<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 18, 1998
Commission file number 0-23802
-------
MOTIVEPOWER INDUSTRIES, INC.
----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 82-0461010
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
Two Gateway Center, 14th Floor, Pittsburgh, Pennsylvania 15222
--------------------------------------------------------------
(Address of principal executive offices; zip code)
(412) 201-1101
--------------
(Registrant's Telephone No., including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 18, 1998, MotivePower Industries, Inc. (the Company)
announced the acquisition, through MotivePower Investments Limited, of Young
Radiator Company (Young), a privately held manufacturer of heat transfer
products, for $79.3 million in cash, which considers the Company acquiring cash
and investments of approximately $11.0 million. The Company acquired 100% of the
common stock of Young. The acquisition agreement was negotiated between the
Company and Fred Young, the owner of the majority of the Young shares issued and
outstanding. The Company plans to file an IRC Section 338(h)(10) election. The
Company utilized borrowing capacity under its domestic revolver to fund the
acquisition.
Founded in 1927, Young is a leading manufacturer of radiators, air
coolers and heat exchange systems for rail and industrial power-related markets.
Young's products are used in locomotives, construction and mining vehicles,
diesel and gas engines, military vehicles, stationary generator sets and
industrial, off-the-road equipment. Young recorded net sales of $48.2 million
for its fiscal year ended December 31, 1997 with assets of $35.4 million and
stockholders' equity of $28.9 million. Young has approximately 440 employees.
Young's assets included owned real property, machinery, and office
equipment located in Racine, WI (approximately 235,000 square feet), Lexington,
TN (approximately 180,000 square feet) and Centerville, IA (approximately
110,000 square feet). Young utilized such assets in the manufacturing and sale
of its product offerings. It is the Company's current intention that the
acquired assets will continue in that same use while the Company seeks synergies
with its other operations. The transaction will be accounted for as a purchase
in accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations."
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
(1) Audited balance sheet of Young Radiator Company as of December
31, 1997 and the related statements of income, changes in
shareholders' investment, and cash flows for the year then
ended.
(b) Pro forma financial information.
(1) Pro forma financial data for the year ended December 31, 1997
and the nine months ended September 30, 1998, reflecting the
acquisition by the Company of Young Radiator Company.
(c) Exhibits
(2) Stock Purchase Agreement by and among Fred M. Young, Jr.;
Sandra H. Young; Fred M. Young, Jr., custodian for Ryan S.
Young under the Wisconsin Uniform Gifts to Minors Act; Fred M.
Young, Jr., trustee of the Ariel H. Young irrevocable trust of
1996 and MotivePower Industries, Inc. dated September 3, 1998.
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Young Radiator Company:
We have audited the accompanying balance sheet of Young Radiator Company (a
Wisconsin corporation) as of December 31, 1997, and the related statements of
income, changes in shareholders' investment, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Young Radiator Company as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 30, 1998
<PAGE> 4
YOUNG RADIATOR COMPANY
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
NET SALES $48,168,945
COST OF SALES 37,313,712
-----------
Gross profit 10,855,233
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 4,058,965
-----------
Income from operations 6,796,268
OTHER INCOME (EXPENSE):
Interest and dividend income and net realized gains on marketable securities 1,040,366
Other expense, net (205,031)
-----------
835,335
-----------
NET INCOME $ 7,631,603
===========
Basic and diluted earnings per share $ 190,790
===========
Basic and diluted weighted average shares outstanding 40
===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
<PAGE> 5
YOUNG RADIATOR COMPANY
BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 9,115
Marketable securities available-for-sale 10,634,160
Accounts receivable, less reserve for doubtful
accounts of $150,000 5,929,794
Inventories 5,456,983
------------
Total current assets 22,030,052
OTHER ASSETS 457,877
PROPERTY, PLANT AND EQUIPMENT, NET
Land and buildings 12,485,241
Machinery and equipment 17,655,427
Furniture and fixtures 1,064,697
Vehicles 649,807
------------
31,855,172
Less- Accumulated depreciation (18,926,836)
Less- Unamortized investment credit (38,415)
------------
Net property, plant and equipment 12,889,921
------------
$ 35,377,850
============
LIABILITIES AND
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 1,798,091
Accrued expenses-
Payroll and commissions 384,488
Vacation benefits 680,101
Health insurance claims 300,000
Warranty 548,811
Real estate taxes 235,000
Workers compensation claims 280,000
State income taxes 61,407
Other 4,076
Current portion of postretirement benefits 189,621
------------
Total current liabilities 4,481,595
LONG-TERM PENSION BENEFITS 394,066
LONG-TERM POSTRETIREMENT BENEFITS,
NET OF CURRENT PORTION 251,109
OTHER LONG-TERM LIABILITIES 1,347,500
SHAREHOLDERS' INVESTMENT:
Common stock, no par or stated value, 141
shares authorized, 40 shares issued and outstanding -
Additional paid in capital 465,332
Retained earnings 28,279,524
Unrealized gains on securities available-for-sale 158,724
------------
Total shareholders' investment 28,903,580
------------
$ 35,377,850
============
</TABLE>
The accompanying notes to financial statements are an integral part of this
balance sheet.
<PAGE> 6
YOUNG RADIATOR COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,631,603
Adjustments to reconcile net income to net cash provided by
operating activities-
Provision for depreciation 1,320,667
Net loss on sale of equipment 3,484
Increase in accounts receivable (836,788)
Increase in inventories (130,798)
Increase in other assets (31,334)
Increase in accounts payable 388,984
Decrease in accrued liabilities (237,602)
Decrease in accrued pension benefits (630,788)
Decrease in accrued postretirement benefits (95,415)
-----------
Net cash provided by operating activities 7,382,013
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,480,701)
Sales of marketable securities available-for-sale, net of unrealized holding gains
1,037,653
-----------
Net cash used in investing activities (443,048)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to shareholders (7,200,000)
-----------
NET DECREASE IN CASH (261,035)
CASH, beginning of year 270,150
-----------
CASH, end of year $ 9,115
===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for state income taxes $ 317,276
Cash paid for interest -
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
<PAGE> 7
YOUNG RADIATOR COMPANY
STATEMENT OF CHANGES IN SHAREHOLDERS' INVESTMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Shares Additional Unrealized Gains Total
Issued and Paid in Retained on Securities Shareholders'
Outstanding(1) Capital Earnings Available-for-Sale Investment
-------------- ---------- ----------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 40 $465,332 $27,847,921 $ 13,011 $28,326,264
Unrealized marketable securities gains - - - 145,713 145,713
Dividends paid ($180,000 per share) - - (7,200,000) - (7,200,000)
Net income - - 7,631,603 - 7,631,603
--- -------- ----------- -------- -----------
BALANCE, December 31, 1997 40 $465,332 $28,279,524 $158,724 $28,903,580
=== ======== =========== ======== ===========
</TABLE>
(1) Common stock--authorized 141 shares of no par value
The accompanying notes to financial statements are an integral part of this
statement.
<PAGE> 8
YOUNG RADIATOR COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) Summary of the Business and Significant Accounting Policies-
(a) Description of the business-
Young Radiator Company (the "Company") is a privately held
company with a general office located in Racine, Wisconsin and
operating plants located in Centerville, Iowa and Lexington,
Tennessee. The Company manufactures a broad range of
radiators, shell and tube heat exchangers, oil coolers and
charge air coolers. Customers served include manufacturers in
the locomotive, diesel engine, bus, military, off-highway
vehicle and equipment markets, as well as customers in the
industrial and engine packager markets primarily in North
America. The Company grants credit to substantially all of its
customers. Approximately 37% of the net sales of the Company
were divided between two customers in the locomotive industry
in 1997.
(b) Inventories-
Inventories are valued at the lower of cost or market,
determined on a last-in, first-out (LIFO) basis. Inventory
costs include material, labor and factory overhead.
All of the Company's inventories are accounted for using the
last-in, first-out (LIFO) method. Inventories at December 31,
1997, included the following:
<TABLE>
<S> <C>
Raw materials $ 4,373,964
Work-in-process and finished products 3,172,016
-----------
Inventories at FIFO cost 7,545,980
LIFO reserve (2,088,997)
-----------
Total inventories at LIFO cost $ 5,456,983
===========
</TABLE>
(c) Property, plant and equipment-
Property, plant and equipment are carried at cost.
Expenditures for additions, and major renewals and
betterments, which extend the life of an asset, are
capitalized, while maintenance and repairs are expensed as
incurred.
(d) Depreciation-
Property, plant and equipment is depreciated using both
straight-line and accelerated methods of depreciation for
financial reporting purposes over their useful lives as
follows:
Buildings 20 years
Machinery and equipment 5 - 15 years
Furniture and fixtures 5 - 15 years
Vehicles 5 years
<PAGE> 9
(e) Use of estimates-
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
(f) Revenue recognition-
Revenue is recognized when inventory is shipped to the
customer.
(g) Advertising costs-
Costs incurred for producing and communicating advertising are
expensed when incurred. Total advertising costs incurred
during 1997 were approximately $255,000.
(h) Impairment of long-lived assets-
The Company assesses the recoverability of the carrying amount
of long-lived assets currently held when various events or
changes in circumstances indicate that the assets may be
impaired.
(i) Earnings per share-
Earnings per share have been computed based upon the weighted
average number of shares outstanding. The Company does not
have any dilutive common stock equivalents. Accordingly, basic
and diluted earnings per share are the same for the period
presented.
(j) Other assets-
Included in other assets as of December 31, 1997, was $299,593
of cash surrender value related to a life insurance policy on
the Company's president and majority shareholder. The face
amount of this policy is $1 million.
(k) Warranty-
The Company offers a one-year limited warranty on its
products, which begins at the time of sale to a customer. The
Company accrues for these warranty costs at the time of sale.
(2) Marketable Securities Available-for-Sale-
The Company classifies its investments in marketable securities as
available-for-sale. As a result, these investments have been recorded
at December 31, 1997, at fair market value with the net unrealized
holding gains (losses) excluded from earnings and recorded as a
separate component of shareholders' investment.
<PAGE> 10
The cost and fair market value of the Company's investments, which
primarily consist of corporate bonds and governmental securities, at
December 31, 1997, by contract maturity, is shown below:
<TABLE>
<CAPTION>
Fair Market
Cost Value
----------- -----------
<S> <C> <C>
Due in 1 year or less $ 890,701 $ 892,315
Due after 1 year through 5 years 4,989,349 5,002,951
Due after 5 years through 10 years 3,466,106 3,563,227
Due after 10 years 1,129,280 1,175,667
----------- -----------
$10,475,436 $10,634,160
=========== ===========
</TABLE>
Although the investments mature at various times, the Company
classifies all investments as short-term as they are considered
available-for-sale. The net unrealized holding gains of $158,724 as of
December 31, 1997, are reflected as a separate component of
shareholders' investment.
(3) Pension Benefits-
The Young Radiator Company Pension Plan (the "Plan") is a defined
benefit pension plan covering substantially all of the employees of the
Company. The benefits under the Plan are based on years of service. The
Company's funding policy for the Plan is to contribute annually at
least the minimum required by applicable regulations.
Net pension (income) expense includes the following components:
<TABLE>
<S> <C>
Service cost-benefits attributed to service during the year $ 302,524
Interest cost on projected benefit obligation 1,253,164
Expected return on Plan assets (1,924,535)
Net amortization (261,941)
-----------
Net periodic pension income $ (630,788)
===========
</TABLE>
The following table sets forth the Plan's funded status and amounts
recognized at December 31, 1997, based upon actuarial data and market
value of Plan assets (primarily fixed income mutual funds) as of
September 30, 1997:
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $16,551,454 $(17,136,785)
============
Projected benefit obligation for service rendered to date $(18,641,278)
Plan assets at fair value 25,008,127
------------
Projected benefit obligation less than Plan assets 6,366,849
Unrecognized net gain (7,027,953)
Unrecognized prior service cost 267,038
------------
Accrued pension benefits $ (394,066)
============
</TABLE>
<PAGE> 11
The actuarial assumptions used to determine net pension income during
1997 and the projected benefit obligation at September 30, 1997 were:
Discount rate 7.0%
Expected long-term rate of return 8.5%
Expected salary scale 5.0%
(4) Postretirement Benefits-
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for certain retired employees
("Postretirement Benefits"). The Company follows FASB Statement No. 106
"Employers' Accounting for Postretirement Benefits, Other than
Pensions" ("SFAS No. 106"), which requires that the expected cost of
these Postretirement Benefits be charged to expense in the years the
employees render the services necessary to earn their benefits.
The components of the Company's net periodic Postretirement Benefit
expense are as follows:
<TABLE>
<S> <C>
Interest cost on accumulated postretirement benefit obligation $30,995
Actuarial loss 6,582
-------
Net periodic Postretirement Benefit expense $37,577
=======
</TABLE>
The Company does not offer Postretirement Benefits to its current
employees. The Company also capped future Postretirement Benefits to
retired employees to a flat defined benefit amount. Therefore, any
future increases in Postretirement Benefit costs beyond the defined
established benefit amount will be the responsibility of the retired
employee.
The following table sets forth the funded status for the Postretirement
Benefits at December 31, 1997, based upon actuarial data as of
September 30, 1997:
<TABLE>
<S> <C>
Accumulated Postretirement Benefit obligation $(440,730)
Plan assets at market value -
---------
Accumulated Postretirement Benefit obligation in excess of
plan assets (440,730)
Unrecognized net gain/loss from experience different from
that assumed and from changes in assumptions -
Unamortized transition obligation -
---------
Accrued Postretirement Benefits $(440,730)
=========
</TABLE>
At December 31, 1997, the Company has $189,621, of accrued
Postretirement Benefits included in current accrued liabilities.
The discount rate used in determining the accumulated Postretirement
Benefit obligation was 7.5%. As the Company has defined and capped the
future Postretirement Benefits, future cost trend rates will not impact
the cost of the Postretirement Benefits.
<PAGE> 12
The Company maintains the right to unilaterally modify or eliminate
such Postretirement Benefits, which, if acted upon, could significantly
change the liability.
(5) Bank Lines of Credit-
At December 31, 1997, the Company had unsecured bank lines of credit
available totaling $3,500,000, with no outstanding borrowings. During
1997, the Company did not borrow on these lines of credit. The Company
is not required to maintain compensating balances on the lines. The
lines of credit mature in August of 1998 and June of 1998.
(6) Income Taxes and Stockholder Distributions-
The Company and its shareholders have elected, for Federal and state
income tax purposes, to be taxed as an "S" corporation. As an "S"
corporation, the Company's taxable income or loss is includable in the
individual tax return of its shareholders for Federal and state income
tax purposes. The Company intends to make future distributions to its
shareholders to allow for payment of the future income taxes.
In the event the "S" corporation election is terminated, a net deferred
income tax benefit for timing differences between financial statement
and income tax reporting related to postretirement medical and life
insurance expenses, pension expense, inventory costs, depreciation and
other items would be reflected in the Company's financial statements.
(7) Contingencies-
The Company has received a notice from the current owners of a prior
operating plant indicating that the Company is the responsible party
for the contamination of the prior operating plant site. The current
owner seeks to recover from the Company the estimated costs of cleaning
up the alleged contamination. Although management has not completed its
investigation of this matter, it believes this matter could ultimately
have an unfavorable impact on the Company's financial position;
however, the ultimate decision may not be known for some time. The
Company has accrued, as a component of other accrued long-term
liabilities, $1,000,000 related to this matter as management's best
estimate of the ultimate settlement cost. While the estimated accrued
costs are considered adequate by management, the ultimate net amount
paid may be greater or less than the amount estimated.
In addition, the Company is one of several potentially responsible
parties ("PRPs") in an action in which the Environmental Protection
Agency ("EPA") seeks to recover the estimated costs of cleaning up a
landfill alleged to be contaminated by toxic waste materials. The EPA
sent the Company a "Special Notice" letter requesting reimbursement of
certain investigation and cleanup costs and also providing an
opportunity to participate in future remedial action. The letter, which
identified the Company as 138th of 362 PRPs, alleges the Company has a
percentage contribution of .05006%. The Company has and continues to
argue for a lower volumetric percentage. The Company has not accrued a
liability for this matter.
The Company believes that the outcome of these proceedings,
individually and in the aggregate, will not have a materially adverse
effect on the Company's operations.
<PAGE> 13
(8) Accounting Pronouncements-
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards ("SFAS") No. 130 "Reporting
Comprehensive Income." This statement establishes standards for the
reporting and display of comprehensive income and its components.
Comprehensive income is defined as net income and all other
non-shareholder changes in equity. This pronouncement, which will be
adopted in 1998, will only impact the Company's financial statement
disclosures.
Beginning on January 1, 1998, the Company will be required to adopt
Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." Because the
Company currently accounts for computer software costs in accordance
with the SOP, it will not have an impact on the Company's financial
position or results from operations.
<PAGE> 14
UNAUDITED PRO FORMA CONSOLIDATED DATA
The following unaudited pro forma income statement data for the year
ended December 31, 1997 and the nine months ended September 30, 1998 have been
prepared based on historical income statements of the Company, as adjusted to
reflect the acquisition of Young Radiator as if it had occurred on January 1,
1997. The pro forma income statement data may not be indicative of the future
results of operations or what the actual results of operations would have been
had the acquisition described above been effective January 1, 1997. The
unaudited pro forma balance sheet has been prepared assuming Young Radiator was
acquired on September 30, 1998.
<PAGE> 15
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA INCOME STATEMENT
(In thousands except share data)
December 31, 1997
--------------------------------------------------
Young
MotivePower Radiator
Industries Company Adjustments Total
------------ -------- ----------- -----
<S> <C> <C> <C> <C>
Net sales $ 305,930 $ 48,169 $ - $ 354,099
Cost of sales (233,588) (37,879) (694) (1) (272,161)
--------- -------- ------- ---------
Gross profit 72,342 10,290 (694) 81,938
Selling, general and
administrative expenses (37,724) (4,125) (921) (2) (42,770)
--------- -------- ------- ---------
Operating income 34,618 6,165 (1,615) 39,168
Investment income 761 1,041 (1,041) (3) 761
Interest expense (5,163) - (4,598) (4) (9,761)
Other income 2,003 426 - 2,429
Foreign exchange loss (230) - - (230)
--------- -------- ------- ---------
Income before income taxes 31,989 7,632 (7,253) 32,368
Income tax expense (11,713) - (136) (5) (11,849)
--------- -------- ------- ---------
Net income $ 20,276 $ 7,632 $(7,390) $ 20,518
========= ======== ======= =========
Earnings per common share -basic:
Net income $ 1.16
=========
Adjusted weighted average commons shares outstanding 17,694
=========
Earnings per common share -assuming dilution:
Net income $ 1.13
=========
Adjusted weighted average commons shares outstanding 18,209
=========
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA INCOME STATEMENT
(In thousands except share data)
September 30, 1998
--------------------------------------------------
Young
MotivePower Radiator
Industries Company Adjustments Total
------------ -------- ----------- -----
<S> <C> <C> <C> <C>
Net sales $ 258,720 $ 37,704 $ - $ 296,424
Cost of sales (196,946) (28,467) (521) (1) (225,934)
--------- -------- ------- ---------
Gross profit 61,774 9,237 (521) 70,490
Selling, general and
administrative expenses (29,395) (4,113) (690) (2) (34,198)
--------- -------- ------- ---------
Operating income 32,379 5,124 (1,211) 36,292
Investment income 918 614 (614) (3) 918
Interest expense (3,739) (12) (3,466) (4) (7,217)
Other income 2,622 561 - 3,183
Foreign exchange loss 2,071 - - 2,071
--------- -------- ------- ---------
Income before income taxes and extraordinary item 34,251 6,287 (5,291) 35,247
Income tax expense (11,549) - (359) (5) (11,908)
--------- -------- ------- ---------
Income before extraordinary item 22,702 6,287 (5,560) 23,339
Extraordinary loss on debt extinguishment, net of income tax (472) - - (472)
--------- -------- ------- ---------
Net income $ 20,230 $ 6,287 $(5,650) $ 22,867
========= ======== ======= =========
Earnings per common share -basic:
Income before extraordinary item $ 1.31
Extraordinary item (0.03)
---------
Net income $ 1.28
=========
Adjusted weighted average commons shares outstanding 17,830
=========
Earnings per common share -assuming dilution:
Income before extraordinary item $ 1.25
Extraordinary item (0.02)
---------
Net income $ 1.23
=========
Adjusted weighted average commons shares outstanding 18,599
=========
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA BALANCE SHEET
As of September 30, 1998
(In thousands)
--------------------------------------------------
Young
Motive Power Radiator
Industries Company Adjustments Total
------------ -------- ----------- -----
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 11,877 $ 11,937 $ 319 (6) $ 24,133
Receivables from customers:
Billed, net of allowance for doubtful
accounts 45,317 7,005 - 52,322
Unbilled 1,091 - - 1,091
Inventories 99,501 5,208 1,879 (7) 106,588
Deferred income taxes 8,811 - - 8,811
Other 3,357 - - 3,357
-------- -------- -------- --------
Total current assets 169,954 24,150 2,198 196,302
Locomotive lease fleet, net 1,210 - - 1,210
Property, plant and equipment
Land 1,427 222 768 (8) 2,417
Buildings and improvements 44,096 12,265 (5,228)(8) 51,133
Machinery and equipment 75,194 20,073 (8,468)(8) 86,799
-------- -------- -------- --------
Property, plant and equipment -at cost 120,717 32,560 (12,928) 140,349
Less - accumulated depreciation (53,299) (19,869) 19,869 (8) (53,299)
-------- -------- -------- --------
Property, plant and equipment-net 67,418 12,691 6,941 87,050
Underbillings-MPI de Mexico 27,350 - - 27,350
Deferred income taxes 2,941 - - 2,941
Goodwill and intangibles-net 24,770 - 36,821 (9) 61,591
Other 10,666 168 2,599 (10) 13,433
-------- -------- -------- --------
Total assets $304,309 $ 37,009 $ 48,559 $389,877
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 7,014 $ - $ - $ 7,014
Accounts payable - trade 30,321 1,915 418 (11) 32,654
Accrued expenses and other
current liabilities 31,529 2,629 904 (11) 35,062
Income taxes payable 548 53 - 601
Advances from customers 1,255 - - 1,255
-------- -------- -------- --------
Total current liabilities 70,667 4,597 - 75,264
======== ======== ======== ========
Long-term debt 48,091 - 79,345 (12) 127,436
Commitments and contingencies 15,735 - - 15,735
Other 2,381 1,477 149 (11) 4,007
-------- -------- -------- --------
Total liabilities 136,874 6,074 79,494 222,442
Stockholders Equity:
Common stock 178 - - 178
Additional paid-in capital 206,018 465 (465)(13) 206,018
Deficit (33,125) 29,966 (29,966)(13) (33,125)
Cumulative translation adjustments,
net of tax (5,105) - - (5,105)
Other - 504 (504)(13) -
Deferred compensation 3,998 - - 3,998
-------- -------- -------- --------
171,964 30,935 (30,935) 171,964
Less
Treasury stock 4,529 - - 4,529
-------- -------- -------- --------
Total stockholders' equity 167,435 30,935 (30,935) 167,435
-------- -------- -------- --------
Total liabilities and stockholders' equity $304,309 $ 37,009 $ 48,559 $389,877
======== ======== ======== ========
</TABLE>
<PAGE> 18
Footnotes to Unaudited Pro Forma Consolidated Data
- --------------------------------------------------
(1) Estimated additional depreciation related to the recording of property,
plant and equipment at fair value.
(2) Estimated amortization of goodwill related to the purchase, over a 40
year life.
(3) Represents adjustment to interest income based on Company's intention
to sell investments.
(4) Estimated additional interest expense based on increased borrowings
under the Company's domestic revolver at an assumed 6% interest rate.
(5) Estimated income tax effect of Young Radiator Company and of the pro
forma adjustments.
(6) Recording of investments at net realizable value.
(7) Represents an adjustment to record inventory at fair value.
(8) Represents an adjustment to record property, plant and equipment at
fair value.
(9) Estimated goodwill related to the purchase.
(10) Recording of overfunded pension asset and other miscellaneous assets
at fair value.
(11) Recording of liabilities at fair value.
(12) Represents the additional borrowings under the Company's domestic
revolver.
(13) Elimination of Young Radiator's equity accounts.
Note:
- -----
Certain reclassifications have been made to the 1998 and 1997 Young Radiator
Company financial statements to conform to the Company's presentation of such
items.
<PAGE> 19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOTIVEPOWER INDUSTRIES, INC.
By: /s/ David L. Bonvenuto
-----------------------
David L. Bonvenuto
Vice President, Controller and
Principal Accounting Officer
February 1, 1999
<PAGE> 20
EXHIBIT INDEX
Exhibit No.
- -----------
2 Stock Purchase Agreement dated September 3, 1998 by and among Fred M.
Young, Jr., Sandra H. Young, Fred M. Young, Jr., Custodian for Ryan S.
Young under the Wisconsin Uniform Gifts to Minors Act, Fred M. Young,
Jr., Trustee of the Ariel H. Young Irrevocable Trust of 1996 and
MotivePower Industries, Inc.
<PAGE> 1
Exhibit 2
STOCK PURCHASE AGREEMENT
BY AND AMONG
FRED M. YOUNG, JR.
SANDRA H. YOUNG
FRED M. YOUNG, JR., CUSTODIAN FOR RYAN S. YOUNG
UNDER THE WISCONSIN UNIFORM GIFTS TO MINORS ACT
FRED M. YOUNG, JR., TRUSTEE OF THE
ARIEL H. YOUNG IRREVOCABLE TRUST OF 1996
AND
MOTIVEPOWER INDUSTRIES, INC.
SEPTEMBER 3, 1998
<PAGE> 2
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS...........................................................................1
1.1. Defined Terms.................................................................1
ARTICLE II PURCHASE AND SALE; CLOSING; PURCHASE PRICE...........................................5
2.1. Purchase and Sale.............................................................5
2.2. The Closing...................................................................5
2.3. Actions at Closing............................................................5
2.4. Payment of Purchase Price.....................................................5
2.5. Post-Closing Purchase Price Adjustment........................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS......................................7
3.1. Organization and Authority....................................................8
3.2. Authority; Validity...........................................................8
3.3. No Violation..................................................................9
3.4. Third Party Consents..........................................................9
3.5. Financial Statements..........................................................9
3.6. Tax Matters...................................................................9
3.7. Absence of Certain Changes...................................................11
3.8. Assets.......................................................................12
3.9. Bank Accounts................................................................13
3.10. Litigation...................................................................13
3.11. Compliance With Laws.........................................................13
3.12. Insurance....................................................................14
3.13. Material Contracts and Commitments...........................................14
3.14. Labor Matters................................................................15
3.15. Employee Benefit Plans.......................................................15
3.16. Environmental Matters........................................................16
3.17. Proprietary Rights...........................................................17
3.18 Trade Notes and Accounts Receivable and Trade Notes and Account Payable......17
3.19 Certain Relationships; Transactions with Management..........................18
3.20 Adverse Agreements...........................................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.............................................18
4.1. Organization.................................................................18
4.2. No Violation.................................................................18
4.3. Authority; Validity..........................................................18
4.4. Third Party Consents.........................................................19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
4.5. Investment/Operational Intent................................................19
4.6. Breach of Representation and Warranty........................................19
ARTICLE V COVENANTS............................................................................19
5.1. Access to Information and Records............................................19
5.2. Conduct of Business Pending the Closing......................................20
5.3. HSR Act Filings..............................................................21
5.4. Consents.....................................................................21
5.5. Publicity....................................................................22
5.6. Disclosure Schedule..........................................................22
5.7. Indemnification of Directors and Officers....................................22
5.8. Shareholders Representative..................................................22
5.9. Election.....................................................................23
5.10. Bonus........................................................................23
5.11. Non-Compete/Non-Solicitation.................................................23
ARTICLE VI CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.........................................24
6.1. Representations and Warranties True on the Closing Date......................24
6.2. Compliance With Agreement....................................................24
6.3. Absence of Litigation........................................................24
6.4. Consents and Approvals.......................................................24
6.5. HSR Act Waiting Period.......................................................24
6.6. No Material Adverse Change...................................................24
6.7. Documents to be Delivered by Shareholders....................................25
ARTICLE VII CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS..................................25
7.1. Representations and Warranties True on the Closing Date......................26
7.2. Compliance With Agreement....................................................26
7.3. Absence of Litigation........................................................26
7.4. HSR Act Waiting Period.......................................................26
7.5. Documents to be Delivered by Buyer...........................................26
7.6. Closing Payment..............................................................26
ARTICLE VIII SURVIVAL; INDEMNIFICATION.........................................................27
8.1. Survival; Remedies for Breach................................................27
8.2. Indemnification by Shareholders..............................................27
8.3. Indemnification by Buyer.....................................................29
8.4. Procedures for Indemnification...............................................29
8.5. Procedures for Third-Party Claims............................................29
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE IX TERMINATION OF AGREEMENT............................................................30
9.1. Causes.......................................................................30
9.2. Effect of Termination........................................................31
9.3 Right to Proceed.............................................................31
ARTICLE X DISPUTE RESOLUTION...................................................................31
10.1. Dispute......................................................................31
10.2. Process......................................................................31
10.3. Negotiations.................................................................31
10.4. Mediation....................................................................31
10.5. Submission to Adjudication...................................................32
10.6. General......................................................................32
ARTICLE XI MISCELLANEOUS.......................................................................33
11.1. Further Assurance............................................................33
11.2. Assignment...................................................................33
11.3. Law Governing Agreement......................................................33
11.4. Amendment and Modification...................................................33
11.5. Notice.......................................................................33
11.6. Expenses.....................................................................35
11.7. Entire Agreement; Binding Effect.............................................35
11.8. Counterparts.................................................................36
11.9. Headings.....................................................................36
11.10. Construction.................................................................36
11.11. Faxes........................................................................36
</TABLE>
iii
<PAGE> 5
Schedules
---------
Disclosure Schedule
Exhibits
--------
Exhibit A List of Competitors
Exhibit B Opinion of Shareholders' Counsel
Exhibit C Opinion of Buyer's Counsel
iv
<PAGE> 6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT made as of September 3, 1998, by
and among Fred M. Young, Jr., Sandra H. Young, Fred M. Young, Jr., custodian for
Ryan S. Young under the Wisconsin Uniform Gifts to Minors Act, Fred M Young,
Jr., trustee of the Ariel H. Young Irrevocable Trust of 1996 (each individually
a "Shareholder" and collectively the "Shareholders") and MotivePower Industries,
Inc., a Delaware corporation ("Buyer").
RECITALS
A. The Company is engaged in the business of designing,
manufacturing and selling heat transfer products for the heavy duty industrial
and vehicular OEM markets (the "Business").
B. The Shareholders own all of the outstanding shares of the
capital stock of the Company.
C. Buyer desires to acquire all of the outstanding shares of
the capital stock of the Company from the Shareholders and the Shareholders
desire to sell all of the outstanding shares of capital stock of the Company to
Buyer.
NOW THEREFORE, in consideration of the Recitals and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound hereby, do hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. As used in this Agreement, the terms below
shall have the following meanings.
"Affiliate" of an individual shall mean a person who is an
immediate family member of such individual or an entity with respect to which
such individual has the power to direct the management or policies.
"Agreement" shall mean this Stock Purchase Agreement, as the
same shall be amended from time to time in accordance with its terms.
"Arbitrating Accountant" shall have the meaning specified in
Section 2.5(b) of this Agreement.
<PAGE> 7
"Base Price" shall mean Seventy Million Five Hundred Thousand
Dollars ($70,500,000.00).
"Base Working Capital" shall mean the amount of $7,157,000,
less the amount of the interest receivable related to Cash included in the
Company's December 31, 1997 balance sheet.
"Business" shall have the meaning specified in the Recitals of
this Agreement.
"Buyer" shall mean MotivePower Industries, Inc., a Delaware
corporation.
"Cash" shall mean all cash, short-term investments, marketable
securities and other cash equivalents of the Company and any interest receivable
related to any of the foregoing.
"Cash Amount" shall mean the amount of (a) Cash of the Company
immediately prior to the Effective Time of Closing, plus (b) any amount paid by
the Company after December 31, 1997 and before the Effective Time of Closing for
the Toshiba double column machining center ordered by the Company to the
manufacturer thereof, less (c) any amount of Cash excluded from the Cash Amount
pursuant to Section 5.2(e) hereof.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation Liability Act as in force and effect as of the Closing.
"Closing" shall mean the conference to be held at 10:00 A.M.
Central Time, on the Closing Date at the offices of Quarles & Brady, 411 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202, or such other time and place as
the parties may mutually agree to in writing, at which the transactions
contemplated by this Agreement shall be consummated.
"Closing Date" shall have the meaning specified in Section 2.2
of this Agreement.
"Closing Date Balance Sheet" shall have the meaning specified
in Section 2.5(a) of this Agreement.
"Closing Date Cash Amount" shall have the meaning specified in
Section 2.5(a) of this Agreement.
"Closing Date Working Capital" shall have the meaning
specified in Section 2.5(a) of this Agreement.
"Closing Payment" shall mean an amount equal to the Base Price
plus the Estimated Cash Amount.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
<PAGE> 8
"Common Stock" shall mean the 141 authorized shares of the
Company's Common Stock, no par value.
"Company" shall mean Young Radiator Company, a Wisconsin
corporation.
"Company Employees" shall mean any persons employed by
Company.
"CPR" shall have the meaning specified in Section 10.4 of this
Agreement.
"Cut-off Date" shall have the meaning specified in Section
8.1(a) of this Agreement.
"Disclosure Schedule" shall mean the Disclosure Schedule,
dated the date of this Agreement, delivered by the Shareholders Representative
to the Buyer on behalf of the Shareholders contemporaneously with the execution
and delivery of this Agreement and as the same may be updated from time to time
after the date of this Agreement and prior to the Closing Date in accordance
with the terms of this Agreement.
"Disclosure Schedule Change" shall have the meaning specified
in Section 5.6 of this Agreement.
"Dispute" shall have the meaning specified in Section 10.1 of
this Agreement.
"Effective Time" shall mean 12:01 a.m. on the Closing Date,
subject to the occurrence of the Closing.
"Employee Benefit Plan" shall have the meaning specified in
Section 3.15(a) of this Agreement.
"Environmental Laws" shall mean all Laws relating to pollution
or protection of the environment, including Laws relating to emissions,
discharges, generation, storage, release or threatened release of Hazardous
Substances into the environment, including the Clean Water Act, the Clean Air
Act, the Resource Conservation and Recovery Act, the Toxic Substances Control
Act, CERCLA and the Superfund Amendments and Reauthorization Act of 1986, all as
in force and effect as of the Closing.
3
<PAGE> 9
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Estimated Cash Amount" shall mean (a) $13,445,494; less (b)
the amount of any distributions made by the Company in respect to its capital
stock between June 1, 1998 and before the Effective Time of Closing, plus (c)
any amount paid by the Company after December 31, 1997 and before the Effective
Time of Closing for the Toshiba double column machining center ordered by the
Company to the manufacturer thereof.
"Final Closing Date Balance Sheet" shall have the meaning
specified in Section 2.5(b) of this Agreement.
"Final Closing Date Cash Amount" shall have the meaning
specified in Section 2.5(b) of this Agreement.
"Final Closing Date Working Capital" shall have the meaning
specified in Section 2.5(b) of this Agreement.
"Financial Statements" shall mean the financial statements of
the Company consisting of the balance sheets of the Company as of December 31,
1997 and 1996, and the related statements of income, retained earnings and cash
flows for the years then ended, together with the auditor's report thereon.
"Hazardous Substance" shall mean any substance defined or
regulated as hazardous under Environmental Laws.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"Indemnified Party" shall mean any Party seeking
indemnification under Article VIII of this Agreement.
"Indemnifying Party" shall mean the Party from whom the
indemnification is sought under Article VIII of this Agreement.
"Knowledge of Company" or "Company's Knowledge" shall mean the
actual knowledge of the Shareholders, Harry Gant, Rick Dezek, Don Pfaffl, Ralph
Kindl, Robert Eide, Tony Corley and Merlyn Johnson.
"Law" shall mean any federal, state, local or other
governmental law, rule or regulation of any kind, and the rules and regulations
promulgated thereunder.
4
<PAGE> 10
"Losses" shall mean damages, liabilities, deficiencies,
claims, actions, demands, judgments, interest, losses, or costs or expenses of
whatever kind (including reasonable attorneys' fees but exclusive of loss of
profits or consequential damages).
"Material Contracts shall have the meaning specified in
Section 3.13 of this Agreement.
"Negative Closing Date Cash Adjustment Amount" shall have the
meaning set forth in Section 2.5(f) of this Agreement.
"Negative Closing Date Working Capital Adjustment Amount"
shall have the meaning set forth in Section 2.5(e) of this Agreement.
"Parties" shall mean, collectively, Buyer and the
Shareholders.
"Person" shall mean a natural person, corporation, limited
liability company, trust, partnership, government entity, agency or branch or
department thereof, or any other legal entity.
"Positive Closing Date Cash Adjustment Amount" shall have the
meaning set forth in Section 2.5(f) of this Agreement.
"Positive Closing Date Working Capital Adjustment Amount"
shall have the meaning set forth in Section 2.5(e) of this Agreement.
"Pro Rata Percentage" shall mean, as to each Shareholder, the
percentage set forth opposite such Person's name in the applicable portion of
Section 3.1(c) of the Disclosure Schedule.
"Pro Rata Portion" of an obligation or benefit shall mean, as
to any Shareholder, the product of (i) the total amount of the obligation or
benefit, times (ii) the Pro Rata Percentage of such Shareholder.
"Purchase Price" shall mean an amount equal to (i) the Base
Price, plus (ii) the Cash Amount, subject to the adjustments set forth herein.
"Purchased Shares" shall mean all of the issued and
outstanding shares of the Common Stock.
"Real Property" shall mean all real property owned or leased
by the Company.
"Replacement" shall have the meaning specified in Section 10.6
of this Agreement.
5
<PAGE> 11
"Request" shall have the meaning specified in Section 10.4 of
this Agreement.
"Shareholder" or "Shareholder(s)" shall mean Fred M. Young,
Jr., Sandra H. Young, Fred M. Young, Jr., custodian for Ryan S. Young under the
Wisconsin Uniform Gifts to Minors Act, and Fred M. Young, Jr., trustee of the
Ariel H. Young Irrevocable Trust of 1996.
"Shareholders Representative" shall mean the person appointed
to that position as provided in Section 5.8 of this Agreement.
"Subsidiary" shall mean any other Person more than 50% of the
outstanding voting shares or other equity interests of which is at the time
directly owned by the Company, by one or more of its Subsidiaries or by the
Company and one or more of its Subsidiaries.
"Third-Party Claim" shall mean a legal proceeding, action,
claim or demand instituted by any third person or governmental entity.
"Working Capital" shall means (i) the sum of the accounts
receivable less interest receivable related to Cash and inventory, less (ii) the
sum of the accounts payable and accrued expenses as set forth on the Company's
December 31, 1997 balance sheet, Closing Date Balance Sheet or the Final Closing
Date Balance Sheet, as the case may be.
ARTICLE II
PURCHASE AND SALE; CLOSING; PURCHASE PRICE
2.1. Purchase and Sale. At the Closing, and upon all of the terms
and subject to all of the conditions of this Agreement, the Shareholders agree
to sell, assign, convey and deliver to the Buyer, and the Buyer agrees to
purchase and accept from the Shareholders, the Purchased Shares.
2.2. The Closing. The Closing shall take place on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the Parties will take at the
Closing itself), or such other time and date as the Parties may mutually
determine (the "Closing Date").
2.3. Actions at Closing. At the Closing, (i) the Shareholders will
deliver to Buyer the various certificates, instruments and documents referred to
in Article VI of this Agreement, and (ii) Buyer will deliver to the Shareholders
the various certificates, instruments and documents referred to in Article VII
of this Agreement.
6
<PAGE> 12
2.4. Payment of Purchase Price. At the Closing, the Buyer shall
deliver the Closing Payment to the Shareholders by a wire transfer to each
Shareholder of immediately available funds in the amount of such Shareholders'
Pro Rata Portion of the Closing Payment.
2.5. Post-Closing Purchase Price Adjustment:
(a) As promptly as practicable after the Closing Date (but in
no event later than 60 days after the Closing Date), the Shareholders
Representative will cause the accounting firm of Arthur Andersen to prepare and
deliver concurrently to Buyer and the Shareholders Representative an audited
balance sheet of the Company (the "Closing Date Balance Sheet"), which shall set
forth the Cash Amount (the "Closing Date Cash Amount") and the Working Capital
of the Company immediately prior to the Effective Time of Closing (the "Closing
Date Working Capital"). The Closing Date Balance Sheet shall be prepared in
accordance with generally accepted accounting principles on a basis consistent
with the Company's December 31, 1997 financial statements ("GAAP") and with the
preparation of the balance sheet subject, however, to the following
requirements, which requirements shall be adhered to irrespective of whether
such requirements are in accordance with generally accepted accounting
principals:
(i) no liability shall be established or reflected on
the Closing Date Balance Sheet or the Final Closing Date Balance Sheet
for any amount due from the Company to the manufacturer of the Toshiba
double column machining center ordered by the Company;
(ii) the Closing Date Balance Sheet and the Final
Closing Date Balance Sheet shall contain a liability for the full
amount of any "Stay Bonus" or "Sale Bonus" due to Harry Gant (as such
terms are defined in the Employment Agreement between Harry Gant and
the Company dated June 26, 1998); and
(iii) no liability shall be established or reflected
on the Closing Date Balance Sheet or the Final
Closing Date Balance Sheet for any "Sale Bonus" due to Rick Dezek, Don Pfaffl or
Ralph Kindl (as such term is defined in the letter from the Company to each such
individual dated April 21, 1998).
The fees and expenses of Arthur Andersen will be shared equally by the Company
and the Shareholders.
(b) If the Closing Date Balance Sheet has not been prepared in
accordance with this Agreement, Buyer or the Shareholders Representative may
claim that the Closing Date Balance Sheet was not prepared in accordance with
the requirements of Section 2.5 (a), and shall deliver to the other party a
detailed statement describing the basis for any such claim within fifteen (15)
days after receiving the Closing Date Balance Sheet. Buyer and the Shareholders
Representative will use reasonable efforts to resolve any such claims
themselves. If they do not obtain a final resolution within ninety (90) days
after the Closing Date, however, Buyer and the
7
<PAGE> 13
Shareholders Representative will select another accounting firm mutually
acceptable to them to resolve any remaining such claims. If Buyer and the
Shareholders Representative are unable to agree on the choice of an accounting
firm, they will select a nationally-recognized accounting firm by lot (after
excluding any such firm which has provided services to Buyer, the Company or a
Shareholder or others affiliated with Buyer, the Company or any Shareholder)
(the "Arbitrating Accountant"). Upon submission to the Arbitrating Accountant
for resolution, Buyer and the Shareholders Representative shall indicate in
writing its position on each disputed matter. The Arbitrating Accountant shall
choose one of the two positions on each disputed matter no later than 120 days
after the Closing Date and such position will be conclusive and binding upon
Buyer and the Shareholders Representative with respect to that disputed matter.
The proposed Closing Date Balance Sheet will be revised as appropriate to
reflect the resolution of any claims pursuant to this Section 2.5(b). The term
"Final Closing Date Balance Sheet" means the Closing Date Balance Sheet,
together with any revisions thereto pursuant to this Section 2.5(b), the term
"Final Closing Date Cash Amount" means the Cash as set forth on the Final
Closing Date Balance Sheet and the term "Final Closing Date Working Capital"
means the Working Capital of the Company immediately prior to the Effective Time
on the Closing Date as set forth on the Final Closing Date Balance Sheet. Buyer
and the Shareholders shall each be responsible for one-half of the fees and
expenses of the Arbitrating Accountant.
(c) The Shareholders Representative will make the work papers
and back-up materials used in preparing the Closing Date Balance Sheet, and any
books, records and financial staff of the Shareholders, and representatives of
Arthur Andersen, available to Buyer and their accountants and other
representatives and to the Arbitrating Accountant resolving any claim concerning
the Closing Date Balance Sheet at reasonable times and upon reasonable notice at
any time during (a) the preparation of the Closing Date Balance Sheet, (b) the
review by Buyer and the Shareholders Representative of the Closing Date Balance
Sheet, and (c) the resolution by the Shareholders and the Shareholders
Representative of any objections thereto.
(d) Buyer will make the work papers and back-up materials used
in (or necessary for) the Closing Date Balance Sheet, and any books, records and
financial staff of Buyer and the Company and their accountants and other
representatives, available to the Shareholders Representative and its
accountants and other representatives and to the Arbitrating Accountant
resolving any claim concerning the Closing Date Balance Sheet at reasonable
times and upon reasonable notice at any time during (a) the preparation of the
Closing Date Balance Sheet, (b) the review by Buyer and the Shareholders
Representative of the Closing Date Balance Sheet, and (c) the resolution by
Buyer and the Shareholders Representative of any objections thereto.
(e) The Base Price will be adjusted if the Final Closing Date
Working Capital is greater or less than the Base Working Capital. If the Final
Closing Date Working Capital is greater than the Base Working Capital, then the
Base Price will be increased on a dollar-for-dollar basis by the amount of such
excess (the "Positive Closing Date Working Capital
8
<PAGE> 14
Adjustment Amount"). In such event, each Shareholder's Pro Rata Portion of the
Positive Closing Date Adjustment Amount will be paid by Buyer to such
Shareholder, by wire transfer of immediately available funds to an account or
accounts designated by the Company Representative in writing, no later than
three (3) business days after the completion of the Final Closing Date Balance
Sheet. If the Final Closing Date Working Capital is less than the Base Working
Capital, then the Base Price will be decreased on a dollar-for-dollar basis by
the amount of such deficiency (the "Negative Closing Date Working Capital
Adjustment Amount") In such event, the Shareholders Representative will cause
each of the Shareholders to pay its Pro Rata Portion of the Negative Closing
Date Adjustment Amount to Buyer by wire transfer of immediately available funds
to an account or accounts designated by Buyer in writing, no later than three
(3) business days after the completion of the Final Closing Date Balance Sheet.
(f) The Cash Amount will be adjusted if the Final Closing Date
Cash Amount is greater or less than the Estimated Cash Amount. If the Final
Closing Date Cash Amount is greater than the Estimated Cash Amount, then the
Cash Amount will be increased on a dollar-for-dollar basis by the amount of such
excess (the "Positive Closing Date Cash Adjustment Amount"). In such event, each
Shareholder's Pro Rata Portion of the Positive Closing Date Cash Adjustment
Amount will be paid by Buyer to such Shareholder, by wire transfer of
immediately available funds to an account or accounts designated by the
Shareholder Representative in writing, no later than three (3) business days
after the completion of the Final Closing Date Balance Sheet. If the Final
Closing Date Cash Amount is less than the Estimated Cash Amount, then the Cash
Amount will be decreased on a dollar-for-dollar basis by the amount of such
deficiency (the "Negative Closing Date Cash Adjustment Amount"). In such event,
the Shareholders Representative will cause each of the Shareholders to pay its
Pro Rata Portion of the Negative Closing Date Cash Adjustment Amount to Buyer by
wire transfer of immediately available funds to an account or accounts
designated by Buyer in writing, no later than three (3) business days after the
completion of the Final Closing Date Balance Sheet.
(g) In no event will any payment required under paragraph (e)
above be duplicative of any payment required under paragraph (f) above, and vice
versa.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
All representations and warranties of the Shareholders are made subject
to the exceptions which are noted in the Disclosure Schedule and in any other
schedules attached to this Agreement, as supplemented from time to time by the
Shareholders hereafter and prior to the Closing Date. Except as specifically set
forth in this Agreement, the Shareholders make no representations or warranties
to Buyer of any kind whatsoever, express or implied. Subject to the foregoing,
the Shareholders hereby represent and warrant to Buyer as follows:
9
<PAGE> 15
3.1. Organization and Authority.
(a) The Company is a corporation duly incorporated, validly
existing and is of active status under the Laws of the State of Wisconsin. The
Company is duly qualified to conduct business as a foreign corporation, and is
of active status in each jurisdiction wherein the character of the properties
owned or leased by it, or the nature of its business, makes such licensing or
qualification necessary except where the failure to do so would not have a
material adverse effect on the Business. Any states in which Company is licensed
or qualified to do business are listed in Section 3.1(a) of the Disclosure
Schedule.
(b) The Company has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as and where such is now being conducted.
(c) The authorized capital stock of the Company consists of
141 shares of common stock, of which 40 shares are issued and outstanding.
Section 3.1(c) of the Disclosure Schedule sets forth the names and number of
shares of the Common Stock owned by each of the Shareholders. All of the
outstanding shares of the Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable, except as set forth in Section
180.0622(b) of the Wisconsin Statutes, as judicially interpreted, and to the
Knowledge of Company are owned by the Company Shareholders free and clear of all
liens, claims, encumbrances and restrictions whatsoever. No shares of capital
stock of, or other ownership interest in, the Company are reserved for issuance
and, except for this Agreement, there are no outstanding options, warrants,
rights, subscriptions, claims of any character, agreements or understandings
relating to the Common Stock pursuant to which the Company or any Shareholder is
or may become obligated to issue or exchange any shares of Common Stock.
(d) The officers and directors of the Company are set forth
in Section 3.1(d) of the Disclosure Schedule.
(e) True and complete copies of the Articles of Incorporation
and Bylaws of the Company have been delivered to Buyer. The minute books of the
Company which have been provided to Buyer for examination contain complete and
accurate records of all material corporate action taken by the Board of
Directors and stockholders of the Company.
(f) The Company has no Subsidiaries.
3.2. Authority; Validity. The execution and delivery of this Agreement
and the other documents and instruments to be executed and delivered by the
Shareholders pursuant hereto and the consummation by the Shareholders of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action and no further act or proceeding on the part of the
Shareholders is necessary to authorize this Agreement or the other documents and
instruments to be executed and delivered by the Shareholders pursuant hereto or
the consummation by the
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Shareholders of the transactions contemplated hereby and thereby. This Agreement
constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by the Shareholders pursuant hereto
will constitute, valid and binding agreements of the Shareholders, enforceable
against the Shareholders in accordance with their respective terms, except as
such may be limited by bankruptcy, insolvency, reorganization or other Laws
affecting creditors rights generally, and by general equitable principles.
3.3. No Violation. Except as set forth in Section 3.3 of the Disclosure
Schedule, the execution and delivery of this Agreement and the consummation by
the Shareholders of the transactions contemplated hereby will not cause a
material breach or violation of or default under any provision of (a) the
Articles of Incorporation or Bylaws of the Company; (b) any Material Contract to
which the Company is a party or by which the Company may be bound; (c) any
contract or agreement to which a Shareholder is a party or by which a
Shareholder may be bound; or (d) any decree, order, injunction or other decision
of any court, arbitrator or governmental authority to which the Company or any
Shareholder may be subject.
3.4. Third Party Consents. Except for the filing of appropriate notices
under the HSR Act and for the third party consents listed on Section 3.4 of the
Disclosure Schedule, no material approval, authorization, notice, consent or
other action by or filing with any Person is required for the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby by the Shareholders.
3.5. Financial Statements. Section 3.5 of the Disclosure Schedule
contains complete and accurate copies of the Financial Statements. Except as set
forth in Section 3.5 of the Disclosure Schedule, all of such Financial
Statements (a) have been prepared in accordance with the books and records
regularly maintained by the Company, (b) fairly present the assets, liabilities,
financial condition and results of operation of the Company and (c) were
prepared in accordance with generally accepted accounting principles
consistently applied throughout all periods. Except as and to the extent
disclosed therein (including the footnotes thereto), in the Disclosure Schedule
or elsewhere in this Agreement, the Company had, at the date of the Financial
Statements, no material liabilities or obligations of any kind, whether accrued,
absolute, contingent or otherwise, whether or not such liabilities or
obligations would have been required to be disclosed on a balance sheet prepared
in accordance with generally accepted accounting principles. To the Knowledge of
the Company, there is no basis, as of the date of the Financial Statements, for
assertion against the Company of any material claim or liability of any nature
which is not disclosed in the Financial Statements (including the footnotes
thereto), in the Disclosure Schedule or in this Agreement.
3.6. Tax Matters.
(a) The Company has filed all federal, state, local and
foreign tax returns required to be filed. The Company has not requested or
consented to the extension of, or waived
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any law or regulation fixing, any period of time for assessment of any Taxes
which request, consent or waiver is currently in effect. The returns filed are
complete, correct and accurate in all material respects. Except as set forth in
Section 3.6(a) of the Disclosure Schedule, (i) there are no examinations of the
Company's tax returns by the Internal Revenue Service or state taxing authority
in progress, (ii) to the Knowledge of the Company, there are no pending or
threatened claims against the Company for Taxes (as hereinafter defined) for any
period or periods and (iii) the Company has not received any written notice of
any claim for Taxes. The Company has delivered to Buyer true and correct copies
of all returns for the three previous tax years ending prior to the Closing
Date. All Taxes that the Company has been required to collect or withhold have
been duly collected and withheld. All Taxes to be paid by Company as set forth
on its tax returns have been paid or adequate provisions have been made for such
taxes in reserves reflected in the Financial Statements.
(b) The Company has not been a member of an affiliated group
(within the meaning of Section 1504 (a) of the Internal Revenue Code (the
"Code") filing a consolidated federal income tax return.
(c) The federal and state income tax returns of Company have
been audited by the Internal Revenue Service and appropriate state taxing
authorities for the periods and to the extent set forth in Section 3.6(c) of the
Disclosure Schedule, and except as set forth in Section 3.6(c) of the Disclosure
Schedule, the Company has not received from the Internal Revenue Service or from
the tax authorities of any state, county, local or other jurisdiction any notice
of underpayment of taxes or other deficiency which has not been paid nor any
objection to any return or report filed by Company. There are no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any tax return or report.
(d) There are no tax liens on any property of the Company. The
Company has previously delivered to Buyer true and correct copies of any forms,
reports, protests, closing agreements or other documents submitted to, or
received from, any tax authority within the past two years in connection with
any audit, examination, proceeding or litigation.
(e) All elections with respect to Taxes affecting the Company
as of the date hereof have been accepted by the relevant taxing authority. No
new elections with respect to Taxes, or changes in current elections with
respect to Taxes, affecting the Company shall be made after the date of this
Agreement without Buyer's prior written consent. The Company: (i) has not made a
consent dividend election under Section 565 of the Internal Revenue Code of
1986, as amended, and the rules and regulations thereunder (the "Code"); (ii)
has not consented at any time under Section 341(f)(1) of the Code to have the
provisions of Section 341(f)(2) of the Code apply to any disposition of the
Company's assets; (iii) has not agreed, or is not required, to make any
adjustment under 481(a) of the Code by reason of a change in accounting method
or otherwise; (iv) has not made an election, or is not required, to treat any
asset of the Company as owned by another person pursuant to the provisions of
former Section 168(f) of the Code or as
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tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code; and (v) has not made any of the foregoing elections
nor is required to apply any of the foregoing rules under any comparable state
or federal Tax provision.
(f) The Company is not a party to any tax-sharing agreements
or similar arrangements.
(g) The Company is not a party to any joint venture,
partnership, or other arrangement or contract which is or should be treated as a
partnership for Federal income tax purposes.
(h) For purposes of withholding under Section 1445 of the
Code, neither the Shareholders nor the Company is a "foreign person" as defined
in Section 1445(f)(3) of the Code. The transactions contemplated herein are not
subject to the tax withholding provisions of Section 3406 of the Code or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
(i) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or could result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code.
(j) "Taxes" means all taxes, charges, fees, levies or other
assessments including, without limitation, income, gross receipts, excise,
property, sales, withholding, social security, unemployment, occupation, use,
service, license, payroll, franchise, transfer and recording taxes, fees and
charges, imposed by the United States or any state, local or foreign government
or subdivision or agency thereof, whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term includes any interest,
fines, penalties or additional amounts attributable to or imposed with respect
to any such taxes, charges, fees, levies or other assessments.
3.7. Absence of Certain Changes. Since December 31, 1997 and except
as disclosed on Section 3.7 of the Disclosure Schedule, the Company has not done
any of the following and has otherwise conducted its business in the ordinary
course:
(a) incurred any obligation or liability (contingent or
otherwise) except normal trade or business obligations incurred in the ordinary
course of business;
(b) discharged or satisfied any lien or paid any obligation or
liability (contingent or otherwise), except (i) liabilities included in the
Financial Statements, and (ii) liabilities that have been incurred in the
ordinary course of business and consistent with past practices in all material
respects;
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(c) mortgaged, pledged or subjected to any lien any of the
assets of the Company (whether tangible or intangible);
(d) made any material additions to, or sold, assigned,
transferred, conveyed, leased or otherwise disposed of, or agreed to sell,
assign, transfer, convey, lease or otherwise dispose of any of its material
assets or properties, except for fair consideration in the ordinary course of
business;
(e) canceled or compromised any debt or claim, except for
adjustments made in the ordinary course of business which, in the aggregate, are
not material;
(f) waived or released any rights except for rights of
insubstantial value, whether or not in the ordinary course of business;
(g) transferred, granted or licensed under any concessions,
leases, licenses, or agreements or transferred, granted or licensed any
intellectual property rights (as described in Section 3.17) in each case other
than in the ordinary course of business;
(h) made or granted any increase in the rate of compensation
payable and to become payable (including, without limitation, the making of any
loan or the giving or payment of any bonus or incentive compensation) to, or
entered into any employment contract with, any director, officer, employee,
consultant or agent of the Company;
(i) entered into any material transaction, contract or
commitment other than in the ordinary course of business;
(j) made any capital expenditure or entered into any
commitment therefor in each case outside of the Company's approved capital
expenditure budget for 1998 which is set forth in Section 3.7 of the Disclosure
Schedule;
(k) suffered any casualty loss or damage, whether or not such
loss or damage shall have been covered by insurance;
(l) declared any dividend or made any payment or other
distribution in respect of the Company's capital stock to its shareholders or
made any payment or transferred any property to any of the Shareholders other
than the payment in the ordinary course of business of salary without payment of
any bonuses or similar payments;
(m) purchased, redeemed, issued, sold or otherwise acquired or
disposed of any of its shares of capital stock or any evidence of its
indebtedness or other of its securities or granted any options, warrants or
other rights to purchase or convert any obligation into any shares of capital
stock or any evidence of indebtedness or other securities of the Company;
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(n) made any charitable contribution not in accordance with
past practice or entered into any commitment therefor;
(o) lost any material employee or employees;
(p) lost any material customer or customers;
(q) made any change in its method of accounting;
(r) failed to pay when due any of its obligations;
(s) made a material change in any product line;
(t) made a material revaluation of assets or materially wrote
down the value of inventory;
(u) made a material change in sales or distribution channels;
(v) caused or had occur any other event or condition which in
any one case or in the aggregate has had or, to the Knowledge of the Company,
might have a material adverse effect on the assets or business condition of the
Company taken as a whole; or
(w) agreed to do any of the foregoing.
3.8. Assets.
(a) Section 3.8(a) of the Disclosure Schedule lists all
machinery, equipment, tools, parts, supplies, furniture, fixtures, personalty,
automobiles and other tangible personal property owned by or used in the
Company's Business. The Company has good and marketable title to all of its
assets and properties used in or necessary to its Business free and clear of all
mortgages, liens, claims, encumbrances and restrictions except (i) those listed
on Section 3.8 of the Disclosure Schedule, (ii) liens for taxes not yet due or
which are being contested in good faith by appropriate proceedings (and, except
for taxes in respect of calendar year 1998, which have been sufficiently accrued
or reserved against in the Company's December 31, 1997 balance sheet), municipal
and zoning ordinances and easements for public utilities, none of which
interfere, in any material respect, with the use of the property as currently
utilized and (iii) defects in title and mortgages, liens, claims, charges and
encumbrances, if any, that do not materially affect the operations or the value
of the Company's property or of the Company.
(b) To the Knowledge of the Company and except as set forth in
Section 3.8(b) of the Disclosure Schedule, all of the property and assets
currently being used in the operation of the Company are in all material
respects in good operating condition and repair,
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subject to normal wear and tear, and are free from material structural or
mechanical defects or deficiencies. Such assets are sufficient in kind, quality
and quantity to enable the Buyer to operate the Company as now conducted.
(c) Except as set forth in Section 3.8(c) of the Disclosure
Schedule, all inventory reflected on the December 31, 1997 balance sheet is
usable and merchantable in the ordinary course of business (net of reserves
established therefor) and is valued in accordance with lower of cost, determined
on a LIFO basis as described in the notes to the Financial Statements, or
market.
(d) Section 3.8(d) of the Disclosure Schedule contains a
complete and accurate list of all the Real Property. All of the Real Property
has rights of access to public roads. Except as set forth in Section 3.8(d) of
the Disclosure Schedule, to the Knowledge of the Company, there is not (i) any
claim of adverse possession or prescriptive rights involving any of the Real
Property, (ii) any structure located on any Real Property which encroaches on or
over the boundaries of neighboring or adjacent properties or (iii) any structure
of any other party which encroaches on or over the boundaries of any of such
Real Property. Except as set forth in Section 3.8(d) of the Disclosure Schedule,
none of the Real Property is located in a flood plain, flood hazard area,
wetland or lakeshore erosion area within the meaning of any Law. The Company has
not received any written notice of any (i) planned or proposed increase in
assessed valuations of any Real Property, (ii) order requiring repair,
alteration, or correction of any existing condition affecting any Real Property
or the systems or improvements thereat, or (iii) any structural, mechanical, or
other defects of material significance affecting any Real Property or the
systems or improvements thereat (including, but not limited to, inadequacy for
normal use of mechanical systems or disposal or water systems at or serving the
Real Property).
(e) Except as set forth in Section 3.8(e) of the Disclosure
Schedule, all of the tangible personal property owned by Company is located on
the Real Property, except goods in transit sold in the ordinary course of
business.
3.9. Bank Accounts. Section 3.9 of the Disclosure Schedule sets
forth the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which the Company maintains a
safe deposit box, lock box or checking, savings, custodial or other account of
any nature, and the type and number of each such account and the name of each
individual authorized to draw thereon or have access thereto.
3.10. Litigation. Except as set forth in Section 3.10 of the
Disclosure Schedule, there is no action, suit, arbitration, proceeding,
investigation, claim or inquiry, whether civil, criminal or administrative,
pending or, to the Knowledge of the Company, threatened against the Company
which, as can be reasonably foreseen, might have a material adverse effect upon
the operations or financial condition of the Company, nor, to the Knowledge of
the Company, is there any basis for any such action.
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3.11. Compliance With Laws.
(a) Compliance. Except as set forth in Section 3.11(a) of the
Disclosure Schedule, the Company is in compliance with all applicable Laws
(except where non-compliance would not have a material adverse effect on the
Company or the Business), including, without limitation, those applicable to
occupational safety and health, trade practices, competition and pricing,
product warranties, zoning, building and sanitation, retirement and product
advertising. Except as set forth in Section 3.11(a) of the Disclosure Schedule,
the Company has not received written notice of any violation or alleged
violation of, any Laws.
(b) Licenses and Permits. The Company has all governmental
licenses, permits, approvals, authorizations and consents and all certifications
required for the conduct of the Business (as presently conducted) and operation
of the facilities used in the Business (other than licenses, permits, approvals,
authorizations, consents or certifications which, if not obtained, would not
have a material adverse effect on the Company or the Business). All such
licenses, permits, approvals, authorizations, consents and certifications are
described in Section 3.11(b) of the Disclosure Schedule and are in full force
and effect. Except as set forth in Section 3.11(b) of the Disclosure Schedule,
Company (including its operations, properties and assets) is and has been in
compliance with all such permits, licenses, approvals, authorizations, consents
and certifications, except to the extent that noncompliance would not have a
material adverse effect on the Company or the Business.
3.12. Insurance. Section 3.12 of the Disclosure Schedule contains a
complete list and description of all insurance policies maintained by the
Company including the following information with respect to each such policy:
the carrier, policy number, coverage limits, expiration dates, annual premiums,
form (e.g., occurrence or claims made); a general description of the type of
coverage provided; and a named insured schedule for each policy or binder
maintained by the Company with respect to the Business or its employees. Such
insurance policies are in full force and effect and provide coverage to the
extent and in the manner as may be required by law or any Material Contract. The
Company is not in default under any of such policies, and, to the Knowledge of
the Company, the Company has not failed to give any notice of any material claim
under any such policy in a due and timely fashion. Section 3.12 of the
Disclosure Schedule also lists, for each of the lines of coverage identified on
Section 3.12 of the Disclosure Schedule, a description of all claims in excess
of $10,000 for the past five years. No insurer has advised the Company that it
intends to reduce or cancel coverage, increase premiums or fail to renew any
existing policy or binder. There are no outstanding performance bonds issued for
the benefit of the Company.
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3.13. Material Contracts and Commitments.
(a) Section 3.13(a) of the Disclosure Schedule sets forth a
complete list of each executory contract and lease (the "Material Contracts")
which constitute:
(i) a lease of real or personal property involving
consideration or other expenditure in excess of $2,000 per month or involving
performance over a period of more than 12 months;
(ii) a labor union contract;
(iii) a loan agreement, promissory note, letter of credit,
or other evidence of indebtedness as a signatory, guarantor or otherwise;
(iv) an agreement not to compete in any business or
geographic area;
(v) an agreement involving payment or other obligations of
more than $25,000 in the aggregate that is not cancelable on less than twelve
month's notice; or
(vi) a material agreement with a Shareholder, officer,
director or employee of the Company.
(b) Company has made available to Buyer true, correct and
complete copies of the Material Contracts.
(c) Except as set forth in Section 3.13(c) of the Disclosure
Schedule, all of the Material Contracts are valid, binding and enforceable
obligations of the Company and, to the Knowledge of the Company, the other
parties thereto. Except as disclosed in Section 3.13(c) of the Disclosure
Schedule, neither the Company nor to the Knowledge of the Company, any other
party, is in material breach or material violation of, or material default
under, any provision of any Material Contract.
3.14. Labor Matters. The Company is not a party to any written labor
agreement with respect to their respective employees with any labor union. To
the Knowledge of the Company, there are no organizational efforts presently
being made or threatened by or on behalf of any labor union with respect to
Employees of the Company. In the last five (5) years, the Company has not
experienced any general labor disputes or any work stoppage due to labor
disagreements in connection with the Business. Except to the extent set forth in
Section 3.14 of the Disclosure Schedule, (a) the Company is in compliance in all
material respects with all applicable Laws respecting employment practices,
terms and conditions of employment and wages and hours, and is not engaged in
any unfair labor practice; (b) there is no unfair labor practice charge or
complaint against Company pending or, to the Knowledge of
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<PAGE> 24
Company, threatened, before the National Labor Relations Board or any similar
state agency; and (c) there are no administrative charges or court complaints
against Company concerning alleged employment discrimination or other employment
related matters pending or threatened before the U.S. Equal Employment
Opportunity Commission or any other government entity.
3.15. Employee Benefit Plans.
(a) Section 3.15(a) of the Disclosure Schedule sets forth all
pension, medical, dental, life, accident insurance, employee welfare,
disability, group insurance, and other similar fringe or employee benefit plans,
programs and arrangements, and any severance agreements, policies, or plans
(whether written or unwritten), vacation and sick leave plans, including,
without limitation, all "employee benefit plans" (as defined in Section 3(3) of
ERISA). The items described in the foregoing sentence are hereinafter sometimes
referred to collectively as "Employee Benefit Plans," and each individually as
an "Employee Benefit Plan." True and correct copies of all the Employee Benefit
Plans, including all amendments thereto (together with the most recent annual
report prepared in connection with any Employee Benefit Plan), have heretofore
been made available to Buyer. Each of the Employee Benefit Plans is identified
in the Disclosure Schedule, to the extent applicable, as one or more of the
following: an "employee pension benefit plan" (as defined in Section 3 (2) of
ERISA), an "employee welfare benefit plan" (as defined in Section 3 (1) of
ERISA), and/or as a plan intended to be qualified under Section 401 of the Code.
Except as set forth in the Disclosure Schedule, no Employee Benefit Plan is a
"multiemployer plan" (as defined in Section 4001 of ERISA), and the Company has
never contributed or been obligated to contribute to any multiemployer plan.
(b) To the Knowledge of the Company, there have been no
"prohibited transactions" within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code for which a statutory or administrative exemption does
not exist with respect to any Employee Benefit Plan, and no event or omission
has occurred in connection with which the Company or any of its assets or any
Employee Benefit Plan, directly or indirectly, could be subject to any material
liability under ERISA, the Code or any other Law applicable to any Employee
Benefit Plan, or under any agreement, instrument or Law pursuant to or under
which Company has agreed to indemnify or is required to indemnify any person
against liability incurred under any such Law.
(c) With respect to each Employee Benefit Plan, (i) all
payments due from the Company to date have been made and all amounts properly
accrued to date as liabilities of the Company which have not been paid have been
properly recorded on the books of Company and are reflected in the Financial
Statements; (ii) except as set forth in Section 3.15 (c) of the Disclosure
Schedule, the Company has complied with, and each such Employee Benefit Plan
complies in form and has been administered in accordance with all applicable
Laws and regulations, including but not limited to ERISA and the Code, except
for any noncompliance
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which would not alone or in the aggregate, have a material adverse effect upon
the Company; (iii) each such Employee Benefit Plan which is intended to qualify
under Section 401 of the Code has received a favorable determination letter from
the Internal Revenue Service with respect to such qualification, its related
trust has been determined to be exempt from taxation under Section 501(a) of the
Code, and nothing has occurred since the date of such letter that has adversely
affected such qualification or exemption; (iv) there are no actions, suits or
claims pending (other than routine claims for benefits) with respect to such
Employee Benefit Plan or against the assets of such Employee Benefit Plan; and
(v) no accumulated funding deficiency, as defined in ERISA or the Code, or
reportable event, as defined in ERISA, has occurred.
(d) Except as set forth in Section 3.15(a) and Section 3.15(d)
of the Disclosure Schedule, no Employee Benefit Plan provides benefits,
including, without limitation, death or medical benefits (whether or not
insured) with respect to current or former Company Employees beyond their
retirement or other termination of service other than (i) coverage mandated by
applicable Law, (ii) death or retirement benefits under any Employee Benefit
Plan that is an employee pension benefit plan, (iii) deferred compensation
benefits accrued as liabilities on the books of Company, (iv) disability
benefits under any Employee Benefit Plan that is an employee welfare benefit
plan and which have been fully provided for by insurance or otherwise or (v)
benefits in the nature of severance pay.
(e) Except as set forth in Section 3.15(e) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former Company Employee to severance pay,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee or former employee, (iii) result
in any prohibited transaction described in Section 406 of ERISA or Section 4975
of the Code for which an exemption is not available or (iv) result in any
liability pursuant to any employment arrangements with change of control or
similar provisions.
3.16. Environmental Matters.
(a) The Company is in compliance with applicable Environmental
Laws, except as set forth in Section 3.16(a) of the Disclosure Schedule and
except to the extent that noncompliance would not have a material adverse effect
on the Company or the Business.
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, there is no litigation nor any demand, claim, hearing or written
notice of violation pending or to the Company's Knowledge threatened against the
Company relating in any way to the Environmental Laws.
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(c) Except as set forth in Section 3.16(c) of the Disclosure
Schedule, there has been no release, spill or discharge of Hazardous Substance
on, in, under or from the Real Property in an amount or condition which would
require investigative or remedial action under Environmental Laws.
(d) Except as set forth in Section 3.16(d) of the Disclosure
Schedule, the Company has been issued and is in compliance with all federal,
state and local permits, certificates, licenses, approvals and other
authorizations, and has filed all notifications, relating to air emissions,
effluent discharges and solid and hazardous waste storage, treatment and
disposal required in connection with the operation of the business of the
Company.
(e) Except as set forth in Section 3.16 (e) of the Disclosure
Schedule, to the Knowledge of the Company, no PCBs, asbestos or urea
formaldehyde insulation is present at any Real Property. There are no
underground storage tanks at the Real Property. Except as set forth in Section
3.16(e) of the Disclosure Schedule, the Company has not received from any
federal, state or local environmental regulatory entity or third party any
written request for information, written notice of claim, demand letter or other
written notification that, it is or may be potentially responsible with respect
to any investigation or clean-up of Hazardous Substance releases at any site.
(f) To the Knowledge of the Company, the Company has not
arranged by contract, agreement or otherwise, (i) for the disposal or treatment
of, or (ii) with a transporter for the transport or disposal or treatment of,
any Hazardous Substances in violation of any Environmental Law.
(g) Except as set forth in Section 3.16(g) of the Disclosure
Schedule, the Company is not an "owner" or "operator" of a "facility" (as such
terms are defined in CERCLA).
(h) Except as set forth in Section 3.16(h) of the Disclosure
Schedule, the Company has never been an "owner" or "operator" of a "facility" at
the time Hazardous Substances were disposed of.
(i) The Company has not acquired any person or entity in the
past ten (10) years.
(j) To the Knowledge of the Company and except as set forth in
Section 3.16 (f) of the Disclosure Schedule, no wastes generated by Company have
ever been sent directly or indirectly to any site listed or formally proposed
for listing on the National Priority List promulgated pursuant to CERCLA or to
any site listed on any state list of Hazardous Substance sites requiring
investigation or clean-up.
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3.17. Proprietary Rights. Section 3.17 of the Disclosure Schedule
lists all patents, patent applications, trade names, trademarks, service marks,
trademarks registrations, service mark registrations, trade mark applications,
service mark applications, registered copyrights, copyright applications owned
or used by the Company. There is no pending claim against the Company alleging
that the Company infringes on the intellectual property rights of others. The
Company owns the entire right, title and interest in or has a valid license to
use its intangible assets. The Company is not a licensor of any intellectual
property rights. The Company has not defaulted under any license to which it is
a party with respect to intellectual property rights, whether as licensor or
licensee. No director, officer or employee of the Company owns in whole or in
part, any of the intellectual property rights or interests which the Company
which is necessary for the operation of the Business as now conducted. Section
3.17 of the Disclosure Schedule sets forth the maintenance expenses for all
software programs used by the Company in the operation of the Business during
the periods covered by the Financial Statements, except for any software with
respect to which the aggregate expenses in any one year have not exceeded
$5,000, including the costs to maintain and replace the program. Except as set
forth in Section 3.17 of the Disclosure Schedule, all of the Company's material
software systems are year 2000 compliant.
3.18 Trade Notes and Accounts Receivable and Trade Notes and
Account Payable.
(a) The trade notes and accounts receivable of the Company
reflected on the Financial Statements have arisen from bona fide transactions in
the ordinary course of business of the Company, and are (except for normal
claims and allowances which are consistent with the Company's past experience
and which in the aggregate are not material) current and except as set forth in
Section 3.18 of the Disclosure Schedule, fully collectible, less the allowance
for doubtful accounts reflected in the Financial Statements, following the
Company's existing collection practices.
(b) The trade notes and accounts payable of the Company
reflected on the Financial Statements have arisen from bona fide transactions in
the ordinary course of business of the Company.
3.19 Certain Relationships; Transactions with Management.
(a) Except as set forth on Section 3.19(a) of the Disclosure
Schedule, the Company is not a party to any transaction or proposed transaction
with any officer, director or Shareholder (or any Affiliate of such officer,
director or Shareholder) of the Company.
(b) Neither the Company nor any Shareholder (and/or any
Affiliate of a Shareholder) has a financial interest (direct or indirect) in any
competitor, supplier or customer of the Company, except for the ownership of
less than 3% of the outstanding stock of any entity whose stock is traded on an
established stock exchange or quoted on NASDAQ.
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3.20 Adverse Agreements. The Company is not a party to any
agreement or instrument or subject to any judgment, notice, writ, injunction,
decree or charter or corporate restriction which is currently having a material
adverse effect on the Business or, to the Company's Knowledge, will have a
material adverse effect on the Business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Shareholders 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. Buyer has
all requisite corporate power to enter into this Agreement and the other
documents and instruments to be executed and delivered by Buyer and to carry out
the transactions contemplated hereby and thereby.
4.2. No Violation. The execution and delivery of this Agreement
and the consummation by Buyer of the transactions contemplated hereby will not
cause a breach or violation of or default under any provision of (a) the
Certificate of Incorporation or Bylaws of Buyer; (b) any contract to which
either Buyer is a party or by which either Buyer may be bound; or (c) any
decree, order, injunction or other decision of any court, arbitrator or
governmental authority to which either Buyer may be subject.
4.3. Authority; Validity. The execution and delivery of this
Agreement and the other documents and instruments to be executed and delivered
by Buyer pursuant hereto and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors and
stockholders of Buyer. No other corporate act or proceeding on the part of Buyer
is necessary to authorize this Agreement or the other documents and instruments
to be executed and delivered by Buyer pursuant hereto or the consummation by
Parent or Newco of the transactions contemplated hereby and thereby. This
Agreement constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by Buyer pursuant hereto will
constitute, valid and binding agreements of Buyer, enforceable against Buyer in
accordance with their respective terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other Laws affecting creditors rights
generally, and by general equitable principles.
4.4. Third Party Consents. Except for the execution and delivery
of a guarantor joinder and assumption agreement under Buyer's credit facility
with Buyer's lender, and except for the filing of appropriate notices under the
HSR Act, no approval, authorization, notice, consent or other action by or
filing with any Person is required for Buyer's execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
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4.5. Investment/Operational Intent. The following representations
are provided solely for purposes of ensuring that this Agreement, the Parties
hereto and the transactions contemplated hereby comply with the provisions of
the federal Securities Act of 1933 and the Regulations promulgated thereunder
and any state "Blue Sky" law applicable hereto and thereto (collectively
"Securities Laws"). This Section shall not constitute an admission of Buyer, and
no inference may be drawn from this Section by any Shareholder or any other
Person, as to the adequacy, sufficiency, accuracy or completeness of the
information specifically disclosed to the Buyer in this Agreement or otherwise
for any purposes other than ensuring the Parties' compliance with the Securities
Laws.
(a) Buyer has sufficient knowledge and experience in financial
and business matters to enable it to evaluate the merits and risks of the
transactions contemplated by this Agreement.
(b) Buyer has been given access to information provided by the
Company in response to its requests regarding the Company, including the
opportunity to ask questions of and receive answers from the officers of the
Company concerning the present and proposed activities of the Company and to
obtain the information which Buyer deems necessary or advisable in order to
evaluate the merits and risks of the transactions contemplated by this
Agreement.
(c) Buyer is acquiring the Company for its own account, for
investment or operational purposes, and not with a view to resale or for
distributions of all or any portion of the Purchased Shares.
4.6. Breach of Representation and Warranty. Buyer has no actual
knowledge that the representations and warranties of the Shareholders in this
Agreement or the Disclosure Schedule are not true and correct or that there are
omissions from the Disclosure Schedule
ARTICLE V
COVENANTS
From and after the date of this Agreement, the Parties shall comply
with the following covenants:.
5.1. Access to Information and Records. (a) During the period
prior to the Closing, the Shareholders shall cause the Company to give Buyer and
its counsel, accountants and other representatives (i) reasonable access during
normal business hours to all of the properties,
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books, records, contracts and documents of Company for the purpose of such
inspection, investigation and testing as Buyer deems appropriate (and to furnish
to Buyer and its representatives all information with respect to the business
and affairs of Company as Buyer reasonably request); (ii) with the prior consent
of the Shareholders Representative in each instance, access to employees, agents
and representatives for the purposes of such meetings and communications as
Buyer reasonably desires; and (iii) with the prior consent of the Shareholders
Representative in each instance, access to vendors, customers and others having
business dealings with Company.
(b) The Confidentiality Agreement between Piper Jaffray, Inc.,
as agent for the Company, and Buyer, dated June 22, 1998 shall remain in full
force and effect.
5.2. Conduct of Business Pending the Closing. From the date hereof
until the Closing, except as otherwise approved in writing by Buyer (which
approval shall not be unreasonably withheld), the Shareholders shall cause the
Company to comply with the following covenants:
(a) The Shareholders shall cause the Company to carry on the
Business diligently and in substantially the same manner as heretofore conducted
and will not make or institute any material changes in its methods of purchase,
sale, management, accounting or operation.
(b) The Shareholders shall use commercially reasonable efforts
to cause the Company to maintain, preserve, renew and keep in favor and effect
the existence, rights and franchises of the Company and to use commercially
reasonable efforts to preserve the business organization of the Company intact,
to keep available to Company the present officers (other than Mr. Gant) and
employees of the Company, and to preserve its present relationships with
suppliers and customers and others having business relationships with the
Company.
(c) The Shareholders shall cause the Company to not amend its
Articles of Incorporation or Bylaws or make any changes in authorized or issued
capital stock.
(d) The Shareholders shall cause the Company to maintain all
of the insurance in effect as of the date hereof.
(e) The Shareholders shall cause the Company to maintain all
of its properties in customary repair, order and condition, reasonable wear and
use excepted and, in the event of a casualty, loss or damage to any of such
properties the Shareholders shall cause the Company to commence repairs or to
replace the affected property in each case in accordance with its past practices
and any insurance proceeds received by the Company in respect of such casualty,
loss or damage shall be applied to the repair or replacement of property as
described above or if retained by the Company shall not be included in the Cash
Amount.
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(f) The Shareholders shall cause the Company to maintain its
books, accounts and records in the usual, regular and ordinary manner, on a
basis consistent with prior years; endeavor to comply with all laws and
contractual obligations applicable to it and to the conduct of the Business.
(g) Except as set forth in Section 5.2(g) of the Disclosure
Schedule, the Shareholders shall cause the Company to not declare, pay or make
any dividend or other distribution or payment in respect of shares of the Common
Stock; or purchase or redeem any shares of Common Stock or issue any other
security.
(h) The Shareholders shall cause the Company to not: (i) make
or grant any general wage or salary increase or increase in compensation payable
or to become payable to any employee, officer, director or agent; (ii) establish
any new or modify any existing bonus, stock option, stock purchase, profit
sharing, deferred compensation, pension, multi-employer pension, retirement or
other similar payment or arrangement or (iii) enter into any employment or
consulting agreement or sales agency with respect to the performance of personal
services which is not terminable without liability by Company on thirty days
notice or less.
(i) The Shareholders shall cause the Company to make no change
in its accounting procedures; and
(j) The Shareholders shall cause the Company to not: (i) incur
or become subject to, or agree to incur or become subject to any obligation or
liability (contingent or otherwise) other than normal trade and business
obligations incurred in the ordinary course of business; (ii) discharge or
satisfy any lien or pay any obligation or liability (contingent or otherwise)
except for liabilities included in the Financial Statements and liabilities that
have been incurred in the ordinary course of business consistent with past
practice in all material respects; (iii) discharge or satisfy any lien or
encumbrance; (iv) mortgage, pledge or subject to lien, charge, security interest
or any other encumbrance any of its assets or properties; (v) sell, assign,
transfer, convey, lease or otherwise dispose of, or agree to sell, assign,
transfer, convey, lease or otherwise dispose of, any asset or property, except
for fair consideration in the ordinary course of business; (vi) acquire or lease
(other than a renewal of an existing lease in the ordinary course of business),
or agree to acquire or lease (other than a renewal of an existing lease in the
ordinary course of business) any material asset or property; (vii) cancel or
compromise any debt or claim, except for adjustments or settlements made in the
ordinary course of business; (viii) waive or release any material rights; (ix)
transfer or grant any rights under any concessions, leases, licenses,
agreements, patents, inventions, trade names, trademarks, copyrights, or with
respect to any of the Company's know-how or intellectual property rights; (x)
modify, change or terminate any Material Contract; (xi) make any capital
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expenditures or enter into any commitments therefor outside of the Company's
approved capital expenditure budget which, individually exceed $10,000 other
than those listed on Section 3.7 of the Disclosure Schedule; (xii) enter into
any collective bargaining agreement and, through negotiation or otherwise, make
any commitment or incur any liability to any labor organization; (xiii) make any
charitable contribution other than consistent with past practice; and (xiv)
enter into any transaction and make any contract or commitment which by reason
of its size or otherwise is not in the ordinary course of business; and
(k) The Shareholders shall cause the Company to make no change
in the banking and safe deposit arrangements reflected in Section 3.9 of the
Disclosure Schedule hereto without prior written notice to the Buyer, giving the
details of such change; and grant no powers of attorney, except as disclosed in
writing to the Buyer.
5.3. HSR Act Filings. Each Party shall, in cooperation with the
other Parties, file or cause to be filed any reports or notifications that may
be required to be filed by it under the HSR Act, with the Federal Trade
Commission and the Antitrust Division of the Department of Justice, and shall
furnish to the others all such information in its possession as may be necessary
for the completion of the reports or notifications to be filed by the others.
Prior to making any communication, written or oral, with the Federal Trade
Commission, the Antitrust Division of the federal Department of Justice or any
other governmental agency or authority or members of their respective staffs
with respect to this Agreement or the transactions contemplated hereby, each
Party shall consult with the other Parties with respect thereto. Buyer shall be
solely responsible for all filing fees in connection with the HSR Act.
5.4. Consents. The Parties will use their best efforts prior
to Closing to obtain all consents necessary for the consummation of the
transactions contemplated hereby.
5.5. Publicity. All notices, releases, statements and
communications generally directed to employees, suppliers, customers and the
public and the press relating to the transactions contemplated by this Agreement
shall be made only at such times and in such manner as may be mutually agreed
upon by the Shareholders Representative and the Buyer; provided, however, that
any party may make a public announcement of the proposed transaction, if, in the
opinion of counsel, such announcement is required to comply with any Law or any
rule or regulation of any securities exchange or securities quotation system and
such party shall, to the extent practicable, consult with the other party with
respect to such announcements and give reasonable prior written notice of its
intent to issue such announcement.
5.6. Disclosure Schedule.
(a) Disclosure Schedule. Contemporaneously with the execution
and delivery of this Agreement, the Shareholders Representative, on behalf of
the Shareholders is
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delivering to Buyer the Disclosure Schedule, which is accompanied by a
certificate signed by the Shareholders Representative stating that the
Disclosure Schedule is being delivered pursuant to this Agreement and is the
Disclosure Schedule referred to in this Agreement. The Disclosure Schedule is
deemed to constitute an integral part of this Agreement and to modify the
representations, warranties, covenants or agreements of the Shareholders
contained in this Agreement. The inclusion of any item in the Disclosure
Schedule shall constitute disclosure for all purposes under this Agreement, and
shall not be construed as an indication of the materiality or lack of
materiality of such item. The Shareholders shall use their best efforts to
number all exceptions noted in the Disclosure Schedule to correspond to the
applicable section of this Agreement to which such exception refers, but it is
understood that the failure to do so shall not constitute a breach of any
representation or warranty made in this Agreement so long as such exception is
disclosed elsewhere in the Disclosure Schedule or elsewhere in this Agreement or
in any other schedule attached to this Agreement.
(b) Updates. Prior to the Closing Date, the Shareholders may
update and supplement the Disclosure Schedule from time to time by written
notice from the Shareholders Representative to Buyer. If requested by Buyer, the
Shareholders Representative shall meet and discuss with Buyer any change in the
Disclosure Schedule made by the Shareholders which is, in the reasonable
judgment of Buyer, materially adverse to the Company, (a "Disclosure Schedule
Change"). If the Parties cannot resolve any differences regarding a Disclosure
Schedule Change within a reasonable period of time (not to exceed ten (10)
calendar days), Buyer may terminate this Agreement by written notice from Buyer
to the Shareholders Representative given within five (5) calendar days after the
expiration of such ten-day period.
5.7. Indemnification of Directors and Officers. Until the fourth
anniversary of the Closing Date, Buyer shall not take, nor permit the Company to
take, any action so as to amend the provisions of the Articles of Incorporation
or Bylaws of the Company providing for indemnification of directors and
officers, if such amendment would adversely affect the rights of any Person who
shall have served as a director or officer of the Company prior to the Closing.
This covenant of Buyer may be enforced after the Closing Date by the
Shareholders Representative on behalf of any person whose rights are adversely
affected by any such amendment.
5.8. Shareholders Representative. By approving this Agreement, the
Shareholders hereby irrevocably make, constitute and appoint Frederick M. Young,
Jr. as their true and lawful attorney-in-fact to take all actions required under
this Agreement on behalf of the Company Shareholders (including, without
limitation, the resolution or dispute of any claims) in their name and stead and
further ratify and approve all such actions as their own. In the event of the
death, inability to act or declination to act of Frederick M. Young, Jr., then a
successor Shareholders Representative shall be selected by a majority vote of
the Shareholders.
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5.9. Election. The Buyer and the Shareholders shall make an
election under Section 338(h)(10) of the Code (and any comparable election under
state of local tax Law) with respect to the purchase of the Purchased Shares by
the Buyer as described in this Agreement. The Buyer and the Shareholders shall
cooperate fully with each other in the making of such elections. The Parties
shall prepare and deliver the appropriate election forms as soon as is
practicable after the Closing. In connection with such elections, the Buyer and
the Shareholders shall mutually agree on an allocation of the Purchase Price for
tax reporting purposes.
5.10. Bonus. Prior to Closing, the Company may transfer to Mr.
Young as additional compensation the assets described on Section 5.10 of the
Disclosure Schedule and a bonus in an amount sufficient to pay the income taxes
incurred in connection with the transfer of such assets to him.
5.11. Non-Compete/Non-Solicitation.
(a) Fred M. Young, Jr. hereby agrees that in consideration of
the sale of his Purchased Shares to the Buyer that for a period of five (5)
years from the Closing Date, he shall not directly or indirectly:
(i) own, manage, operate, control, consult with, advise,
be employed by, be an agent or representative of or solicit a customer for, any
business which competes, with the Company, as such business is currently
conducted by the Company (other than through ownership of not more than three
percent (3%) of the outstanding shares of a corporation's stock which is listed
on a national stock securities exchange or quoted on NASDAQ);
(ii) request, suggest or advise any customers of the
Company (whether current, previous or potential new customers from whom the
Company has solicited business prior to the Closing Date) to withdraw or cancel
any of their business or refuse to continue to do business with the Company as
such business is currently conducted by the Company; or
(iii) solicit, induce, assist in the solicitation or
inducement of, any current employee of the Company to leave the employ of the
Company.
(b) One Hundred Thousand Dollars ($100,000) of the Purchase
Price shall be allocated to the foregoing covenants.
(c) It is understood and agreed by the Parties that the rights
and privileges granted to the Buyer by each of the Shareholders under this
Section 5.11 are of a special, unique, extraordinary and intellectual character,
which gives them peculiar value, the loss of which cannot be reasonably or
adequately compensated in damages in any action at law and that a breach by any
of the Shareholders of any of the provisions contained in Section 5.11 will
cause the Buyer great and irreparable injury and damage. Each of the
Shareholders hereby expressly
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agrees that the Buyer, its successors and assigns shall be entitled to the
remedies of injunction, specific performance and other equitable relief to
prevent a breach of such provisions by any of the Shareholders. This provision
shall not, however, be construed as a waiver of any of the rights which Buyer
may otherwise have for damages and the equitable remedies described above shall
not be deemed to be the exclusive remedies of the Buyer. Mr. Young further
acknowledges that the restrictions provided for herein are reasonable and that
they are necessary for the protection of the Buyer and the Company.
(d) If any court determines that any of the provisions of this
Section 5.11 is unenforceable because of the duration or scope hereof, such
court shall have the power to reduce the duration or scope of such provisions to
the extent necessary to make the provision enforceable and, in its reduced form,
such provision shall then be enforceable and shall be enforced.
(e) Exhibit A attached hereto sets forth, for purposes of
illustration, a list of competitors of the Company known to Buyer and Mr. Young
on the date hereof. Buyer and Mr. Young acknowledge that the competitors listed
on Exhibit A may change from time to time following the date hereof.
ARTICLE VI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
6.1. Representations and Warranties True on the Closing Date. Each
of the representations and warranties made by the Shareholders in this Agreement
shall be true and correct in all material respects when made and shall be true
and correct in all material respects at and as of the Closing Date as though
such representations and warranties were made or given on and as of the Closing
Date, except for any changes permitted by the terms of this Agreement or
consented to by Buyer. For purposes of this Section 6.1 only, no effect shall be
given to any materiality qualifier contained in any such representation or
warranty and no materiality standard contained herein shall be deemed to modify
any representation or warranty contained in Article III hereof for purposes of
any claim made by Buyer for indemnification under Article VIII hereof..
6.2. Compliance With Agreement. The Shareholders shall have in all
material respects performed and complied with all of the agreements and
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing Date.
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6.3. Absence of Litigation. No litigation shall have been commenced
or threatened against Buyer, Company, the Shareholders, or any of the
affiliates, officers or directors of any of them, with respect to the
transactions contemplated hereby which would prevent the Closing or which has an
adverse affect on the right of the Buyer to own the Common Stock or to own,
operate or control the assets of the Company after the Closing Date.
6.4. Consents and Approvals. All material approvals, consents and
waivers that are required to effect the transactions contemplated hereby shall
have been received, and executed counterparts thereof shall have been delivered
to Buyer at or prior to the Closing.
6.5. HSR Act Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
6.6. No Material Adverse Change. During the period from the date
hereof to the Closing Date, there shall not have occurred any material adverse
change in the business, properties, operations or business of the Company or any
loss or damage to any of its assets or properties which could affect or impair
the ability of the Company to conduct the Business after the consummation of the
transactions contemplated hereby in substantially the manner now conducted.
6.7. Documents to be Delivered by Shareholders. At the Closing, the
Shareholders shall have delivered to the Buyer the following documents, in each
case duly executed or otherwise in proper form:
(a) Stock Certificate(s). Stock certificates representing the
Purchased Shares.
(b) Compliance Certificate. A certificate signed by the
Shareholders that each of the representations and warranties made by them in
this Agreement is true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made or given on
and as of the Closing Date (except for any changes permitted by the terms of
this Agreement or consented to in writing by Buyer), and that the Shareholders
have performed and complied with all of their obligations under this Agreement
which are to be performed or complied with on or prior to the Closing Date.
(c) Opinion of Counsel. A written opinion of Quarles & Brady,
counsel to Shareholders, dated as of the Closing Date, addressed to Buyer,
substantially in the form of Exhibit B hereto.
(d) Articles; Bylaws. A copy of the Articles of Incorporation
of Company and a [Status] Certificate, each certified by the Wisconsin
Department of Financial Institutions as of a date no earlier than ten (10) days
prior to the Closing Date and a copy of the Bylaws of Company certified by the
Secretary of Company.
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(e) Resignations. Resignations of the directors of the Company
and such officers of the Company as Buyer may request (which shall not include
the resignation of employment of any officers of the Company other than Mr.
Young who shall resign his employment if requested by Buyer).
(f) Pay Off Letter. A pay off letter with respect to the
Company's line of credit with Bank One.
(g) IDB Letter. A letter from the Industrial Development Board
of the City of Lexington, Tennessee (the "Board"), or other written evidence
reasonably satisfactory to Buyer, stating that all principal, interest and any
other amounts (including fees and expenses) due in respect of the First Mortgage
Revenue Bonds (Gilson Brothers Company Project) Series 1979, have been paid in
full.
(h) Other Documents. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing pursuant
to this Agreement and such other certificates of authority and documents as
Buyer may reasonably request.
ARTICLE VII
CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS
Each and every obligation of the Shareholders to be performed on the
Closing Date shall be subject to the satisfaction prior to or at the Closing of
the following conditions:
7.1. Representations and Warranties True on the Closing Date. Each
of the representations and warranties made by Buyer in this Agreement shall be
true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date.
For purposes of this Section 7.1, no materiality standard contained herein shall
be deemed to modify any representation or warranty contained in Article IV
hereof for purposes of any claim made by the Shareholders for indemnification
under Article VIII hereof.
7.2. Compliance With Agreement. Buyer shall have in all material
respects performed and complied with all of its agreements and obligations under
this Agreement which are to be performed or complied with by it prior to or on
the Closing Date.
7.3. Absence of Litigation. No litigation shall have been
commenced or threatened against Buyer, Company, the Shareholders or any of the
affiliates, officers or directors of any
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of them, with respect to the transactions contemplated hereby which would
prevent the Closing or which has an adverse affect the right of the Buyer to own
the Common Stock or to own, operate or control the assets of the Company after
the Closing Date.
7.4. HSR Act Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
7.5. Documents to be Delivered by Buyer. At the Closing, Buyer
shall deliver to the Shareholders the following documents, in each case duly
executed or otherwise in proper form:
(a) Compliance Certificates. A certificate signed by an
authorized officer of Buyer that each of the representations and warranties made
by Buyer in this Agreement are true and correct in all material respects on and
as of the Closing Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date (except for any
changes permitted by the terms of this Agreement or consented to in writing by
the Shareholders Representative), and that Buyer has performed and complied with
all of its obligations under this Agreement which are to be performed or
complied with on or prior to the Closing Date.
(b) Opinion of Counsel. A written opinion of counsel to Buyer,
dated as of the Closing Date, addressed to the Shareholders, in substantially
the form of Exhibit C hereto.
(c) Certified Resolutions. A certified copy of the resolutions
of the Board of Directors of Buyer authorizing and approving this Agreement and
the consummation of the transactions contemplated by this Agreement.
(d) Incumbency Certificates. Incumbency certificates relating
to each person executing any document executed and delivered to Company by Buyer
pursuant to the terms hereof.
(e) Other Documents. All other documents, instruments or
writings required to be delivered to the Shareholders at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Shareholders may reasonably request.
7.6. Closing Payment. Buyer shall have paid the Closing Payment
in accordance with the provisions of Article II of this Agreement.
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ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1. Survival; Remedies for Breach.
(a) The representation and warranty made by the Shareholders
in Section 3.1(e) of this Agreement relating to title to the Purchased Shares
shall survive the Closing indefinitely. The representations and warranties made
by the Shareholders in Sections 3.6 of this Agreement shall terminate on the
date that is sixty (60) days following the end of any statute of limitations
period applicable thereto and thereafter be of no further force or effect. The
representations and warranties made by the Shareholders in Sections 3.16 of this
Agreement shall terminate on the date that is twenty-four (24) months after the
Closing Date and thereafter be of no further force or effect. The representation
and warranty made by the Buyer in Section 4.6 of this Agreement shall survive
the closing with respect to each representation and warranty made by the
Shareholders until such representation and warranty made by the Shareholders
expires. Each and every other representation, warranty, agreement and covenant
made by the Shareholders and the Buyer in this Agreement or in any exhibits,
schedules, instruments of transfer or other documents delivered pursuant thereto
or in connection therewith shall survive the Closing, but except as otherwise
provided in this Section 8.1, shall terminate on the date that is eighteen (18)
months after the Closing Date and thereafter be of no further force or effect.
(The date on which any covenant, agreement, representation or warranty
terminates in accordance with this Article VIII being referred to herein as the
"Cut-off Date" for such covenant, agreement, representation or warranty).
(b) Any covenant or agreement contained herein that by its
terms is to be performed after the Closing Date shall survive for (i) a period
of eighteen (18) months from the last date on which performance is due under
such covenant or agreement, or (ii) in the absence of a specified due date for
performance, a period of two (2) years after the Closing Date.
(c) Any covenant, agreement, representation or warranty that
would otherwise terminate at the Cut-off Date with respect thereto shall survive
if the notice referred to in Section 8.2(b)(vi) or Section 8.3(b), as the case
may be, of the breach, inaccuracy or nonperformance thereof shall have been
given on or prior to the Cut-off Date with respect thereto to the party against
whom indemnification may be sought.
(d) The covenants and agreements contained in this Article
VIII shall survive until such time as any claim for indemnification is finally
settled in accordance with the terms hereof.
(e) After the Closing, the indemnities set forth in this
Article VIII shall be the exclusive remedies of the Shareholders and the Buyer
for the breach of any covenant, agreement, representation or warranty in this
Agreement by the Shareholders and the Buyer, as the case may be, and the Parties
shall not be entitled to a rescission of this Agreement or to any further
indemnification rights or claims of any nature whatsoever in respect thereof,
all of which the Parties waive.
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8.2. Indemnification by Shareholders.
(a) General. Subject to the provisions of this Section and the
other Sections of this Article VIII, the Shareholders, jointly and severally,
agree to indemnify the Buyer and hold the Buyer harmless from and against, any
and all Losses incurred or sustained by, or imposed upon, Buyer, with respect to
or by reason of any failure, breach, default, inaccuracy or lack of performance
on the part of the Shareholders of any of its representations, warranties,
agreements or covenants under this Agreement or contained in any certificate,
document or instrument delivered by the Shareholders hereunder.
(b) Notwithstanding anything to the contrary in this
Agreement, the Buyer shall not be entitled to indemnification under Section
8.2(a):
(i) with respect to a claim for indemnification hereunder
related to the title of any real estate with respect to which there is a title
insurance policy in effect (up to such policy's policy limit), except to the
extent that the Buyer has first unsuccessfully attempted to recover upon such
title insurance; and
(ii) in connection with any claim for indemnification
hereunder with respect to which the Company has a right of indemnification or
set-off against any third party until (A) Buyer provides a notice of such claim
to the Shareholders Representations in accordance with subsection (v) below, (B)
Buyer uses reasonable efforts to receive the benefit of such indemnification or
set-off from such third-party, and (C) Buyer reasonably determines by legal
process, insolvency of the third party or otherwise that it is not able to
collect the full amount of the claim; provided, however, that Buyer shall have
no obligation to exert right against any customer of the Company if Buyer
reasonably determines that the exercise of such rights would impair its business
relationship with such customer; provided, further, that the Shareholder shall
be subrogated to all such third party claims to the extent of any
indemnification claims made by Buyer hereunder; and
(iii) with respect to any Loss resulting from a breach of
a representation, warranty, covenant or agreement that is disclosed in a written
notice, setting forth in reasonable detail the specific facts and circumstances
pertaining thereto, delivered by the Shareholders Representative to Buyer after
the date of this Agreement and no less than five (5) days prior to the Closing
if the Buyer nevertheless elects to close (regardless of whether the Buyer
waives such breach in writing or otherwise); and
(iv) to the extent of the value of any net tax benefit
realized (by reason of a tax deduction, basis reductions, shifting of income,
credits and/or deductions or otherwise) by the Buyer or the Company in
connection with the Loss that forms the basis of the Buyer's claim for
indemnification hereunder; and
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(v) with respect to any claim for indemnification
hereunder, unless Buyer has given the Shareholders Representative written notice
of such claim, setting forth in reasonable detail the facts and circumstances
pertaining thereto, (A) as soon as practicable following the Buyer's discovery
of such claim and (B) prior to the applicable Cut-off Date; and
(vi) to the extent of any insurance proceeds actually
received by the Buyer or the Company in connection with the facts giving rise to
such indemnification; and
(vii) for any Losses as to which the Buyer otherwise may
be entitled to indemnity hereunder (without giving effect to this clause (ix)),
until such Losses exceed One Million Dollars ($1,000,000), and then only for
such Losses in excess of One Million Dollars ($1,000,000); and
(viii) for any Losses in excess of Five Million Dollars
($5,000,000), all of such Losses in excess of Five Million Dollars ($5,000,000)
being the responsibility of the Buyer.
8.3. Indemnification by Buyer.
(a) Subject to the provisions of this Section and the other
Sections of this Article VIII, Buyer agrees to indemnify the Shareholders and
hold them harmless (and agrees to indemnify and hold harmless any persons
adversely affected by Buyer's failure to comply with Section 5.7 of this
Agreement) from and against any and all Losses incurred or sustained by or
imposed upon the Shareholders (or such persons) with respect to or by reason of
any failure, breach, default, inaccuracy or lack of performance on the part of
Buyer of any of its representations, warranties, agreements or covenants under
this Agreement or contained in any certificate, document or instrument delivered
by Buyer hereunder.
(b) Notwithstanding anything to the contrary in this
Agreement, the Shareholders shall not be entitled to indemnification under
Section 8.3(a) with respect to any claim for indemnification hereunder unless
the Shareholders Representative has given Buyer written notice of such claim,
setting forth in reasonable detail the facts and circumstances pertaining
thereto, (A) as soon as practicable following the Shareholders Representative's
discovery of such claim and (B) prior to the applicable Cut-off Date.
8.4. Procedures for Indemnification.
(a) If an Indemnified Party shall claim to have suffered a
Loss for which indemnification is available under Section 8.2 or 8.3, as the
case may be (for purposes of this Section 8.4, regardless of whether such
Indemnified Party is entitled to receive a payment in respect of such claim by
virtue of paragraph (b)(vii) of Section 8.2), the Indemnified Party shall
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notify the Indemnifying Party in writing of such claim within the time periods
provided in paragraph (b)(vi) of Section 8.2 or paragraph (b) of Section 8.3, as
the case may be, which written notice shall describe the nature of such claim,
the facts and circumstances that give rise to such claim and the amount of such
claim if reasonably ascertainable at the time such claim is made (or if not then
reasonably ascertainable, the maximum amount of such claim reasonably estimated
by the Indemnified Party). In the event that within forty-five (45) days after
the receipt by the Indemnifying Party of such a written notice from the
Indemnified Party, the Indemnified Party shall not have received from the
Indemnifying Party a written objection to such claim, such claim shall be
conclusively presumed and considered to have been assented to and approved by
the Indemnifying Party following receipt by the Indemnifying Party of a written
notice from the Indemnified Party to such effect.
(b) If within the forty-five (45) day period described in
paragraph (a) above the Indemnified Party shall have received from the
Indemnifying Party a notice setting forth the Indemnifying Party's objections to
such claim and the Indemnifying Party's reasons for such objection, then the
Parties shall follow the procedures set forth in Article X below with respect to
the resolution of such matter.
8.5. Procedures for Third-Party Claims.
(a) Any Indemnified Party seeking indemnification pursuant to
this Article VIII in respect of any Third-Party Claim shall give the
Indemnifying Party from whom indemnification with respect to such claim is
sought (i) prompt written notice (but in no event more than ten (10) days after
the Indemnified Party acquires knowledge thereof) of such Third-Party Claim and
(ii) copies of all documents and information relating to any such Third Party
Claim within ten (10) days of their being obtained by the Indemnified Party;
provided, that the failure by the Indemnified Party to so notify or provide
copies to the Indemnifying Party shall not relieve the Indemnifying Party from
any liability to the Indemnified Party for any liability hereunder except to the
extent that such failure shall have prejudiced the defense of such Third Party
Claim.
(b) The Indemnifying Party shall have the right, at its
option, and expense, to defend against, negotiate, settle or otherwise deal with
any Third-Party Claim with respect to which it is the Indemnifying Party and to
be represented by counsel of its own choice, and the Indemnified Party will not
admit any liability with respect thereto or settle, compromise, pay or discharge
the same without the consent of the Indemnifying Party, which consent shall not
be unreasonably withheld, so long as the Indemnifying Party is contesting or
defending the same with reasonable diligence and in good faith; provided, that
the Indemnified Party may participate in any proceeding with counsel of its
choice and at its expense; provided further, that the Indemnifying Party may not
enter into a settlement of any such Third-Party Claim without the consent of the
Indemnified Party, which consent shall be not unreasonably withheld, unless such
settlement requires no more than a monetary payment for which the Indemnified
Party is fully
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indemnified by the Indemnifying Party or involves other matters not binding upon
the Indemnified Party; and provided further that, in the event the Indemnifying
Party does not, within fifteen (15) days after it receives written notice of the
Third-Party Claim from the Indemnified Party, agree in writing to accept the
defense of, and assume all responsibility for, such Third-Party Claim as
provided above in this Section 8.5(b), then the Indemnified Party shall have the
right to defend against, negotiate, settle or otherwise deal with the
Third-Party Claim in such manner as the Indemnified Party deems appropriate, in
its sole discretion, and the Indemnified Party shall be entitled to
indemnification therefor from the Indemnifying Party to the extent provided
under this Article VIII.
ARTICLE IX
TERMINATION OF AGREEMENT
9.1. Causes. This Agreement and the transactions contemplated hereby
may be terminated at any time prior to the completion of the Closing as follows,
and in no other manner:
(a) By mutual consent of the Parties;
(b) By written notice from Buyer to the Shareholders if:
(i) there has been a material misrepresentation or breach
by the Shareholders in the representations, warranties, agreements or covenants
of the Shareholders set forth herein and such misrepresentation or breach has
not been cured within a reasonable time after notice thereof to the Shareholders
from Buyer; or
(ii) any of the conditions provided for in Article VI of
this Agreement have not been satisfied or waived by Buyer in writing and the
Closing has not occurred by November 30, 1998 for reasons other than the failure
of the Buyer to perform its obligations hereunder; or
(iii) Buyer and the Shareholders are unable to resolve
differences regarding a Disclosure Schedule Change pursuant to Section 5.6(b) of
this Agreement and Buyer gives notice of termination in the manner required by
Section 5.6(b) of this Agreement;
(c) By written notice from the Shareholders Representative to
Buyer if:
(i) there has been a material misrepresentation or breach
by Buyer in the respective representations, warranties, agreements or covenants
of Buyer set forth herein and such misrepresentation or breach has not been
cured within a reasonable time after notice thereof to Buyer from the
Shareholders Representative; or
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(ii) any of the conditions provided for in Article VII of
this Agreement have not been satisfied or waived by the Shareholders in writing
and the Closing has not occurred by November 30, 1998 for reasons other than the
failure of the Shareholders to perform their obligations hereunder.
9.2. Effect of Termination. In the event of a termination of this
Agreement by Buyer or the Shareholders under subparagraphs 9.1(b)(i) or
9.1(c)(i), the terminating party shall have such rights and remedies in law or
in equity as the law may provide. The respective obligations of the parties
pursuant to Section 5.1(b), 11.3, 11.6 and Article X shall survive any
termination of this Agreement.
9.3 Right to Proceed. If any of the conditions specified in
Article VI hereof have not been satisfied, Buyer, in lieu of any other rights
that may be available to them, may waive their rights to have such conditions
satisfied prior to Closing and may proceed with the transactions contemplated
hereby, and if any of the conditions specified in Article VII hereof have not
been satisfied prior to Closing, the Shareholders, in lieu of any other rights
that may be available to it, may waive their right to have such conditions
satisfied and may proceed with the transactions contemplated hereby.
ARTICLE X
DISPUTE RESOLUTION
10.1. Dispute. As used in this Agreement, "Dispute" shall mean any
dispute or disagreement between Buyer and Shareholders or the Shareholders
Representative concerning the interpretation of this Agreement, the validity of
this Agreement, any breach or alleged breach by any party under this Agreement
or any other matter relating in any way to this Agreement.
10.2. Process. If a Dispute arises, the parties to the Dispute
shall follow the procedures specified in Sections 10.3, 10.4 and 10.5 of
this Agreement.
10.3. Negotiations. The parties shall promptly attempt to resolve
any Dispute by negotiations between the Buyer and the Shareholders
Representative. Either the Buyer or Shareholders Representative may give the
other party written notice of any Dispute not resolved in the normal course of
business. The Buyer and the Shareholders Representative shall meet at a mutually
acceptable time and place within ten (10) calendar days after delivery of such
notice, and thereafter as often as they reasonably deem necessary, to exchange
relevant information and to attempt to resolve the Dispute. If the Dispute has
not been resolved by these Persons within thirty (30) calendar days of the
disputing party's notice, or if the parties fail to meet within such ten (10)
calendar days, either the Buyer or the Shareholders Representative may initiate
mediation as provided in Section 10.4 of this Agreement. If a negotiator intends
to be accompanied at a meeting by legal counsel, the other negotiator shall be
given at least three (3) business days, notice of such intention and may also be
accompanied by legal counsel.
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10.4. Mediation. If the Dispute is not resolved by negotiations
pursuant to Section 10.3 of this Agreement, the Buyer and the Shareholders
Representative shall attempt in good faith to resolve any such Dispute by
mediation. Either the Buyer or the Shareholders Representative may initiate a
mediation proceeding by a request in writing to the other party (the "Request"),
and both parties will then be obligated to engage in a mediation. The proceeding
will be conducted in accordance with the then current Center for Public
Resources ("CPR") Model Procedure for Mediation of Business Disputes, with the
following exceptions:
(a) if the parties have not agreed within thirty (30) calendar
days of the Request on the selection of a mediator willing to serve, CPR, upon
the request of either the Buyer or the Shareholders Representative, shall
appoint a member of the CPR Panels of Neutrals as the mediator; and
(b) efforts to reach a settlement will continue until the
conclusion of the proceedings, which shall be deemed to occur upon the earliest
of the date that: (i) a written settlement is reached; or (ii) the mediator
concludes and informs the parties in writing that further efforts would not be
useful; or (iii) the Buyer and the Shareholders Representative agree in writing
that an impasse has been reached; or (iv) is sixty (60) calendar days after the
Request and none of the events specified in Sections 10.4(b)(i), (ii) or (iii)
have occurred. No party may withdraw before the conclusion of the proceeding.
10.5. Submission to Adjudication. If a Dispute is not resolved by
negotiation pursuant to Section 10.3 of this Agreement or by mediation pursuant
to Section 10.4 of this Agreement within 100 calendar days after initiation of
the negotiation process pursuant to Section 10.3 of this Agreement, such Dispute
and any other claims arising out of or relating to this Agreement may be heard,
adjudicated and determined in an action or proceeding filed in any state or
federal court sitting in Racine or Milwaukee County, Wisconsin.
10.6. General.
(a) Provisional Remedies. At any time during the procedures
specified in Sections 10.3 and 10.4 of this Agreement, a party may seek a
preliminary injunction or other provisional judicial relief if in its judgment
such action is necessary to avoid irreparable damage or to preserve the status
quo. Despite such action, the parties will continue to participate in good faith
in the procedures specified in this Article X of this Agreement.
(b) Tolling Statue of Limitations. All applicable statutes of
limitation and defenses based upon the passage of time shall be tolled while the
procedures specified in this Article X of this Agreement are pending. The
parties will take such action, if any, as is required to effectuate such
tolling.
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(c) Performance to Continue. Each Party is required to
continue to perform its obligations under this Agreement pending final
resolution of any Dispute.
(d) Extension of Deadlines. All deadlines specified in this
Article X of this Agreement may be extended by mutual agreement between the
Buyer and the Shareholders Representative.
(e) Enforcement. The parties regard the obligations in this
Article X of this Agreement to constitute an essential provision of this
Agreement and one that is legally binding on them. In case of a violation of the
obligations in this Article X of this Agreement by either the Buyer or the
Shareholders Representative, the other party may bring an action to seek
enforcement of such obligations in any court of Law having jurisdiction thereof.
(f) Costs. The parties to the dispute shall pay: (i) their own
costs, fees, and expenses incurred in connection with the application of the
provisions of this Article X of this Agreement; and (ii) fifty percent (50%) of
the fees and expenses of CPR and the mediator in connection with the application
of the provisions of Section 10.4 of this Agreement.
(g) Replacement. If CPR is no longer in business or is unable
or refuses or declines to act or to continue to act under this Article X of this
Agreement for any reason, then the functions specified in this Article X of this
Agreement to be performed by CPR shall be performed by another Person engaged in
a business equivalent to that conducted by CPR as is agreed to by the Buyer and
the Shareholders Representative (the "Replacement"). If the Buyer and the
Shareholders Representative cannot agree on the identity of the Replacement
within ten (10) calendar days after a Request, the Replacement shall be selected
by the Chief Judge of the United States District Court for the Eastern District
of Wisconsin upon application by any party hereto. If a Replacement is selected
by either means, this Article X shall be deemed appropriately amended to refer
to such Replacement.
ARTICLE XI
MISCELLANEOUS
11.1. Further Assurance. From time to time, at a Party's request and
without further consideration, the other Parties will execute and deliver to the
requesting Party such documents and take such other action as the requesting
Party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
11.2. Assignment. The rights and obligations of a Party hereunder
may not be assigned, transferred or encumbered without the prior written consent
of the other parties; provided, however, that Buyer may assign its rights and
delegate its duties under this Agreement to a wholly-owned subsidiary of Buyer
pursuant to an assignment in form and substance reasonably acceptable to the
Shareholders Representative along with an acknowledgment of the assignee in
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form and substance reasonably acceptable to the Shareholders Representative that
it is bound by all of the liabilities, representations, warranties and
obligations of Buyer hereunder, provided that any such assignment, delegation or
acknowledgment will not release Buyer from its obligations hereunder.
11.3. Law Governing Agreement. This Agreement shall be construed and
interpreted according to the internal Laws of the State of Wisconsin, excluding
any choice of law rules that may direct the application of the Laws of another
jurisdiction.
11.4. Amendment and Modification. The Shareholders and the Buyer may
amend, modify and supplement this Agreement, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, only by a
written instrument executed on behalf of all of the Parties hereto or, in the
case of a waiver, by the Party waiving compliance.
11.5. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a) personally
delivered; (b) sent by telecopier, facsimile transmission or other electronic
means of transmitting written documents; or (c) sent to the parties at their
respective addresses indicated herein by registered or certified U.S. mail,
return receipt requested and postage prepaid, or by private overnight mail
courier service. The respective addresses to be used for all such notices,
demands or requests are as follows:
(a) If to Buyer, to:
MotivePower Industries, Inc.
2 Gateway Center, 14th Floor
Pittsburgh, PA 15222
Attention: General Counsel
Facsimile: (412) 201-1116
(with a copy to)
Doepken Keevican & Weiss Professional Corporation
58th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219
Attention: Leo A. Keevican, Jr.
Facsimile: (412 355-2609
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(b) If to Shareholders Representative:
Fred M. Young, Jr.
3201 Michigan Boulevard
Racine, WI 53402
(with a copy to)
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Henry J. Loos
Facsimile:(414) 271-3552
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent by
overnight courier pursuant to this paragraph, such communication shall be deemed
delivered upon receipt; and if sent by U.S. mail pursuant to this paragraph,
such communication shall be deemed delivered as of the date of delivery
indicated on the receipt issued by the relevant postal service, or, if the
addressee fails or refuses to accept delivery, as of the date of such failure or
refusal. Delivery to the Shareholders Representative shall constitute delivery
to all Shareholders. Any Person may change its address for the purposes of this
Agreement by giving notice thereof in accordance with this Section.
11.6. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
(a) Brokerage. Except as to Piper Jaffray, Inc. who shall be
compensated by the Shareholders, the Parties each represent and warrant to each
other that there is no broker involved or in any way connected with the transfer
provided for herein on their behalf respectively and each agrees to hold the
other harmless from and against all other claims for brokerage commissions or
finder's fees in connection with the execution of this Agreement or the
transactions provided for herein.
(b) Other. Except as otherwise provided herein, each of the
Parties shall bear its own expenses and the expenses of its counsel and other
agents in connection with the transactions contemplated hereby.
11.7. Entire Agreement; Binding Effect. This Agreement embodies the
entire agreement between the Parties hereto with respect to the transactions
contemplated herein, and there have been and are no agreements, representations
or warranties between the parties other than those set forth or provided for
herein or executed contemporaneously or in connection herewith. This Agreement
shall be binding upon and shall inure to the benefit of the Parties hereto and
their respective legal representatives, successors and permitted assigns.
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11.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.9. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
11.10. Construction. Where any group or category of items or
matters is defined collectively in the plural number, any item or matter within
such definition may be referred to using such defined term in the singular
number.
11.11. Faxes. Fax copies of executed signature pages of this
Agreement shall be effective and binding upon the parties as if such signatures
were original signatures.
<PAGE> 50
44
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
SHAREHOLDERS
/s/ FRED M. YOUNG, JR.
-----------------------------------------
Fred M. Young, Jr.
/s/ SANDRA H. YOUNG
-----------------------------------------
Sandra H. Young
/s/ FRED M. YOUNG, JR.
-----------------------------------------
Fred M. Young, Jr., custodian for
Ryan S. Young under the Wisconsin
Uniform Gifts to Minors Act
/s/ FRED M. YOUNG, JR.
-----------------------------------------
Fred M Young, Jr., trustee of the
Ariel H. Young Irrevocable Trust of
1996
MotivePower Industries, Inc.
By: /s/ JEANNETTE FISHER-GARBER
-------------------------------------
Title: Vice President, General Counsel
----------------------------------
and Secretary
45
