<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 9, 1996
SHILOH INDUSTRIES, INC.
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-21964 51-0347683
- --------------------------- ---------------------- ---------------------
(State or other jurisdiction Commission File Number (I.R.S. Employer
of incorporation or Identification No.)
organization)
Suite 350, 1013 Centre Road, Wilmington, Delaware 19805
- --------------------------------------------------- --------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (302) 998-0592
1
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 9, 1996, Shiloh Industries, Inc. (the "Company") completed the sale of
all of the issued and outstanding common stock of its wholly owned subsidiary,
Shafer Valve Company ("Shafer Valve"), to Bettis Corporation (the "Buyer") for
$13.2 million in cash. The consideration paid in the transaction was
determined in accordance with a negotiated Stock Purchase Agreement related to
the transaction. In accordance with the terms of such Stock Purchase
Agreement, the Buyer is indemnified by the Company for certain preclosing
liabilities of Shafer Valve, including, among other things, matters which
constitute breaches of warranties made in the Stock Purchase Agreement, certain
unknown and unasserted employment, employee benefit plan and tax liabilities.
The Company's investment in Shafer Valve was accounted for as a discontinued
operation in the Company's Quarterly Report on Form 10-Q filed on June 14, 1996
(the "Second Quarter 10-Q"). As set forth in the Second Quarter 10-Q, the
Company recorded an after-tax loss on the sale of the discontinued operations
of approximately $10.2 million, or $.78 per share. The proceeds from the
sale will be used principally to repay indebtedness.
There is no relationship between the Buyer and the Company or any of the
Company's affiliates, directors, or officers.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information
This report includes an unaudited pro forma condensed consolidated
balance sheet as of April 30, 1996 and unaudited pro forma condensed
consolidated income statements for the fiscal years ended October 31,
1995, 1994 and 1993, giving pro forma effect to the disposition
described above. Pro forma results for the interim periods ended
April 30, 1996 and 1995 have not been presented herein as such pro
forma results do not differ from the Company's results from continuing
operations presented in the Company's Second Quarter 10-Q.
(c) Exhibits
2.1 Stock Purchase Agreement for Shafer Valve, dated May
22, 1996, by and between the Company and the Buyer.
The Company agrees to furnish to the Securities and
Exchange Commission, upon request, a copy of any
omitted schedule or exhibit to Exhibit 2.1.
99.1 Press release issued by the Company on May 22, 1996.
99.2 Press release issued by the Company on July 11, 1996.
2
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SHILOH INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTORY COMMENTS
- ---------------------
The unaudited pro forma condensed consolidated financial statements
presented herein show the effects of the July 9, 1996 sale of the Company's
stock in its wholly owned subsidiary, Shafer Valve. The Company's investment
in Shafer Valve was accounted for as a discontinued operation in the Company's
Second Quarter Form 10-Q. The Company recorded a loss on the sale of the
discontinued operation of approximately $10.2 million, or $.78 per share, in
the second quarter of 1996. The proceeds from the sale of $13.2 million in
cash were used principally to repay indebtedness.
The pro forma information is based on historical financial statements
of the Company after adjusting for the transactions and assumptions as set
forth in the accompanying notes to the pro forma statements. The pro forma
condensed consolidated balance sheet assumes the transactions occurred at April
30, 1996, and the pro forma condensed consolidated income statements presented
assume all of the transactions occurred at the beginning of the respective
fiscal year or interim period.
The pro forma condensed consolidated financial statements may not be
indicative of the results that would have occurred if the transactions had been
in effect as of the respective dates of the pro forma condensed consolidated
financial statements, or results which may be attained in the future. The
adjustments reflected in these pro forma condensed consolidated financial
statements are preliminary and may change as more facts become known.
3
<PAGE> 4
SHILOH INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF APRIL 30,1996
(Unaudited)
<TABLE>
<CAPTION>
Adjustments
Shiloh for Shiloh
Industries Shafer Valve Industries
ASSETS Consolidated (a) Divestiture Pro Forma
- ------ ---------------- ------------ ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ --- $ 1,103,361 (b) $ 1,103,361
Accounts receivable 31,842,676 --- 31,842,676
Inventory 15,426,290 --- 15,426,290
Deferred income taxes 2,447,195 --- 2,447,195
Prepaid expenses 2,340,030 --- 2,340,030
Investment in discontinued operations, net 12,177,264 (12,177,264) (c) ---
------------ -------------- ------------
Total current assets 64,233,455 (11,073,903) 53,159,552
------------ -------------- ------------
Property, plant and equipment, net 100,255,412 100,255,412
Goodwill 625,700 --- 625,700
Other long-term assets 3,234,873 --- 3,234,873
------------ -------------- ------------
Total assets $168,349,440 $ (11,073,903) $157,275,537
============ ============== ============
LIABILITIES AND STOCKHOLDERS' EOUITY
- ------------------------------------
Accounts payable $ 9,561,270 $ --- $ 9,561,270
Current portion of long-term debt 1,750,000 (1,750,000) (d) ---
Accrued income taxes 2,794,663 --- 2,794,663
Other accrued expenses 6,871,511 926,097 (e) (f) 7,797,608
------------ -------------- ------------
Total current liabilities 20,977,444 (823,903) 20,153,541
------------ -------------- ------------
Long-term debt 23,887,115 (10,250,000) (d) 13,637,115
Deferred income taxes 7,284,018 --- 7,284,018
Long-term pension liability --- --- ---
------------ -------------- ------------
Total liabilities 52,148,577 (11,073,903) 41,074,674
------------ -------------- ------------
Stockholders'equity
Common stock 130,116 --- 130,116
Paid-in capital 38,375,152 --- 38,375,152
Retained earnings 77,695,595 --- 77,695,595
------------ -------------- ------------
Total stockholders' equity 116,200,863 --- 116,200,863
------------ -------------- ------------
Commitments and contingent liabilities --- --- ---
------------ -------------- ------------
Total liabilities and stockholders' equity $168,349,440 $ (11,073,903) $157,275,537
============ ============== ============
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
4
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SHILOH INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED OCTOBER 31,1995
(Unaudited)
<TABLE>
<CAPTION>
1995 Adjustments 1995
Shiloh for Shiloh
Industries Shafer Valve Industries
Consolidated (a) Divestiture (b) Pro Forma
---------------------- ----------------- --------------
<S> <C> <C> <C> <C>
Revenues $228,809,832 $ (16,461,916) $212,347,916
Cost of sales 185,960,425 (12,226,317) 173,734,108
--------------- -------------- -------------
Gross profit 42,849,407 (4,235,599) 38,613,808
Selling, general and administrative expenses 18,265,180 (3,924,528) 14,340,652
--------------- -------------- -------------
Operating income 24,584,227 (311,071) 24,273,156
Interest expense, net 1,034,686 (632,237) (c) 402,449
Other income, net 76,151 (12,132) 64,019
--------------- -------------- -------------
Income from continuing operations before
income taxes 23,625,692 309,034 23,934,726
Provision for income taxes 9,450,290 20,565 (d) 9,470,855
--------------- -------------- -------------
Income from continuing operations $ 14,175,402 $ 288,469 $ 14,463,871
=============== ============== =============
Earnings Per Share:
Income per share from continuing operations $1.09 $1.11
Weighted average number of common shares: 13,002,616 13,002,616
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income.
<PAGE> 6
SHILOH INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED OCTOBER 31,1994
(Unaudited)
<TABLE>
<CAPTION>
1994 Adjustments 1994
Shiloh for Shiloh
Industries Shafer Valve Industries
Consolidated (a) Divestiture (b) Pro Forma
---------------- --------------- ---------
<S> <C> <C> <C> <C>
Revenues $210,018,575 $ (15,252,804) $194,765,771
Cost of sales 174,983,533 (10,970,842) 164,012,691
------------ ------------- ------------
Gross profit 35,035,042 (4,281,962) 30,753,080
Selling, general and administrative expenses 18,363,565 (4,401,753) 13,961,812
------------ ------------- ------------
Operating income 16,671,477 119,791 16,791,268
Interest expense, net 1,593,157 (757,016) (c) 836,141
Other income, net (88,935) 6,681 (82,254)
------------ ------------- ------------
Income from continuing operations before
income taxes 14,989,385 883,488 15,872,873
Provision for income taxes 6,220,563 270,035 (d) 6,490,598
------------ ------------- ------------
Income from continuing operations $ 8,768,822 $ 613,453 $ 9,382,275
============ ============= ============
Earnings Per Share:
Income per share from continuing operations $0.67 $0.72
Weighted average number of common shares: 12,968,210 12,968,210
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income.
6
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SHILOH INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED OCTOBER 31,1993
(Unaudited)
<TABLE>
<CAPTION>
1993 Adjustments 1993
Shiloh for Shiloh
Industries Shafer Valve Industries
Consolidated (a) Divestiture (b) Pro Forma
------------------ ----------------- ------------
<S> <C> <C> <C> <C>
Revenues $184,121,106 $ (21,595,161) $162,525,945
Cost of sales 148,614,532 (14,007,120) 134,607,412
------------ ------------- ------------
Gross profit 35,506,574 (7,588,041) 27,918,533
Selling, general and administrative expenses 17,676,517 (5,352,013) 12,324,504
------------ ------------- ------------
Operating income 17,830,057 (2,236,028) 15,594,029
Interest expense, net 2,629,644 (1,252,571) 1,377,073
Minority interest (6,137) --- (6,137)
Other income, net 173,861 8,051 181,912
------------ ------------- ------------
Income from continuing operations before
income taxes 15,368,137 (975,406) 14,392,731
Provision for income taxes 6,504,620 (548,614) (d) 5,956,006
------------ ------------- ------------
Income from continuing operations $ 8,863,517 $ (426,792) $ 8,436,725
============ ============= ============
Earnings Per Share:
Income per share from continuing operations $0.86 $0.82
Weighted average number of common shares: 10,350,705 10,350,705
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income.
<PAGE> 8
SHILOH INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(a) Unaudited Condensed Consolidated Balance Sheet at April 30, 1996.
(b) The proceeds from the sale of Shafer Valve remaining after retirement
of indebtedness and payment of related interest.
(c) Represents the elimination of the Company's investment in Shafer Valve
as a result of the sale to the Buyer. Shafer Valve was accounted for
as a discontinued operation at April 30, 1996.
(d) Represents the use of the proceeds from the sale of Shafer Valve to
retire indebtedness.
(e) Represents the accrual of professional fees and other transaction
costs as well as the estimated operating loss of Shafer Valve from
April 30, 1996 to July 9, 1996. Such amounts were previously
reflected in the net investment in discontinued operations.
(f) Includes $96,639 which represents the repayment of interest expense
associated with the retired indebtedness.
8
<PAGE> 9
SHILOH INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
(a) Consolidated results of operations of the Company. This column
includes the results of operations of Shafer Valve as a component of
continuing operations.
(b) This column represents the historical results of operations of Shafer
Valve, except as noted in items (c) and (d) below.
(c) Interest expense, net reflects the interest cost directly attributable
to the third party debt incurred by the Company upon acquisition of
Shafer Valve. Such amount does not differ materially from the pro
forma adjustment that results from the use of proceeds upon sale of
Shafer Valve to retire such debt.
(d) These adjustments reflect the pro forma amount for income taxes on
Shafer Valve's earnings. Shafer Valve's effective tax rate differs
from the statutory rate due to the impact of state income taxes and
permanent differences in the periods presented.
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 23, 1996 SHILOH INDUSTRIES, INC.
By: /s/ Robert L. Grissinger
-------------------------------
Robert L. Grissinger,
President and Chief
Executive Officer
10
<PAGE> 1
Exhibit 2.1
-----------
STOCK PURCHASE AGREEMENT
------------------------
Stock Purchase Agreement dated as of May 22, 1996, by and among Valley
City Steel Company, Shiloh Industries, Inc., and Shiloh Corporation, and Bettis
Corporation.
<PAGE> 2
STOCK PURCHASE AGREEMENT
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C> <C>
RECITALS:.............................................................................................. 1
ARTICLE I - SALE OF SHARES............................................................................. 1
Section 1. Sale of Stock.................................................................... 1
Section 1.2 Purchase Price................................................................... 2
ARTICLE II - CLOSING................................................................................... 2
Section 2.1 Closing......................................................................... 2
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER AND
PARENT......................................................................................... 2
3.1. Organization............................................................................ 2
3.2. Authorization of Agreement.............................................................. 3
3.3. Valid and Binding Agreement............................................................. 3
3.4. Ownership of the Company and Subsidiaries............................................... 3
3.5. Financial Statements.................................................................... 4
3.6. No Undisclosed Liabilities.............................................................. 5
3.7. Tax Matters............................................................................. 5
3.8. Title to Properties; Absence of Liens and
Encumbrances, Etc....................................................................... 6
3.9. Compliance with Law..................................................................... 8
3.10. Certain Schedules....................................................................... 9
3.11. Insurance............................................................................... 11
3.12. Employee Benefits....................................................................... 12
3.13. Environmental Matters................................................................... 15
3.14. Absence of Certain Changes, Events or Conditions........................................ 18
3.15. Litigation.............................................................................. 20
3.16. Relations with Principal Customers...................................................... 20
3.17. Relations with Principal Suppliers...................................................... 20
3.18. Consents, etc........................................................................... 20
3.19. No Legal Obstacle to Agreement.......................................................... 21
3.20. Patents and Trade Names................................................................. 22
3.21. No Infringement......................................................................... 23
3.22. Inventories; Work in Progress; Raw Materials
and Consumables......................................................................... 23
3.23. Accounts Receivable..................................................................... 23
3.24. Indebtedness to and from Affiliates and Others.......................................... 24
3.25. Labor Matters........................................................................... 24
3.26. Absence of Untrue or Misleading Statements.............................................. 24
3.27. Absence of Illegal Payments............................................................. 25
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER................................................... 25
4.1. Organization............................................................................ 25
4.2. Authorization of Agreement.............................................................. 26
4.3. Valid and Binding Agreement............................................................. 26
4.4. No Legal Obstacle to Agreement.......................................................... 26
4.5. No Legal Proceedings.................................................................... 26
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
4.6. Securities Act Status of Buyer.......................................................... 26
4.7. WARN Act................................................................................ 27
ARTICLE V - COVENANTS OF SELLER AND PARENT............................................................. 27
5.1. Conduct of Business of the Company Prior to the
Closing Date............................................................................ 27
5.2. Information............................................................................. 31
5.3. Notification............................................................................ 32
5.4. Approvals: Conditions................................................................... 32
5.5. Covenant Not to Compete................................................................. 32
ARTICLE VI - CONDITIONS TO BUYER'S OBLIGATIONS......................................................... 32
6.1. Representations, Warranties and Covenants............................................... 32
6.2. Opinion of Counsel of Seller............................................................ 33
6.3. No Adverse Proceedings or Events........................................................ 33
6.4. Consents, etc........................................................................... 33
6.5. Update of Disclosure Schedules.......................................................... 34
6.6. HSR Filing.............................................................................. 34
6.7. Resignations............................................................................ 34
6.8. Covenant Not to Compete................................................................. 34
ARTICLE VII - CONDITIONS TO SELLER'S AND PARENT'S
OBLIGATIONS.................................................................................... 34
7.1. Representations, Warranties, and Covenants.............................................. 34
7.2. Opinion of Counsel...................................................................... 35
7.3. No Adverse Proceedings.................................................................. 35
7.4. Consents, etc........................................................................... 35
7.5. HSR Filing.............................................................................. 35
7.6. Payment of Purchase Price............................................................... 35
ARTICLE VIII - TAX MATTERS............................................................................. 35
8.1. Preparation and Filing of Tax Returns................................................... 35
8.3. Access to Information................................................................... 36
8.4. Seller and Parent Indemnifications...................................................... 37
8.5. Buyer Indemnifications.................................................................. 38
8.6. Indemnification Procedures.............................................................. 38
8.7. Definitions............................................................................. 40
8.8. Survival................................................................................ 41
8.9. Conflict................................................................................ 41
8.10. Limitation of Indemnification for Pre-May 21,
1992 Taxes.............................................................................. 41
ARTICLE IX (Section 9) - TERMINATION AND CONFIDENTIALITY............................................... 42
9.1. Termination............................................................................. 42
9.2. Effect of Termination................................................................... 42
9.3. Confidentiality......................................................................... 42
ARTICLE X - INDEMNIFICATION............................................................................ 43
10.1. Indemnification by the Seller and Parent................................................ 43
10.2. Notice and Defense...................................................................... 45
10.3. Contribution............................................................................ 46
10.4. Indemnification by Buyer................................................................ 46
10.5. Indemnification Reports................................................................. 48
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C> <C>
11. Miscellaneous..................................................................................... 48
11.1. Survival............................................................................... 48
11.2. Amendments............................................................................. 49
11.3. Notices................................................................................ 49
11.4. Brokers' Commission.................................................................... 50
11.5. General Provisions..................................................................... 50
11.6. Entire Agreement....................................................................... 50
11.7. Applicable Law and Jurisdiction........................................................ 51
11.8. No Party Deemed Drafter................................................................ 51
11.9. Public Statements...................................................................... 51
11.10. Further Actions........................................................................ 51
11.11. Severability........................................................................... 51
11.12. Time of the Essence.................................................................... 52
11.13. HSR Filing and Fees.................................................................... 52
11.14. Execution in Counterparts.............................................................. 52
ARTICLE XII - EMPLOYEE BENEFIT MATTERS................................................................. 52
12.1. Employee Matters....................................................................... 52
12.2. Employment of Employees................................................................ 52
12.3. Benefits............................................................................... 53
12.4. Indemnity Regarding 401(k) Plan and
Pension Plan........................................................................ 56
</TABLE>
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STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement (this "Agreement") dated as of
the 22nd day of May, 1996, is by and among Valley City Steel Company, an Ohio
corporation ("Seller"), Shiloh Industries, Inc., a Delaware corporation, and
Shiloh Corporation, an Ohio corporation, the shareholders of Seller (Shiloh
Industries, Inc. and Shiloh Corporation hereinafter collectively referred to as
"Parent"), and Bettis Corporation, a Delaware corporation ("Buyer").
RECITALS:
WHEREAS, Seller owns 1,000 shares (the "Shares") of Common
Stock, without par value (the "Common Stock"), of Shafer Valve Company, an Ohio
corporation (the "Company"), constituting all of the issued and outstanding
shares of capital stock of the Company; and
WHEREAS, Seller desires to sell, transfer and convey all of
the Shares to Buyer and Buyer desires to purchase the Shares, all on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration for the mutual promises
contained herein, and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
<PAGE> 6
ARTICLE I - SALE OF SHARES
SECTION 1. SALE OF STOCK. At the Closing (as defined in
Section 2.1), subject to the terms and conditions of this Agreement, Seller
shall sell to Buyer, and Buyer shall purchase from Seller, all of Seller's
interest in and to the Shares, in exchange for receipt of the consideration
payable for the Shares. The Shares shall be evidenced by delivery of
certificates endorsed in blank or otherwise in transferable form satisfactory to
counsel for Buyer.
SECTION 1.2 PURCHASE PRICE. At Closing, subject to the terms
and conditions of this Agreement, Buyer shall deliver to Seller the sum of
Thirteen Million Two Hundred Thousand Dollars ($13,200,000.00) (the "Purchase
Price"), payable by wire transfer in immediately available funds into an account
designated to Seller at least two days prior to Closing.
ARTICLE II - CLOSING
SECTION 2.1 CLOSING. The Closing of the transactions provided
herein (the "Closing") shall take place on a mutually determined date, such date
to be as soon as practical after satisfaction of the conditions contained in
Article VI and VII hereof (the "Closing Date"). The Closing shall take place at
the offices of Wegman, Hessler, Vanderburg & O'Toole, legal counsel for the
Seller, and shall be effective as of the close of business on the Closing Date.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
Seller and Parent, jointly and severally, hereby
represent and warrant to Buyer as follows:
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3.1. ORGANIZATION. The Company, and its wholly owned
subsidiaries, Shafer Valve Company of Houston ("Houston"), Shafer Valve Company
de Mexico S.A. de C.V. ("Mexico") and Shafer Valve International, Inc.
("International") (Houston, Mexico and International sometimes hereinafter
collectively referred to as the "Subsidiaries") are corporations duly organized,
validly existing, and in good standing under the laws of the State of Ohio, the
State of Texas, the Country of Mexico and the U.S. Virgin Islands respectively,
have full corporate power and authority to own all of their property and assets
and to carry on their business as it is now being conducted, and are duly
qualified to do business and are in good standing in all jurisdictions where the
ownership or leasing of property by them or the conduct of their business
requires them to be so qualified except where the failure to so qualify or to be
in good standing would not have a material adverse effect on the results of
operations or businesses of the Company or the Subsidiaries. The Company and
Subsidiaries have delivered to Buyer true, complete, and correct copies of (i)
the Articles of Incorporation or other constituent documents, of the Company and
the Subsidiaries, as amended to date, and (ii) the Code of Regulations or
By-Laws of the Company and the Subsidiaries, as amended to date (collectively
the Company's and Subsidiaries' "Governing Documents"). Except for the
Subsidiaries, and except as set forth on Schedule 3.1, the Company does not own
any capital stock, securities or other interests of any corporation,
partnership, joint venture or other entity.
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<PAGE> 8
3.2. AUTHORIZATION OF AGREEMENT. The execution and delivery of
this Agreement and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Seller, Parent, the Company and the
Subsidiaries and all corporate action by the Seller, Parent, the Company and the
Subsidiaries necessary for the authorization and consummation of the
transactions contemplated hereby has been taken.
3.3. VALID AND BINDING AGREEMENT. This Agreement has been
validly executed and delivered by and constitutes a valid and binding obligation
of the Seller and Parent enforceable against them in accordance with its terms.
3.4. OWNERSHIP OF THE COMPANY AND SUBSIDIARIES. Seller owns
1,000 shares of the Company's common stock, constituting all of the issued and
outstanding shares of capital stock of the Company. The Shares have been duly
and validly issued and are fully paid, and none of such Shares were issued in
violation of the preemptive rights of any shareholder of the Company or in
violation of any applicable securities laws. Upon the sale of the Shares at the
Closing, Buyer shall have obtained good and marketable title to such Shares,
free and clear of any pledges, liens, mortgages, adverse claims, security
interests, restrictions or encumbrances of any kind, whether accrued, absolute,
contingent or otherwise, with no defects of title whatsoever. There are no
existing warrants, options, rights of first refusal, conversion rights, calls or
commitments of any character pursuant to which the Company is or may become
obligated to issue any shares or any other securities. The Company does not have
a commitment or obligation to repurchase,
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<PAGE> 9
reacquire or redeem any of the outstanding shares of the Company or the
securities of any other corporation. The Company owns 100% of the issued and
outstanding shares of capital stock of both Houston and International. The
Company and Houston own all the issued and outstanding shares of capital stock
of Mexico. None of the Subsidiaries have any existing warrants, options, rights
of first refusal, conversion rights, calls or commitments of any character
pursuant to which any Subsidiary is or may become obligated to issue any shares
of common stock or other securities.
3.5. FINANCIAL STATEMENTS. Seller has delivered to Buyer
copies of the Company's consolidated financial statements for the fiscal year
ended October 31, 1995 and the six months ended April 30, 1996 (the "Financial
Statements"). Said Financial Statements have not been audited. The Financial
Statements have been prepared in accordance with generally accepted accounting
principles as applied by the Company for reporting to Parent, on a consistent
basis throughout the periods covered thereby and present fairly the financial
condition and results of operations of the Company and its Subsidiaries as of
the dates thereof and for the periods covered thereby.
3.6. NO UNDISCLOSED LIABILITIES. Since May 21, 1992, and to
the best knowledge of Seller and Parent prior to May 21, 1992, except as and to
the extent reflected or reserved against in the balance sheet for the six month
period ended April 30, 1996 (the "Balance Sheet"), the Company has no
liabilities or obligations (whether accrued, absolute, contingent or otherwise),
including without limitation, any liabilities resulting from
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<PAGE> 10
failure to comply with any law or arising out of transactions entered into, or
any state of facts existing, prior thereto, other than those liabilities and
obligations incurred in the ordinary course of business. The assets of the
Company set forth on Schedule 3.6 include all of the assets and properties
necessary for or used in the conduct of the Company's business in the manner in
which such business currently is being conducted.
3.7. TAX MATTERS. Since May 21, 1992, and to the knowledge of
Seller and Parent for all periods prior to May 21, 1992, (i) The Company and
each of its Subsidiaries have filed all tax returns and reports ("Tax Returns")
required to be filed by them with any tax authority regarding Taxes as
hereinafter defined (ii) all items of income, gain, loss, deduction and credit
or other items required to be included in each such Tax Return have been so
included and all information provided in each such Tax Return is true, correct
and complete, (iii) all Taxes required to be paid by them in respect of the
periods covered by such Tax Returns, whether or not shown on such returns have
been paid, and the Company and its Subsidiaries have no liability for such taxes
in excess of the amounts so paid (iv) all required withholding Taxes imposed on
or with respect to the Company or any of its Subsidiaries have been satisfied in
full, and (v) no penalty, interest or other charge is or will become due with
respect to the late filing of any such Tax Return or late payment of any Taxes.
Except as set forth in Schedule 3.7, the Company and its Subsidiaries are not
delinquent in the payment of any tax, assessment, or governmental charge, (ii)
there is no claim against the Company or any Subsidiary for any
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<PAGE> 11
Taxes, and no assessment, deficiency or adjustment has been asserted or proposed
with respect to any Tax Return of or with respect to the Company or any
Subsidiary, and (iii) except as set forth on Schedule 3.7 there is not in force
any extension of time with respect to the due date for the filing of any Tax
Return of or with respect to the Company or any Subsidiary or any waiver or
agreement for any extension of time for the assessment or payment of any Taxes
of or with respect to the Company or any Subsidiary. Since Seller's acquisition
of the Company on May 21, 1992, the Company has been included in the
consolidated federal income tax returns of the controlled group of which the
Seller is a part, and such consolidated federal income tax returns have not been
audited by the Internal Revenue Service, and no audit is pending. As used
herein, the term "Taxes" includes all governmental taxes and related
governmental charges imposed by the laws and regulations of any governmental
jurisdiction. As to Taxes of the Seller for periods prior to May 21, 1992, see
Section 8.10.
3.8. TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES,
ETC.
(a) Except as set forth on Schedule 3.8, (a)(i) and (ii), the
Company has good and marketable title to all of its properties and assets, real
and personal, reflected in the Balance Sheet (except for properties or assets
disposed of in the ordinary course of business since the date of the Balance
Sheet), (all such properties and assets whether real or personal referred to
herein as the "Properties") in each case free and clear of all pledges, liens,
mortgages, adverse claims, security interests, restrictions
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and encumbrances, of any kind, whether contingent or absolute, except liens for
current taxes not yet due and payable, statutory exceptions to indefeasibility
of title, or as described on Schedule 3.8. Neither the Seller nor Parent has any
knowledge of any threatened or pending condemnation of or expropriation
proceeding, with respect to the Properties by any governmental authority, or any
other proposed action by any governmental authority or by any other person or
entity, which condemnation or action would adversely affect the Company's use
and enjoyment of the Properties. The current use of the Properties by the
Company, all means of ingress and egress to the improvements thereon, and the
location of all improvements thereon complies in all respects with all current
applicable laws, zoning, building and other bylaws, regulations, ordinances and
all other requirements of governmental bodies, their agencies and all other
regulatory authorities having jurisdiction with respect thereto. There are no
easements, subdivision agreements, rights-of-way or liens of any nature binding
the Properties or the improvements thereon, or any part thereof, excepting those
which in no material way interfere with the existing uses of the Properties. The
boundaries of the Properties do not conflict with those of the adjoining
properties, and there are no encroachments onto or from adjoining properties or
streets. Except as set forth on Schedule 3.13, no urea formaldehyde foam
insulation or asbestos materials have been used in the construction, renovation
or alteration of any of the improvements on the Properties. No notice has been
received from any municipal, or other authority or other agency having
jurisdiction, advising of
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<PAGE> 13
any defect in the state of repair, malfunction or nonperformance of or for any
alteration or improvement to the Properties or any improvement thereon or any
part thereof, except where such deficiency has been rectified. Except as
provided on Schedule 3.8(a)(iii), the improvements upon the Properties are in a
state of good repair and in good working order and free from all material
defects in workmanship and materials.
(b) Except as set forth on Schedule 3.8 (b)(i), the assets
owned by the Company as of the date of the Financial Statements and as of the
date hereof constitute all of the material tangible property and assets (real,
personal and fixed) used in or necessary to conduct the business operations of
the Company as conducted prior to the date of this Agreement and necessary to
enable the Company to carry on such business as presently conducted. Except as
set forth on Schedule 3.8 (b)(ii), the Company does not own or lease any
property or asset (x) which is not used in its business and is used by any other
person or (y) which is used in its business but use of which is made available
to other persons for matters unrelated to the business of the Company.
3.9. COMPLIANCE WITH LAW. To the best knowledge of Seller and
Parent, the respective businesses, properties, plant, and offices of the Company
and Subsidiaries are in compliance with all applicable foreign and domestic,
federal, state, and local laws, statutes, ordinances, codes, rules, regulations,
licenses, authorizations, decisions, orders, injunctions and decrees, including,
but not limited to, those legal requirements relating to zoning, city planning,
fire safety, environmental protection, and
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similar matters (collectively, "Laws"). All permits, licenses, franchises,
registrations, consents, and other authorizations necessary for the conduct of
the businesses of the Company and its Subsidiaries (collectively, "Permits")
have been timely obtained and are currently in effect. The Company and its
Subsidiaries are in compliance with all terms or provisions of all applicable
Permits.
3.10. CERTAIN SCHEDULES. There have been delivered to Buyer
true and complete copies of the following schedules or contracts:
(i) a schedule showing the address and approximate size of
all buildings and facilities, leased, occupied or used by the Company;
(ii) copies of all written contracts for amounts in excess of
$5,000 to perform services or for the purchase, sale, lease or exchange
of personal property to which the Company is a party involving receipts
by the Company or payments by the Company other than purchase orders or
sales contracts entered into in the ordinary course of business;
(iii) except for open purchase orders, copies of all other
currently effective written contracts, leases, agreements and other
instruments to which the Company is a party or is bound (other than
insurance policies), together with a schedule listing such agreements,
and all oral agreements involving payments in excess of $5,000 per
annum to which the Company is a party; provided, however, there shall
separately be itemized and copies provided of all indebtedness of which
the Company is an obligor, maker or guarantor;
(iv) a schedule of (a) each automobile, truck and other piece
of automotive equipment owned or leased by the Company and its
location, and (b) all liens, security interests, and encumbrances, of
any kind (other than statutory liens not yet delinquent) to which the
properties described in (a) of this Section 3.10(iv) are subject
(including copies of all instruments representing such liens, security
interests, and encumbrances, of any kind);
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<PAGE> 15
(v) a schedule, as of April 30, 1996, of the trade and
accounts receivable of the Company showing separately for each
receivable its age denominated as "0-30 days," "30-60 days," "60-90
days" and "older than 90 days;"
(vi) in addition to the persons identified on Schedule 12.2, a
list, as of April 30, 1996, of the name, address and salary, as well as
the title or functional position, of each current director and officer
of the Company and each other current employee, consultant,
distributor, representative, salesman or agent employed by or under
contract with the Company, together with copies of all currently
effective agreements or arrangements with regard to the payment of
compensation, profit-sharing, pension, vacation, retirement or other
compensation benefits to officers, employees, former officers or former
employees of the Company;
(vii) a schedule which sets forth (a) the name of each bank,
trust company, stock and other broker with which the Company has an
account, credit line, or safe deposit box or vault, (b) the names of
all persons authorized to draw thereon or to have access to any safe
deposit box or vault, (c) the purpose of each such account, safe
deposit box or vault, and (d) the names of all persons authorized by
proxies, powers of attorney or like instruments to act on behalf of the
Company in matters concerning any of its business or affairs;
(viii) copies of the form of all express product warranties
with respect to goods sold or services performed by the Company in the
(2) years prior to the date hereof;
(ix) copies of all pleadings or other documents relating to
pending litigation or known claims against the Company;
(x) copies of all employee benefit plans (including profit
sharing, health, life or other insurance plan, etc.) or other
contractual obligation for deferred compensation of the Company
(including any plan described in Section 3.12);
(xi) copies of all currently effective contracts containing
covenants limiting the freedom of the Company to compete in any line of
business or with any person in any geographical area;
(xii) copies of all currently effective contracts or options
relating to the acquisition by the Company of any operating business;
and
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<PAGE> 16
(xiii) copies of all currently effective contracts or
arrangements requiring the payment by the Company to any person of a
commission or fee in excess of $1,000 per annum.
Except as set forth in Schedule 3.10, the Company is not in default, nor but for
a requirement that notice be given or that a period of time elapse or both,
would be in default, under any contract, agreement, lease or other instrument to
which it is a party or by which it or its properties is bound. Except as set
forth in Schedule 3.10, all of the Company's contracts, agreements,
understandings, franchises, permissions and commitments, whether or not attached
as a schedule to this Agreement, are in good standing, valid and effective and
the Company has, in the ordinary course of business, paid in full all amounts
due thereunder and has satisfied in full all of the liabilities and obligations
with respect thereto and the Company is not in default under any of them, nor to
the best knowledge of the Seller and Parent, is any other party to such
contracts, agreements, understandings, franchises, permissions or commitments in
default thereunder. Except as set forth in Schedule 3.10, the Seller and Parent
have no reason to believe that any of such other parties is or will be unable to
comply with any of such contracts, agreements, understandings, franchises,
permissions or commitments. Except as set forth in Schedule 3.10, the Company is
not a party to or bound by any contract, agreement, understanding, franchise,
permission or commitment which was entered into other than in the ordinary and
the usual course of its business.
3.11. INSURANCE. All properties and assets of the Company and
its Subsidiaries are insured in amounts and against risks usually insured
against by persons operating similar
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businesses. Schedule 3.11 lists all such insurance policies presently maintained
by the Company and its Subsidiaries, showing the types of coverage, policy
expiration dates, policy numbers, and policy limits as to each such policy. All
such policies pursuant to which coverage exists are in full force and effect and
have been issued under valid policies for the benefit of the Company or its
Subsidiaries by insurance carriers licensed to do business in Ohio and/or Texas.
Except as described on Schedule 3.11, there are no pending claims against the
Company or its Subsidiaries for personal injuries, products liability, property,
or other damage under any insurance policy heretofore or presently issued to the
Company or its Subsidiaries. Except as noted in Schedule 3.11, to the best of
the knowledge of Seller and Parent, the performance by the Company and its
Subsidiaries of their obligations hereunder will not cause the termination or
cancellation of any insurance policy.
3.12. EMPLOYEE BENEFITS.
(a) DEFINITIONS. Where the following words and phrases appear
in this Agreement, they shall have the respective meanings set forth below,
unless the context clearly indicates to the contrary.
(i) PLAN: Each "employee benefit plan," as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), including, but not limited to, those
employee benefit plans that may be exempt from some or all of the
provisions of ERISA, which is sponsored, maintained, or contributed to
by Parent, Seller, or the Company for the benefit of the employees or
former employees, of the Company, or has been so sponsored, maintained,
or contributed to within six years prior to the Closing Date.
(ii) BENEFIT PROGRAM OR AGREEMENT: Each personnel
policy, stock option plan, collective bargaining
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<PAGE> 18
agreement, bonus plan or arrangement, incentive award plan or
arrangement, vacation policy, severance pay plan, policy or agreement,
deferred compensation agreement or arrangement, executive compensation
or supplemental income arrangement, and each other employee benefit
plan, agreement, arrangement, program, practice, or understanding,
which is not described in Section 3.12(a)(i) and which is sponsored,
maintained, or contributed to by Parent, Seller, or the Company for the
benefit of the employees or former employees of the Company, or has
been so sponsored, maintained, or contributed to within six years prior
to the Closing Date.
(b) COPIES OF PLANS AND BENEFIT PROGRAMS OR AGREEMENTS.
Schedule 3.12(b) provides a description of each Plan and Benefit Program or
agreement, and true, correct, and complete copies of each of such Plans and
Benefit Programs or Agreements, and related trusts, if applicable, including all
amendments thereto, have been furnished to Buyer. There have also been furnished
to Buyer, with respect to each Plan required to file such report and
description, and each Benefit Program or Agreement in which such report and
description was filed, the most recent report on Form 5500 and the summary plan
descriptions as set forth on Schedule 3.12(b).
(c) EMPLOYEE BENEFIT PLAN COMPLIANCE.
(i) Neither Parent, Seller or the Company contributes to or
has an obligation to contribute to, nor has Parent, Seller, or the
Company at any time contributed to or had an obligation to contribute
to, a multiemployer plan within the meaning of Section 3(37) of ERISA;
(ii) Except as set forth in this Section 3.12, all
obligations, whether arising by operation of law or by contract,
required to be performed in connection with the Plans and Benefit
Programs or Agreements have been performed, and there have been no
defaults or violations by any party to the Plans or Benefit Programs or
Agreements;
(iii) All reports and disclosures relating to the Plans and
Benefit Programs or Agreements required to be filed with or furnished
to governmental agencies,
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<PAGE> 19
participants, or beneficiaries have been filed or furnished in
accordance with applicable law in a timely manner, and each Plan and
each Benefit Program or Agreement has been administered in compliance
with its governing documents and all applicable law;
(iv) Except as set forth on Schedule 3.12(c)(iv), each Plan
that is intended to be qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended, ("Code") (A) satisfied the
requirements of such Section, (B) has received a favorable
determination letter from the Internal Revenue Service ("IRS")
regarding such qualified status and governing amendments required under
the Tax Reform Act of 1986, the Unemployment Compensation Amendments of
1992, the Omnibus Reconciliation Act of 1993, and the final
nondiscrimination regulations under Section 401(a)(4) of the Code (or
such amendments to such Plan have been timely made and filed with the
IRS for such a determination letter), and (C) has not, since receipt of
the most recent favorable determination letter, been amended or
operated in a way that would adversely affect such qualified status;
(v) Except for matters set forth on Schedule 3.12(c)(v), there
are no actions, suits, or claims pending (other than routine claims for
benefits) or threatened against, or with respect to, any of the Plans
or Benefit Programs or Agreements or their assets;
(vi) All contributions required to be made to the Plans and
Benefit Programs or Agreements pursuant to their terms and provisions
have been made timely;
(vii) As to any Plan subject to Title IV of ERISA, there has
been no event or condition which presents a material risk of Plan
termination, no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code
has been incurred, no reportable event within the meaning of Section
4043 of ERISA (for which the disclosure requirements of Regulation
ss.2615.3 promulgated by the Pension Benefit Guaranty Corporation
("PBGC") have not been waived) has occurred, no notice of intent to
terminate the Plan has been given under Section 4041 of ERISA, no
proceeding has been instituted under Section 4042 of ERISA to terminate
the Plan, no liability to the PBGC has been incurred, and the assets of
the Plan equal or exceed the actuarial present value of the benefit
liabilities, within the meaning of Section 4041 of ERISA, under the
Plan, based upon reasonable actuarial assumptions and the asset
valuation principles established by the PBGC;
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<PAGE> 20
(viii) As to any Plan intended to be qualified under Section
401(a) of the Code, there has been no termination of, partial
termination of, or discontinuance of contributions to the Plan within
the meaning of Section 411(d)(3) of the Code;
(ix) No act, omission, or transaction has occurred that would
result in imposition on the Company of (A) breach of fiduciary duty or
prohibited transaction liability under Section 409 or Section 502 of
ERISA, (B) a civil penalty assessed pursuant to subsections (c), (i),
or (1) of Section 502 of ERISA, or (C) a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code;
(x) Except as set forth in Schedule 3.12(c)(x), there is no
matter pending (other than routine qualification determination filings)
with respect to any of the Plans or Benefit Programs or Agreements
before the IRS, the Department of Labor, or the PBGC;
(xi) Each trust, which is part of a Plan and intended to be
exempt from federal income taxation pursuant to Section 501(c)(9) of
the Code, satisfies the requirements of such Section and has received a
favorable determination letter from the IRS regarding such exempt
status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which would
adversely affect such exempt status; and
(xii) With respect to any employee benefit plan, within the
meaning of Section 3(3) of ERISA, which is not listed on Schedule
3.12(b) but which is sponsored, maintained, or contributed to, or has
been sponsored, maintained, or contributed to within six (6) years
prior to the Closing Date, by any corporation, trade, business, or
entity under common control with Parent, Seller, or the Company, within
the meaning of Section 414(b), (c), (m), or (o) of the Code or Section
4001 of ERISA ("Commonly Controlled Entity"), (A) no withdrawal
liability, within the meaning of Section 4201 of ERISA, has been
incurred, which withdrawal liability has not been satisfied, (B) no
liability to the PBGC has been incurred by any Commonly Controlled
Entity, which liability has not been satisfied, (C) no accumulated
funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code has been incurred, and
(D) all contributions (including installments) to such plan required by
Section 302 of ERISA and Section 412 of the Code have been timely made.
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<PAGE> 21
(d) NO ADDITIONAL RIGHTS OR OBLIGATIONS. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not (A) require the Company to make a larger contribution to, or pay
greater benefits under, any Plan or Benefit Program or Agreement than it
otherwise would or (B) create or give rise to any additional vested rights or
service credits under any Plan or Benefit Program or Agreement.
(e) NO ADDITIONAL SEVERANCE. Except as set forth on Schedule
3.12(e), the Company is not a party to any agreement, nor has it established any
policy or practice, requiring it to make a payment or provide any other form of
compensation or benefit to any person performing services for the Company upon
termination of such services that would not be payable or provided in the
absence of the consummation of the transactions contemplated by this Agreement.
(f) NO EXCESS PARACHUTE PAYMENTS. In connection with the
consummation of the transaction contemplated by this Agreement, no payments have
or will be made under the Plans or Benefit Programs or Agreements which, in the
aggregate, would result in imposition of the sanctions imposed under Section
280G or Section 4999 of the Code.
(g) AMENDMENT OR TERMINATION OF PLANS. Except as set forth in
Schedule 3.12(g), each Plan and Benefit Program or Agreement may be unilaterally
amended or terminated in its entirety by the Company or Parent without liability
except as to benefits accrued thereunder prior to such amendment or termination.
3.13. ENVIRONMENTAL MATTERS.
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(a) Since May 21, 1992 and except as set forth in
Schedule 3.13:
(i) each of the Company and its Subsidiaries and their
respective businesses, real properties, plant, and offices (including
by way of example and not by way of limitation any real estate,
building, structures, fixtures, facilities, improvements, interests,
privileges, and easements and any appurtenances thereto) owned,
operated, leased, or otherwise used (collectively, the "Premises") are
and have at all times been in full compliance with all applicable Laws
which pertain to health, safety and environment (including but not
limited to ground or air or water or noise pollution, contamination,
and underground or aboveground tanks) and shall include without
limitation, material compliance with the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Resource, Conservation and Recovery Act of 1976, as
amended ("RCRA"), and any state lien or state superlien or
environmental statutes (collectively, "Environmental Laws");
(ii) all Permits required to be obtained or filed by each of
the Company and its Subsidiaries under any Environmental Laws in
connection with the Company's and its Subsidiaries' Premises, including
without limitation those relating to the treatment, storage, disposal
or release of a Contaminant (as such term is defined in Section 4.13(b)
hereof) into the environment, have been duly obtained or filed, and
each of the Company and its Subsidiaries are and have at all time been
in compliance with the terms and conditions of all such Permits;
(iii) no Contaminants have at any time been improperly stored,
treated, recycled disposed or released in any way by the Company or any
of its Subsidiaries in, under or about the Premises;
(iv) no investigative, enforcement, cleanup, removal,
containment, remedial or other private or governmental or regulatory
action has at any time been threatened, instituted or completed against
or with respect to the Premises in response to the presence of
Contaminants;
(v) there are no locations offsite of the Premises or on the
Premises where Contaminants resulting from the operation or use of the
Premises by the Company or any of its Subsidiaries, have been
improperly stored, treated, recycled, or disposed and released;
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<PAGE> 23
(vi) there are no underground storage tanks or dispensing
equipment located on, under or about the Premises;
(vii) there are no polychlorinated biphenyls or asbestos-
containing material located in, under or about the Premises;
(viii) there are no past, intermittent or continuing releases
or threatened releases of Contaminants into the environment from the
Premises or from any other offsite locations where Contaminants
resulting from the operation or use of the Company's or any of its
Subsidiaries' properties or businesses exist or have existed;
(ix) neither the Company nor any of its Subsidiaries has
information indicating that any employee (including, but not limited
to, any past or present employee of the Company or any of it
Subsidiaries) has or is suspected of having impaired health as the
result of the operation or use of the Premises by the Company or any of
its Subsidiaries;
(x) neither the Company nor any of its Subsidiaries has
treated, stored or disposed of any hazardous waste (within the meaning
of such terms under RCRA or any similar Environmental Law) in, under or
about the Premises;
(xi) neither the Company nor any of its Subsidiaries has
received any notice from any governmental authority or private or
public person: (1) requesting information of the Company or such
Subsidiaries regarding the presence of Contaminants in, under or about
the Premises; (2) requiring the removal by the Company or such
Subsidiaries of Contaminants from the Premises; (3) advising the
Company or such Subsidiaries that it is in violation or noncompliance
with any Environmental Laws; (4) advising the Company or such
Subsidiaries of the institution or pendency against it of any suit,
action, claim, proceeding or investigation associated with any
violation or noncompliance with any Environmental Laws or any presence
of Contaminants in, under or about the Premises; or (5) advising the
Company or such Subsidiaries that it is a potentially responsible party
under CERCLA or any similar Environmental Law; and for response costs
with respect to a release or threatened release of Contaminants.
(xii) None of the Company's or any of its Subsidiaries'
Premises is listed or proposed for listing on the "National Priorities
List" under CERCLA, or on the Comprehensive Environmental Response,
Compensation, and
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Liability Information System maintained by the U.S. Environmental
Protection Agency, as updated through the date hereof, or any similar
state list of sites requiring investigation or cleanup.
(b) "CONTAMINANTS" DEFINED. The term "Contaminants" means:
(i) any solid wastes, hazardous materials, hazardous wastes,
hazardous substances, and toxic substances as those or similar terms
are defined under any Environmental Laws;
(ii) any asbestos or any material which contains any hydrated
mineral silicate, including chrysolite, amosite, crocidolite,
tremolite, anthophylite and/or actinolite, whether friable or
non-friable;
(iii) any polychlorinated biphenyls ("PCBs"), or PCB-
containing materials, or fluids;
(iv) any substance that, whether by its nature or its use, is
subject to regulation under any Environmental Law or with respect to
which any Environmental Law or governmental authority requires
environmental investigation, monitoring or remediation.
(c) PRIOR OWNERS. Except as set forth on Schedule 3.13, to the
best knowledge of Seller and Parent, the representations and warranties set
forth in Section 3.13(a) are true and correct with regard to the activities of
owners of the Company and/or the Premises prior to May 21, 1992.
3.14. ABSENCE OF CERTAIN CHANGES, EVENTS OR CONDITIONS.
Except as set forth in Schedule 3.14, and as otherwise contemplated
by this Agreement, since October 31, 1995:
(a) there has not been:
(i) any material adverse change in the business, assets,
financial condition or prospects of the Company or any Subsidiary, or
(ii) any damage, destruction or loss (whether covered by
insurance or not) adversely affecting the business, assets, financial
condition or prospects of the Company or any Subsidiary; and
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(b) the Company or any Subsidiary has not:
(i) declared, set apart for the payment of, or paid any
dividend or other distribution of assets (whether in cash, shares or
property) with respect to the shares of the Company or the Subsidiary
or any direct or indirect redemption, purchase or other acquisition of
such shares;
(ii) except for customary increases based on merit, term of
service or regular promotion of non-officer employees, increased the
compensation payable or to become payable to any employee or increased
any bonus, insurance, pension or other employee benefit plan, payment
or arrangement for such employees or entered into or amended any
collective bargaining, employment, consulting, severance or similar
agreement;
(iii) borrowed any funds or incurred any liability or
obligation (absolute, accrued, contingent or otherwise), except
obligations incurred in the ordinary course of business;
(iv) paid, discharged or satisfied any claim, liability or
obligation other than current liabilities or the current portions of
long-term liabilities reflected in or shown on the Balance Sheet and
current liabilities incurred in the ordinary course of business since
the date of the Balance Sheet and set forth on Schedule 3.14;
(v) permitted any of its assets to be subjected to any
mortgage, lien, security interest, restriction or charge of any kind;
(vi) waived any material claims or rights to its business,
assets or financial condition;
(vii) sold, transferred or otherwise disposed of any of its
assets, except in the ordinary course of business consistent with past
practice;
(viii) made any change in any method of accounting, or any
material practice or principle of accounting;
(ix) paid, loaned or advanced any amount or asset to or sold,
transferred or leased any asset to any employee except for normal
compensation involving salary and benefits payable in the ordinary
course of business;
(x) entered into any material commitment or transaction, other
than in the ordinary course of business, affecting the operations of
the Company or the Subsidiary;
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<PAGE> 26
(xi) entered into any agreement or arrangement, other than in
the ordinary course of business granting any preferential right to
purchase any of its assets, property or rights or requiring the consent
of any party to the transfer and assignment of any such assets,
property or rights;
(xii) except as set forth on Schedule 3.14 (b)(xii) made any
capital expenditures, capital additions or capital improvements in
excess of $5,000 per annum, other than in the ordinary course of
business; or
(xiii) agreed in writing, or otherwise, to take any action
described in this Section.
3.15. LITIGATION. Except as disclosed in Schedule 3.15, no
litigation or other judicial, administrative, or investigative proceeding, at
law or in equity or otherwise, is pending or, to the best knowledge of Seller
and Parent, threatened before any court or governmental agency against or
affecting Seller, the Company, the Subsidiaries, or their properties. Schedule
3.15 also identifies each products liability or similar claim brought or, to the
knowledge of Seller, threatened against the Company or its Subsidiaries during
the five (5) year period prior to the date hereof in connection with products
sold or services rendered by the Company or its Subsidiaries.
3.16. RELATIONS WITH PRINCIPAL CUSTOMERS. No customer has
cancelled any order or contract for services or products to be provided by the
Company or its Subsidiaries, and there has been no other change or indication of
a pending change communicated to the Company, the Subsidiaries or the Seller
regarding orders or requirements of any customer for such products or services,
which cancellation or change would have a material adverse effect on the
businesses of the Company or its Subsidiaries.
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<PAGE> 27
3.17. RELATIONS WITH PRINCIPAL SUPPLIERS. No supplier has
cancelled any contract or order for provision of, and there has been no threat
by any supplier not to provide, any raw materials, supplies, or services
(including utilities) to the Company or its Subsidiaries, the loss of which
would have a material adverse effect on the businesses of the Company or the
Subsidiaries.
3.18. CONSENTS, ETC. No consents or approvals of parties with
whom the Company, the Subsidiaries or Seller have contractual relationships or
have had such contractual relationships or by any governmental or administrative
authorities (other than approval under the Hart-Scott-Rodeno Antitrust
Improvement Act of 1976 (the "Antitrust Laws")) are required or will be required
in order to permit the consummation of the transactions contemplated by this
Agreement.
3.19. NO LEGAL OBSTACLE TO AGREEMENT.
3.19.1. The execution, delivery, and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated, and the fulfillment of the terms hereof, do not and will not
conflict with, or result in a breach or violation of, or constitute a default
under the Governing Documents of the Company or the Subsidiaries or any
applicable law or regulation or any judgment, order, or decree binding upon
Seller, the Parent, the Company, or the Subsidiaries or upon the properties of
the Seller, the Parent, the Company, or the Subsidiaries, or conflict with, or
result in a breach or violation of, or constitute a default in the performance,
observance, or fulfillment of any obligation, covenant, or condition contained
in, or constitute, or, but for any
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requirement of notice or lapse of time or both, would constitute, an event of
default by the Seller, the Parent, the Company, or the Subsidiaries under any
applicable lease, mortgage, or other contractual obligation to which Seller, the
Parent, the Company or the Subsidiaries are bound, or result in, or require, the
creation or imposition of any lien, charge, or encumbrance upon the assets of
the Company or the Subsidiaries.
3.19.2. No permit, license, franchise, or authorization of the
Company or its Subsidiaries will be terminated or impaired by reason of the
execution, delivery, and performance of this Agreement or the consummation of
any transaction herein referred to or contemplated.
3.20. PATENTS AND TRADE NAMES.
3.20.1. As to each patent, patent application, trade name,
trademark, service mark, and copyright applied for by, registered, or licensed
to or used by the Company or its Subsidiaries in their businesses, Schedule 3.20
contains a complete list thereof specifying (i) the date of first use, if known,
(ii) the jurisdiction(s) in which registered, (iii) the application or
registration numbers and dates thereof, and (iv) the renewal status thereof. If
any such patent, patent application, name, mark, or right was acquired by
assignment, such assignment is likewise identified in Schedule 3.20. Complete
and correct copies of each application for or registration of each such patent,
trade name, trademark, service mark, and copyright, and each such assignment
have been made available to Buyer prior to execution of this Agreement. There is
no claim, infringement, or, to the knowledge
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of Seller, Parent, the Company, or the Subsidiaries any threat of claim or
infringement which in any material way may derogate from or dilute the Company's
or the Subsidiaries' rights in or to any one of the patents, patent
applications, trade name, trademarks, services marks, or copyrights listed in
Schedule 3.20.
3.20.2. With respect to all patents and patent
applications listed on Schedule 3.20:
(i) the Company or the Subsidiaries are
the sole and exclusive owner of the
improvement, invention, and letters
patent;
(ii) the listed patents and all rights
appurtenant thereto are free of
any and all liens, claims,
security interests, and other
encumbrances of any nature or kind;
and
(iii) no prior transfer, sale, or assignment has
been made by the Company or the
Subsidiaries of any part of a listed patent
or any rights appurtenant thereto.
3.21. NO INFRINGEMENT. To the best knowledge of Seller and
Parent, during the past five (5) years, the Company or the Subsidiaries have not
infringed any patents, trademarks, service marks, or trade names registered to
or used by the Company or the Subsidiaries in their businesses, nor has the
Company or the Subsidiaries claimed any such infringement.
3.22. INVENTORIES; WORK IN PROGRESS; RAW MATERIALS AND
CONSUMABLES. Except as set forth on Schedule 3.22, the inventories
of the Company shown on the Balance Sheet (dated April 30, 1996)
consist of items of a quality and quantity usable or salable in the
normal course of business and the recorded value of all raw
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materials, finished products and component parts and work-in-progress are
reflected and valued in accordance with the customary valuation policies of the
Company utilized in the preparation of the Financial Statements of the Company.
3.23. ACCOUNTS RECEIVABLE. Except as set forth on Schedules
3.10 and 3.23, all accounts receivable of the Company which are reflected on the
Balance Sheet or reflected on the books and records of the Company are (i)
valid, existing and collectible without resort to legal proceedings or
collection agencies, net of reserves established on the books and records of the
Company, (ii) represent monies due for goods sold or services rendered in the
ordinary course of business and (iii) are not subject to any defenses, rights of
set-off, assignments, security interests or other encumbrances. Except as shown
on Schedule 3.10, all such accounts receivable are current (not more than 60
days in age), and neither the Seller nor Parent is aware of any dispute
regarding the collectability of any such accounts receivable.
3.24. INDEBTEDNESS TO AND FROM AFFILIATES AND OTHERS. Except
as set forth in Schedule 3.24, the Company is not indebted to any affiliate,
shareholder or employee of the Company (except for amounts due as normal salary,
wages, commissions, or reimbursement of ordinary business expenses); and no
affiliate, shareholder or employee of the Company is indebted to the Company. On
the Closing Date as set forth herein, all inter Company indebtedness owed by the
Company to the Seller, any affiliate or any shareholder shall be satisfied in
full.
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3.25. LABOR MATTERS. None of the employees of the Company is
covered by a collective bargaining agreement, and no organization efforts with
respect to any of the Company's employees are pending before a labor
organization, or, to the best knowledge of Seller and Parent, threatened. No
labor dispute, strike, work stoppage or slowdown, employee action, certification
question or organization drive which has affected the Company, or any of its
businesses or operations, has occurred or, currently is pending or, to the best
knowledge of Seller and Parent, threatened. To the best knowledge of the Seller
and Parent, except as set forth in Schedule 3.25, no officers or senior or key
employees of the Company are planning to terminate their relationship with the
Company.
3.26. ABSENCE OF UNTRUE OR MISLEADING STATEMENTS. No statement
contained in any certificate, separate schedule, financial statement, exhibit or
other document or instrument furnished or to be furnished by the Company or
Seller or Parent pursuant to or in connection with this Agreement or in any
exhibit hereto contains any untrue statement or omits to state a material fact
necessary in order to make the statements contained herein and therein not
misleading or necessary to provide Buyer with the proper information with
respect thereto. There is no fact known to the Seller, Parent or the Company
which materially adversely affects, or might reasonably be expected to have a
material adverse effect on, the business, assets, financial condition or
prospects of the Company which has not been specifically set forth in this
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Agreement or otherwise disclosed by the Seller, Parent or the Company to Buyer
in writing.
3.27. ABSENCE OF ILLEGAL PAYMENTS. The Company has an
unwritten policy against, and neither the Company, any Subsidiary or the Seller,
nor, to the best knowledge of the Company, Seller or Parent, any officer,
employee or agent of the Company or any Subsidiary, has used any corporate funds
for direct or indirect unlawful payment to any governmental official or
employee.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1. ORGANIZATION. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
has full corporate power and authority to own all of its property and assets and
to carry on its business as it is now being conducted, and is duly qualified to
do business and is in good standing in all jurisdictions where the ownership or
leasing of property by it or conduct of its business requires it to be so
qualified, including the State of Texas, except where the failure to so qualify
or to be in good standing would not have a material adverse effect on the
results of operations or businesses of Buyer. Buyer has delivered to Seller
complete and accurate copies of (i) its Certificate of Incorporation as amended
to date, and (ii) By-Laws as amended to date (collectively its "Governing
Documents").
4.2. AUTHORIZATION OF AGREEMENT. The execution and delivery of
this Agreement and the performance of the transactions contemplated hereby have
been duly and validly authorized by the
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Buyer, and all corporate action necessary for the authorization and consummation
of the transactions contemplated hereby has been taken.
4.3. VALID AND BINDING AGREEMENT. This Agreement has been
validly executed and delivered by and constitutes a valid and binding obligation
of Buyer enforceable in accordance with its terms.
4.4. NO LEGAL OBSTACLE TO AGREEMENT. The execution, delivery,
and performance of this Agreement and the consummation of the transactions
contemplated hereby do not and will not conflict with, or result in a breach or
violation of, or constitute a default in the performance, observance, or
fulfillment of any obligation, covenant, or condition contained in, or
constitute, or, but for any requirement of notice or lapse of time or both,
would constitute, an event or default by Buyer under any applicable contract,
lease, mortgage, or other agreement to which Buyer is a party or by which it is
bound.
4.5. NO LEGAL PROCEEDINGS. As of the date of this Agreement
there is no suit, action, or other proceeding against Buyer pending or (to the
best knowledge of Buyer) threatened before any court or governmental agency in
which it is, or will be, sought to restrain or prohibit, or to obtain damages or
other relief in connection with, this Agreement, or the transactions
contemplated hereby.
4.6. SECURITIES ACT STATUS OF BUYER. Buyer is acquiring
the stock for its own account for investment purposes and not with
a view towards distribution. Buyer has such knowledge and
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experience in financial matters and is capable of evaluating the merits and
risks of its investments in the Shares.
4.7. WARN ACT. Buyer has not advised or otherwise disclosed to
Seller that Buyer has any plans to implement a plant closing or mass layoff, as
defined by the Worker Adjustment Retraining and Notification Act, 29 U.S.C.
Section 2101 et seq. and regulations promulgated thereunder ("WARN Act"), either
on the Closing Date or within sixty (60) days after the Closing Date. Buyer
understands and agrees that it is solely responsible for providing any and all
notices required under the WARN Act, and is solely liable and responsible for
any and all back pay, benefits or other damages incurred by the Company as
result of the WARN Act and the failure of the Company to comply therewith. Buyer
further agrees to indemnify and hold Seller harmless from any and all judgments,
damages, interest, costs, expenses, and reasonable attorneys' fees arising out
of any action, claim or demand made against the Seller for any violation, or
alleged violation, of the WARN Act.
ARTICLE V - COVENANTS OF SELLER AND PARENT
Seller and Parent covenant and agree as follows:
5.1. CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO THE
CLOSING DATE.
(a) The business of the Company and each Subsidiary shall be
operated only in the ordinary course of business and consistent with past
practice, and, consistent with such operation, the Seller and the Company will
use their best efforts to preserve intact the present organization of the
Company and each Subsidiary,
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the goodwill associated with the business of the Company and each Subsidiary and
the relationships of the Company and each Subsidiary with persons having
relationships with it.
(b) No change shall be made in the Governing Documents
of the Company or the Subsidiaries.
(c) No change shall be made in the number of shares of the
Company or the Subsidiaries; nor shall any option, warrant, call, right,
commitment, conversion right, right of first refusal, or agreement of any
character be granted or made by the Company or the Subsidiaries relating to the
authorized shares thereof; nor shall the Company or the Subsidiaries issue,
grant or sell any securities or obligations convertible into shares of the
Company or the Subsidiaries; nor shall the Company or the Subsidiaries declare,
set aside for the payment of, or pay any dividend or distribution of assets (in
cash, kind or otherwise) in respect of its share capital, nor repurchase or
agree to repurchase any share of such share capital.
(d) Without prior notice to and approval by Buyer which
approval shall not be unreasonably withheld, the Company and the Subsidiaries
shall not settle any disputed tax claims in any material amount (including
interest and penalties).
(e) The Company and the Subsidiaries shall duly comply in all
material respects with all known laws applicable to it and all laws applicable
to the transactions contemplated by this Agreement.
(f) Except in the ordinary course of business and
consistent with past practice, the Company and the Subsidiaries
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shall not (i) incur any indebtedness in addition to any indebtedness outstanding
on the date hereof or any renewals or extensions thereof; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other individual, firm or
corporation, except for endorsement of checks for collection in the ordinary
course of business; or (iii) make any loans, advances or capital contributions
to, or investments in, any other individual, firm or corporation, except in
connection with normal relocations, travel advances or other advances which in
the aggregate are not material.
(g) The Company and the Subsidiaries shall not (i) except for
customary increases based on merit, term of service or regular promotion of
non-officer employees, increase the compensation payable or to become payable by
the Company or the Subsidiaries to any officer or employee thereof, or increase
any bonus, insurance, pension or other employee benefit plan, or increase any
payment plan, payment or arrangement made to, for or with any employees, or (ii)
except as set forth on Schedule 5.1(g) commit itself to any additional pension,
profit sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay, retirement or
other employee benefit plan, agreement or arrangement, or to any employment or
material consulting agreement with or for the benefit of any person or to amend
any of such plans or any of such agreements in existence on the date hereof.
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(h) The Company and the Subsidiaries shall not, except in the
ordinary course of business, sell, transfer, mortgage, or otherwise dispose of,
or encumber, or agree to sell, transfer, mortgage or otherwise dispose of or
encumber, any properties, real, personal or mixed, tangible or intangible.
(i) The Company and the Subsidiaries shall not enter into any
other agreement, commitment or contract, except agreements, commitments or
contracts for the purchase, sale or lease of products or services in the
ordinary course of business, consistent with past practice and not in excess of
current requirements.
(j) The Company and the Subsidiaries shall not make any single
capital expenditure, capital addition or capital improvement, except in the
ordinary course of business in an amount that shall not exceed $5,000 per annum
in the aggregate.
(k) Neither the Seller nor the officers or directors of the
Company or the Subsidiaries, shall approve, recommend or undertake, with the
Company or the Subsidiaries as the surviving, disappearing or acquiring
corporation, any merger, consolidation, acquisition of all or substantially all
of the assets, or tender offer or other takeover transaction, or enter into any
negotiations with, or furnish or cause to be furnished, any information
concerning its business, properties or assets to, any person (other than Buyer)
which the Company or any of such officers or directors knows to be interested in
any such transaction.
(l) The Company shall not take or knowingly permit to be
taken, any action or do, or knowingly permit to be done, anything
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in the conduct of the business of the Company or the Subsidiaries which would be
contrary to or in breach of any of the terms or provisions of this Agreement or
which would cause any of the representations contained herein to be or to become
untrue.
(m) Without prior notice and approval by Buyer, which approval
shall not be unreasonably withheld, the Company and the Subsidiaries shall not
settle any claim, action or proceeding commenced after the date hereof.
(n) Except for wages or other employee benefits due to
employees under existing arrangements, the Company and the Subsidiaries shall
not declare or set aside payment for or make any dividend or other distribution
whether in cash, stock or property (or any combination thereof) to the Seller or
Parent.
(o) The Company and the Subsidiaries shall not make any loans
or advances to any officer, director, employee, consultant, representative,
salesman or agent of the Company or the Subsidiary involving more than $1,000 in
the aggregate or make any other loan or advance otherwise than in the ordinary
and usual course of business which exception shall include payment of advances
and expense reports consistent with prior practices of the Company.
(p) Neither the Company nor the Subsidiaries shall change its
accounting methods or practices, or change the depreciation or amortization
policies or rates theretofore adopted by it.
(q) The Company and the Subsidiaries shall not pay or
commit to pay any commission or other amount to any shareholder or
any director or officer of the Company or the Subsidiary or any
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employee, consultant, representative, salesman or agent of the Company or the
Subsidiary or any relative or affiliate of any of them, except in accordance
with employment contracts or arrangements entered into in the ordinary and usual
course of business.
(r) The Company and the Subsidiaries shall not make any
unlawful payment to governmental or quasi-governmental officials or payments to
customers or suppliers for the sharing of fees or rebating of charges or
reciprocal practices.
5.2. INFORMATION. Seller shall cause the Company and its
Subsidiaries to give to Buyer and its agents, attorneys, advisors, and
representatives full and free access at all reasonable times to all of the
properties, books, contracts, documents, and records of the Company or its
Subsidiaries and shall furnish to Buyer such information with respect to the
affairs of the Company or its Subsidiaries (including permitting Buyer's
representatives to meet with Seller's officers and employees of the Company or
the Subsidiaries and their attorneys and accountants to obtain information
concerning the Company or the Subsidiaries which is in their possession) as
Buyer may from time to time reasonably request.
5.3. NOTIFICATION. Seller and Parent shall promptly give
Buyer, and Buyer shall promptly give Seller and Parent, as the case may be,
written notice of the existence or occurrence of any condition of which such
party may become aware which might make any representation herein then untrue or
which might prevent the consummation of the transactions contemplated hereby. No
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disclosure made pursuant to this Section 5.3, however, shall be deemed to amend
or supplement any schedule or provision to this Agreement or to prevent or cure
any misrepresentation, breach of warranty or breach of covenant.
5.4. APPROVALS: CONDITIONS. Seller shall use its best efforts
to obtain from third parties all necessary approvals of this Agreement and the
consummation of the transactions contemplated hereby, and to cause the
conditions to Closing set forth in Section 7 to be satisfied on or prior to the
Closing Date.
5.5. COVENANT NOT TO COMPETE. On or prior to the Closing, each
of the Seller and Parent shall execute and deliver to Buyer a non-compete
agreement in substantially the form attached hereto as Exhibit A.
ARTICLE VI - CONDITIONS TO BUYER'S OBLIGATIONS
Unless waived in writing by Buyer, in its sole discretion, all
obligations of Buyer under this Agreement are subject to the following
conditions:
6.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each
representation and warranty of Seller and Parent contained in this Agreement
shall be true at and as of the Closing Date, shall be deemed made again at and
as of such date and be true as so made again; Seller and Parent shall have
performed each obligation and complied with each covenant required by this
Agreement to be performed or complied with by it on or prior to the Closing; and
Buyer shall have received from Seller and Parent a certificate or certificates
in the form of Schedule 6.1, signed by it, by the
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President of the Company and Parent and by the President of Houston and dated
the Closing Date.
6.2. OPINION OF COUNSEL OF SELLER. Seller shall have delivered
to Buyer the favorable opinion of Seller's counsel, Wegman, Hessler, Vanderburg
& O'Toole, dated the Closing Date, as to the matters set forth on Schedule 6.2,
in form and substance reasonably satisfactory to Buyer.
6.3. NO ADVERSE PROCEEDINGS OR EVENTS.
(a) No material suit, action, or other proceeding
against Seller, the Subsidiaries, or the Company or their officers or directors,
shall be pending or threatened before any court or governmental agency seeking
to restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the transactions contemplated hereby and which in the
reasonable judgment of Buyer makes the consummation of the transactions
contemplated by this Agreement inadvisable.
(b) Neither the Company nor the assets of the Company shall
have been materially and adversely affected in any way by any act of God, fire,
flood, war, labor disturbance, legislation (proposed or enacted) or other event
or occurrence, and there shall have been no material adverse change in the
financial condition of the Company.
6.4. CONSENTS, ETC. Seller shall have received and
delivered to Buyer all consents and approvals necessary under this
Agreement.
6.5. UPDATE OF DISCLOSURE SCHEDULES. Seller shall update each
of the disclosure schedules attached hereto and
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delivered herewith as of the Closing Date, such that all items disclosed thereon
will be true, correct, and complete as of the Closing Date.
6.6. HSR FILING. If applicable, the applicable waiting period
with respect to the notification and report forms filed by the Buyer and the
Seller as of the date hereof, pursuant to the Antitrust Laws shall have expired
or been terminated.
6.7. RESIGNATIONS. The Company shall have received the
written resignations of all directors and officers of the Company
set forth on Schedule 6.7 effective as of Closing.
6.8. COVENANT NOT TO COMPETE. The Seller and Parent
shall have executed and delivered a covenant not to compete
agreement in substantially the form attached hereto as Exhibit A.
ARTICLE VII - CONDITIONS TO SELLER'S AND PARENT'S OBLIGATIONS
Unless waived in writing by Seller and Parent, in their sole
discretion, all obligations of Seller and Parent under this Agreement are
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions:
7.1. REPRESENTATIONS, WARRANTIES, AND COVENANTS. Each
representation and warranty of Buyer shall be true at and as of the Closing
Date, shall be deemed made again at and as of such date and shall be true as so
made again; Buyer shall have performed each obligation and complied with each
covenant required by this Agreement to be performed or complied with by it on or
prior to the Closing; and Seller and Parent shall have received from Buyer a
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certificate or certificates in the form of Schedule 7.1, signed by the President
of Buyer and dated the Closing Date.
7.2. OPINION OF COUNSEL. Buyer shall have delivered to Seller
the favorable opinion of its counsel, Vinson & Elkins, L.L.P., dated the Closing
Date, as to the matters set forth on Schedule 7.2, in form and substance
reasonably satisfactory to Seller.
7.3. NO ADVERSE PROCEEDINGS. No material suit, action, or
other proceeding against the Buyer, or its officers or directors, shall be
pending or threatened before any court of governmental agency seeking to
restrain or prohibit, or to obtain damages or other relief in connection with,
this Agreement or the transactions contemplated hereby and which in the
reasonable judgment of Seller make the consummation of the transactions
contemplated by this Agreement inadvisable.
7.4. CONSENTS, ETC. Buyer shall have received and delivered to
Seller all consents and approvals necessary under this Agreement.
7.5. HSR FILING. If applicable, the applicable waiting period
with respect to the notification and report forms filed by the Buyer and the
Seller as of the date hereof, pursuant to the Antitrust Laws shall have expired
or been terminated.
7.6. PAYMENT OF PURCHASE PRICE. Buyer shall have paid the
consideration for the Shares to the Seller at the Closing as specified in
Section 1.2.
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ARTICLE VIII
TAX MATTERS
8.1. PREPARATION AND FILING OF TAX RETURNS.
8.1.1. Seller shall cause to be included in the consolidated
federal income Tax Returns (and the state income Tax Returns of any state that
permits consolidated, combined or unitary income Tax Returns, if any) of the
Seller controlled group for all periods ending on or before or which include the
Closing Date, all Tax Items of the Company and the Subsidiaries which are
required to be included therein, shall file timely all such Tax Returns with the
appropriate taxing authorities and shall pay timely all Taxes due with respect
to the periods covered by such Tax Returns ("Pre-Closing Taxable Periods").
8.1.2. With respect to each Tax Return that is required to be
filed after the Closing Date for, by or with respect to the Company or any
Subsidiary that includes any period ending after the Closing Date (other than
the Tax Returns described in 8.1.1), Buyer shall cause such Tax Return to be
prepared and filed and shall cause to be included in such Tax Return all Tax
Items required to be included therein and shall timely pay all Taxes due with
respect to the periods covered by such Tax Returns ("Post-Closing Taxable
Periods).
8.2. Any Tax Return to be prepared pursuant to the provisions
of this Article VIII shall be prepared in a manner consistent with practices
followed in prior years with respect to similar Tax Returns, except for changes
required by changes in law.
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8.3. ACCESS TO INFORMATION.
8.3.1 Upon reasonable notice, Seller shall grant to Buyer (or
its designees) access at all reasonable times to all of the pertinent
information, books and records relating to the Company and the Subsidiaries
within the possession of Seller or any affiliate of Seller (including workpapers
and correspondence with taxing authorities), and shall afford Buyer (or its
designees) the right (at Buyer's expense) to take extracts therefrom and to make
copies thereof, to the extent reasonably necessary to permit Buyer (or its
designees) to prepare Tax Returns, to conduct negotiations with Tax authorities,
and to implement the provisions of, or to investigate or defend any claims
between the parties arising under, this Agreement.
8.3.2 Upon reasonable notice, Buyer shall grant or cause the
Company and the Subsidiaries to grant to Seller (or its designees) access at all
reasonable times to all of the pertinent information, books and records relating
to the Company and the Subsidiaries within the possession of Buyer, the Company
or the Subsidiaries (including workpapers and correspondence with taxing
authorities), and shall afford Seller (or its designees) the right (at Seller's
expense) to take extracts therefrom and to make copies thereof, to the extent
reasonably necessary to permit Seller (or its designees) to prepare Tax Returns,
to conduct negotiations with Tax authorities, and to implement the provisions
of, or to investigate or defend any claims between the parties arising under,
this Agreement.
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8.3.3. Each of the parties hereto will preserve and retain all
schedules, workpapers and other documents relating to any Tax Returns of or with
respect to the Company or any Subsidiary or to any claims, audits or other
proceedings affecting the Company or any Subsidiary until the expiration of the
statute of limitations (including extensions) applicable to the taxable period
to which such documents relate or until the final determination of any
controversy with respect to such taxable period, and until the final
determination of any payments that may be required with respect to such taxable
period under this Agreement.
8.4. SELLER AND PARENT INDEMNIFICATIONS. Seller and Parent
hereby agree to protect, defend, indemnify and hold harmless Buyer, the Company
and the Subsidiaries from and against, and agree to pay, all Taxes imposed and
all reasonable costs and expenses (including, without limitation, litigation
costs and reasonable attorneys' and accountants' fees and disbursements)
incurred (all herein referred to as "Tax Losses") as a result of:
8.4.1 A claim, notice of deficiency, or assessment by, or any
obligation owing to, any taxing authority for:
(i) Any Taxes of the Company or any Subsidiary attributable to
any period ending on or before the Closing Date;
(ii) Any Taxes of any corporation (other than the Company and
the Subsidiaries) that is or was a member of the Seller controlled
group or of any other affiliated group of corporations of which the
Company or any Subsidiary was a member at any time on or prior to the
Closing Date;
(iii) Any Taxes attributable to the transactions contemplated
by this Agreement which are properly payable by Seller;
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(iv) Any breach of any representation, warranty or obligation
of Seller under Article VIII of this Agreement.
8.5. BUYER INDEMNIFICATIONS. Buyer agrees to protect, defend,
indemnify and hold harmless Seller from and against, and agrees to pay, all Tax
Losses incurred as a result of:
8.5.1 A claim, notice of deficiency, or assessment by, or any
obligation owing to, any taxing authority for any Taxes of the Company or any
Subsidiary attributable to any period ending after the Closing Date;
8.5.2. Any Taxes attributable to the transactions contemplated
by this Agreement which are properly payable by Buyer; and
8.5.3. Any breach of any representation, warranty or
obligation of Buyer under Article VIII of this Agreement.
8.6. INDEMNIFICATION PROCEDURES.
8.6.1. If a claim shall be made by any taxing authority that,
if successful, would result in the indemnification of a party under this
Agreement (referred to herein as the "Tax Indemnified Party"), the Tax
Indemnified Party shall promptly notify the party obligated under this Agreement
to so indemnify (referred to herein as the "Tax Indemnifying Party"), in writing
of such fact.
8.6.2. The Tax Indemnified Party shall take such action in
connection with contesting such claim as the Tax Indemnifying Party shall
reasonably request in writing from time to time, including the selection of
counsel and experts and the execution of powers of attorney, provided that (i)
within 30 days after the notice described in Section 8.6.1 has been delivered
(or such
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earlier date that any payment of Taxes is due by the Tax Indemnified Party but
in no event sooner than twenty (20) days after the Tax Indemnifying Party's
receipt of such notice), the Tax Indemnifying Party requests that such claim be
contested, (ii) the Tax Indemnifying Party shall have agreed to pay to the Tax
Indemnified Party all reasonable costs and expenses that the Tax Indemnified
Party incurs in connection with contesting such claim, including, without
limitation, reasonable attorneys' and accountants' fees and disbursements, and
(iii) if the Tax Indemnified Party is requested by the Tax Indemnifying Party to
pay the Tax claimed and sue for a refund, the Tax Indemnifying Party shall have
advanced to the Tax Indemnified Party, on an interest-free basis, the amount of
such claim. The Tax Indemnified Party shall not make any payment of such claim
for at least 30 days (or such shorter period as may be required by applicable
law) after the giving of the notice required by Section 8.6.1, shall give to the
Tax Indemnifying Party any information reasonably requested relating to such
claim, and otherwise shall cooperate with the Tax Indemnifying Party in good
faith in order to contest effectively any such claim.
8.6.3. Subject to the provisions of Section 8.6.2, the Tax
Indemnified Party shall enter into a settlement of such contest with the
applicable taxing authority or prosecute such contest to a determination in a
court or other tribunal of initial or appellate jurisdiction, all as the Tax
Indemnifying Party may request.
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8.6.4. If, after actual receipt by the Tax Indemnified Party
of an amount advanced by the Tax Indemnifying Party pursuant to Section
8.6.2(iii), the extent of the liability of the Tax Indemnified Party with
respect to the claim shall be established by the final judgment or decree of a
court or other tribunal or a final and binding settlement with an administrative
agency having jurisdiction thereof, the Tax Indemnified Party shall promptly
repay to the Tax Indemnifying Party the amount advanced to the extent of any
refund received by the Tax Indemnified Party with respect to the claim together
with any interest received thereon from the applicable taxing authority and any
recovery of legal fees from such taxing authority, net of any Taxes as are
required to be paid by the Tax Indemnified Party with respect to such refund,
interest or reasonable legal fees (calculated at the maximum applicable
statutory rate of Tax without regard to any other Tax Items).
8.6.5. Promptly after a final determination the Tax
Indemnifying Party shall pay to the Tax Indemnified Party the amount of any Tax
Losses to which the Tax Indemnified Party may become entitled by reason of the
provisions of this Article VIII.
8.7. DEFINITIONS
8.7.1. "Pre-Closing Taxable Period" means all or a portion of
(i) any taxable period up to and including the Closing Date or (ii) any taxable
period with respect to which the Tax is computed by reference to Tax Items,
assets, capital or operations of the Company or a Subsidiary arising on or
before, or existing as of, the Closing Date.
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8.7.2. "Post-Closing Taxable Period" means all or a portion
of (i) any taxable period after the Closing Date or (ii) any taxable period with
respect to which the Tax is computed by reference to Tax Items, assets, capital
or operations of the Company or a Subsidiary arising after, or existing
subsequent to, the Closing Date.
8.8. SURVIVAL. Anything to the contrary in this Agreement
notwithstanding, the representations, warranties, covenants, agreements, rights
and obligations of the parties hereto with respect to any Tax covered by Article
VIII of this Agreement shall survive the Closing and shall not terminate until
one day after the expiration of the statute of limitations (including
extensions) applicable to such Tax.
8.9. CONFLICT. In the event of a conflict between the
provisions of this Article VIII regarding tax matters and any other provisions
of this Agreement, the provisions of this Article VIII shall control.
8.10. LIMITATION OF INDEMNIFICATION FOR PRE-MAY 21, 1992
TAXES. Notwithstanding anything to the contrary in Article VIII of this
Agreement including but not limited to Sections 3.7 and 8.4, the amount of
indemnification for Tax Losses incurred as a result of a claim, notice of
deficiency, penalty or assessment by, or any obligation owing to, any taxing
authority for any Taxes of the Company or any Subsidiary attributable to any
taxable period prior to May 21, 1992 shall be limited to and shall not exceed
the amount of the indemnification provided for pursuant to the terms and
conditions of a certain Shareholder Indemnity Agreement and a
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certain Indemnity Escrow Agreement both dated May 21, 1992 (the "Escrow
Agreements") (copies of which are attached hereto as Schedule 8.10). On the
Closing Date, Seller agrees to assign to the Buyer all Seller's rights and
interests in and to the Escrow Agreements pursuant to a written assignment, a
copy of which is attached hereto as Schedule 8.10(b). Buyer acknowledges the
terms and conditions of the Escrow Agreement.
SECTION 9. TERMINATION AND CONFIDENTIALITY
9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Closing as follows:
9.1.1. By mutual agreement of Seller and Buyer, in which event
there shall be no liability on the part of any of the parties or their
respective officers or directors, except as otherwise set forth herein;
9.1.2. By Buyer if on the Closing Date any of the conditions
specified in Sections 5.3 or 6 have not been met or fulfilled or waived by
Buyer; or
9.1.3. By Seller if on the Closing Date any of the conditions
specified in Section 7 have not been met or fulfilled or waived by Seller; or
9.1.4. By Seller if the Closing Date has not occurred by
June 30, 1996;
9.1.5. By Buyer if the Closing Date has not occurred by
August 31, 1996.
9.2. EFFECT OF TERMINATION. Upon termination of this
Agreement based on the occurrence of one of the events set forth in
Section 9.1, except for the obligations set forth in Section 9.3
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all further obligations of either party to the other under this Agreement shall
terminate. Each party shall be responsible for payment of all expenses incurred
by that party in connection with this Agreement.
9.3. CONFIDENTIALITY. (a) If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties shall
keep confidential any information obtained from the other party (unless in the
public domain) and shall promptly return to the other party all schedules,
documents, work papers, or other written information, without retaining copies
thereof, previously furnished to or otherwise obtained by it as a result of this
Agreement or in connection herewith.
(b) Prior to the execution of this Agreement, the parties
acknowledge that the Seller will provide to the Buyer, on a limited basis,
certain sensitive and highly confidential information of the Company relating to
its business and operations. Set forth in Schedule 9.3(b)-1 is a list of the
sensitive and highly confidential information which will be disclosed and made
available on a limited basis to the Buyer by the Seller.
As a result of the disclosure by the Seller to the Buyer of
the confidential information set forth in Schedule 9.3 (b)-1 hereof, the Buyer
agrees to execute and enter into a certain and specific confidentiality
agreement with the Seller, in the form set forth in Schedule 9.3(b)-2, which
confidentiality agreement provides, among other provisions, specific protection
and safeguards to the Company and the Seller, in the event that the Buyer
breaches the terms and conditions of the confidentiality
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agreement. Such confidentiality agreement shall remain in force and effect for a
period of the earlier of two years from the date of execution or the Closing
Date.
ARTICLE X
INDEMNIFICATION
10.1. INDEMNIFICATION BY THE SELLER AND PARENT. Each of the
Seller and Parent, jointly and severally, hereby covenant and agree to indemnify
and hold harmless Buyer, any of its officers, directors, shareholders,
employees, agents, affiliates and representatives, including the Company, and
their respective successors and assigns (the "Indemnified Parties"), at all
times from and after the Closing Date, against and in respect of the following:
(a) Any liability, loss, damage, or expense resulting from any
misrepresentation, breach of warranty or non-fulfillment of any agreement or
covenant on the part of the Seller or Parent set forth in this Agreement, or
from any misrepresentation in or omission from any certificate or other
instrument or document furnished or to be furnished by the Seller or Parent
hereunder, and any liability, loss, damage or expense of the Company which in
any way relates to or arises out of the business, operations, ownership or
assets of the Company prior to the Closing Date; provided, however, that the
Indemnified Parties shall not be entitled to assert rights of indemnification
under this Section 10.1 until the aggregate amount of all such liability, loss,
damage or expense (including reasonable attorneys' fees and expenses)
(collectively, "Buyer Indemnified Losses") exceeds $250,000 (it being understood
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that such Buyer Indemnified Losses shall accumulate until such time or times as
the aggregate of all such Buyer Indemnified Losses exceeds $250,000, whereupon
the Indemnified Parties shall be entitled to indemnification for any such Buyer
Indemnified Losses for amount in excess of $250,000 (and not for any of the
amount up to $250,000) and provided further that the maximum amount of Buyer
Indemnified Losses is $2,500,000); (provided that indemnification for tax
matters as set forth in Section 3.7 and Article VIII of this Agreement and
indemnification for Pension Plan and the 401(k) Plan as set forth in Article XII
of this Agreement shall not be subject to the $250,000 and $2,500,000 basket
amounts above.
(b) If Buyer prevails on its claim for indemnification, all
reasonable costs, attorneys' fees and expenses of any nature incident to any of
the matters indemnified against pursuant to this Section 10.1, including,
without limitation, all such costs and expenses incurred in the defense thereof
or in the enforcement of any rights of Buyer hereunder.
10.2. NOTICE AND DEFENSE. Buyer agrees to give prompt notice
to the Seller and Parent of any action or proceeding to which it or any of the
other Indemnified Parties believes they have a right to indemnification
hereunder and failure to give such notice shall be a breach of this Section
10.2; provided, however, that the omission so to notify the Seller and Parent
shall not release them from any liability which they may have to the Indemnified
Parties if such breach does not materially impair the ability to defend the
claim. If any such action or proceeding shall be brought against the Indemnified
Parties, and the Seller
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and Parent shall be so notified, or otherwise shall learn of the commencement
thereof, then the Seller or Parent, upon acknowledging in writing to Buyer their
indemnification obligation hereunder, shall have the right to participate in,
and, to the extent that they may wish, to assume the defense thereof, with
counsel reasonably satisfactory to Buyer, which approval shall not be
unreasonably withheld (as indicated in writing within five (5) days of the
Seller or Parent's request for approval) and after notice of their election to
assume the defense thereof, the Seller or Parent will not be liable to the
Indemnified Parties for any further legal expenses incurred by the Indemnified
Parties in connection with any such action or proceeding, other than (i) the
reasonable costs of investigation or assistance required by the Seller or Parent
or any party claiming against the Seller or Parent or the Indemnified Parties;
(ii) expenses reasonably incurred by the Indemnified Parties to comply with any
order of any court, governmental agency or authority, legal discovery, or other
law, statute, rule or regulation in connection with such claim; and (iii)
expenses reasonably incurred by the Indemnified Parties as a result of, or
arising from, the Seller or Parent's failure or refusal to defend such claim.
The Indemnified Parties may participate actively, at their expense, after notice
of assumption of defense has been given by the Seller or Parent, in any
negotiations, lawsuits or other resolution of such claim. Buyer shall have the
right to approve any out-of-court settlement if it would divest Buyer of any of
the Shares or otherwise materially adversely affect the operations of
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the Company; provided that such approval shall not be unreasonably
withheld.
10.3. CONTRIBUTION. In the event that Buyer obtains a recovery
from the Seller or Parent pursuant to Section 10.1 following the Closing Date,
the Seller or Parent shall have no right of contribution from, or other right of
recovery against, the Company and the Seller or Parent covenants that they will
not assert any such claim or right.
10.4. INDEMNIFICATION BY BUYER.
(a) Buyer hereby covenants and agrees to indemnify and hold
harmless the Seller and Parent from and after the Closing Date against and in
respect of the following:
(i) any liability, loss, damage or expense resulting from any
misrepresentation, breach of warranty or non-fulfillment of any
agreement or covenant on the part of Buyer under this Agreement, or
from any misrepresentation in or omission from any certificate or other
instrument or document furnished or to be furnished by Buyer hereunder,
any liability, loss, damage or expense of the Company which in any way
relates to or arises out of the business, operations, ownership or
assets of the Company after the Closing Date; provided, however, that
the Seller and Parent shall not be entitled to assert any rights of
indemnification under this Section 10.4 until the aggregate amount of
all such liability, loss, damage or expense (including reasonable
attorneys' fees and expenses) (the "Seller and Parent's Indemnified
Losses") exceeds $250,000 (it being understood that such Seller and
Parent's Indemnified Losses shall accumulate until such time or times
as the aggregate of all such Seller and Parent's Indemnified Losses
exceeds $250,000, whereupon the Seller and Parent shall be entitled to
indemnification for any such Seller and Parent's Indemnified Losses,
from amounts in excess of $250,000 (and not for any of the amount up to
$250,000) and provided further that the maximum amount of Seller and
Parent's Indemnified Losses is $2,500,000;
(ii) if Seller prevails on its claim for indemnification, all
reasonable costs, attorneys' fees and expenses of any nature incident
to any of the matters indemnified against pursuant to this Section
10.4,
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including, without limitation, all such costs and expenses incurred in
the defense thereof or in the enforcement of any rights of the Seller
and Parent hereunder.
(b) The Seller and Parent agree to give Buyer prompt notice of
any action or proceeding to which the Seller and Parent believe they have a
right of indemnification hereunder and failure to give such notice shall be a
breach of this Section 10.4(b); provided, however, that the omission so to
notify Buyer shall not release it from any liability which it may have to the
Seller and Parent, if such breach does not materially impair the ability to
defend the claim. If any such action or proceeding shall be brought against the
Seller and Parent, and Buyer shall be so notified or otherwise shall learn of
the commencement thereof, then Buyer, upon acknowledging in writing to the
Seller and Parent its indemnification obligation hereunder, shall have the right
to participate in, and, to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to the Seller and Parent, which
approval shall not be unreasonably withheld (as indicated in writing within five
(5) days of Buyer's request for approval) and after notice of its election to
assume the defense thereof, Buyer will not be liable to the Seller or Parent for
any further legal expenses incurred by the Seller or Parent in connection with
any such action or proceeding, other than (i) the reasonable costs of
investigation or assistance required by Buyer or any party claiming against
Buyer, its officers, directors, employees, agents, affiliates or
representatives, the Company or the Seller or Parent; (ii) expenses reasonably
incurred by the Seller or Parent to comply with any order of any court,
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governmental agency or authority, legal discovery, or other law, statute, rule
or regulation in connection with such claim; and (iii) expenses reasonably
incurred by the Seller or Parent as a result of, or arising from, Buyer's
failure or refusal to defend such claim. The Seller and Parent may participate
actively, at their expense, after notice of assumption of defense has been given
by the Buyer in any negotiations, lawsuits or other resolution of such claim.
10.5. INDEMNIFICATION REPORTS. In addition to the above
provisions regarding any individual claims, each six months commencing six
months after the Date of Closing, Buyer and Seller shall use reasonable efforts
to submit to each other written reports of the status of indemnification claims
under this Article X and under Article VIII (Tax Matters). The report shall
identify the claimant, the amount and nature of the claim and the status of the
claim. The reports will be for informational purposes only and shall not have
any legal or other binding effects. The reporting or failure to report any claim
shall not adversely affect the rights of either party to pursue an
indemnification claim as set forth in this Agreement.
11. MISCELLANEOUS.
11.1. SURVIVAL. The representations and warranties and the
applicable indemnification provisions related thereto and provided herein
contained or made by the parties in this Agreement and in any other certificate
or document delivered in connection herewith, shall survive the Closing for a
period of two (2) years except that the provisions contained in Section 3.4
(Title) shall
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survive indefinitely, the provisions contained in Section 3.7 (Taxes) shall
survive until one day after expiration of the relevant statute of limitations
pertaining to claims regarding particular Taxes, time periods and/or filing of
returns, whichever is later, and the provisions contained in Section 3.12 and
Article XII relating to Employee Benefits (other than the Pension Plan and
401(k) Plan) shall survive until six years after the Closing Date.
11.2. AMENDMENTS. Any amendment to this Agreement must be in
writing and duly executed by an authorized representative of each of the parties
hereto.
11.3. NOTICES. All notices, requests, demands, and other
communications under or in connection with this Agreement shall be delivered to
the following addresses:
To Seller, Parent, the Company or Subsidiaries:
Valley City Steel Company
402 Ninth Avenue
P.O. Box 2037
Mansfield, Ohio 44905
Attn: Robert L. Grissinger, President
with a copy to:
Steven E. Pryatel, Esq.
Wegman, Hessler, Vanderburg & O'Toole
6100 Rockside Woods Blvd., Suite 345
Cleveland, Ohio 44131
To Buyer:
Bettis Corporation
P.O. Box 508
Waller, Texas 77484
Attn: Wilfred M. Krenek
Vice President and CFO
with a copy to:
T. Mark Kelly
Vinson & Elkins, L.L.P.
2300 First City Tower
101 Fannin
Houston, Texas 77002-6760
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All such notices, requests, demands, or communications shall
be mailed postage prepaid, first class mail, or delivered personally, and shall
be sufficient and effective when delivered to or received at the address so
specified. Notice may be provided by facsimile if received with receipt
acknowledged. Any party may change the address at which it is to receive notice
by written notice to the other parties.
11.4. BROKERS' COMMISSION. The parties acknowledge, warrant,
and represent that no Broker was involved in the consummation of this
transaction, except Carleton, McCreary, Homes & Co. and Robert W. Baird and Co.
Incorporated who acted as Seller's agents. Seller shall be responsible for any
commission, fee, or claim arising as a result of the involvement of Carleton,
McCreary, Holmes & Co. and/or Robert W. Baird and Co. Incorporated in this
transaction. Buyer represents and warrants that it did not utilize the services
of a broker with regard to the transaction contemplated in this Agreement. Each
party hereto will indemnify and hold harmless each other party from any
commission, fee, or claim of any person, firm, or corporation employed or
retained or claiming to be employed or retained by the indemnifying party to
bring about, or to represent it in, the transactions hereby.
11.5. GENERAL PROVISIONS. The section headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors, but nothing herein, express or implied, is intended to or shall
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confer any rights, remedies, or benefits upon any person other than the parties
hereto. This Agreement may not be assigned by any party hereto without the
written consent of each other party.
11.6. ENTIRE AGREEMENT. This Agreement (including the exhibits
hereto and the annexes, schedules, and other documents delivered pursuant
hereto, which are a part hereof) is intended by the parties to, and does,
constitute the entire agreement of the parties with respect to the transactions
contemplated by this Agreement. This Agreement supersedes any and all prior
understandings, written or oral, between the parties.
11.7. APPLICABLE LAW AND JURISDICTION.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, unless or only to the extent
precluded by another law of mandatory application.
11.8. NO PARTY DEEMED DRAFTER. The parties agree that no party
shall be deemed to be the drafter of this Agreement and that in the event this
Agreement is ever construed by a court of law or equity, such court shall not
construe this Agreement or any provision hereof against a party as the drafter
of the Agreement, the parties acknowledging that each of the parties hereto have
contributed substantially and materially to the preparation hereof.
11.9. PUBLIC STATEMENTS. The parties hereto agree to consult
with one another prior to issuing any public announcement or statement with
respect to the transactions contemplated herein and agree that, except as
required by law, they will not make any such public announcement to which the
other may reasonably object.
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11.10. FURTHER ACTIONS. Each party shall execute and deliver
such other documents and take such other actions as may reasonably be requested
by the other parties in order to consummate or implement the transactions
contemplated by this Agreement.
11.11. SEVERABILITY. Any provision of this Agreement or any
instrument referred to herein which is invalid or unenforceable in any
jurisdiction shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions of this Agreement, and, to the extent permitted by law, any
determination of invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
11.12. TIME OF THE ESSENCE. Time is of the essence of this
Agreement and all of the terms, provisions, covenants and conditions hereof.
11.13. HSR FILING AND FEES. The Buyer and Seller shall
mutually cooperate with the preparation of appropriate filings with the Federal
Trade Commission in connection with the Antitrust Laws including the
Hart-Scott-Rodeno Antitrust Improvement Act of 1976, 15 USC Section 1311 et seq.
and regulations promulgated thereunder. Buyer shall pay any filing fees due in
connection therewith; provided, however, that Seller shall reimburse Buyer
one-half of such fees if the Federal Trade Commission and/or the Department of
Justice prevents and/or rules unfavorably on the transaction contemplated by
this Agreement.
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11.14. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in several counterparts, and each counterpart shall be
considered as an original.
ARTICLE XII - EMPLOYEE BENEFIT MATTERS
12.1. EMPLOYEE MATTERS. Except as otherwise indicated in
this Article XII, all capitalized terms used in this Article XII shall be as
defined in Section 3.12 or as otherwise defined in this Agreement.
12.2. EMPLOYMENT OF EMPLOYEES.
(a) ACTIVE EMPLOYEES. Set forth on Schedule 12.2(a) is a list
of all active employees of the Company. As of the Closing Date, Buyer shall
employ all active employees of the Company listed on Schedule 12.2. For purposes
of the preceding sentences, "active employee" shall mean (i) all employees
listed on Schedule 12.2 who are physically at work on the last work day prior to
the Closing Date and (ii) employees who are not physically at work on such day
solely because they are on employer-approved: sick leave, vacation leave, paid
or unpaid time off, or leave under the Family and Medical Leave Act of 1993.
(The persons listed on Schedule 12.2(a) who remain employees by the Company on
the Closing Date shall hereinafter be referred to as the "Employees").
Notwithstanding the foregoing, Buyer expressly reserves the right to evaluate
its work force needs and the work force needs of the Company and to terminate
the employment of any Employee after the Closing Date subject to the WARN Act
provisions previously set forth in this Agreement.
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(b) DISABLED FORMER EMPLOYEES. Set forth on Schedule 12.2(b)
is a list of former employees of the Company who are not physically at work
because they have been determined to have a "permanent" disability and are
receiving disability benefits. Buyer shall have no obligation or responsibility
with regard to the former employees set forth on Schedule 12.2(b) other than
processing life insurance information reports.
12.3. BENEFITS.
(a) IN GENERAL. Effective as of the day prior to the Closing
Date, except with respect to the Shafer Value Company 401(k) Plan (the "401(k)
Plan"), the Shafer Valve Company Pension Plan and Trust (the "Pension Plan"),
and the Martin Willmore arrangement ("Willmore Arrangement") which shall remain
in full force and effect at the Company on the Closing Date, Parent shall cause
the Company to terminate, or cease participation as an adopting entity of, as
applicable, each Plan and Benefit Program or Agreement listed on Schedule
3.12(b) and Parent shall retain and/or assume all responsibility, obligation and
liabilities for such action. Effective as of the Closing Date, Buyer shall cause
each Employee to be provided with benefits on a basis substantially similar to
Buyer's normal practice, including, but not limited to, other qualified and
nonqualified retirement plans, welfare plans, and all other employee benefit
arrangements and personnel policies and Buyer shall retain and/or assume all
responsibility, obligation and liabilities for such action.
(b) WELFARE PLANS. Effective as of the Closing Date:
(i) Parent and/or Seller shall cause the Company to terminate, or
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cease participation as an adopting entity of, as applicable, each Plan that is a
welfare plan (as such term is defined in section 3(1) of ERISA) and each Benefit
Program or Agreement that is a disability welfare plan excluded as a payroll
practice under 29 C.F.R. 2510.3-l(b) or a plan entitled to favorable tax
treatment under the Code ("Prior Welfare Plans") and Parent shall retain and/or
assume all responsibility, obligation and liabilities for such action, and (ii)
Buyer as it deems appropriate shall cause or otherwise be responsible for each
Employee to be covered by each of Buyer's or the Company's newly established
welfare plans (as such term is defined in section 3(1) of ERISA) that provides
medical, life, or disability benefits ("Buyer's Welfare Plans") and Buyer shall
retain and/or assume all responsibility, obligation and liabilities for such
action or inaction. Effective as of the Closing Date: (i) Prior Welfare Plans
shall be liable for any and all claims for benefits by Employees for covered
expenses incurred, or attributable to events that occurred, prior to the Closing
Date; provided, however, Buyer shall also pay to Seller when invoiced by the
Seller an amount equal to the group insurance runoff accrual on the books of the
Company associated with such covered expenses as of the Closing Date and (ii)
Buyer's Welfare Plans shall be liable for any and all claims for benefits by
Employees for covered expenses incurred on or after the Closing Date, to the
extent such expenses are attributable to events that occurred on or after the
Closing Date.
(c) NONQUALIFIED RETIREMENT AND DEFERRED COMPENSATION
PLANS. Except as set forth on Schedule 12.3(c), effective not
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later than the day prior to the Closing Date, Seller and/or Parent shall (i)
cause the Company to terminate all Plans and Benefit Programs or Agreements that
are deferred compensation or retirement plans, except for the Pension Plan, the
401(k) Plan, and the Willmore Arrangement ("Prior Retirement Plans") and (ii)
cause the Company to make all contributions that are required to be made under
all such Prior Retirement Plans to satisfy all liabilities under the Prior
Retirement Plans as so terminated, with Parent to maintain all responsibility,
obligation and liability for such action.
(d) VACATION, SICK LEAVE, AND PAID TIME OFF. Effective as of
the Closing Date: (i) Parent and/or Seller shall cause the Company to terminate,
or cease participation as an adopting entity of, as applicable, all vacation,
paid time off, and sick leave programs ("Prior PTO Plans"), and Parent shall
retain and/or assume all responsibility and liability for such action, and (ii)
Buyer shall cause each Employee to be covered by any program of vacation, sick
leave, and paid time off benefits maintained by Buyer or newly established by
the Company ("Buyer's PTO Plans") and Buyer shall retain and/or assume all
responsibility and liability for such action. Attached hereto as Schedule
12.3(d) is a list of all the accruals associated with Prior PTO Plans and Parent
represents and warrants that said accruals are up to date and sufficient to
cover any and all liabilities or obligations under said Prior PTO Plans.
(e) COBRA. Buyer shall cause to be provided to all
active employees of the Company who are listed on Schedule 12.2(a)
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and who do not become Employees after the Closing Date, and all persons listed
on Schedule 12.3(e), sufficient medical, mental health, vision, dental, and
other group health plan benefits to satisfy the obligations, if any, of the
Company, or Seller, and Buyer under the continuation of coverage provisions
described in Section 4980B of the Code and Sections 601 through 608 of ERISA and
any similar continuation of health coverage provisions under applicable state
law.
12.4. INDEMNITY REGARDING 401(K) PLAN AND PENSION PLAN. Parent
shall retain or assume and be liable for all past, present, and future
obligations and liabilities of Parent, the Seller, the Company, and any commonly
controlled entity arising out of any law or contract (i) with respect to the
Pension Plan and the 401(k) Plan, and all associated trusts, contracts and
documents and (ii) with respect to all employees and former employees of Parent,
the Company, or any commonly controlled entity in connection with any event
commencing, occurring, or failing to occur on or prior to the Closing Date.
Parent agrees to indemnify Buyer and its affiliates, including the Company and
the Subsidiaries and their directors, officers, and employees with respect to
any loss, liability, assessment, withdrawal liability assessment, funding
deficiency assessment, taxes, interest, penalties, judgments, employee benefit
claims, and PBGC liability assessments (including any and all costs and fees
related to proceedings establishing such loss, liability, assessment, withdrawal
liability assessment, funding deficiency assessment, taxes, interest, penalties,
judgments, employee benefit claims, or PBGC liability assessment) arising out of
any law or
-63-
<PAGE> 68
contract, with respect to (i) the Pension Plan and the 401(k) Plan and (ii) each
employee or former employee of Parent, Seller, the Company or any commonly
controlled entity. The indemnity provided in this Section 12.4 shall survive
this Agreement for a period of two (2) years after the date that the Company
receives both (1) a favorable determination letter with respect to each of the
401(k) Plan and the Pension Plan covering the TRA 86 Amendments and (2) a
determination letter by the Department of Labor, under its current audit of the
Pension Plan that the Pension Plan is in compliance with ERISA.
Furthermore, the indemnity provided in this Section 12.4 shall
be in addition to any other indemnities provided in this Agreement, and shall
not be subject to any restrictions imposed in this Agreement upon any such other
indemnities, including, but not limited to, any restrictions imposed by Section
8.10, Section 10.1 and Section 11.1.
IN WITNESS WHEREOF, Buyer and Seller have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
all as of the date first written above.
Signed and acknowledged SELLER:
in the presence of:
VALLEY CITY STEEL COMPANY
By: /S/ROBERT L. GRISSINGER
- --------------------------------- ---------------------------------
Robert L. Grissinger
Treasurer
And:
- --------------------------------- --------------------------------
--------------------------------
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<PAGE> 69
PARENT:
SHILOH INDUSTRIES, INC.
By: /S/ROBERT L. GRISSINGER
- --------------------------------- ---------------------------------
Robert L. Grissinger
President and Chief
Executive Officer
And:
- --------------------------------- -----------------------------
-----------------------------
SHILOH CORPORATION
By: /S/ROBERT L. GRISSINGER
- --------------------------------- -----------------------------
Robert L. Grissinger
Executive Vice President
and Treasurer
And:
- --------------------------------- -----------------------------
-----------------------------
BUYER:
BETTIS CORPORATION
By: /S/WILFRED M. KRENEK
- --------------------------------- -----------------------------
Wilfred M. Krenek
Vice President and Chief
Financial Officer
And:
- --------------------------------- -----------------------------
-----------------------------
-65-
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
SHILOH INDUSTRIES TO SELL SHAFER VALVE COMPANY
----------------------------------------------
MANSFIELD, Ohio, May 22, 1996 -- Shiloh Industries, Inc. (Nasdaq-NNM:
SHLO) announced today that it has entered into an agreement to sell the stock
of its Shafer Valve Company subsidiary to Bettis Corporation for $13.2 million.
The transaction is expected to be finalized on or about June 30, 1996, subject
to governmental approval.
"The sale of Shafer Valve is consistent with Shiloh's strategic
objective to concentrate on our core steel processing business," said Robert L.
Grissinger, President and Chief Financial Officer. "This divestiture will
allow management to focus its energies and the company's financial resources on
other activities to achieve greater value creation for our shareholders."
Purchased by Shiloh in May 1992, Shafer manufactures valve actuators
primarily for the oil and gas industries. The subsidiary has its headquarters
and a manufacturing facility in Mansfield, Ohio, another manufacturing facility
in Orrville, Ohio, and a sales office in Houston, Texas. Shafer Valve employs
135 and contributed about $16.5 million to Shiloh's total revenues of $228.8
million.
Bettis Corporation, based in Waller, Texas, manufactures valve
actuators and control systems used worldwide for the automation of valves in
numerous energy and industrial markets. Its common stock trades on the Nasdaq
National Market under the symbol BETT.
Based in Mansfield, Ohio, Shiloh Industries is a premier supplier of
high quality steel blanks, stampings and processed steel to automotive,
appliance and other industrial manufacturers. The company operates seven
facilities in Ohio and employs about 1,100 employees.
<PAGE> 2
CONTACT: Rodger Loesch, Chief Financial Officer and Treasurer
Shiloh Industries, Inc. (419) 525-2315
<PAGE> 1
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
SHILOH INDUSTRIES COMPLETES SALE OF SHAFER VALVE COMPANY
---------------------------------------------------------
TO BETTIS CORPORATION FOR $13.2 MILLION
---------------------------------------
MANSFIELD, Ohio, July 11, 1996 -- Shiloh Industries, Inc. (Nasdaq-NNM:
SHLO) announced today that on July 9, 1996, it completed the sale of the stock
of its Shafer Valve Company subsidiary to Bettis Corporation (Nasdaq-NNM: BETT)
for $13.2 million in cash.
"The sale of Shafer Valve is consistent with Shiloh's strategic
objective to concentrate on our core steel processing business," said Robert L.
Grissinger, President and Chief Financial Officer. "This divestiture will
allow management to focus its energies and the company's financial resources on
other activities to achieve greater value for our shareholders. Accordingly,
Shiloh plans to use the proceeds of the sale to reduce debt to enhance our
strong financial condition in anticipation of future growth."
Purchased by Shiloh in May 1992, Shafer manufactures valve actuators
primarily for the oil and gas industries. Shafer Valve contributed
approximately $16.5 million to Shiloh's 1995 total revenues of $228.8 million.
Based in Mansfield, Ohio, Shiloh Industries is a premier supplier of
high quality steel blanks, stampings and processed steel to automotive,
appliance and other industrial manufacturers. The company operates six
facilities in Ohio and employs more than 1,000 people.
<PAGE> 2
/CONTACT: Rodger Loesch, Chief Financial Officer and Treasurer, Shiloh
Industries, (419) 525-2315/
