such termination or release from the holder of any such Lien, Buyer may,
upon appropriate instructions from the holder of such Lien, deduct from the
portion of the Estimated Purchase Price otherwise payable to Seller at the
Closing pursuant to Section 3.2 the amount of the indebtedness secured by
such Lien and pay such amount over to such lienholder for the account of
Seller, and such payment to such lienholder shall constitute payment to
Seller for purposes of Section 3.2 and Section 6.3(e);
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(i) TRANSFER INSTRUMENTS. Buyer shall have received a
general bill of sale and assignment substantially in the form attached hereto
as Exhibit 6.2(i), and such certificates of title, assignments, and other
instruments of transfer as shall be required to permit Buyer to acquire the
Purchased Assets free and clear of all Liens, in each case duly executed by
Seller;
(j) CONSENTS. Buyer shall have received all consents,
approvals, permits, licenses and registrations of all persons, entities, and
governmental authorities necessary for Buyer, Seller and each Shareholder to
execute, deliver and perform this Agreement and for Buyer to operate the
Business as heretofore conducted;
(k) ESTOPPEL CERTIFICATES; EVIDENCE OF DUE AUTHORIZATION,
ETC. Buyer shall have received an estoppel certificate from each lessor of
real property leased by Seller to the effect that Seller has not breached any
of its obligations to such lessor and an agreement from each mortgagee of
such lessor to the effect that so long as Buyer fulfills Seller's
post-Closing obligations under the applicable lease, Buyer will be entitled
to occupy the premises for the remainder of the lease term and will be
entitled to all other rights of Seller under such lease;
(l) REAL ESTATE LEASES. Northcoast/America shall have
received (i) a lease agreement with respect to the premises located at 6875
Old U.S. 223, Ottawa Lake, Michigan 49267 (the "Michigan Lease"), including
the form of Purchase and Sale Agreement appended thereto (the "Michigan
Option Agreement"), mutually satisfactory to Buyer and Northcoast Real
Estate, Ltd., an Ohio limited liability company ("NREL"), with the Michigan
Lease duly executed by NREL, and (ii) a lease agreement with respect to the
premises located at 127 Rickman Industrial Drive, Holly Springs, Georgia
30142 (the "Georgia Lease"), mutually satisfactory to Buyer and NREL, duly
executed by NREL; and Buyer shall have received a lease agreement with
respect to the premises located at 16655 Buffalo Speedway, Houston, Texas
77047 (the "Texas Lease"), including the form of Purchase and Sale Agreement
appended thereto (the "Texas Option Agreement"), mutually satisfactory to
Buyer and F&B Real Estate LLC, an Ohio limited liability company ("F&B"),
with the Texas Lease duly executed by F&B; and all prior lease agreements
with respect to such Michigan, Georgia and Texas facilities shall have been
terminated to Buyer's satisfaction;
(m) EMPLOYMENT AGREEMENT. Buyer shall have received an
Employment Agreement in a form mutually satisfactory to Buyer and Mark A.
Bauman, duly executed by Mark A. Bauman;
(n) OTHER CLOSINGS. The "Closing," as defined in that
certain Stock Purchase Agreement, dated as of the date of this Agreement (the
"Stock Purchase Agreement"), by and between Buyer and Mark A. Bauman with
respect to all of the issued and outstanding shares of the capital stock of
Northcoast of America Cryogenic Inc., an Ohio corporation
("Northcoast/America"), shall have occurred; and the "Closing," as defined in
that certain Agreement and Plan of Merger, dated as of the date of this
Agreement (the "NCI Merger Agreement"), by and among Chart Industries, Inc.,
a Delaware corporation ("Chart"), NCI Acquisition Corp., an Ohio corporation,
Shareholders and NCI Sales and Leasing, Inc., an Ohio corporation ("NCI"),
shall have occurred;
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(o) {Intentionally omitted.}
(p) RELEASE OF GUARANTY. Northcoast/Texas shall have
received an unconditional release of its obligations under that certain
Commercial Guaranty, dated September 3, 1998, by Northcoast/Texas in favor of
Heller Financial, Inc., and evidence of such release shall have been given to
Buyer;
(q) OTHER. Buyer shall have received each other document
required to be delivered to Buyer hereunder.
Any agreement or document to be delivered to Buyer pursuant to this Section
6.2, the form of which is not attached to this Agreement as an exhibit, shall
be in form and substance satisfactory to Buyer.
6.3 CONDITIONS TO SELLER'S AND SHAREHOLDERS' OBLIGATIONS.
The obligations of each Seller and Shareholders to perform this
Agreement are subject to satisfaction of the following conditions at or
before the Closing with respect to BOTH Sellers:
(a) AGREEMENTS PERFORMED. Buyer shall have performed all of
the obligations under this Agreement to be performed by it at or before the
Closing;
(b) REPRESENTATIONS ACCURATE. The representations and
warranties of Buyer contained herein shall continue to be accurate in all
material respects just as if made at and as of the Closing;
(c) CERTIFICATE OF BUYER. Seller shall have received a
certificate from Buyer certifying as to the fulfillment of the conditions set
forth in Sections 6.3(a) and 6.3.(b), signed by Buyer's chief executive officer;
(d) LEGAL ACTION. There shall be no pending or threatened
legal action or inquiry which challenges the validity or legality of or seeks
to or could reasonably be expected to prevent, delay or impose conditions on
the consummation of the transactions contemplated by this Agreement;
(e) WIRE TRANSFER. Seller shall have received immediately
available funds by wire transfer in the amount of the Estimated Purchase
Price;
(f) ASSUMPTION OF LIABILITIES AGREEMENT. Seller shall have
received an Assumption of Liabilities Agreement substantially in the form
attached hereto as Exhibit 6.3(f), duly executed by Buyer;
(g) REAL ESTATE LEASES. NREL shall have received the
Michigan Lease and the Georgia Lease, each duly executed by
Northcoast/America, and F&B shall have received the Texas Lease, duly
executed by Buyer;
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(h) OTHER CLOSINGS. The "Closing," as defined in the Stock
Purchase Agreement, shall have occurred; and the "Closing," as defined in the
NCI Merger Agreement, shall have occurred;
(i) EMPLOYMENT AGREEMENT. Mark A. Bauman shall have received
an Employment Agreement, in a form mutually satisfactory to him and Buyer,
duly executed by Buyer; and
(j) OTHER. Seller and Shareholders shall have received each
other document required to be delivered to them hereunder.
ARTICLE 7
ADDITIONAL COVENANTS
7.1 PRE-CLOSING COVENANTS.
7.1.1 CONDUCT OF BUSINESS.
From the date hereof until the Closing, except to the extent
that Buyer otherwise consents in writing, the Business will be operated
substantially as presently operated and only in the ordinary course. Seller
and each Shareholder will use their respective best efforts to preserve
intact the present business organization and the relationships with persons
having business dealings with Seller. Without limiting the generality of the
foregoing, Seller will not:
(i) purchase or lease (or commit to purchase or lease)
any assets (other than inventory) in excess of
$10,000.00 individually or $50,000.00 in the
aggregate, except as otherwise expressly
contemplated by Section 4.5.9 hereof;
(ii) create, incur or assume any debt; assume, guarantee,
endorse or otherwise become liable or responsible
for the obligation of any other person or entity; or
make any loans, advances or capital contributions
to, or investments in, any other person or entity;
(iii) increase in any manner the rate of compensation of
any of its employees, other than normal increases
using standards consistent with past practice or as
required by any collective bargaining agreement; or
pay or agree to pay any bonus, pension, retirement
allowance, severance or other employee benefit not
required by any existing employee benefit plan;
(iv) permit any of its assets to be subjected to any
Lien;
(v) enter into any Contract, except in the ordinary
course of business consistent with past practice, or
modify or terminate any Contract
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under circumstances which might adversely affect the
condition (financial or otherwise) or prospects of
the Business;
(vi) sell or dispose of any assets other than inventory
in the ordinary course of business;
(vii) engage in any unusual or novel method of transacting
business, or change any accounting procedures or
practices, including practices with respect to the
payment of accounts payable or the collection of
accounts receivable, or change its financial
structure; or
(viii) take any action the taking of which, or omit to take
any action the omission of which, would cause any of
the representations and warranties herein to fail to
be true and correct in all respects as of the date
of such action or omission as though made at and as
of the date of such action or omission, except as
otherwise specifically contemplated by this
Agreement.
7.1.2 ACCESS.
From the date hereof until the Closing, Seller and Shareholders
shall provide Buyer, its lenders and their representatives full access to
Seller's personnel, facilities and all books and records and such other
information and persons relating to Seller or the Business as Buyer may
request. In addition, Seller and Shareholders shall permit Buyer to perform
engineering, environmental and workplace condition surveys and such other
physical inspections as Buyer deems necessary. If the transactions
contemplated by this Agreement are not consummated for any reason, Buyer
agrees to return to Seller all materials obtained from Seller and not to use
for its own benefit any information not available to Buyer from a source
other than Seller and not to disclose any information contained in the
materials except information available to Buyer from a source other than
Seller or required to be disclosed by law.
7.1.3 INTERIM FINANCIAL STATEMENTS.
Within 15 days after the end of each calendar month, if any,
prior to the Closing, Seller will deliver to Buyer unaudited balance sheets
of Seller and the related statements of income for the months then ended and
for that portion of such fiscal year ended with the last day of such monthly
accounting period, in each case certified by Seller to fairly present the
financial position and results of operations of Seller as at or for the
periods indicated on a basis consistent with past practice.
7.1.4 SUPPLEMENTAL DISCLOSURE.
Seller and Shareholders will immediately notify Buyer of any
event or circumstance which makes it necessary to correct any representation
and warranty contained in
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Article 4 which has been rendered inaccurate thereby; or arises hereafter and
which, had it existed on or prior to the date hereof, would have resulted in
an inaccuracy in a representation and warranty contained in Article 4.
7.1.5 SATISFACTION OF CONDITIONS.
Seller and Shareholders shall use their respective best efforts
to cause each of the conditions set forth in Section 6.2 to Buyer's
proceeding with the Closing to be satisfied at or before the Closing, as such
conditions may apply to that Seller hereunder AND as such conditions may
apply to the other Seller hereunder. Buyer shall use its best efforts to
cause each of the conditions set forth in Section 6.3 to each Seller's and
Shareholders' proceeding with the Closing to be satisfied at or before the
Closing.
7.1.6 TERMINATION.
As to each Seller, this Agreement may be terminated (i) by the
written agreement of Buyer and that Seller, or (ii) by Buyer or that Seller
at any time after March 23, 1999, if the Closing shall not have taken place
on or before such date. If this Agreement is terminated pursuant to clause
(i) of the preceding sentence, all provisions of this Agreement except
Sections 7.3, 7.4 and 8 shall become void without any liability on the part
of any party. If this Agreement is terminated pursuant to clause (ii) of the
first sentence of this Section 7.1.6, all rights and remedies of each party
hereunder and all other provisions hereof related thereto shall survive
termination to the extent required so that any party responsible for any
breach or nonperformance of its obligations hereunder prior to termination
shall remain liable for the damages resulting therefrom.
7.2 NONDISCLOSURE, NONCOMPETITION AND NONINTERFERENCE.
Northcoast/Texas, Northcoast/Kansas, and each Shareholder (i)
shall at all times hold in strictest confidence any and all confidential data
and other confidential information concerning the products, services,
businesses, suppliers and customers of the Business, (ii) for a period of
five (5) years following the Closing Date, shall not, without the prior
written consent of Buyer, either directly or indirectly operate or perform
any advisory or consulting services for, invest in (other than publicly
traded stock constituting less than 5% of the equity of a publicly held
corporation), or otherwise operate or become associated in any capacity with,
any corporation, partnership, organization, proprietorship or other business
entity or association which sells or performs services then in competition
with the Business at any place within the United States of America, and (iii)
for a period of five (5) years following the Closing Date, shall not, without
the prior written consent of Buyer, directly or indirectly induce or attempt
to induce any employee, agent or other representative or associate of Buyer
to terminate his or its relationship with Buyer, or in any way knowingly
interfere with such a relationship or a relationship between Buyer and any of
its suppliers or customers. Northcoast/Texas, Northcoast/Kansas, and each
Shareholder acknowledges that compliance with their respective covenants in
this Section 7.2 is necessary to protect Buyer's legitimate business
interests and that any breach of any such covenant will result in irreparable
and continuing damage to Buyer for which money damages alone will not provide
an adequate
28
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remedy, and that in the event of any such breach or threatened breach of any
such covenant, Buyer and its successors and assigns shall be entitled to
injunctive relief, without having to post any bond, and to such other and
further relief at law or in equity as is proper under the circumstances.
7.3 PUBLICITY.
Neither Buyer, Seller nor either Shareholder will make any
public announcement relating to this Agreement or the transactions
contemplated hereby without the written consent of Buyer and Seller, unless
and except to the extent otherwise required by law. If public disclosure or
notice is required by law, Buyer, Seller or a Shareholder, as the case may
be, will use his or its best efforts to give the other parties prior written
notice of the disclosure to be made.
7.4 EXPENSES; TRANSFER TAXES.
Except to the extent otherwise specifically provided herein,
Buyer shall pay all of the expenses incident to the transactions contemplated
by this Agreement which are incurred by Buyer or its representatives, and
each Seller and Shareholders shall pay all of the expenses incident to the
transactions contemplated by this Agreement which are incurred by such Seller
or Shareholders or their respective representatives. Each Seller shall pay
all sales, bulk transfer or other transfer Taxes, if any, which may be
payable in connection with the transactions contemplated by this Agreement.
7.5 ASSIGNMENT OF CONTRACTS, RIGHTS, ETC.
Notwithstanding any other provision of this Agreement or of any
bill of sale or other assignment instrument delivered hereunder, this
Agreement and any such bill of sale or assignment instrument shall not
constitute an agreement to assign any Contract or any claim or any right or
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 thereunder. Seller
and Shareholders shall use their respective best efforts to obtain the
consent of the other party to any such Contract to the assignment of such
Contract to Buyer in all cases in which such consent is required for
assignment or transfer. If such consent is not obtained, Seller and
Shareholders agree to cooperate with Buyer in any reasonable arrangement
designed to provide for Buyer the benefits thereunder, including but not
limited to having Buyer act as agent for Seller and having Seller enforce for
the benefit of Buyer any and all rights of Seller against the other party
thereto.
7.6 RECEIVABLES.
Buyer shall use all reasonable efforts to collect the accounts
receivable included in the Purchased Assets but Buyer shall not be required
to take or threaten legal action to collect any such accounts receivable. At
the option of Buyer, Seller and Shareholders jointly and severally agree to
repurchase from Buyer, for an amount equal to the unpaid balance thereof,
less any allowance for doubtful accounts reflected on the Final Closing
Balance Sheet,
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all or any part of the accounts receivable included in the Purchased Assets
applicable to such Seller which shall not have been paid within ninety (90)
days after the Closing Date (other than accounts receivable from the other
Seller hereunder or from Northcoast/America or NCI), it being understood that
Buyer shall exercise such option at any time after such date up to the first
anniversary of the Closing Date without waiving any rights hereunder. Seller
shall have the right to verify the existence of the unpaid balance of any
accounts receivable.
7.7 EMPLOYMENT.
Pending the Closing, Seller and Shareholders shall use their
respective best efforts to retain the services of those employees of Seller
whom Buyer desires to employ and to encourage such employees to continue
their employment with Buyer after the Closing. Buyer may offer employment,
on such terms and conditions as shall be determined by Buyer in its sole
discretion, to those employees of Seller as Buyer may determine in its sole
discretion, but Buyer, subject to Sections 6.2(m) and 6.3(i), shall not be
required to offer employment to any of Seller's employees. The employment by
Buyer of any employee of Seller who accepts the terms of employment offered
by Buyer will commence at the Closing. Seller shall pay the cost of any
compensation, severance or other benefits which may be payable to Seller's
employees to whom Buyer does not offer employment or to such other persons as
shall claim compensation, severance or other benefits in connection with the
consummation of the transactions contemplated by this Agreement. Subject to
Sections 6.2(m) and 6.3(i), nothing in this Agreement shall be deemed to
require Buyer to retain any of the employees it hires for any period of time
or at any particular compensation rate or in any particular position.
7.8 PRODUCT WARRANTY.
Although Buyer does not expressly or by implication assume any
of Seller's product warranty or product liability obligations, Buyer shall
have the right after the Closing, on Seller's behalf, to perform Seller's
obligations under Seller's product warranties in accordance with Buyer's
business judgment consistent with the ongoing operation of the Business. The
performance by Buyer of any of Seller's product warranty obligations shall
not give rise to any rights in Seller, either Shareholder, or any third
party. Seller and Shareholders, jointly and severally, agree to reimburse
Buyer upon demand for Buyer's reasonable costs in performing such obligations
for Seller, including but not limited to reasonable out-of-pocket costs and
reasonable internal labor, material and overhead costs at Buyer's customary
rates.
7.9 NO ASSIGNMENT.
Without the consent of Seller or Shareholders, Buyer may assign
all or any part of this Agreement and all or any part of its rights and
obligations hereunder to any affiliate of Buyer, to any of Buyer's lenders,
and to any person or entity which purchases from Buyer substantially all of
the business purchased by Buyer hereunder, in which event Seller and
Shareholders shall execute and deliver any documents reasonably requested by
the assignee in connection with such assignment. Except as for provided in
the preceding sentence, no assignment by any party of this Agreement or any
right or obligation hereunder may be made
30
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without the prior written consent of all other parties, and any assignment
attempted without such consent will be void.
7.10 CONSENT TO JURISDICTION.
Any action or proceeding brought by a party against any other
party in connection with this Agreement may be commenced in any federal or
state court located in Cuyahoga County, Ohio, or Lucas County, Ohio, and all
objections to personal jurisdiction and venue in any action or proceeding so
commenced are hereby waived. So long as service and process is by notice as
provided in Section 9.1 of this Agreement or as required by any such court,
all objections to improper service of process are hereby waived.
7.11 FURTHER ASSURANCES AND ASSISTANCE.
The parties agree that each will execute and deliver any and
all documents in addition to those expressly provided for herein that may be
necessary or appropriate to effect or give evidence to the provisions of this
Agreement and each of the other agreements and instruments delivered by them
in connection herewith and the consummation of the transactions contemplated
hereby. Seller further agrees that at any time and from time to time after
the Closing, it will execute and deliver to Buyer such further conveyances,
assignments or other written assurances as Buyer may reasonably request to
perfect and protect Buyer's title to the Purchased Assets.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLER AND SHAREHOLDERS.
Seller and Shareholders shall jointly and severally indemnify
Buyer against and hold Buyer harmless from (i) any and all loss, damage,
liability or deficiency (collectively, "Losses") resulting from or arising
out of any inaccuracy in or breach of any representation, warranty, covenant
or obligation made or incurred by Seller or Shareholders herein or in any
other agreement, instrument or document delivered by or on behalf of Seller
or Shareholders in connection herewith; (ii) any imposition (including by
operation of any bulk transfer or other law) or attempted imposition by a
third party (including any business broker or finder) upon Buyer of any
Retained Liability; and (iii) any and all costs and expenses (including
reasonable legal and accounting fees) (collectively, "Expenses") related to
any of the foregoing. In addition, and notwithstanding any disclosure to
Buyer hereunder or otherwise, Seller and Shareholders shall jointly and
severally indemnify Buyer against and hold Buyer harmless from any and all
Losses resulting from or arising out of: (i) the death of Hillard Mitchell
Jr. in or about September 1998, and any and all Expenses related thereto,
including in any present or future litigation relating thereto; and (ii) any
matters alleged by plaintiffs in the pending litigation captioned Andrew
Wilborn and Demetrius Wilborn vs. Northcoast of Texas Cryogenic, Inc. [sic],
Case No. 98-42541 in the 151st Judicial District, Harris County, Texas, or in
the pending litigation captioned Andrew Wilborn and Demetrius Wilborn v.
Northcoast
31
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Cryogenic, Inc. [sic], Case No. 2:98-CV-296 PG in the United States District
Court for the Southern District of Mississippi, Hattiesburg Division, and any
and all Expenses related thereto, including in any other present or future
litigation relating to such matters; and (iii) any matters alleged in or
arising out of the pending litigation captioned Milwaukee Precision Casting,
Inc. vs. Northcoast of America Cryogenic, Inc., Case No. 98CV009914 in the
Circuit Court of Milwaukee County, Wisconsin, and any and all Expenses
related thereto, including in any other present or future litigation relating
to such matters.
8.2 INDEMNIFICATION BY BUYER.
Buyer shall indemnify Seller and Shareholders against and hold
each of them harmless from (i) any and all Losses resulting from or arising
out of any inaccuracy in or breach of any representation, warranty, covenant
or obligation made or incurred by Buyer herein or in any other agreement,
instrument or document delivered by or on behalf of Buyer in connection
herewith; (ii) any imposition (including by operation of any bulk transfer or
other law) or attempted imposition by a third party (including any business
broker or finder) upon Seller or either Shareholder of any Assumed Liability;
and (iii) any and all Expenses related to any of the foregoing.
8.3 NOTIFICATION OF AND PARTICIPATION IN CLAIMS.
No claim for indemnification will arise until notice thereof is
given to the party from whom indemnity is sought. In the event that any
legal proceedings shall be instituted or any claim or demand be asserted by
any third party in respect of which Seller or either Shareholder on the one
hand, or Buyer on the other hand, may have an obligation to indemnify the
other(s), the party asserting such right to indemnity shall give or cause to
be given to the party from whom indemnity may be sought written notice
thereof, and such party shall have the right, at its option and expense, to
be present at the defense of such proceeding, claim or demand, but not to
control the defense, negotiation or settlement thereof, which control shall
at all times rest with the party asserting such right to indemnity, unless
the party from whom indemnity may be sought irrevocably acknowledges full and
complete responsibility for indemnification of the party asserting such right
to indemnity, in which case such party may assume such control through
counsel of its choice. The parties agree to cooperate fully with each other
in connection with the defense, negotiation or settlement of any such third
party legal proceeding, claim or demand.
8.4 SURVIVAL; LIMITATIONS ON INDEMNIFICATION.
The representations, warranties, covenants and agreements of
the parties contained herein or in any other agreements or documents executed
in connection herewith shall survive the Closing. Notwithstanding the
foregoing, the indemnification of Buyer provided under Section 8.1 shall be
limited in certain respects as follows: any claim for indemnification
relating to any inaccuracy in or breach of any representation or warranty of
Seller or Shareholders must be made within eighteen (18) months after the
Closing Date, except that (i) there shall be no limits on the time for making
a claim for indemnification relating to the representations and warranties
contained in Sections 4.1.1 ("Organization and
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Power"), 4.1.4 ("Ownership of Seller"), 4.2.1 ("Seller Enforceability"),
4.2.2 ("Shareholder Enforceability") or 4.7.1 ("Title"), (ii) any claim for
indemnification relating to the representations and warranties contained in
Section 4.3.4 ("Taxes") may be made until the expiration of the applicable
statute of limitations for either the assessment or collection of Taxes for
the periods referred to therein, and (iii) any claim for indemnification
relating to the representations and warranties contained in Sections 4.6
("Employee Benefits") or 4.7.4 ("Environmental Matters") may be made until
the second (2nd) anniversary of the Closing Date. There shall be no limits
on the time for making a claim for indemnification relating to the
undertakings of Seller set forth in the second sentence of Section 8.1 hereof.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 NOTICES.
All notices and other communications required by this Agreement
shall be in writing and shall be deemed given if delivered by hand or mailed
by registered or certified mail to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) If to Buyer, to: Northcoast Acquisition Corp.
c/o Chart Industries, Inc.
5885 Landerbrook Drive, Suite 150
Mayfield Heights, Ohio 44124
Attention: James R. Sadowski
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<PAGE>
With a copy to: Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Thomas F. McKee, Esq.
(b) If to Mark A. Bauman, to: Mark A. Bauman
8106 Beck Road
Ottawa Lake, Michigan 49267
If to Patrick J. Flynn, to: Patrick J. Flynn
9478 Douglas Road
Temperance, Michigan 48182
If to Seller, to Seller in care of both Mark A. Bauman and
Patrick J. Flynn at their respective addresses as provided
herein.
In each case,
with a copy to: Wasserman, Bryan, Landry & Honold
300 Inns of Court Building
405 North Huron Street
Toledo, Ohio 43604
Attention: David L. Honold, Esq.
9.2 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
9.3 INCLUSION.
In every place where it is used in this Agreement, the word
"including" is intended and shall be construed to mean "including, without
limitation".
9.4 "SELLER".
In every place where it is used in this Agreement, the word
"Seller" is intended and shall be construed to mean, simultaneously, both (a)
Northcoast/Texas, individually and severally, and (b) Northcoast/Kansas,
individually and severally; PROVIDED, HOWEVER, that the representations and
warranties of each Seller in Article 4 are made by that Seller jointly and
severally with Shareholders, and the obligations of each Seller in Article 8
are incurred by that Seller jointly and severally with Shareholders.
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9.5 HEADINGS.
The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
9.6 EXECUTION IN COUNTERPARTS; SIGNATURE PAGES.
This Agreement may be executed and delivered in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. This Agreement may be
executed and delivered with separate signature pages with the same effect as
though all parties had executed and delivered the same signature page.
9.7 SEVERABILITY.
In the event any part of Section 7.2 of this Agreement shall be
found by a court of competent jurisdiction to be invalid or unenforceable for
any reason, Seller and each Shareholder hereby grants to such court full
authority and discretion, and hereby authorizes and requests such court to
exercise all such authority and discretion as it may possess hereunder or
under applicable law, to reform such provision to the end that Seller and
Shareholders shall be subject to nondisclosure, noncompetition and
noninterference covenants that are reasonable under the circumstances and
enforceable by Buyer. In the event any other provision of this Agreement
shall be held unenforceable or invalid to any extent for any reason, such
provision shall remain in force and effect to the maximum extent permitted,
and the enforceability or validity of the remaining provisions of this
Agreement shall not be affected thereby.
9.8 AMENDMENTS, WAIVERS.
No amendment to or waiver of any of the provisions of this
Agreement, including this Section 9.8, shall be valid or enforceable unless
such amendment or waiver is set forth in writing and signed by the party
against whom enforcement of such amendment or waiver is sought or such
party's authorized representative. Unless otherwise expressly stated
therein, each such amendment or waiver shall be effective only with respect
to the specific instance in which it is given, and no such amendment or
waiver shall constitute a waiver of any other provision hereof (whether or
not similar), or a continuing waiver.
9.9 NO THIRD-PARTY RIGHTS.
Nothing expressed or implied in this Agreement is intended or
shall be construed to confer on any person, other than the parties hereto and
their respective successors and permitted assigns, any rights under this
Agreement.
9.10 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents to be
delivered hereunder constitute the entire agreement among the parties
pertaining to the subject matter
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hereof and supersede all prior and contemporaneous negotiations, agreements
and understandings of the parties. There are no warranties, representations
or other agreements between the parties in connection with the subject matter
hereof except as specifically set forth herein or in the agreements or
instruments delivered in connection herewith, and no supplement,
modification, waiver or termination of this Agreement shall be binding unless
executed in writing by the party sought to be bound thereby.
9.11 SCHEDULES AND EXHIBITS.
The schedules and exhibits referenced in this Agreement
constitute an integral part of this Agreement as if fully rewritten herein.
All references in this document to "this Agreement" and the terms "herein,"
"hereof," "hereunder" and the like shall be deemed to include all of such
schedules and exhibits.
9.12 TIME PERIODS.
Any action required hereunder to be taken within a certain
number of days shall, except as may otherwise be expressly provided herein,
be taken within that number of calendar days; PROVIDED, HOWEVER, that if the
last day for taking such action falls on a Saturday, a Sunday, or a day which
shall be in Cleveland, Ohio, or New York, New York, a legal holiday or a day
on which banking institutions therein are authorized by law to close, then
the period during which such action may be taken shall automatically be
extended to the next business day.
9.13 GOVERNING LAW.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Ohio, without giving effect to the
choice-of-laws or conflict-of-laws provisions thereof.
{The remainder of this page is intentionally left blank.}
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IN WITNESS WHEREOF, the parties have executed and delivered this Asset
Purchase Agreement as of the date first written above.
NORTHCOAST OF TEXAS CRYOGENICS, INC.
By: /s/ Mark A. Bauman
----------------------------------------
Mark A. Bauman, President
NORTHCOAST OF KANSAS CRYOGENICS, INC.
By: /s/ Mark A. Bauman
----------------------------------------
Mark A. Bauman, President
/s/ Mark A. Bauman
-------------------------------------------
MARK A. BAUMAN
/s/ Patrick J. Flynn
-------------------------------------------
PATRICK J. FLYNN
NORTHCOAST ACQUISITION CORP.
By: /s/ James R. Sadowski
----------------------------------------
James R. Sadowski,
President and Chief Operating Officer
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EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
by and between
MARK A. BAUMAN
("Seller")
and
NORTHCOAST ACQUISITION CORP.
("Buyer")
with respect to all of the
issued and outstanding shares of
NORTHCOAST OF AMERICA CRYOGENIC INC.
(the "Company")
March 15, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Estimated Payment at Closing. . . . . . . . . . . . . . . . . . . . . . . .2
1.5 Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.5.1 Closing Balance Sheet Preparation. . . . . . . . . . . . . . . . . .3
1.5.2 Closing Balance Sheet Review . . . . . . . . . . . . . . . . . . . .3
1.5.3 Closing Balance Sheet Dispute. . . . . . . . . . . . . . . . . . . .3
1.5.4 Post-Closing Refund. . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE 2 EARN-OUT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1 Earn-Out Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1.1 Net Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1.2 Northcoast Companies.. . . . . . . . . . . . . . . . . . . . . . . .6
2.2 Calculation and Payment of Earn-Out Amount. . . . . . . . . . . . . . . . .7
2.3 Supplemental Earn-Out Opportunity . . . . . . . . . . . . . . . . . . . . .7
2.4 Interim Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.5 Minimum Earn-Out if Early Termination of Employment Without Cause . . . . .8
ARTICLE 3 SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING THE
TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.1 Authority and Capacity. . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.2 Authorized and Issued Stock . . . . . . . . . . . . . . . . . . . . . . . .8
3.3 Title to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.4 Execution and Delivery; Enforceability. . . . . . . . . . . . . . . . . . .9
3.5 Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.6 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE 4 SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. . . . . .9
4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.1.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . . 10
4.1.2 Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1.3 Other Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1.4 {Intentionally omitted.} . . . . . . . . . . . . . . . . . . . . . 10
4.2 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2.1 {Intentionally omitted.} . . . . . . . . . . . . . . . . . . . . . 10
4.2.2 {Intentionally omitted.} . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
ii
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<TABLE>
<S> <C>
4.2.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2.4 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.1 Financial Records. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.2 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.3 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4.1 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 12
4.4.2 Product and Service Warranties . . . . . . . . . . . . . . . . . . 13
4.4.3 Product Liability. . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5.1 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5.2 Employment Termination . . . . . . . . . . . . . . . . . . . . . . 14
4.5.3 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5.4 Compliance with Contracts. . . . . . . . . . . . . . . . . . . . . 15
4.5.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5.6 Customers and Suppliers. . . . . . . . . . . . . . . . . . . . . . 16
4.5.7 Purchases and Sales. . . . . . . . . . . . . . . . . . . . . . . . 16
4.5.8 Prepayments and Deposits . . . . . . . . . . . . . . . . . . . . . 16
4.5.9 Capital Projects . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7.1 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7.2 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7.3 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7.4 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 18
4.7.5 Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7.6 Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.7.7 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 19
4.7.8 Extent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.8 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.9 Additional Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.9.1 Conflicts of Interest. . . . . . . . . . . . . . . . . . . . . . . 20
4.9.2 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . 21
5.1 Organization and Power. . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.1 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.2 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 6 CLOSING; CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Conditions to Buyer's Obligation. . . . . . . . . . . . . . . . . . . . . 22
6.3 Conditions to Seller's Obligations. . . . . . . . . . . . . . . . . . . . 25
ARTICLE 7 ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1.1 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 26
7.1.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1.3 Interim Financial Statements . . . . . . . . . . . . . . . . . . . 27
7.1.4 Supplemental Disclosure. . . . . . . . . . . . . . . . . . . . . . 27
7.1.5 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . 27
7.1.6 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 Nondisclosure, Noncompetition and Noninterference . . . . . . . . . . . . 28
7.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.4 Expenses; Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 {Intentionally omitted.}. . . . . . . . . . . . . . . . . . . . . . . . . 29
7.6 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.7 Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.8 {Intentionally omitted.}. . . . . . . . . . . . . . . . . . . . . . . . . 29
7.9 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.10 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . 30
7.11 Further Assurances and Assistance. . . . . . . . . . . . . . . . . . . . 30
7.12 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.13 Certain Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 8 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2 Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Notification of and Participation in Claims . . . . . . . . . . . . . . . 32
8.4 Survival; Limitations on Indemnification. . . . . . . . . . . . . . . . . 33
ARTICLE 9 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 33
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.2 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3 Inclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4 {Intentionally omitted.}. . . . . . . . . . . . . . . . . . . . . . . . . 34
9.5 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.6 Execution in Counterparts; Signature Pages. . . . . . . . . . . . . . . . 35
9.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.8 Amendments, Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.9 No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
9.11 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.12 Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.13 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
LIST OF SCHEDULES:
Schedule 4.1.2 (Qualification)
Schedule 4.2.3 (Consents)
Schedule 4.2.4 (Conflicts)
Schedule 4.3.1(a) (Financial Statements)
Schedule 4.3.1(b) (Exceptions from GAAP)
Schedule 4.3.2 (Liabilities)
Schedule 4.4.1 (Compliance with Laws)
Schedule 4.4.2 (Product and Service Warranties)
Schedule 4.4.3 (Product Liability)
Schedule 4.4.4 (Litigation)
Schedule 4.5.1 (Employment)
Schedule 4.5.2 (Employment Termination)
Schedule 4.5.3 (Contracts)
Schedule 4.5.5 (Insurance)
Schedule 4.5.8 (Prepayments and Deposits)
Schedule 4.5.9 (Capital Projects)
Schedule 4.6 (Employee Benefits)
Schedule 4.7.1 (Title)
Schedule 4.7.2 (Receivables)
Schedule 4.7.6 (Location of Assets)
Schedule 4.7.7 (Intellectual Property)
Schedule 4.8 (Real Property)
Schedule 4.9.1 (Conflicts of Interest)
v
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Where
Term Defined
- --------------------------------------------------------- ----------------
<S> <C>
Acquisition Balance Sheet . . . . . . . . . . . . . . . . Section 4.3.1(a)
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.1(d)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Asset Purchase Agreement. . . . . . . . . . . . . . . . . Section 6.2(n)
Automobile Note . . . . . . . . . . . . . . . . . . . . . Section 6.2(p)
Business Combination. . . . . . . . . . . . . . . . . . . Section 2.1.2
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Chart . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1
Closing Date. . . . . . . . . . . . . . . . . . . . . . . Section 6.1
Closing Payment . . . . . . . . . . . . . . . . . . . . . Section 1.4
Closing Working Capital . . . . . . . . . . . . . . . . . Section 1.3(b)
Company . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Contracts . . . . . . . . . . . . . . . . . . . . . . . . Section 4.5.3
Debt Certificate. . . . . . . . . . . . . . . . . . . . . Section 1.3(a)
Earn-Out Amount . . . . . . . . . . . . . . . . . . . . . Section 2.1
Earn-Out Period . . . . . . . . . . . . . . . . . . . . . Section 2.1
Employment Agreement. . . . . . . . . . . . . . . . . . . Section 6.2(m)
Estimated 1998 Tax Payment. . . . . . . . . . . . . . . . Section 7.13
Estimated Debt Adjustment . . . . . . . . . . . . . . . . Section 1.3(a)
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . Section 8.1
F&B . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(l)
Final Closing Balance Sheet . . . . . . . . . . . . . . . Section 1.5.2 OR
Section 1.5.3
Final Post-Closing Purchase Price Adjustment. . . . . . . Section 1.5.2 OR
Section 1.5.3
Fourth-Year Earn-Out. . . . . . . . . . . . . . . . . . . Section 2.3
Georgia Lease . . . . . . . . . . . . . . . . . . . . . . Section 6.2(l)
Hazardous Substances. . . . . . . . . . . . . . . . . . . Section 4.7.4
Hazardous Waste . . . . . . . . . . . . . . . . . . . . . Section 4.7.4
Independent Accountants . . . . . . . . . . . . . . . . . Section 1.5.3
Intellectual Property Rights. . . . . . . . . . . . . . . Section 4.7.7
Liability . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3.1(b)
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.3
Losses. . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.1
</TABLE>
vi
<PAGE>
<TABLE>
<CAPTION>
Where
Term Defined
- --------------------------------------------------------- ----------------
<S> <C>
Michigan Lease. . . . . . . . . . . . . . . . . . . . . . Section 6.2(l)
Michigan Option Agreement . . . . . . . . . . . . . . . . Section 6.2(l)
NCI . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.2(c)
NCI Acquisition . . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
NCI Merger Agreement. . . . . . . . . . . . . . . . . . . Section 6.2(n)
Net Closing Indebtedness. . . . . . . . . . . . . . . . . Section 1.3(a)
Net Worth Differential. . . . . . . . . . . . . . . . . . Section 1.3(c)
Northcoast Companies. . . . . . . . . . . . . . . . . . . Section 2.1.2
Northcoast/Kansas . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
Northcoast/Texas. . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
NREL . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
Post-Closing Purchase Price Adjustment. . . . . . . . . . Section 1.4
Pre-Closing Inventory . . . . . . . . . . . . . . . . . . Section 1.5.1
Preliminary Closing Balance Sheet . . . . . . . . . . . . Section 1.5.1
Preliminary Post-Closing Purchase Price Adjustment. . . . Section 1.5.1
Pre-Closing Taxes . . . . . . . . . . . . . . . . . . . . Section 7.13
Product Liability Claim . . . . . . . . . . . . . . . . . Section 4.4.3
Purchase Price. . . . . . . . . . . . . . . . . . . . . . Section 1.2
Seller. . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Shares. . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . Section 4.3.4
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3.4
Texas Lease . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(l)
Texas Option Agreement. . . . . . . . . . . . . . . . . . Section 6.2(l)
Three-Year Earn-Out . . . . . . . . . . . . . . . . . . . Section 2.3
Transferred Liquid Cylinder Repair Business . . . . . . . Section 2.1.1(c)
</TABLE>
vii
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered
into as of the 15th day of March, 1999, by and between MARK A. BAUMAN
("Seller"), and NORTHCOAST ACQUISITION CORP., an Ohio corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller owns all of the issued and outstanding shares
of the capital stock (as more particularly in Section 3.2 hereof, the
"Shares") of Northcoast of America Cryogenic Inc., an Ohio corporation (the
"Company"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, all of the Shares upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, Seller and Buyer hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE.
Subject to the terms and conditions of this Agreement, at the
Closing (as defined in Section 6.1), Seller shall sell, transfer and deliver
to Buyer, and Buyer will purchase from Seller, all of Seller's right, title
and interest in and to all of the Shares.
1.2 PURCHASE PRICE.
The aggregate purchase price for all of the Shares (the
"Purchase Price") shall be an amount equal to:
(a) Eight Hundred Eleven Thousand Dollars ($811,000.00), PLUS
(b) the Earn-Out Amount, if any, payable pursuant to Article 2
of this Agreement, MINUS
(c) the amount, if any, by which the Net Closing Indebtedness
(as defined below) exceeds $650,624.00, MINUS
(d) the amount, if any, by which $379,666.00 exceeds the
Closing Working Capital (as defined below); MINUS
1
<PAGE>
(e) the amount, if any, by which the Net Worth Differential (as
defined below) exceeds $45,000.00.
1.3 CERTAIN DEFINITIONS.
(a) "Net Closing Indebtedness" means an amount equal to (i)
the sum of all of the Company's indebtedness for borrowed money (including
obligations in respect of principal, accrued interest, and any applicable
prepayment charges or premiums), MINUS (ii) the sum of all cash and cash
equivalents held by the Company (not including checks or drafts issued but
not yet cleared), all as reflected on the Final Closing Balance Sheet (as
defined below). On the Closing Date, Seller will cause the Company to
estimate in good faith the amount of the Net Closing Indebtedness in
accordance with the preceding sentence, and will deliver to Buyer a
certificate signed by Seller and the Company's chief financial officer
setting forth such estimate (the "Debt Certificate"), together with such
supporting detail and lender confirmations as Buyer may request. The
"Estimated Debt Adjustment" will be the amount, if any, by which the estimate
of the Net Closing Indebtedness as set forth in the Debt Certificate exceeds
$650,624.00.
(b) "Closing Working Capital" means the difference between
(i) the Company's current assets MINUS (ii) the Company's current
liabilities, all as reflected on the Final Closing Balance Sheet; PROVIDED,
HOWEVER, that for purposes of such calculation, the Company's current assets
will not include any accounts or notes receivable from NCI, Northcoast/Texas
or Northcoast/Kansas, and the Company's current liabilities will not include
any accounts or notes payable to NCI, Northcoast/Texas or Northcoast/Kansas
and will not include any indebtedness for borrowed money (including
obligations in respect of principal, accrued interest, and any applicable
prepayment charges or premiums) taken into account in determining Net Closing
Indebtedness.
(c) "Net Worth Differential" means the difference between
(i) the net worth of the Company (I.E., all assets, net of depreciation and
amortization, less all liabilities) as actually reflected on the Final
Closing Balance Sheet, allowing for the variances from generally accepted
accounting principles identified on Schedule 4.3.1(b) hereto, MINUS (ii) the
net worth of the Company (I.E., all assets, net of depreciation and
amortization, less all liabilities) as it would be reflected on the Final
Closing Balance Sheet if the same were prepared without allowance for any of
the variances from generally accepted accounting principles identified on
Schedule 4.3.1(b) hereto.
1.4 ESTIMATED PAYMENT AT CLOSING.
At the Closing, Buyer will pay to Seller, subject to adjustment
as provided in Section 1.5 and subject to Section 7.13, an amount (the
"Closing Payment") equal to: (a) $811,000.00, MINUS (b) the Estimated Debt
Adjustment, if any, pursuant to Section 1.3(a) hereof. The Closing Payment
will be paid by means of a wire-transfer of immediately available funds to an
account designated by Seller. If, and to the extent that, the portion of the
Purchase Price payable before taking into account any Earn-Out Amount, as
determined in
2
<PAGE>
accordance with Sections 1.2(a), 1.2(c), 1.2(d), 1.2(e) and 1.5 hereof, is
less than the Closing Payment, then Seller shall refund the amount of such
difference to Buyer in accordance with Section 1.5 ("Post-Closing Purchase
Price Adjustment").
1.5 ADJUSTMENT.
1.5.1 CLOSING BALANCE SHEET PREPARATION.
Promptly after the Closing, Seller will prepare a balance sheet
of the Company as of the Closing ("Preliminary Closing Balance Sheet"). The
Preliminary Closing Balance Sheet will be prepared in accordance with
generally accepted accounting principles and, to the extent permitted
thereby, on a basis consistent with the past practices of the Company;
PROVIDED, HOWEVER, that the preparation of the Closing Balance Sheet may vary
from generally accepted accounting principles by not taking into account the
accruals and adjustments identified as "GAAP Adjustments" on Schedule
4.3.1(b) hereto. Seller caused the Company to conduct a physical inventory
as of March 7, 1999 (the "Pre-Closing Inventory"), the results of which shall
be accurately reflected in the Preliminary Closing Balance Sheet. Based on
the Preliminary Closing Balance Sheet, Seller will prepare a written
calculation of the Net Closing Indebtedness in accordance with the provisions
of Section 1.3(a), a written calculation of the Closing Working Capital in
accordance with the provisions of Section 1.3(b), and a written calculation
of the Net Worth Differential in accordance with the provisions of Section
1.3(c), and based thereon, a calculation of the Post-Closing Purchase Price
Adjustment in accordance with the provisions of Section 1.4 (the "Preliminary
Post-Closing Purchase Price Adjustment").
1.5.2 CLOSING BALANCE SHEET REVIEW.
Not later than forty-five (45) days after the Closing Date,
Seller will deliver to Buyer the Preliminary Closing Balance Sheet and
Seller's calculation of the Preliminary Post-Closing Purchase Price
Adjustment. All work papers, documents and records used or generated by
Seller and his accountants and other representatives in connection with the
preparation of its Preliminary Closing Balance Sheet and the calculation of
the Preliminary Post-Closing Purchase Price Adjustment will be made available
to Buyer. Unless Buyer gives Seller a written objection by the thirtieth
(30th) day after Buyer's receipt of the Preliminary Closing Balance Sheet and
the Preliminary Post-Closing Purchase Price Adjustment, the Preliminary
Closing Balance Sheet and the Preliminary Post-Closing Purchase Price
Adjustment will become final and binding on the parties and shall be deemed
to be the "Final Closing Balance Sheet" and the "Final Post-Closing Purchase
Price Adjustment," respectively.
1.5.3 CLOSING BALANCE SHEET DISPUTE.
If Buyer objects to the Preliminary Closing Balance Sheet or to
the Preliminary Post-Closing Purchase Price Adjustment and Buyer and Seller
are able to resolve their dispute within fifteen (15) days after Buyer's
objection, the Preliminary Closing Balance Sheet and the Preliminary
Post-Closing Purchase Price Adjustment (each as adjusted to reflect such
3
<PAGE>
resolution) will become final and binding on the parties and shall be deemed
to be the "Final Closing Balance Sheet" and the "Final Post-Closing Purchase
Price Adjustment," respectively. If Buyer objects to the Preliminary Closing
Balance Sheet or to the Preliminary Post-Closing Purchase Price Adjustment
and Buyer and Seller are unable to resolve their dispute within fifteen (15)
days after Buyer's objection, the dispute will be resolved in accordance with
the terms of this Agreement by the firm of Arthur Andersen LLP (the
"Independent Accountants"). The Independent Accountants will be instructed
to perform their services as expeditiously as possible. The resolution of
the Independent Accountants shall be presented in a "Final Closing Balance
Sheet" with respect to the Company and a "Final Post-Closing Purchase Price
Adjustment" with respect to the Company, each prepared by the Independent
Accountants, which shall be final and binding on the parties.
The fees and expenses of the Independent Accountants for the
resolution of any dispute shall be paid by Buyer and Seller in inverse
proportion to the respective amounts of the disputed matters which are
resolved in its favor. For example, if:
(a) Buyer claims that the Final Post-Closing Purchase
Price Adjustment should be $100;
(b) Seller claims that the Final Post-Closing Purchase
Price Adjustment should be $20; and
(c) the Independent Accountants determine that the Final
Post-Closing Purchase Price Adjustment is $40;
then the fees and expenses of the Independent Accountants would be paid 25%
by Seller (I.E., 20 DIVIDED BY 80), and 75% (I.E., 60 DIVIDED BY 80) by Buyer.
1.5.4 POST-CLOSING REFUND.
If, after giving effect to the Final Post-Closing Purchase
Price Adjustment, the portion of the Purchase Price payable before taking
into account any Earn-Out Amount pursuant to Article 2, as determined in
accordance with Sections 1.2(a), 1.2(c), 1.2(d), 1.2(e) and the foregoing
provisions of this Section 1.5, is less than the Closing Payment, then Seller
shall refund to Buyer the amount of such difference by means of a
wire-transfer of immediately available funds to an account designated by
Buyer. Any such post-closing refund shall be made not more than three (3)
days after the Preliminary Post-Closing Purchase Price Adjustment of the
Company becomes the Final Post-Closing Purchase Price Adjustment of the
Company.
4
<PAGE>
ARTICLE 2
EARN-OUT
2.1 EARN-OUT AMOUNT.
Subject to the terms and conditions of this Agreement, Seller
shall be entitled to receive, as a component of the Purchase Price for the
Shares, an amount (the "Earn-Out Amount") equal to three percent (3%) of the
Net Sales of the Northcoast Companies (each as defined below) with respect to
each fiscal year or partial fiscal year during the three-year period that
begins on the Closing Date ("Earnout Period"), subject to possible extension
for one additional year in accordance with Section 2.3 hereof.
2.1.1 NET SALES.
(a) As used herein, the term "Net Sales" shall mean (i) the
Northcoast Companies' aggregated revenues in respect of sales and leases of
goods or services by the Northcoast Companies, net of any returns, credits,
discounts or allowances extended to customers and net of any freight charges,
sales taxes and other similar charges, all as reflected on the books and
records of the Northcoast Companies in accordance with generally accepted
accounting principles, consistently applied, of Buyer, PLUS (ii) those
revenues of Affiliates (as defined below) of the Northcoast Companies
described in Section 2.1.1(b), MINUS (iii) those revenues of the Northcoast
Companies described in Section 2.1.1(c). Revenues described in the foregoing
clause (i) shall include, without limitation, revenues in respect of: repair
and rehabilitation services with respect to cryogenic tanks, cryogenic
trailers and liquid cylinders; installation, maintenance and replacement
services with respect to VJ pipe; direct sales of pipe, pumps, trailers and
tanks; and direct sales of leased cryogenic equipment.
(b) In the event any Affiliate of a Northcoast Company shall
lease a product to an end-user customer of such Affiliate and, in connection
with such lease transaction, a Northcoast Company shall enter into a contract
with such Affiliate or with such customer to provide maintenance service with
respect to the product so leased, then "Net Sales" shall include the revenues
of such Affiliate in respect of such lease transaction, net of the items
described in Section 2.1.1(a), as reasonably determined by Buyer.
(c) The parties acknowledge that, from time to time after
the Closing, the Northcoast Companies may sell liquid cylinder repair
services to customers who have previously purchased such services from, but
whose business has been transferred or referred to the Northcoast Companies
by, their Affiliates (collectively, "Transferred Liquid Cylinder Repair
Business"). Section 2.1.1(a) notwithstanding, revenues realized by the
Northcoast Companies in respect of Transferred Liquid Cylinder Repair
Business shall be excluded from the calculation of "Net Sales" to the extent
such revenues are likely to have been realized by such Affiliates, taking
into account such customers' prior sales volumes, had such transfers or
referrals not occurred. The determination of the revenues to be excluded
from the calculation of "Net Sales" pursuant to this Section 2.1.1(c) shall
be made by mutual agreement of Buyer
5
<PAGE>
and Seller, each acting reasonably and in good faith in accordance herewith,
and set forth in a writing signed by such parties at the time at which each
such transfer or referral occurs.
(d) For purposes of this Article 2, an "Affiliate" of a
Northcoast Company means a corporation, partnership, limited liability
company or other business entity which directly or indirectly controls, is
controlled by, or is under common control with such Northcoast Company, and
"control" means possession of the power to direct or cause the direction of
the management and policies of an entity through ownership of voting
securities or by contract.
2.1.2 NORTHCOAST COMPANIES.
As used herein, the term "Northcoast Companies" shall mean and
include:
(a) Buyer, or, from and after any Business Combination (as defined
below) involving Buyer, the business carried on using only the
assets of Buyer (other than the Shares purchased hereunder) as
such assets exist immediately after the consummation of the
transactions contemplated by this Agreement, but including
replacements thereof in the ordinary course of business, and taken
substantially as an entirety, as reasonably determined by Buyer;
(b) the Company, or, from and after any Business Combination involving
the Company, the business carried on using only the assets of the
Company as such assets exist immediately after the consummation of
the transactions contemplated by this Agreement, but including
replacements thereof in the ordinary course of business, and taken
substantially as an entirety, as reasonably determined by Buyer;
and
(c) NCI Sales and Leasing, Inc., an Ohio corporation ("NCI"), or, from
and after any Business Combination involving NCI, the business
carried on using only the assets of NCI as such assets exist
immediately after the consummation of the transactions
contemplated by this Agreement, but including replacements thereof
in the ordinary course of business, and taken substantially as an
entirety, as reasonably determined by Buyer.
For purposes of this Section 2.1.2, a "Business Combination" shall mean a
merger or consolidation to which a Northcoast Company is a constituent entity
(whether or not it is the surviving entity), or a transaction in which a
Northcoast Company transfers all or substantially all of its assets to
another entity, or a transaction in which a Northcoast Company acquires all
or substantially all of the assets of another entity.
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2.2 CALCULATION AND PAYMENT OF EARN-OUT AMOUNT.
(a) 1999. On or before March 1, 2000, Buyer will calculate
and pay to Seller the Earn-Out Amount, if any, that accrues to Seller
pursuant to Section 2.1 during the period from the Closing Date to December
31, 1999.
(b) 2000. On or before March 1, 2001, Buyer will calculate
and pay to Seller the Earn-Out Amount, if any, that accrues to Seller
pursuant to Section 2.1 during the 12-month period that ends on December 31,
2000.
(c) 2001. On or before March 1, 2002, Buyer will calculate
and pay to Seller the Earn-Out Amount, if any, that accrues to Seller
pursuant to Section 2.1 during the 12-month period that ends on December 31,
2001.
(d) 2002. On or before May 1, 2002, Buyer will calculate
and pay to Seller the Earn-Out Amount, if any, that accrues to Seller
pursuant to Section 2.1 during the period that begins on January 1, 2002, and
ends on the third anniversary of the Closing Date.
2.3 SUPPLEMENTAL EARN-OUT OPPORTUNITY.
If the sum of the amounts payable to Seller pursuant to
paragraphs 2.2(a), 2.2(b), 2.2(c) and 2.2(d) (the "Three-Year Earn-Out")
equals or exceeds One Million Dollars ($1,000,000.00), then no Earn-Out
Amount shall accrue after the third anniversary of the Closing Date, and all
further liability of Buyer under this Article 2 shall cease (except liability
for payment of the Earn-Out Amount in accordance with Section 2.2). If, and
only if, the Three-Year Earn-Out is less than One Million Dollars
($1,000,000.00), then Buyer, on or before May 1, 2003, will calculate the
Earn-Out Amount, if any, that accrues to Seller pursuant to Section 2.1
during the period that begins on the third anniversary of the Closing Date
and ends on the fourth anniversary of the Closing Date (the "Fourth Year
Earn-Out"), and will pay to Seller the LESSER of (a) the Fourth Year
Earn-Out, or (b) such portion of the Fourth Year Earn-Out which, when added
to the Three-Year Earn-Out, equals One Million Dollars ($1,000,000.00). In
other words, if the Three-Year Earn-Out is less than $1,000,000.00, then the
sum of the Three-Year Earn-Out plus the Fourth Year Earn-Out shall not exceed
$1,000,000.00.
2.4 INTERIM PAYMENTS.
Buyer in its sole discretion may, but shall not be required to,
make advance payments of Earn-Out Amount prior to the time at which payments
of Earn-Out Amount become due pursuant to Sections 2.2 or 2.3. Any and all
such advance payments shall be applied to Buyer's liability, if any, for
payments of Earn-Out Amount in the order in which such payments become due in
accordance with Sections 2.2 and 2.3, and shall be refunded by Seller to
Buyer upon Buyer's demand if and to the extent any amounts advanced exceed
the Earn-Out Amount owed to Seller at the next scheduled date for payment
under Section 2.2 or 2.3.
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2.5 MINIMUM EARN-OUT IF EARLY TERMINATION OF EMPLOYMENT WITHOUT
CAUSE.
Earn-Out Amount shall continue to accrue and be paid in
accordance with this Agreement notwithstanding any termination of Seller's
employment under the Employment Agreement for any reason during the Earn-Out
Period. However, if Seller's employment under the Employment Agreement is
terminated by the employer prior to the third anniversary of the date
thereof, and if such termination is effected by the employer without "cause"
for purposes of the Employment Agreement, then Buyer, on or before May 1,
2003, will pay to Seller as additional Earn-Out Amount the amount, if any, by
which (i) One Million Dollars ($1,000,000.00) exceeds (ii) the sum of (A) all
prior payments of Earn-Out Amount pursuant to Sections 2.2 and 2.3 hereof,
PLUS (B) all base salary payable to Seller after such termination pursuant to
the terms of the Employment Agreement.
ARTICLE 3
SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
Seller represents and warrants to Buyer as follows:
3.1 AUTHORITY AND CAPACITY.
Seller possesses all requisite legal right, power, authority
and capacity to execute, deliver and perform this Agreement, including the
authority and capacity to sell and transfer the Shares to Buyer as provided
by this Agreement.
3.2 AUTHORIZED AND ISSUED STOCK.
The total authorized capital stock of the Company consists of
750 shares, all of which are Common Shares, without par value. Of such
authorized shares, a total of 100 are issued and outstanding (collectively,
the "Shares"), and all 100 are owned of record and beneficially by Seller
exclusively. All of the Shares have been duly authorized and validly issued,
are fully paid and nonassessable, and have been issued in compliance with
(and since issuance, have not been transferred except in compliance with) all
applicable federal and state securities laws and any preemptive rights,
rights of first refusal, or similar rights of any person. There does not
exist any right or security granted or issued by the Company, Seller or any
other person to cause the Company or Seller to issue or sell any shares of
capital stock of the Company to any person (including, without limitation,
any stock option, warrant, convertible debt obligation, subscription for
stock or securities convertible into stock of the Company, or any other
similar right, security, instrument or agreement). Neither the Company nor
Seller is a party to, and none of the Company Shares is subject to, any close
corporation agreement, voting trust agreement, buy-sell agreement, or other
similar agreement relating in any way to the voting or the transfer of any
Company Shares.
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3.3 TITLE TO SHARES.
Seller owns all of the Shares free and clear of all liens,
charges, covenants, conditions, adverse claims, demands, encumbrances,
limitations, security interests or other title defects or restrictions of any
kind (collectively, "Liens").
3.4 EXECUTION AND DELIVERY; ENFORCEABILITY.
This Agreement has been, and each other document, instrument or
agreement to be executed and delivered by Seller in connection herewith will
upon such delivery be, duly executed and delivered by Seller, and
constitutes, or will upon such delivery constitute, the legal, valid and
binding obligation of Seller, enforceable in accordance with its terms.
3.5 NONCONTRAVENTION.
Seller is not required to submit any notice, report or other
filing with any governmental authority in connection with Seller's execution,
delivery or performance of this Agreement or any other document, instrument
or agreement to be executed and delivered by Seller in connection herewith,
and such execution, delivery and performance will not violate any statute,
rule, regulation, ordinance, arbitration award, judgment, order or decree
(each, a "Law") by which Seller is bound or any agreement to which Seller is
a party. No consent, approval or authorization of any governmental authority
or any other person is required to be obtained by Seller in connection with
Seller's execution, delivery and performance of this Agreement or any other
document, instrument or agreement to be executed and delivered by Seller in
connection herewith.
3.6 BROKERAGE.
No person is or will become entitled, by reason of any
agreement or arrangement entered into or made by or on behalf of Seller or
the Company, to receive any commission, brokerage, finder's fee or other
similar compensation in connection with the consummation of any of the
transactions contemplated by this Agreement.
ARTICLE 4
SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
Seller represents and warrants to Buyer as follows:
4.1 ORGANIZATION.
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4.1.1 ORGANIZATION AND POWER.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Ohio. The Company has
full corporate power to own, lease and operate its assets and carry on its
business as and where such assets are now owned or leased and as such
business is presently being conducted.
4.1.2 QUALIFICATION.
Schedule 4.1.2 lists each state or foreign country in which the
Company (i) owns or leases real property, (ii) has employees or sales agents,
or (iii) maintains inventory. The Company is qualified to do business as a
foreign corporation in each of the states and foreign countries listed in
Schedule 4.1.2. The Company is not required to be qualified to do business
in any other state or foreign country where the failure to be so qualified
would have a material adverse effect on the Company.
4.1.3 OTHER VENTURES.
Except as otherwise disclosed on Schedule 4.1.3, the Company
does not have any ownership interest in any other business entity, is not a
member of any partnership, joint venture or limited liability company, and
has never operated as a subsidiary or division of any other corporation or
other business entity.
4.1.4 {Intentionally omitted.}
4.2 AGREEMENTS.
4.2.1 {Intentionally omitted.}
4.2.2 {Intentionally omitted.}
4.2.3 CONSENTS.
Except as set forth on Schedule 4.2.3, no approval or consent
of, or filing with, any person, entity or governmental authority is required
to be obtained by the Company in connection with the transactions
contemplated hereby or the execution, delivery or performance by Seller of
this Agreement or any other agreement or document delivered or to be
delivered by or on behalf of Seller or the Company.
4.2.4 NO CONFLICTS.
Except as set forth on Schedule 4.2.4, no action taken by or on
behalf of Seller or the Company in connection herewith, including but not
limited to the execution, delivery and performance of this Agreement by
Seller and each other agreement and document to be delivered by Seller or the
Company in connection herewith, (i) gives rise to a right of
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termination or acceleration or the loss or impairment of any material right
or benefit under any Contract by which the Company or any of its assets is
bound, (ii) disrupts or impairs any business relationship which the Company
has with any dealer, distributor, sales representative, supplier or customer,
(iii) conflicts with or violates any law, the Company's Articles of
Incorporation, the Company's Code of Regulations, any Contract by which the
Company or Seller is bound, or any order, arbitration award, judgment, decree
or other similar restriction to which the Company or Seller is subject, or
(iv) constitutes an event which, after notice or lapse of time or both, could
result in any of the foregoing.
4.3 FINANCIAL.
4.3.1 FINANCIAL RECORDS.
(a) Schedule 4.3.1(a) consists of (i) the balance sheets of
the Company as of December 31, 1997, 1996 and 1995 and the related statements
of income and retained earnings for the twelve-month periods then ended, and
(ii) the balance sheet of the Company as of November 30, 1998, and the
related income statement for the 11-month period then ended, and (iii) the
balance sheet of the Company as of January 31, 1999 (the "Acquisition Balance
Sheet"), all as prepared by the Company.
(b) Except as expressly disclosed in Schedule 4.3.1(b), all
such financial statements were prepared from the Company's books of account
in accordance with generally accepted accounting principles, consistently
applied, are accurate and complete, and present fairly the financial position
and results of operations of the Company at the dates and for the periods
indicated, except, in the case of the Acquisition Balance Sheet and related
income statement, for customary year-end adjustments of a normal recurring
type which would not be material in the aggregate and the absence of
footnotes. The books of account of the Company accurately reflect all items
of income and expense (including, but not limited to, accruals) and all
assets and Liabilities of the Company in accordance with normal accrual
accounting practices, subject to customary year-end adjustments of a normal,
recurring type which would not be material in the aggregate.
As used in this Agreement, the term "Liability" means and
includes any responsibility, obligation, duty, commitment, claim or
liability, whether known or unknown, accrued, absolute, contingent or
otherwise.
4.3.2 LIABILITIES.
The Company has no Liabilities except (i) to the extent
provided for or reserved against on the Acquisition Balance Sheet, (ii)
current Liabilities which have arisen in the ordinary course of business
consistent with past practice since the date of the Acquisition Balance Sheet
(all of which have been recorded on the Company's books), or (iii) as listed
on Schedule 4.3.2. Since the date of the Acquisition Balance Sheet, there has
not been any incurrence (whether discharged or not) of any Liability by the
Company other than current Liabilities incurred in the ordinary course of
business consistent with past practice.
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4.3.3 NO CHANGES.
Since the date of the Acquisition Balance Sheet, the Company
has been operated only in the ordinary course, consistent with past practice.
Since that date, there has not been any adverse change, or event or
circumstance which might reasonably be expected to result in an adverse
change, in the Company's assets, Liabilities, operating performance, business
relationships or prospects. Since the date of the Acquisition Balance Sheet,
there has been no change in any accounting policy or practice of the Company,
including practices with respect to the payment of accounts payable or the
collection of accounts receivable. Since the date of the Acquisition Balance
Sheet, the Company has not paid any dividend (whether in cash or in property)
or engaged in any transaction that has resulted in any shareholder of the
Company, any relative of a shareholder of the Company, or any entity
affiliated with any such shareholder or relative receiving any direct or
indirect economic benefit, other than payments of normal wages, salaries or
rents, and reimbursement of deductible business expenses actually incurred in
the ordinary course of business.
4.3.4 TAXES.
All tax returns, reports and declarations (collectively, "Tax
Returns") required by any governmental authority to be filed in connection
with the properties, business, income, expenses, net worth or franchises of
the Company have been timely filed, and all such Tax Returns are correct and
complete. The Company has delivered to Buyer copies of each of its most
recent federal, state and local Tax Returns. All governmental taxes, charges
or assessments and related deficiencies, interest and penalties
(collectively, "Taxes") due in connection with the properties, business,
income, expenses, net worth or franchises of the Company have been paid.
There are no Tax claims, audits or proceedings pending in connection with the
properties, business, income, expenses, net worth or franchises of the
Company, and, to the best knowledge of Seller and the Company, there are no
such threatened claims, audits or proceedings.
4.4 LEGAL.
4.4.1 COMPLIANCE WITH LAWS.
The Company is not in violation of (i) any outstanding
arbitration award, judgment, order or decree, or (ii) any law, regulation or
ordinance (each, a "law"), including any law relating to discrimination,
employment practices, protection of the environment, occupational health or
safety, working conditions, payroll withholding, pensions, zoning, or Taxes.
Except as disclosed on Schedule 4.4.1, there have been no allegations of or
inquiries concerning any violations of any law by the Company within the past
three years. Neither Seller nor the Company has received any notice or
allegation from any governmental authority of any jurisdiction to the effect
that the Company is or might be required to acquire or modify any asset or
change any aspect of its business operations in order to comply with any
applicable law. Except as listed on Schedule 4.4.1, no permits, licenses,
approvals or authorizations of any governmental authority are required to
conduct the Company's business. All such permits, licenses, approvals and
authorizations have been legally obtained and
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maintained by the Company and are in full force and effect. No proceeding is
pending to revoke or limit any of them or otherwise to impose any conditions
or obligations on the possession or transfer of any of them. In addition,
there is no state of facts or event which could reasonably be expected to
form the basis for any revocation or limitation of them or other imposition
of conditions or obligations on the possession or transfer of any of them.
In the past three years, there have been no claims, notices, orders or
directives issued by any governmental authority with respect to the business
of the Company or any of the Company's assets. The Company is not required
to make, and has no reasonable expectation that it will be required to make
in order to operate its business after the Closing, any expenditures to
achieve or maintain compliance with any law, except in amounts similar to
those reflected in the financial statements contained on Schedule 4.3.1.
4.4.2 PRODUCT AND SERVICE WARRANTIES.
Except as set forth on Schedule 4.4.2, there have been no
product warranty or service warranty claims made by customers of the Company
in the past three years and there are no product warranties or service
warranties outstanding or currently being offered to customers of the Company.
4.4.3 PRODUCT LIABILITY.
Except as set forth on Schedule 4.4.3, no claims alleging
bodily injury or property damage as a result of any defect in the design or
manufacture of any product or the breach of any duty to warn, test, inspect
or instruct of dangers therein (each a "Product Liability Claim"), have been
made or threatened against the Company within the past three years. There
are no defects in the design or manufacture of products manufactured or sold
by the Company which defects could result in a Product Liability Claim, and
there has not been any failure by the Company to warn, test, inspect or
instruct of dangers which could form the basis for a product recall or any
Product Liability Claim against the Company.
4.4.4 LITIGATION.
Except as set forth on Schedule 4.4.4, no claim, litigation,
investigation or proceeding is pending or, to the knowledge of Seller and the
Company, threatened against the Company or involving the Company has been
concluded in the past three years, and there is no state of facts or event
which could reasonably be expected to form the basis for such a claim,
litigation, investigation or proceeding. No arbitration award, judgment,
order, decree or similar restriction is outstanding against or relating to
the Company or its assets, business or products.
4.5 BUSINESS.
4.5.1 EMPLOYMENT.
The Company employs a total of thirty-three (33) employees.
The Company does not use any leased or temporary employees. Schedule 4.5.1
lists the names, current
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annual compensation rates and other compensation arrangements of all of the
Company's employees whose compensation paid or accrued during 1998 exceeded
$50,000.00 on an annualized basis. The Company has paid in full to all
employees, or made appropriate accruals for on its books of account, all
wages, commissions, bonuses and other direct compensation for all services
performed by its employees. The Company has withheld or collected from each
payment made to each of its employees the amount of all Taxes required to be
withheld or collected therefrom, and the Company has paid the same when due
to the proper governmental authorities. Except as set forth on Schedule
4.5.1, during the past three years there have been no controversies,
grievances or claims by any of the employees, former employees or
beneficiaries of any employees of the Company with respect to their
employment or employment benefits, including but not limited to any
discrimination claims, sexual harassment claims or workers' compensation
claims. There is no union representation of any of the Company's employees
and, to the knowledge of Seller and the Company, there has never been any
attempt by a labor organization to organize the Company's employees into a
collective bargaining unit. Since the date of the Acquisition Balance Sheet,
there has not been any general increase made or promised in the level or rate
of salaries or other compensation of any of the Company's employees.
4.5.2 EMPLOYMENT TERMINATION.
Except as set forth on Schedule 4.5.2, upon the termination of
employment of any of the Company's employees, the Company will not by reason
of anything done prior to or at the Closing be liable to any of its employees
for so-called "severance pay" or any other payments. To the knowledge of
Seller and the Company, none of the employees of the Company intends to
resign or seek other employment as a result of the transactions contemplated
hereby or otherwise.
4.5.3 CONTRACTS.
As used in this Agreement, the term "Contracts" means and
includes all agreements, contracts, leases, licenses, purchase or sales
orders, commitments, promises and similar arrangements evidencing or creating
any obligation, whether written or oral. Schedule 4.5.3 contains a complete
and accurate list of:
(a) all Contracts to which the Company is a party or by
which it is bound, involving amounts in excess of $50,000.00 or which are
cancelable by the Company only after giving at least 30 days' notice;
(b) all loan, financing, security, credit or other Contracts
evidencing or relating to indebtedness, guarantees or Liens;
(c) all Contracts with distributors, dealers or sales
representatives;
(d) all management, employment, consulting, or agency
Contracts and all collective bargaining Contracts;
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(e) all Contracts providing employee benefits;
(f) all Contracts which contain an obligation of
confidentiality with respect to information furnished by the Company to a
third party or received by the Company from a third party;
(g) all Contracts containing covenants limiting the freedom
of the Company to compete in any line of business or with any person or in
any geographic area or market;
(h) all Contracts relating to patents, trademarks, trade
names or copyrights or applications for any of the foregoing, inventions,
trade secrets or other proprietary information;
(i) all Contracts relating to the past or present disposal
of waste;
(j) all Contracts pursuant to which the Company leases or
subleases any real property, or any interest therein, from or to any person;
(k) all Contracts pursuant to which the Company leases or
subleases any personal property, or any interest therein, from or to any
person;
(l) all Contracts with any shareholder, officer, director,
consultant or employee of the Company, or any relative of any of the
foregoing, or any corporation, partnership, limited liability company or
other entity directly or indirectly owned or controlled by Seller, or one or
more of his relatives; and
(m) all other Contracts entered into other than in the
ordinary course of business consistent with past practice, including but not
limited to Contracts (i) with suppliers for the purchase of goods or services
in excess of normal requirements or at prices in excess of the current market
price, (ii) for the sale by the Company of goods or services at prices not
reasonably calculated to produce gross profit margins consistent with those
achieved by the Company during its three prior fiscal years, or (iii) which
contain terms or conditions which the Company cannot reasonably expect to
fulfill in their entirety.
Seller has delivered to Buyer accurate and complete copies of each such
written Contract, and an accurate and complete written description of each
such oral Contract, in each case with all modifications and amendments
thereto. Since the date of the last year-end balance sheet included in the
financial statements on Schedule 4.3.1, there has been no modification or
termination of any Contract under circumstances which might have an adverse
effect on the Company.
4.5.4 COMPLIANCE WITH CONTRACTS.
With respect to each Contract which is required to be disclosed
on any Schedule to this Agreement, (i) the Company is not in default under or
in violation thereof, and (ii) no event has occurred which, with notice or
lapse of time or both, would constitute such a default
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or violation. There have been no discussions or correspondence concerning
the breach by the Company of, or the termination of, any of such Contracts.
To the knowledge of Seller and the Company, there is no default under or
violation of any such Contract by any other party thereto.
4.5.5 INSURANCE.
Schedule 4.5.5 lists all insurance policies maintained by the
Company and identifies for each such policy the following information:
underwriter, policy number, coverage type, premium, expiration date, coverage
amount and deductible. All such policies are in full force and effect, and
all premiums have been paid. The Company is not, and has not been at any
time, subject to Liability as a self-insurer. Schedule 4.5.5 also sets forth
a description of all claims pending under such insurance policies.
4.5.6 CUSTOMERS AND SUPPLIERS.
No customer or supplier which has accounted for more than two
percent (2%) of the Company's sales or purchases in the past year and no
other customer or supplier material to the Company's business (including any
supplier which is the Company's sole source of supply of any product or
service) has terminated, or threatened to terminate, its relationship with
the Company or has during the past year decreased or delayed materially, or
threatened to decrease or delay materially, its purchases from the Company or
its sale of services or supplies to the Company, and there is no state of
facts or event which could reasonably be expected to form the basis for such
a decrease or delay. To the knowledge of Seller and the Company, the
transactions contemplated by this Agreement will not adversely affect the
relationship of the Company with any customer or supplier. The Company is
not required, in the ordinary course of business, to provide any bonding or
any other financial security arrangements in connection with transactions
with any supplier.
4.5.7 PURCHASES AND SALES.
Since the date of the most recent year-end balance sheet
included in the financial statements on Schedule 4.3.1, the Company has not
made any purchase commitments in excess of its normal business requirements
and there has not been any reduction in the aggregate dollar volume of the
Company's backlog of sales orders.
4.5.8 PREPAYMENTS AND DEPOSITS.
Except as disclosed on Schedule 4.5.8, the Company has not
received any prepayments or deposits from customers for products to be
shipped, or for services to be performed, after the Closing.
4.5.9 CAPITAL PROJECTS.
Schedule 4.5.9 contains a description of all capital projects
committed for or authorized by the Company involving the expenditure of
$10,000.00 or more. Except as
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disclosed on Schedule 4.5.9, the estimated aggregate cost of completing all
capital projects does not exceed $50,000.00.
4.6 EMPLOYEE BENEFITS.
Except as otherwise set forth on Schedule 4.6, the Company does
not maintain and is not required to contribute to any employee benefit plan,
welfare benefit plan or pension plan. Seller has delivered to Buyer accurate
and complete copies of each such written plan, and an accurate and complete
written description of each such oral plan, in each case with all
modifications and amendments thereto. Each employee benefit plan, welfare
benefit plan or pension plan maintained by the Company has been operated in
accordance with its terms and all applicable laws. The Company has not
engaged in any prohibited transaction with respect to any employee benefit
plan which it maintains or to which it contributes. The Company has the
right to amend or terminate, without the consent of any other person or
entity, any employee benefit plan which it maintains, except as otherwise
prohibited by law. No welfare benefit plan maintained by the Company is
funded by a trust or fails to satisfy any applicable requirement for
tax-favored treatment. There are no unfunded benefit liabilities or
accumulated funding deficiencies under any pension plan maintained by the
Company. The Company is not required, nor has it ever been required, to
contribute to or with respect to any multiemployer plan.
4.7 ASSETS.
4.7.1 TITLE.
Except as set forth on Schedule 4.7.1, the Company owns, with
good title, and in every case free and clear of all Liens, all of the
properties and assets which it purports to own (whether real, personal or
mixed, and whether tangible or intangible), including all properties and
assets reflected on the Acquisition Balance Sheet (other than assets disposed
of in the ordinary course of business since the date of the Acquisition
Balance Sheet).
4.7.2 RECEIVABLES.
All of the Company's accounts receivable represent valid
obligations arising from sales actually made or services actually performed.
None of the Company's accounts receivable is subject to any set-off or
counterclaim, and, to the knowledge of Seller and the Company, all of the
Company's accounts receivable are collectible to the extent included on the
Final Closing Balance Sheet. Schedule 4.7.2 sets forth a 30/60/90 day aging
summary of the Company's accounts receivable as of January 31, 1999. Seller
has delivered to Buyer the Company's complete aging schedule of accounts
receivables as of such date.
4.7.3 INVENTORIES.
All inventory has been valued on the Acquisition Balance Sheet
and on the Company's records and books of account at the lower of cost
(determined on a first-in, first-out basis) or market value on a basis
consistent with that reflected in the annual financial
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statements included on Schedule 4.3.1. Obsolete inventory and inventory of
below-standard quality has been written down to amounts not in excess of net
realizable value. All of the Company's finished goods inventories are
currently salable in the ordinary course of business consistent with past
practice at gross profit margins consistent with the levels reflected in the
annual financial statements included on Schedule 4.3.1. All of the Company's
work-in-process, raw materials and supplies inventories can be used or
consumed in the usual and ordinary course of business as now conducted and
are not in amounts in excess of normal requirements. The Pre-Closing
Inventory was conducted in accordance with the Company's past practices and
will be accurately reflected in the Preliminary Closing Balance Sheet. The
Company's actual inventories as of the Closing will be the same as reflected
in the Pre-Closing Inventory except for sales or purchases of inventory in
the ordinary course of business during the period from March 7, 1999, to the
Closing.
4.7.4 ENVIRONMENTAL MATTERS.
The Company has not generated, used, treated, released, stored
or disposed of any Hazardous Substances or any Hazardous Waste (as such terms
are hereinafter defined) in a manner that has caused or could cause the
Company or Buyer to incur any Liability under any applicable laws. The
Company has complied in all respects with all federal, state and local
environmental laws, rules and regulations applicable to the Company and its
operations. To the knowledge of Seller and the Company, there are no
underground storage tanks located on (nor, to the knowledge of Seller and the
Company, have any underground storage tanks been removed from) any real
property currently owned or leased by the Company or formerly owned or leased
by the Company. For purposes of this Agreement, the term "Hazardous
Substances" shall have the meaning set forth in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
and the regulations thereunder, or as defined by any similar law of any
jurisdiction where the Company has conducted business or has generated, used,
treated, released, stored or disposed of any Hazardous Substances, and also
shall include petroleum products, asbestos, urea formaldehyde and
polychlorinated biphenyls. For purposes of this Agreement, the term
"Hazardous Waste" shall have the meaning set forth in the Resource
Conversation and Recovery Act, as amended, and the regulations thereunder, or
as defined by any similar law of any jurisdiction where the Company has
conducted business or has generated, used, treated, released, stored or
disposed of any Hazardous Waste. To the knowledge of Seller and the Company,
there has not been any release of Hazardous Substances or Hazardous Waste at
or from any properties adjacent to any current or former facilities of the
Company. To the knowledge of Seller and the Company, there are no materials
containing asbestos or urea formaldehyde incorporated into the building or
interior improvements that are part of the Company's owned or leased
facilities, and there is no equipment or fixture containing any
polychlorinated biphenyls located at any of the Company's owned or leased
facilities.
4.7.5 CONDITION.
All of the Company's tangible assets, and all of the tangible
assets leased by the Company, are in good operating condition, normal wear and
tear excepted, neither require nor
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are reasonably expected to require any special or extraordinary expenditures
to remain in such condition beyond maintenance and repairs necessary in the
ordinary course of business, and are capable of being used for their intended
purpose in the ordinary course of business consistent with past practice.
4.7.6 LOCATION.
All of the Company's assets are located at the address or
addresses set forth on Schedule 4.7.6.
4.7.7 INTELLECTUAL PROPERTY.
Schedule 4.7.7 lists all Intellectual Property Rights (as
defined below) owned by the Company or in which (as noted on such Schedule)
the Company has any rights or licenses. To the knowledge of Seller and the
Company, there has not been any infringement or alleged infringement by
others of any such Intellectual Property Rights. Except as set forth on
Schedule 4.7.7, the Company is not a party to any Contract, whether as
licensor, licensee, franchisor, franchisee, dealer, distributor or otherwise,
with respect to any Intellectual Property Rights. The Company has the right
to use all Intellectual Property Rights as are necessary to enable the
Company to conduct, and to continue to conduct after the Closing, all phases
of its business in the manner presently conducted by the Company, and that
use has not conflicted with, infringed upon or otherwise violated any rights
of any person or entity. The Intellectual Property Rights listed on Schedule
4.7.7 are valid and in full force and effect and are not subject to any
Taxes, maintenance fees, or actions falling due within the next three months.
Except as set forth on Schedule 4.7.7, there have been no interference
actions or other judicial, arbitration or other adversary proceedings
concerning the Intellectual Property Rights listed on Schedule 4.7.7. The
Company has not infringed any intellectual property right or other right of
any other person or entity. To the knowledge of Seller and the Company, none
of the Intellectual Property Rights has been used, divulged or appropriated
for the benefit of any past or present employees of the Company or any other
person or entity, or to the detriment of the Company. The Company has not
disposed of or permitted to lapse, or otherwise failed to preserve the
Company's right to use, any rights referenced in this Section 4.7.7.
"Intellectual Property Rights" means and includes all
intellectual property, including trade names, trademarks and service marks
and all registrations and applications therefor, together with the goodwill
of the business symbolized or represented by the foregoing, mask works, works
of authorship and all copyrights related thereto and all registrations and
applications therefor, inventions, discoveries, designs, industrial models
and all patent rights relating thereto and all applications therefor and all
reissues, divisions, continuations and extensions thereof, know-how, trade
secrets, processes, technology, discoveries, formulae and procedures.
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4.7.8 EXTENT.
The Company owns, or has a valid and subsisting interest as a
lessee or licensee in, and in any case has the right to hold and to use, all
assets (whether real, personal or mixed, and whether tangible or intangible)
which have been used to conduct its business in the ordinary course as such
business is presently being conducted. Since the date of the most recent
fiscal year-end balance sheet included on Schedule 4.3.1, there has not been
any damage to or disposition (except for the sale of inventory in the
ordinary course of business consistent with past practice) or loss of
(whether or not covered by insurance) any asset of the Company. Over the
period covered by the financial statements included on Schedule 4.3.1, no
aspect of the business of the Company was conducted by any affiliate of the
Company or any affiliate of Seller or any former shareholder of the Company.
4.8 REAL PROPERTY.
Complete and accurate legal descriptions of all real property
owned or leased by the Company are set forth on Schedule 4.8. There is no
state of facts or event which could reasonably be expected to form the basis
for any condemnation proceedings which could effect such real property or any
future improvements by any public authority, any part of the cost of which
could be assessed against such real property. In the past three years, the
Company has not experienced any interruption in the delivery of adequate
utilities required in the operation of its business. The roof and foundation
of the real property owned or leased by the Company are watertight and free
of leaks, seepages and moisture.
4.9 ADDITIONAL MATTERS.
4.9.1 CONFLICTS OF INTEREST.
Except as set forth on Schedule 4.9.1, no shareholder, director
or employee of the Company, nor any relative of any shareholder, director or
employee of the Company, nor any affiliate of any of the foregoing, (i) owns,
directly or indirectly, any interest in, or is an employee or agent of, any
entity which is a competitor, lessor, lessee, customer or supplier of the
Company, (ii) owns, directly or indirectly, any interest in any tangible or
intangible property, asset or right which the Company uses in its business,
(iii) has any cause of action or claim against, owes any amount to, or is
owed any amount by the Company other than salary and reimbursement of
deductible business expenses in the ordinary course of business, or (iv) is a
party to any Contract with the Company.
4.9.2 FULL DISCLOSURE.
No representation or warranty by Seller in this Agreement, and
no statement contained in any Schedule to this Agreement, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements contained therein, in light of the circumstances in which
they are made, not misleading. To the knowledge of Seller, there is no event
or circumstance which Seller has not disclosed to Buyer in writing which
adversely
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affects or could reasonably be expected to adversely affect the business,
prospects, or condition (financial or otherwise) of the Company or the
ability of Seller to perform this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 ORGANIZATION AND POWER.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio. Buyer has full corporate
power to execute, deliver and perform this Agreement and all other agreements
and documents to be executed and delivered by it in connection herewith.
5.2 AGREEMENTS.
5.2.1 ENFORCEABILITY.
All requisite corporate action to approve, execute, deliver and
perform this Agreement and each other agreement and document delivered or to
be delivered by Buyer in connection herewith has been taken by Buyer. This
Agreement and every other agreement and document delivered or to be delivered
by Buyer in connection herewith has been, or upon delivery will be, duly
executed and delivered by Buyer and constitutes a binding obligation of
Buyer, enforceable in accordance with its terms.
5.2.2 CONSENTS.
No approval or consent of, or filing with, any person, entity
or governmental authority is required in connection with the transactions
contemplated hereby or the execution, delivery or performance by Buyer of
this Agreement or any other agreement or document delivered or to be
delivered by or on behalf of Buyer in connection herewith, except for filings
required to be made by Buyer or its affiliates under the Securities Exchange
Act of 1934, as amended, and the regulations thereunder.
5.2.3 NO CONFLICTS.
No action taken by or on behalf of Buyer in connection
herewith, including, but not limited to, the execution, delivery and
performance of this Agreement and each other agreement and document delivered
or to be delivered by it in connection herewith, (i) conflicts with or
violates any law, Buyer's Articles of Incorporation, Buyer's Code of
Regulations, or any Contract by which Buyer is bound, or (ii) constitutes an
event which, after notice or lapse of time or both, could result in any of
the foregoing.
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ARTICLE 6
CLOSING; CLOSING CONDITIONS
6.1 CLOSING.
The consummation of the purchase and sale of the Shares and the
other transactions contemplated hereby (the "Closing") shall take place
simultaneously with the execution and delivery of this Agreement on the date
hereof, or on such other date as Buyer and Seller may agree in writing, at
the offices of Calfee, Halter & Griswold LLP at 800 Superior Avenue, Suite
1400, Cleveland, Ohio 44114, or at such other place as Buyer and Seller may
agree in writing. The date on which the Closing occurs is referred to herein
as the "Closing Date." The transfers and deliveries described in this
Article 6 shall be mutually interdependent and shall be regarded as occurring
simultaneously, and, notwithstanding any other provision of this Agreement,
no such transfer or delivery shall become effective or shall be deemed to
have occurred until all of the other transfers and deliveries provided for in
this Article 6 shall also have occurred or have been waived. Such transfers
and deliveries shall be deemed to have occurred and the Closing shall be
effective as of the commencement of business of the Company on the Closing
Date.
6.2 CONDITIONS TO BUYER'S OBLIGATION.
The obligation of Buyer to perform this Agreement is subject to
satisfaction of the following conditions at or before the Closing:
(a) AGREEMENTS PERFORMED. Seller shall have performed all
of the obligations under this Agreement to be performed by him at or before
the Closing;
(b) REPRESENTATIONS AND WARRANTIES ACCURATE. The
representations and warranties of Seller contained herein shall continue to
be accurate in all material respects just as if made at and as of the Closing;
(c) CERTIFICATE OF SELLER. Buyer shall have received a
certificate from Seller certifying as to the fulfillment of the conditions
set forth in Sections 6.2(a) and 6.2(b), signed by Seller;
(d) RELEASE OF GUARANTY. The Company shall have received an
unconditional release of its obligations under that certain Commercial
Guaranty, dated September 3, 1998, by the Company in favor of Heller
Financial, Inc., and evidence of such release shall have been given to Chart;
(e) GOOD STANDING. Buyer shall have received a certificate
as to the Company's good standing, dated no more than 10 days prior to the
Closing Date, from the
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secretary of state of Ohio and of each other state in which the Company is
qualified to do business as a foreign corporation;
(f) NO CHANGE. There shall not have occurred any material
adverse change, or any event, fact or circumstance which might reasonably be
expected to result in a material adverse change, in the financial condition,
results of operations, assets, business or prospects of the Company;
(g) LEGAL ACTION. There shall be no pending or threatened
legal action or inquiry which challenges the validity or legality of or seeks
to or could reasonably be expected to prevent, delay or impose conditions on
the consummation of the transaction contemplated by this Agreement;
(h) MINUTE AND STOCK RECORD BOOKS. Seller shall have
delivered to Buyer the complete originals of all existing corporate minute
books and stock record books of the Company;
(i) SHARE CERTIFICATES. Seller shall have delivered to
Buyer all certificates evidencing or representing all of the Shares, in each
case duly endorsed for transfer to Buyer or in blank, or accompanied by a
stock power duly endorsed to Buyer or in blank, and otherwise in proper form
for transfer to Buyer, free and clear of all Liens;
(j) CONSENTS. Buyer shall have received all consents,
approvals, permits, licenses and registrations of all persons, entities, and
governmental authorities necessary for Buyer and Seller to execute, deliver
and perform this Agreement and for the Company to continue operate its
business as heretofore conducted;
(k) ESTOPPEL CERTIFICATES; EVIDENCE OF DUE AUTHORIZATION,
ETC. Buyer shall have received an estoppel certificate from each lessor of
real property leased by the Company to the effect that the Company has not
breached any of its obligations to such lessor and an agreement from each
mortgagee of such lessor to the effect that so long as the Company fulfills
its post-Closing obligations under the applicable lease, the Company will be
entitled to occupy the premises for the remainder of the lease term and will
be entitled to all other rights of the Company under such lease;
(l) REAL ESTATE LEASES. The Company shall have received (i)
a lease agreement with respect to the premises located at 6875 Old U.S. 223,
Ottawa Lake, Michigan 49267 (the "Michigan Lease"), including the form of
Purchase and Sale Agreement appended thereto (the "Michigan Option
Agreement"), mutually satisfactory to Buyer and Northcoast Real Estate, Ltd.,
an Ohio limited liability company ("NREL"), with the Michigan Lease duly
executed by NREL, and (ii) a lease agreement with respect to the premises
located at 127 Rickman Industrial Drive, Holly Springs, Georgia 30142 (the
"Georgia Lease"), mutually satisfactory to Buyer and NREL, duly executed by
NREL; and Buyer shall have received a lease agreement with respect to the
premises located at 16655 Buffalo Speedway, Houston, Texas 77047 (the "Texas
Lease"), including the form of Purchase and Sale Agreement appended thereto
(the "Texas Option Agreement"), mutually satisfactory to Buyer and F&B
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Real Estate LLC, an Ohio limited liability company ("F&B"), with the Texas
Lease duly executed by F&B; and all prior lease agreements with respect to
such Michigan, Georgia and Texas facilities shall have been terminated to
Buyer's satisfaction;
(m) EMPLOYMENT AGREEMENT. Buyer shall have received an
Employment Agreement in a form mutually satisfactory to Buyer and Seller,
duly executed by Seller (the "Employment Agreement");
(n) OTHER CLOSINGS. The "Closing," as defined in that
certain Asset Purchase Agreement, dated as of the date of this Agreement (the
"Asset Purchase Agreement"), by and among Buyer, Northcoast of Texas
Cryogenics, Inc. ("Northcoast/Texas"), Northcoast of Kansas Cryogenics, Inc.
("Northcoast/Kansas"), Seller and Patrick J. Flynn with respect to
substantially all of the assets of Northcoast/Texas and Northcoast/Kansas,
shall have occurred; and the "Closing," as defined in that certain Agreement
and Plan of Merger, dated as of the date of this Agreement (the "NCI Merger
Agreement"), by and among Chart Industries, Inc., a Delaware corporation
("Chart"), NCI Acquisition Corp., an Ohio corporation ("NCI Acquisition"),
Seller, Patrick J. Flynn and NCI, shall have occurred;
(o) AFFILIATE RECEIVABLES. All accounts receivable of and
notes payable to the Company from Seller or from any entity directly or
indirectly controlled by Seller (other than Northcoast/Texas,
Northcoast/Kansas, or NCI) shall have been repaid to the Company in full,
except as otherwise provided in the Employment Agreement, and Seller shall
have delivered evidence of such repayment to Buyer;
(p) VEHICLE. Seller shall have purchased from the Company
the 1995 Lincoln Continental automobile referenced in that certain Fixed Rate
Simple Interest Note and Security Agreement, dated September 28, 1998, among
the Company, Seller and National City Bank (the "Automobile Note"), for cash
at a price equal to the unpaid principal amount and all accrued but unpaid
interest (including prepayment premiums, if any) on the Automobile Note, all
measured as of November 30, 1998, and Seller shall have delivered evidence of
such purchase to Buyer;
(q) RESIGNATIONS AND RELEASE. Buyer shall have received the
written resignations of all Directors and officers of the Company from their
respective directorships and offices as of the Closing, and shall have
received from Seller a duly executed general release of claims against the
Company; and
(r) OTHER. Buyer shall have received each other document
required to be delivered to Buyer hereunder.
Any agreement or document to be delivered to Buyer pursuant to this Section
6.2, the form of which is not attached to this Agreement as an exhibit, shall
be in form and substance satisfactory to Buyer.
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6.3 CONDITIONS TO SELLER'S OBLIGATIONS.
The obligations of Seller to perform this Agreement are subject
to satisfaction of the following conditions at or before the Closing:
(a) AGREEMENTS PERFORMED. Buyer shall have performed all of
the obligations under this Agreement to be performed by it at or before the
Closing;
(b) REPRESENTATIONS ACCURATE. The representations and
warranties of Buyer contained herein shall continue to be accurate in all
material respects just as if made at and as of the Closing;
(c) CERTIFICATE OF BUYER. Seller shall have received a
certificate from Buyer certifying as to the fulfillment of the conditions set
forth in Sections 6.3(a) and 6.3.(b), signed by Buyer's chief executive
officer;
(d) LEGAL ACTION. There shall be no pending or threatened
legal action or inquiry which challenges the validity or legality of or seeks
to or could reasonably be expected to prevent, delay or impose conditions on
the consummation of the transactions contemplated by this Agreement;
(e) WIRE TRANSFER. Seller shall have received immediately
available funds by wire transfer in the amount of the Closing Payment;
(f) {Intentionally omitted.}
(g) REAL ESTATE LEASES. NREL shall have received the
Michigan Lease and the Georgia Lease, each duly executed by the Company, and
F&B shall have received the Texas Lease, duly executed by Buyer;
(h) OTHER CLOSINGS. The "Closing," as defined in the Asset
Purchase Agreement, shall have occurred; and the "Closing," as defined in the
NCI Merger Agreement, shall have occurred;
(i) EMPLOYMENT AGREEMENT. Seller shall have received the
Employment Agreement, in a form mutually satisfactory to Seller and Buyer,
duly executed by Buyer; and
(j) OTHER. Seller shall have received each other document
required to be delivered to Seller hereunder.
ARTICLE 7
ADDITIONAL COVENANTS
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7.1 PRE-CLOSING COVENANTS.
7.1.1 CONDUCT OF BUSINESS.
From the date hereof until the Closing, except to the extent
that Buyer otherwise consents in writing, Seller will cause the Company to
operate its business substantially as presently operated and only in the
ordinary course. Seller will, and will cause the Company to, use their
respective best efforts to preserve intact the present business organization
and the relationships with persons having business dealings with the Company.
Without limiting the generality of the foregoing, Seller will cause the
Company not to:
(i) purchase or lease (or commit to purchase or lease)
any assets (other than inventory) in excess of
$10,000.00 individually or $50,000.00 in the
aggregate, except as otherwise expressly
contemplated by Section 4.5.9 hereof;
(ii) create, incur or assume any debt; assume, guarantee,
endorse or otherwise become liable or responsible
for the obligation of any other person or entity; or
make any loans, advances or capital contributions
to, or investments in, any other person or entity;
(iii) increase in any manner the rate of compensation of
any of its employees, other than normal increases
using standards consistent with past practice or as
required by any collective bargaining agreement; or
pay or agree to pay any bonus, pension, retirement
allowance, severance or other employee benefit not
required by any existing employee benefit plan;
(iv) permit any of its assets to be subjected to any
Lien;
(v) enter into any Contract, except in the ordinary
course of business consistent with past practice, or
modify or terminate any Contract under circumstances
which might adversely affect the condition
(financial or otherwise) or prospects of the
Company's business;
(vi) sell or dispose of any assets other than inventory
in the ordinary course of business;
(vii) engage in any unusual or novel method of transacting
business, or change any accounting procedures or
practices, including practices with respect to the
payment of accounts payable or the collection of
accounts receivable, or change its financial
structure; or
(viii) take any action the taking of which, or omit to take
any action the omission of which, would cause any of
the representations and
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warranties herein to fail to be true and correct in
all respects as of the date of such action or
omission as though made at and as of the date of
such action or omission, except as otherwise
specifically contemplated by this Agreement.
7.1.2 ACCESS.
From the date hereof until the Closing, Seller will cause the
Company to provide Buyer, its lenders and their representatives full access
to the Company's personnel, facilities and all books and records and such
other information and persons relating to the Company as Buyer may request.
In addition, Seller will cause the Company to permit Buyer to perform
engineering, environmental and workplace condition surveys and such other
physical inspections as Buyer deems necessary. If the transactions
contemplated by this Agreement are not consummated for any reason, Buyer
agrees to return to Seller all materials obtained from Seller or the Company
and not to use for its own benefit any information not available to Buyer
from a source other than Seller or the Company and not to disclose any
information contained in the materials except information available to Buyer
from a source other than Seller or the Company or required to be disclosed by
law.
7.1.3 INTERIM FINANCIAL STATEMENTS.
Within 15 days after the end of each calendar month, if any,
prior to the Closing, Seller will deliver to Buyer unaudited balance sheets
of the Company and the related statements of income for the months then ended
and for that portion of such fiscal year ended with the last day of such
monthly accounting period, in each case certified by Seller to fairly present
the financial position and results of operations of the Company as at or for
the periods indicated on a basis consistent with past practice.
7.1.4 SUPPLEMENTAL DISCLOSURE.
Seller will immediately notify Buyer of any event or
circumstance which makes it necessary to correct any representation and
warranty contained in Article 3 or Article 4 which has been rendered
inaccurate thereby; or arises hereafter and which, had it existed on or prior
to the date hereof, would have resulted in an inaccuracy in a representation
and warranty contained in Article 3 or Article 4.
7.1.5 SATISFACTION OF CONDITIONS.
Seller will, and will cause the Company to, use their
respective best efforts to cause each of the conditions set forth in Section
6.2 to Buyer's proceeding with the Closing to be satisfied at or before the
Closing. Buyer shall use its best efforts to cause each of the conditions
set forth in Section 6.3 to Seller's proceeding with the Closing to be
satisfied at or before the Closing.
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7.1.6 TERMINATION.
This Agreement may be terminated (i) by the written agreement
of Buyer and Seller, or (ii) by Buyer or Seller at any time after March 23,
1999, if the Closing shall not have taken place on or before such date. If
this Agreement is terminated pursuant to clause (i) of the preceding
sentence, all provisions of this Agreement except Sections 7.3, 7.4 and 8
shall become void without any liability on the part of any party. If this
Agreement is terminated pursuant to clause (ii) of the first sentence of this
Section 7.1.6, all rights and remedies of each party hereunder and all other
provisions hereof related thereto shall survive termination to the extent
required so that any party responsible for any breach or nonperformance of
its obligations hereunder prior to termination shall remain liable for the
damages resulting therefrom.
7.2 NONDISCLOSURE, NONCOMPETITION AND NONINTERFERENCE.
Seller (i) shall at all times hold in strictest confidence any
and all confidential data and other confidential information concerning the
products, services, businesses, suppliers and customers of the Company, (ii)
for a period of five (5) years following the Closing Date, shall not, without
the prior written consent of Buyer, either directly or indirectly operate or
perform any advisory or consulting services for, invest in (other than
publicly traded stock constituting less than 5% of the equity of a publicly
held corporation), or otherwise operate or become associated in any capacity
with, any corporation, partnership, organization, proprietorship or other
business entity or association which sells or performs services then in
competition with the Company at any place within the United States of
America, and (iii) for a period of five (5) years following the Closing Date,
shall not, without the prior written consent of Buyer, directly or indirectly
induce or attempt to induce any employee, agent or other representative or
associate of the Company to terminate his or its relationship with the
Company, or in any way knowingly interfere with such a relationship or a
relationship between the Company and any of its suppliers or customers.
Seller acknowledges that compliance with his covenants in this Section 7.2 is
necessary to protect Buyer's and the Company's legitimate business interests
and that any breach of any such covenant will result in irreparable and
continuing damage to Buyer and the Company for which money damages alone will
not provide an adequate remedy, and that in the event of any such breach or
threatened breach of any such covenant, Buyer and the Company and their
respective successors and assigns shall be entitled to injunctive relief,
without having to post any bond, and to such other and further relief at law
or in equity as is proper under the circumstances.
7.3 PUBLICITY.
Neither Buyer nor Seller will make any public announcement
relating to this Agreement or the transactions contemplated hereby without
the written consent of the other, unless and except to the extent otherwise
required by law. If public disclosure or notice is required by law, Buyer or
Seller, as the case may be, will use his or its best efforts to give the
other party prior written notice of the disclosure to be made.
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7.4 EXPENSES; TRANSFER TAXES.
Except to the extent otherwise specifically provided herein,
Buyer shall pay all of the expenses incident to the transactions contemplated
by this Agreement which are incurred by Buyer or its representatives, and
Seller shall pay all of the expenses incident to the transactions
contemplated by this Agreement which are incurred by the Company or by Seller
or their respective representatives. Seller shall pay all sales or other
transfer Taxes, if any, which may be payable in connection with the
transactions contemplated by this Agreement.
7.5 {Intentionally omitted.}
7.6 RECEIVABLES.
Buyer shall cause the Company to use all reasonable efforts to
collect the accounts receivable reflected on the Final Closing Balance Sheet
but neither Buyer nor the Company shall be required to take or threaten legal
action to collect any such accounts receivable. At the option of Buyer,
Seller agrees to purchase from the Company, for an amount equal to the unpaid
balance thereof, less any allowance for doubtful accounts reflected on the
Final Closing Balance Sheet, all or any part of the accounts receivable
included thereon which shall not have been paid within ninety (90) days after
the Closing Date (other than accounts receivable from Northcoast/Texas,
Northcoast/Kansas or NCI), it being understood that Buyer shall exercise such
option at any time after such date up to the first anniversary of the Closing
Date without waiving any rights hereunder. Seller shall have the right to
verify the existence of the unpaid balance of any accounts receivable.
7.7 EMPLOYMENT.
Seller shall pay the cost of any compensation, severance or
other benefits which may be payable to any employees of the Company or to
such other persons as shall claim compensation, severance or other benefits
in connection with the consummation of the transactions contemplated by this
Agreement. Subject to Sections 6.2(m) and 6.3(i), nothing in this Agreement
shall be deemed to require the Company to retain after the Closing any of its
employees for any period of time or at any particular compensation rate or in
any particular position.
7.8 {Intentionally omitted.}
7.9 NO ASSIGNMENT.
Without the consent of Seller, Buyer may assign all or any part
of this Agreement and all or any part of its rights and obligations hereunder
to any affiliate of Buyer, to any of Buyer's lenders, and to any person or
entity which purchases from Buyer substantially all of Buyer's business, in
which event Seller shall execute and deliver any documents reasonably
requested by the assignee in connection with such assignment. Except as
provided in the preceding sentence, no assignment by any party of this
Agreement or any
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right or obligation hereunder may be made without the prior written consent
of all other parties, and any assignment attempted without such consent will
be void.
7.10 CONSENT TO JURISDICTION.
Any action or proceeding brought by a party against any other
party in connection with this Agreement may be commenced in any federal or
state court located in Cuyahoga County, Ohio, or Lucas County, Ohio, and all
objections to personal jurisdiction and venue in any action or proceeding so
commenced are hereby waived. So long as service and process is by notice as
provided in Section 9.1 of this Agreement or as required by any such court,
all objections to improper service of process are hereby waived.
7.11 FURTHER ASSURANCES AND ASSISTANCE.
The parties agree that each will execute and deliver any and
all documents in addition to those expressly provided for herein that may be
necessary or appropriate to effect or give evidence to the provisions of this
Agreement and each of the other agreements and instruments delivered by them
in connection herewith and the consummation of the transactions contemplated
hereby. Seller further agrees that at any time and from time to time after
the Closing, it will execute and deliver to Buyer such further conveyances,
assignments or other written assurances as Buyer may reasonably request to
perfect and protect Buyer's title to the Shares.
7.12 RIGHT OF SET-OFF.
Upon notice to Seller, Buyer may set-off against any payments
of Earn-Out Amount payable pursuant to Article 2 of this Agreement (i) any
amounts to which Buyer may be entitled under Article 8 hereof, (ii) any
amounts to which Buyer may be entitled under Article 8 of the Asset Purchase
Agreement, (iii) any amounts to which Chart or NCI Acquisition may be
entitled under Article 8 of the NCI Merger Agreement, (iv) any amounts to
which Chart or its nominee may be entitled under Article 10 of the Michigan
Option Agreement, the Georgia Option Agreement or the Texas Option Agreement.
The exercise of such right of set-off by Buyer in good faith, whether or not
ultimately determined to be justified, will not constitute a breach of this
Agreement. Neither the exercise of nor any failure to exercise such right of
set-off will constitute an election of remedies or limit Buyer, NCI
Acquisition, or Chart or its nominees in any manner in the enforcement of any
other rights or remedies that may be available to any of them.
7.13 CERTAIN TAX MATTERS.
After the Closing, Buyer, the Company and Seller will
coordinate the preparation of all necessary Tax Returns relating to the
Company with respect to periods ending on or before the Closing Date. Each
party agrees to timely furnish to the other party any records and other
information reasonably requested by it in connection therewith.
Notwithstanding any other provision of this Agreement or any disclosure to
Buyer hereunder or otherwise, Seller shall be responsible for the payment of,
and shall pay, any and all federal,
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state and local income taxes (including interest and penalties, if any)
payable by the Company with respect to all periods ending on or before the
Closing Date (collectively, "Pre-Closing Taxes"), and will promptly reimburse
Buyer or the Company upon demand for any payments of Pre-Closing Taxes which
either Buyer or the Company or any of their Affiliates may make after the
Closing. To secure such obligation, but without limiting Buyer's rights or
Seller's obligations under the preceding sentence, Seller will deposit with
Buyer at the Closing, or Buyer may withhold from the portion of the Purchase
Price payable to Seller at the Closing pursuant to Section 1.4 hereof, cash
in the amount of Twenty-Five Thousand Dollars ($25,000.00) (the "Estimated
1998 Tax Payment"). Buyer shall apply the Estimated 1998 Tax Payment to the
payment of all Pre-Closing Taxes and, no later than the date which is six (6)
months after the Closing Date, shall pay to Seller the remainder, if any, of
the Estimated 1998 Tax Payment not so applied.
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ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLER.
Seller shall indemnify Buyer and the Company against and hold
Buyer and the Company harmless from (i) any and all loss, damage, liability
or deficiency (collectively, "Losses") resulting from or arising out of any
inaccuracy in or breach of any representation, warranty, covenant or
obligation made or incurred by Seller herein or in any other agreement,
instrument or document delivered by or on behalf of Seller in connection
herewith; and (ii) any and all costs and expenses (including reasonable legal
and accounting fees) (collectively, "Expenses") related to any of the
foregoing. In addition, and notwithstanding any disclosure to Buyer
hereunder or otherwise, Seller shall indemnify Buyer and the Company and
their respective Affiliates against and hold them harmless from any and all
Losses resulting from or arising out of: (i) the death of the Company's
employee Hillard Mitchell Jr. in or about September 1998, and any and all
Expenses related thereto, including in any present or future litigation
relating thereto; and (ii) any matters alleged by plaintiffs in the pending
litigation captioned ANDREW WILBORN AND DEMETRIUS WILBORN VS. NORTHCOAST OF
TEXAS CRYOGENIC, INC. [sic], Case No. 98-42541 in the 151st Judicial
District, Harris County, Texas, or in the pending litigation captioned ANDREW
WILBORN AND DEMETRIUS WILBORN V. NORTHCOAST CRYOGENIC, INC. [sic], Case No.
2:98-CV-296 PG in the United States District Court for the Southern District
of Mississippi, Hattiesburg Division, and any and all Expenses related
thereto, including in any other present or future litigation relating to such
matters; and (iii) any matters alleged in or arising out of the pending
litigation captioned MILWAUKEE PRECISION CASTING, INC. VS. NORTHCOAST OF
AMERICA CRYOGENIC, INC., Case No. 98CV009914 in the Circuit Court of
Milwaukee County, Wisconsin, and any and all Expenses related thereto,
including in any other present or future litigation relating to such matters.
8.2 INDEMNIFICATION BY BUYER.
Buyer shall indemnify Seller against and hold Seller harmless
from (i) any and all Losses resulting from or arising out of any inaccuracy
in or breach of any representation, warranty, covenant or obligation made or
incurred by Buyer herein or in any other agreement, instrument or document
delivered by or on behalf of Buyer in connection herewith; and (ii) any and
all Expenses related to any of the foregoing.
8.3 NOTIFICATION OF AND PARTICIPATION IN CLAIMS.
No claim for indemnification will arise until notice thereof is
given to the party from whom indemnity is sought. In the event that any
legal proceedings shall be instituted or any claim or demand be asserted by
any third party in respect of which Seller on the one hand, or Buyer on the
other hand, may have an obligation to indemnify the other, the party
asserting such right to indemnity shall give or cause to be given to the
party from whom indemnity may be sought written notice thereof, and such
party shall have the right, at its option and expense, to be present at the
defense of such proceeding, claim or demand, but not to control the
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defense, negotiation or settlement thereof, which control shall at all times
rest with the party asserting such right to indemnity, unless the party from
whom indemnity may be sought irrevocably acknowledges full and complete
responsibility for indemnification of the party asserting such right to
indemnity, in which case such party may assume such control through counsel
of its choice. The parties agree to cooperate fully with each other in
connection with the defense, negotiation or settlement of any such third
party legal proceeding, claim or demand.
8.4 SURVIVAL; LIMITATIONS ON INDEMNIFICATION.
The representations, warranties, covenants and agreements of
the parties contained herein or in any other agreements or documents executed
in connection herewith shall survive the Closing. Notwithstanding the
foregoing, the indemnification of Buyer and the Company provided under
Section 8.1 shall be limited in certain respects as follows: any claim for
indemnification relating to any inaccuracy in or breach of any representation
or warranty of Seller must be made within eighteen (18) months after the
Closing Date, except that (i) there shall be no limits on the time for making
a claim for indemnification relating to the representations and warranties
contained in Article 3 ("Seller's Representations and Warranties Concerning
the Transaction"), Sections 4.1.1 ("Organization and Power"), or 4.7.1
("Title"), (ii) any claim for indemnification relating to the representations
and warranties contained in Section 4.3.4 ("Taxes") may be made until the
expiration of the applicable statute of limitations for either the assessment
or collection of Taxes for the periods referred to therein, and (iii) any
claim for indemnification relating to the representations and warranties
contained in Sections 4.6 ("Employee Benefits") or 4.7.4 ("Environmental
Matters") may be made until the second (2nd) anniversary of the Closing Date.
There shall be no limits on the time for making a claim for indemnification
relating to the undertakings of Seller set forth in Section 7.13 hereof or in
the second sentence of Section 8.1 hereof.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 NOTICES.
All notices and other communications required by this Agreement
shall be in writing and shall be deemed given if delivered by hand or mailed
by registered or certified mail to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
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(a) If to Buyer, to: Northcoast Acquisition Corp.
c/o Chart Industries, Inc.
5885 Landerbrook Drive, Suite 150
Mayfield Heights, Ohio 44124
Attention: James R. Sadowski
With a copy to: Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Thomas F. McKee, Esq.
(b) If to Mark A. Bauman, to: Mark A. Bauman
8106 Beck Road
Ottawa Lake, Michigan 49267
If to Patrick J. Flynn, to: Patrick J. Flynn
9478 Douglas Road
Temperance, Michigan 48182
If to Seller, to Seller in care of both Mark A. Bauman and
Patrick J. Flynn at their respective addresses as provided
herein.
In each case,
with a copy to: Wasserman, Bryan, Landry & Honold
300 Inns of Court Building
405 North Huron Street
Toledo, Ohio 43604
Attention: David L. Honold, Esq.
9.2 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
9.3 INCLUSION.
In every place where it is used in this Agreement, the word
"including" is intended and shall be construed to mean "including, without
limitation".
9.4 {Intentionally omitted.}
9.5 HEADINGS.
The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
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9.6 EXECUTION IN COUNTERPARTS; SIGNATURE PAGES.
This Agreement may be executed and delivered in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. This Agreement may be
executed and delivered with separate signature pages with the same effect as
though all parties had executed and delivered the same signature page.
9.7 SEVERABILITY.
In the event any part of Section 7.2 of this Agreement shall be
found by a court of competent jurisdiction to be invalid or unenforceable for
any reason, Seller hereby grants to such court full authority and discretion,
and hereby authorizes and requests such court to exercise all such authority
and discretion as it may possess hereunder or under applicable law, to reform
such provision to the end that Seller shall be subject to nondisclosure,
noncompetition and noninterference covenants that are reasonable under the
circumstances and enforceable by Buyer and the Company. In the event any
other provision of this Agreement shall be held unenforceable or invalid to
any extent for any reason, such provision shall remain in force and effect to
the maximum extent permitted, and the enforceability or validity of the
remaining provisions of this Agreement shall not be affected thereby.
9.8 AMENDMENTS, WAIVERS.
No amendment to or waiver of any of the provisions of this
Agreement, including this Section 9.8, shall be valid or enforceable unless
such amendment or waiver is set forth in writing and signed by the party
against whom enforcement of such amendment or waiver is sought or such
party's authorized representative. Unless otherwise expressly stated
therein, each such amendment or waiver shall be effective only with respect
to the specific instance in which it is given, and no such amendment or
waiver shall constitute a waiver of any other provision hereof (whether or
not similar), or a continuing waiver.
9.9 NO THIRD-PARTY RIGHTS.
Nothing expressed or implied in this Agreement is intended or
shall be construed to confer on any person, other than the parties hereto and
their respective successors and permitted assigns, any rights under this
Agreement.
9.10 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents to be
delivered hereunder constitute the entire agreement between the parties
pertaining to the subject matter hereof and supersede all prior and
contemporaneous negotiations, agreements and understandings of the parties.
There are no warranties, representations or other agreements between the
parties in connection with the subject matter hereof except as specifically
set forth herein or in the agreements or instruments delivered in connection
herewith, and no supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party sought to
be bound thereby.
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9.11 SCHEDULES AND EXHIBITS.
The schedules and exhibits referenced in this Agreement
constitute an integral part of this Agreement as if fully rewritten herein.
All references in this document to "this Agreement" and the terms "herein,"
"hereof," "hereunder" and the like shall be deemed to include all of such
schedules and exhibits.
9.12 TIME PERIODS.
Any action required hereunder to be taken within a certain
number of days shall, except as may otherwise be expressly provided herein,
be taken within that number of calendar days; PROVIDED, HOWEVER, that if the
last day for taking such action falls on a Saturday, a Sunday, or a day which
shall be in Cleveland, Ohio, or New York, New York, a legal holiday or a day
on which banking institutions therein are authorized by law to close, then
the period during which such action may be taken shall automatically be
extended to the next business day.
9.13 GOVERNING LAW.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Ohio, without giving effect to the
choice-of-laws or conflict-of-laws provisions thereof.
{The remainder of this page is intentionally left blank.}
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IN WITNESS WHEREOF, Buyer and Seller have executed and
delivered this Stock Purchase Agreement as of the date first written above.
/s/ Mark A. Bauman
------------------------------
MARK A. BAUMAN
NORTHCOAST ACQUISITION CORP.
By: /s/ James R. Sadowski
---------------------------
James R. Sadowski,
President and Chief Operating Officer
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 15th day of March, 1999,
by and between NORTHCOAST ACQUISITION CORP., an Ohio corporation (the
"Company"), and MARK A. BAUMAN ("Executive").
WITNESSETH:
WHEREAS, Executive has been a principal officer and shareholder of
each of Northcoast of America Cryogenic Inc. ("Northcoast/America"), NCI Sales
and Leasing, Inc. ("NCI"), Northcoast of Texas Cryogenics, Inc.
("Northcoast/Texas"), and Northcoast of Kansas Cryogenics, Inc.
("Northcoast/Kansas"), each an Ohio corporation (collectively, the "Target
Companies"), and has obtained valuable knowledge and experience pertaining to
the Target Companies' respective businesses of manufacturing, selling and
servicing cryogenic equipment and systems and related products and services
(collectively, the "Business");
WHEREAS, the Company has acquired substantially all of the assets of
each of Northcoast/Texas and Northcoast/Kansas pursuant to a certain Asset
Purchase Agreement, dated today, among the Company, Northcoast/Texas,
Northcoast/Kansas, Executive and Patrick J. Flynn (the "Asset Purchase
Agreement"), and has acquired all of the capital stock of Northcoast/America
pursuant to a certain Stock Purchase Agreement, dated today, between the Company
and Executive (the "Stock Purchase Agreement"); and Chart Industries, Inc., a
Delaware corporation and the sole shareholder of the Company ("Chart"), has
acquired all of the capital stock of NCI pursuant to a certain Agreement and
Plan of Merger, dated today, among Chart, NCI Acquisition Corp., an Ohio
corporation and wholly owned subsidiary of Chart, NCI, Executive and Patrick J.
Flynn (the "Merger Agreement");
WHEREAS, as a condition to the consummation of the transactions
contemplated by the Asset Purchase Agreement, the Stock Purchase Agreement and
the Merger Agreement, Executive and the Company desire to enter into an
agreement providing for the employment of Executive by the Company and for
certain arrangements upon the termination of Executive's relationship with the
Company under the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the Company and Executive hereby agree as follows:
1. EMPLOYMENT. Beginning on the date hereof and continuing for a
period of three (3) years thereafter, unless terminated earlier pursuant to
Section 8 of this Agreement, the Company shall employ Executive as President of
the Company, and Executive hereby accepts such employment and agrees to perform
all duties consistent with such position that are assigned to him from time to
time by the Board of Directors of the Company or its designee (the "Board").
The term of this Agreement automatically shall be extended for additional one-
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year periods unless either party notifies the other party in writing at least
thirty (30) days prior to the end of the then current term that it does not wish
to extend the term of this Agreement. The period of time during which Executive
is employed by the Company is referred to herein as the "Employment Period."
During the Employment Period, Executive shall devote his full time and best
efforts to the business and welfare of the Company. Such duties shall be
rendered primarily at the Company's facility in Ottawa Lake, Michigan, and the
surrounding area, and shall include such regular travel as is necessary in
connection with the performance of his duties hereunder.
2. SALARY AND BONUSES.
(a) BASE SALARY. During the Employment Period, the Company will
pay Executive for his services a base salary at the annual rate of $125,000.00,
which salary shall be payable in accordance with the Company's standard payroll
practices. The Board, in its sole and absolute discretion, may increase such
base salary based on an annual review of Executive's performance.
(b) ANNUAL BONUS. During the Employment Period, Executive shall
be entitled to participate in an annual bonus plan under which Executive shall
receive, with respect to each fiscal year or partial fiscal year of the Company
during the Employment Period, such percentage of the Annual Bonus Pool (as
defined below), if any, as the Board shall determine with respect to such fiscal
year or partial fiscal year. The Annual Bonus Pool, if any, shall be
distributed to such key employees of the Company (including Executive) and in
such amounts as the Board may determine in its sole discretion after giving due
consideration to the recommendations of Executive. Distributions from the
Annual Bonus Pool, if any, shall be payable by March 1 of the following year.
An Annual Bonus Pool shall be established with respect to any fiscal year of the
Company in which the Company achieves the performance goals developed by the
Board in its sole discretion with respect to such fiscal year after consultation
with Executive, which performance goals may be based on the Company's return on
its net assets, earnings before interest and taxes or other factors determined
by the Board. For purposes of this Agreement, the term "Annual Bonus Pool"
shall mean an amount equal to ten percent (10%) of the aggregate earnings (if
any) of the Northcoast Companies (as defined in Section 2.1.2 of the Stock
Purchase Agreement), before interest, before taxes, and before any amortization
of goodwill arising from the transactions contemplated by the Asset Purchase
Agreement, the Stock Purchase Agreement or the Merger Agreement, all as
reflected on the statements of income of the Northcoast Companies in accordance
with generally accepted accounting principles, and including as an expense for
the purpose of such calculation the amount of the Annual Bonus Pool and all
sales commissions payable by the Northcoast Companies.
(c) SIGNING BONUS. On the day after the Closing Date, the
Company will cause Northcoast/America to discharge Executive's existing
indebtedness to Northcoast/America in the amount of $105,099.89, or will pay
such amount to Northcoast/America on Executive's behalf (the "Signing
Bonus"). Executive and the
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Company will each treat such cancellation or satisfaction of indebtedness,
for income tax purposes, as being $105,099.89 of compensation to Executive
for services performed, and will prepare their respective tax returns
accordingly. On or before the first payroll date after the Closing Date,
Executive will pay the Company all federal, state and local tax withholdings
due as a result of the Signing Bonus.
3. BENEFITS. During the Employment Period, Executive shall be
entitled: (a) to participate in any group medical, short-term and long-term
disability, and life insurance benefit plans and any 401(k) or other
retirement savings or pension plans which are maintained or established for
employees of the Company generally (but subject to the eligibility and
vesting provisions thereof); (b) to the use of one (1) automobile which may
be selected by Executive but shall be subject to the approval of the Board
(which automobile may be owned or leased by the Company), and the payment or
reimbursement by the Company for the expenses of related insurance,
maintenance and repair, and gas and oil (but only to the extent the
automobile is used for business purposes); (c) to four (4) weeks' paid
vacation per year; (d) to reimbursement of monthly dues paid by Executive for
one country club or dining club approved by the Board and up to two travel
clubs approved by the Board; and (e) to be reimbursed for reasonable
business, promotional, travel and entertainment expenses actually incurred by
Executive on behalf of the Company in the performance of his duties during
the Employment Period, if and to the extent such expenses are approved by the
Board. Executive agrees that he shall at all times keep, maintain and
furnish to the Company adequate records and documentation of the benefits
provided under paragraphs (b), (d) and (e) of this Section 3 in accordance
with Company policies as in effect from time to time, and to the extent
required by the United States Internal Revenue Code and the regulations
thereunder to ensure the availability to the Company of all deductions and
credits attributable to such benefits. Executive acknowledges that
reimbursed club dues and non-business usage of Company-provided automobiles
will be treated for income tax purposes as compensation to Executive for
services performed.
4. NONCOMPETITION. Executive agrees that during the Employment
Period and for a period of one (1) year thereafter, he will not directly or
indirectly operate or perform any advisory or consulting services for, invest in
(other than publicly traded stock constituting less than 5% of the equity of a
publicly held corporation), or otherwise operate or become associated in any
capacity with, any corporation, partnership, organization, proprietorship or
other business entity or association which sells or performs services then in
competition with the Company in the Business anywhere within the United States
of America; PROVIDED, HOWEVER, that if the Company terminates Executive's
employment without Cause (as defined in Section 8(e)) and the Company desires to
have this noncompetition covenant remain in effect with respect to any period of
time following the fifth anniversary of the date of this Agreement, then the
Company shall pay to Executive the sum of Fifty Thousand Dollars ($50,000) as
additional consideration for this covenant for the twelve-month period following
the later to occur of the fifth anniversary of the date of this Agreement and
the effective date of Executive's termination of employment, payable quarterly
in arrears.
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5. NONDISCLOSURE. Executive agrees at all times to hold as secret
and confidential (unless disclosure is required by the Company or would be in
furtherance of Executive's employment with the Company or is required pursuant
to court order, subpoena in a governmental proceeding, arbitration or pursuant
to other process or requirement of law) any and all knowledge, information,
developments, manufacturing and trade secrets, know-how and confidences of the
Company or its business of which he has knowledge as of the date hereof, or of
which he may acquire knowledge during the Employment Period, to the extent such
matters have not previously been made public, are not thereafter made public or
do not otherwise become available to Executive from a third party who is not, to
Executive's best knowledge, bound by any confidentiality agreement with the
Company ("Confidential Information"). The phrase "made public" as used in this
Agreement shall apply to matters within the domain of (a) the general public or
(b) the Company's industry. Executive agrees not to use such knowledge for his
own benefit or for the benefit of others or, except as provided above, disclose
any of such Confidential Information without the prior written consent of the
Board, which consent shall make express reference to this Agreement.
6. NONINTERFERENCE. Executive agrees that during the Employment
Period and for a period of one (1) year thereafter, he will not, without the
prior written consent of the Board, directly or indirectly solicit, induce or
attempt to solicit or induce any employee, agent, or other representative or
associate of the Company to terminate its relationship with the Company or in
any way interfere with such a relationship or a relationship between the Company
and any of its suppliers or distributors.
7. DISCLOSURE OF PROPRIETARY INTELLECTUAL PROPERTY. Executive
agrees that he will promptly disclose to the Company any and all improvements,
discoveries, ideas or inventions composing proprietary intellectual property
which may be material to the operations and business of the Company (the
"Improvements") which Improvements are made or conceived by Executive, acting
alone or in conjunction with others, either (a) during the Employment Period, or
(b) within two (2) years after the Employment Period, if such Improvement
results from or was suggested by such employment or in any way relates to the
Business. Executive shall not disclose any such Improvement to any person
except the Company and shall use all reasonable efforts to provide the Company
written disclosure of such Improvements. Each such Improvement shall be the
sole and exclusive property of and is hereby assigned to the Company. Executive
agrees that, at the request of the Company, Executive will execute such
applications, statements, assignments or other documents, furnish such
information and data and take all such other action (including without
limitation the giving of testimony) as the Company may from time to time
reasonably request in order to obtain for the Company a registration or patent
in the United States or any foreign country covering or pertaining to any such
Improvement.
8. TERMINATION.
(a) BY EXECUTIVE WITHOUT GOOD REASON. This Agreement may be
terminated by Executive at any time without Good Reason (as defined below)
upon the giving
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of thirty (30) days' advance written notice to the Company. In the event
Executive terminates this Agreement without Good Reason, (i) the Company
shall pay to Executive his base salary accrued through the effective date of
such termination, and (ii) bonus compensation pursuant to Section 2(b) hereof
shall cease to accrue on the effective date of such termination and shall be
payable on a pro-rated basis through such date no later than sixty (60) days
after the end of the Company's fiscal year in which such termination becomes
effective. As used herein, the term "Good Reason" means only (i) a
requirement that Executive relocate his principal place of business to a
location more than fifty (50) miles outside of Ottawa Lake, Michigan without
Executive's consent, (ii) a significant diminution in Executive's position,
responsibilities or authority (other than during any period of time during
which Executive is unable to perform such responsibilities, such as during
any Disability), or (iii) a material breach of this Agreement by the Company
which is not cured within ten (10) days after notice thereof is given to the
Company, including without limitation any failure by the Company to pay to
Executive the compensation or benefits to which he is entitled hereunder.
(b) DISABILITY OF EXECUTIVE. If Executive becomes physically or
mentally disabled, whether totally or partially, such that he is unable to
perform his services hereunder (a "Disability") throughout the Disability Period
(as defined below), the Company may terminate this Agreement at any time after
the end of the Disability Period by written notice to Executive and, except for
the obligations of Executive set forth in Sections 4 through 7 hereof, the
payment by the Company of Executive's base salary through the end of the month
in which such termination becomes effective, the reimbursement of business
expenses, and the payment by the Company of bonus compensation in accordance
with the following sentence, all rights and obligations of the Company and
Executive hereunder shall terminate. In the event of any termination pursuant
to this Section 8(b), bonus compensation pursuant to Section 2(b) hereof shall
cease to accrue at the end of the Disability Period and shall be payable on a
pro-rated basis through the end of the month in which such termination becomes
effective no later than sixty (60) days after the end of the fiscal year in
which such termination becomes effective. For purposes hereof, the term
"Disability Period" means the SHORTER of (i) the period beginning on the date of
onset of the Disability and ending on the date Executive becomes entitled to
receive long-term disability benefits under any long-term disability insurance
coverage provided through the Company, or (ii) the six (6) month period
following the date of onset of the Disability. Notwithstanding anything
contained herein to the contrary, during the period following the onset of any
Disability, but prior to a termination of this Agreement pursuant to this
Section 8(b), the Company shall continue to pay Executive his base salary and
shall continue to provide him any benefits to which he may be entitled
hereunder.
(c) DEATH OF EXECUTIVE. In the event of Executive's death,
this Agreement shall be terminated without notice by any party as of the end
of the month in which Executive's death occurs, and, except for the payment
by the Company of Executive's base salary through the end of such month, the
reimbursement of business expenses, the payment of any life insurance
proceeds to which the beneficiaries of Executive may be entitled, and the
payment by the Company of bonus compensation in accordance with the following
sentence, all rights and obligations of the Company and Executive's heirs
hereunder shall terminate. In
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the event of any termination pursuant to this Section 8(c), bonus
compensation pursuant to Section 2(b) hereof shall cease to accrue at the end
of the month in which Executive's death occurs and shall be payable on a
pro-rated basis through such month no later than sixty (60) days after the
end of the Company's fiscal year in which the termination becomes effective.
(d) BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE WITH GOOD
REASON. In the event the Company terminates this Agreement without Cause (as
defined below), other than due to Executive's death or Disability, or if
Executive terminates this Agreement for Good Reason, the Company shall continue
to pay to Executive his annual base salary in accordance with Section 2(a)
hereof, as in effect at the date of termination, (i) until the third anniversary
of the date of this Agreement, if such termination occurs within thirty (30)
months after the date hereof, or (ii) for a period of six (6) months after such
termination, if such termination occurs on or after the date which is thirty
(30) months after the date of this Agreement. In the event of any termination
pursuant to this Section 8(d), bonus compensation pursuant to Section 2(b)
hereof shall cease to accrue at the end of the month in which such termination
becomes effective and shall be payable on a pro-rated basis through such month
no later than sixty (60) days after the end of the Company's fiscal year in
which the termination becomes effective. The obligations of Executive set forth
in Sections 4 through 7 hereof shall survive any termination of this Agreement
pursuant to this Section 8(d).
(e) BY THE COMPANY FOR CAUSE. This Agreement may be terminated
at any time by the Company for Cause by written notice to Executive. In such
event, all rights and obligations of the parties hereunder shall immediately
terminate, except for the obligations of Executive set forth in Sections 4
through 7 hereof, the payment by the Company of Executive's base salary through
the end of the month in which such termination occurs, the reimbursement of
business expenses, and the payment by the Company of bonus compensation in
accordance with the following sentence. In the event of any termination
pursuant to this Section 8(e), bonus compensation pursuant to Section 2(b)
hereof shall cease to accrue at the end of the month in which such termination
occurs and shall be payable on a pro-rated basis through such month no later
than sixty (60) days after the end of the Company's fiscal year in which the
termination occurs. As used herein, the term "Cause" means the occurrence of
any of the following events: (i) Executive's conviction of any felony, or
Executive's embezzlement or misappropriation of money or other property of the
Company; (ii) Executive's failure reasonably to perform his duties on behalf of
the Company, which duties are consistent with Executive's position, which
failure is not remedied by Executive within ten (10) days after receipt of
written notice of such alleged failure; (iii) any act of gross negligence or
corporate waste with respect to the Company; or (iv) any breach by Executive of
any of the terms of Sections 4 through 7 of this Agreement or any breach of the
fiduciary duties owed by Executive to the Company.
9. REMEDY FOR CERTAIN BREACHES. Executive acknowledges that in
consideration for the covenants set forth in Sections 4 through 7 hereof, the
Company has granted to Executive the employment, salary and benefits described
herein, and that such covenants were negotiated at arms' length and are required
for the fair and reasonable protec-
-6-
<PAGE>
tion of the Company. Executive further acknowledges and agrees that a breach
of any of such covenants will result in irreparable and continuing damage to
the Company for which there will be no adequate remedy at law, and Executive
agrees that in the event of any such breach the Company and its successors
and assigns shall be entitled to injunctive relief to restrain such breach by
Executive and to such other and further relief (including damages) as is
proper under the circumstances.
10. REFORMATION OF AGREEMENT; SEVERABILITY. The parties intend this
Agreement to be enforced as written. However, in the event that any provision
of this Agreement is held by a court of competent jurisdiction to be invalid or
unenforceable as against public policy or otherwise, Executive and the Company
hereby authorize and instruct such court to exercise its discretion in reforming
such provision to the end that Executive shall be subject to such restrictions
and obligations as are reasonable under the circumstances and enforceable by the
Company. In the event that any term of this Agreement is found to be void or
unenforceable to any extent for any reason, it is the agreed upon intent of the
parties that all remaining terms of this Agreement shall remain in full force
and effect to the maximum extent permitted by law and this Agreement shall be
enforceable as if such void or unenforceable term had never been a part hereof.
11. NOTICES. Any notice required to be given under the terms of this
Agreement shall be in writing and shall either be delivered in person or by
United States mail. Notices mailed to Executive shall be addressed to him at
his last known address as reflected on the records of the Company, and notices
mailed to the Company shall be addressed to the Company, Attention: Chairman of
the Board, in care of Chart Industries, Inc., 5885 Landerbrook Drive, Suite 150,
Mayfield Heights, Ohio 44124, or delivered in person to the Chairman of the
Board. Notices sent by registered or certified mail shall be deemed given when
mailed; otherwise, they shall be deemed given when received.
12. ASSIGNMENT. No rights of any kind under this Agreement shall,
without the written consent of the Company, be transferable to or assignable by
Executive, or be subject to alienation, encumbrance, garnishment, attachment,
execution or levy of any kind, voluntary or involuntary. This Agreement shall
be binding upon and shall inure to the benefit of the Company and its successors
and assigns.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof, and there shall
be no implied terms in addition to the express terms contained herein.
Concurrently herewith, in the Stock Purchase Agreement, in the Asset Purchase
Agreement and in the Merger Agreement, Executive has made certain nondisclosure,
noncompetition and noninterference covenants to and for the benefit of the
Company and its affiliates, which covenants by Executive are similar to those
contained in Sections 4, 5 and 6 hereof. It is the mutual intent of Executive
and the Company that such separate covenants in the Stock Purchase Agreement,
the Asset Purchase Agreement and the Merger Agreement shall be not be affected
by this Agreement or the continuation, expiration or termination of Executive's
employment hereunder, and that such
-7-
<PAGE>
separate covenants shall be separately enforceable in accordance with the
respective terms thereof notwithstanding any provision hereof.
14. AMENDMENTS, WAIVERS, ETC. This Agreement may not be changed
orally, but only by an agreement, in writing, signed by Executive and an officer
of the Company specifically designated by the Board to execute such amendment.
The terms of this Agreement may be waived only by a written instrument
specifically referring to this Agreement, executed by the party waiving
compliance. The failure of the Company at any time or from time to time to
require performance of any of Executive's obligations under this Agreement shall
in no manner affect the Company's right to enforce any provisions of this
Agreement at a subsequent time; and the waiver by the Company of any right
arising out of any breach shall not be construed as a waiver of any right
arising out of any subsequent breach.
15. CAPTIONS. The section and paragraph headings used in this
Agreement are intended solely for convenience of reference and shall not be
given effect in construing its provisions.
16. CAPACITY. Executive represents and warrants to the Company that
he has full legal power and capacity to execute, deliver and perform this
Agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio, without giving effect to the
conflicts of laws principles thereof.
{The remainder of this page is intentionally left blank.}
-8-
<PAGE>
IN WITNESS WHEREOF, the Company and Executive have executed and
delivered this Employment Agreement on the date first written above.
NORTHCOAST ACQUISITION CORP.
(the "Company')
By: /s/ James R. Sadowski
----------------------------------------
James R. Sadowski, President
and Chief Operating Officer
Mark A. Bauman
-------------------------------------------
MARK A. BAUMAN
("Executive")
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 2,493 5,926
<SECURITIES> 0 0
<RECEIVABLES> 39,223 41,498
<ALLOWANCES> 0 0
<INVENTORY> 32,912 28,514
<CURRENT-ASSETS> 82,224 81,493
<PP&E> 63,660 56,970
<DEPRECIATION> (22,694) (16,896)
<TOTAL-ASSETS> 167,276 162,759
<CURRENT-LIABILITIES> 55,590 56,988
<BONDS> 15,497 22,487
0 0
0 0
<COMMON> 244 162
<OTHER-SE> 94,792 82,578
<TOTAL-LIABILITY-AND-EQUITY> 167,276 162,759
<SALES> 44,588 56,104
<TOTAL-REVENUES> 44,588 56,104
<CGS> 32,271 35,544
<TOTAL-COSTS> 32,271 35,544
<OTHER-EXPENSES> 7,592 8,341
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 328 (190)
<INCOME-PRETAX> 4,397 12,409
<INCOME-TAX> 1,495 4,467
<INCOME-CONTINUING> 2,902 7,942
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,902 7,942
<EPS-PRIMARY> 0.12 0.33
<EPS-DILUTED> 0.12 0.32
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