<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report - April 26, 1998
(Date of earliest event reported)
OWOSSO CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Pennsylvania 0-25066 23-2756709
(State or other jurisdiction of Commission file number (IRS Employer Identification No.)
incorporation or organization)
The Triad Building, 2200 Renaissance Boulevard
Suite 150, King of Prussia, PA 19406
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (610) 275-4500
================================================================================
<PAGE>
OWOSSO CORPORATION
FORM 8-K
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Item 2. Acquisition or Disposition of Assets 3
Item 7. Financial Statements and Exhibits 3
<PAGE>
Item 2. Acquisition or Disposition of Assets.
This Form 8-K is filed to report two separate transactions, 1) the
disposition of Great Bend Manufacturing Company, Inc., and 2) the acquisition
of Astro Air, Inc.
Disposition of Great Bend Manufacturing Company, Inc.
Effective April 26, 1998, Owosso Corporation (the "Company")
completed the sale of substantially all of the assets of its Great Bend
Manufacturing subsidiary, a manufacturer of agricultural equipment, located in
Great Bend, Kansas, to Allied Products Corporation of Chicago, Illinois. The
Company received proceeds from the transaction of approximately $10,000,000,
subject to certain post-closing adjustments.
Acquisition of Astro Air, Inc.
Effective April 26, 1998, the Company acquired substantially all of
the assets and assumed certain liabilities of Astro Air, Inc., a privately
owned Texas corporation that manufactures heat transfer coils, for a purchase
price of $8,000,000 of cash, plus the repayment, shortly after closing, of
approximately $2,700,000 of indebtedness for borrowed money. The Company will
continue to operate the business under the same name. The funds used to complete
this acquisition were supplied by the proceeds of the disposition of Great
Bend Manufacturing Company, Inc.
Rex Dacus has agreed to continue as the president of Astro Air
following the acquisition. The Company has entered into a five-year consulting
agreement with Dacus Properties, Inc. ("DPI"), the former owner of Astro Air
(which is majority-owned by Rex Dacus), under which DPI will provide
consulting services to Astro Air and will be entitled to receive 3.4% of the
net revenues generated by certain specified customers.
Prior to the acquisition, neither DPI nor any executive or employee
of DPI or Astro Air, Inc. was an officer, director or principal shareholder of
the Company. The acquisition was negotiated on an arms-length basis.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired:
The financial statements of Astro Air, Inc. are not
available as of the date of this report. Such financial
statements will be filed as an amendment hereto as soon as
practicable, but in any event, within 60 days from the due
date of this Form 8-K.
(b) Pro Forma Financial Information
1) Pro forma financial information regarding the
disposition of Great Bend Manufacturing Company is
filed herewith.
2) Pro forma financial information regarding the
acquisition of Astro Air, Inc. is not available as
of the date of this report. Such pro forma
financial information will be filed as an amendment
hereto as soon as practicable, but in any event,
within 60 days from the due date of this Form 8-K.
(c) Exhibits
2.1 Asset Purchase Agreement, dated March 27, 1998, by
and among Allied Products Corporation, Great Bend
Manufacturing Company, and Owosso Corporation.
2.2 Asset Purchase Agreement among Owosso Corporation,
Astro Air Acquisition Corp., Astro Air, Inc., Rex
Dacus and Dacus Properties, Inc., dated April 2,
1998.
<PAGE>
OWOSSO CORPORATION
Pro Forma Financial Information
<PAGE>
OWOSSO CORPORATION
PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
Effective April 26, 1998, Owosso Corporation (the "Company")
completed the sale of substantially all of the assets of its Great Bend
Manufacturing subsidiary ("Great Bend"), a manufacturer of agricultural
equipment, to Allied Products Corporation of Chicago, Illinois (the
"Disposition"). The Company received proceeds from the transaction of
approximately $10,000,000, subject to certain post-closing adjustments.
The following pro forma condensed consolidated statements of
operations for the three months ended January 25, 1998 and for the year ended
October 26, 1997 give effect to the Disposition as if the transaction had
occurred at the beginning of fiscal 1997. The pro forma condensed consolidated
balance sheet as of January 25, 1998 gives effect to the Disposition as if
such transaction had occurred as of that date.
The pro forma financial data presented herein is based on
management's estimate of the effects of the Disposition, based upon currently
available information and certain assumptions the Company believes are
reasonable. The Company does not expect the receipt of additional information
to have a material adverse effect on the pro forma financial data. The pro
forma condensed consolidated statements of operations for the three months
ended January 25, 1998 and the year ended October 26, 1997 and the pro forma
condensed consolidated balance sheet as of January 25, 1998 are unaudited, but
in the opinion of management, include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the results of
operations and financial position for the periods presented.
The pro forma condensed consolidated statements of operations for the
three months ended January 25, 1998 and the year ended October 26, 1997, and
the pro forma condensed consolidated balance sheet as of January 25, 1998 are
not necessarily indicative of the results of operations or financial position
that actually would have been achieved had the transactions described been
consummated as of the dates indicated, or that may be achieved in the future.
<PAGE>
OWOSSO CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 26, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pro Forma
OWOSSO Adjustments -
Historical Great Bend (a) Pro Forma
<S> <C> <C> <C>
Net sales $ 143,061,000 $ 14,893,000 $ 128,168,000
Cost of products sold 109,155,000 10,927,000 98,228,000
-------------- ------------ -------------
Gross profit 33,906,000 3,966,000 29,940,000
Expenses:
Selling, general and administrative 20,495,000 2,500,000 17,995,000
Corporate 4,816,000 - 4,816,000
--------------- ------------- -------------
Income from operations 8,595,000 1,466,000 7,129,000
Interest expense 4,143,000 186,000 3,957,000
Other income 199,000 23,000 176,000
--------------- ------------- --------------
Income before income taxes 4,651,000 1,303,000 3,348,000
Income tax expense 2,100,000 548,000 1,552,000
--------------- ------------- --------------
Net income 2,551,000 755,000 1,796,000
Dividends and accretion on
preferred stock (1,047,000) - (1,047,000)
--------------- ------------- --------------
Net income available
for common shareholders $ 1,504,000 $ 755,000 $ 749,000
=============== ============= ==============
Basic and diluted earnings
per common share $ 0.26 $ 0.13
=============== ==============
Weighted average number of common shares outstanding:
Basic 5,809,000 5,809,000
=============== ==============
Diluted 5,827,000 5,827,000
=============== ==============
</TABLE>
- --------------------------------------------------------------------------------
(a) - Pro forma adjustments reflect the elimination of the operations of Great
Bend. Pro forma adjustments do not reflect a reduction in interest expense
related to the use of proceeds to repay debt because such proceeds were
utilized to acquire substantially all of the assets and certain of the
liabilities of Astro Air, Inc., effective April 26, 1998. Pro forma
information regarding the acquisition of Astro Air, Inc. is not available
as of the date of this report. Such pro forma information will be filed as
an amendment hereto.
-6-
<PAGE>
OWOSSO CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 25, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pro Forma
OWOSSO Adjustments -
Historical Great Bend (a) Pro Forma
<S> <C> <C> <C>
Net sales $ 34,054,000 $ 4,238,000 $ 29,816,000
Cost of products sold 26,558,000 3,182,000 23,376,000
-------------- ------------ -------------
Gross profit 7,496,000 1,056,000 6,440,000
Expenses:
Selling, general and administrative 5,006,000 682,000 4,324,000
Corporate 1,400,000 - 1,400,000
--------------- ------------ -------------
Income from operations 1,090,000 374,000 716,000
Interest expense 1,124,000 (2,000) 1,126,000
Other income 45,000 7,000 38,000
--------------- ------------ -------------
Income before income taxes 11,000 383,000 (372,000)
Income tax expense 5,000 161,000 (156,000)
--------------- ------------ -------------
Net income 6,000 222,000 (216,000)
Dividends and accretion on
preferred stock (265,000) - (265,000)
--------------- ------------ --------------
Net income (loss) available
for common shareholders $ (259,000) $ 222,000 $ (481,000)
================ ============ ==============
Basic and diluted earnings (loss)
per common share $ (0.04) $ (0.08)
================ ==============
Weighted average number of
common shares outstanding 5,809,000 5,809,000
================ ==============
</TABLE>
- --------------------------------------------------------------------------------
(a) - Pro forma adjustments reflect the elimination of the operations of Great
Bend. Pro forma adjustments do not reflect a reduction in interest expense
related to the use of proceeds to repay debt because such proceeds were
utilized to acquire substantially all of the assets and certain of the
liabilities of Astro Air, Inc., effective April 26, 1998. Pro forma
information regarding the acquisition of Astro Air, Inc. is not available
as of the date of this report. Such pro forma information will be filed as
an amendment hereto.
-7-
<PAGE>
OWOSSO CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JANUARY 25, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OWOSSO Pro Forma
Historical Adjustments Pro Forma
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 625,000 $10,400,000 a $ 10,368,000
(657,000) c
Receivables, net 21,075,000 (2,861,000) a 18,214,000
Inventories, net 24,641,000 (2,141,000) a 22,500,000
Prepaid expenses and other 1,154,000 (265,000) a 889,000
Deferred taxes 1,039,000 (298,000) a 741,000
-------------- -------------
Total current assets 48,534,000 52,712,000
PROPERTY, PLANT AND EQUIPMENT, NET 28,711,000 (1,815,000) a 26,896,000
GOODWILL, NET 28,677,000 (1,838,000) a 26,839,000
OTHER INTANGIBLE ASSETS, NET 7,860,000 (325,000) a 7,535,000
OTHER ASSETS 1,259,000 (281,000) a 978,000
-------------- --------------
TOTAL ASSETS $115,041,000 $114,960,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 10,475,000 $ (753,000) a $ 9,722,000
Accrued expenses 5,582,000 (470,000) a 4,680,000
(432,000) c
Federal and state taxes payable - 1,532,000 b 1,532,000
Current portion of related party debt 3,750,000 3,750,000
Current portion of long-term debt 1,592,000 (115,000) a 1,477,000
-------------- ------------
Total current liabilities 21,399,000 21,161,000
LONG-TERM DEBT, LESS CURRENT PORTION 52,521,000 (820,000) a 51,701,000
POSTRETIREMENT BENEFITS 1,826,000 1,826,000
DEFERRED TAXES 3,269,000 3,269,000
STOCKHOLDERS' EQUITY 36,026,000 977,000 b 37,003,000
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $115,041,000 $114,960,000
============== ==============
</TABLE>
- --------------------------------------------------------------------------------
Notes to pro forma adjustments:
(a) Reflects the sale of the Company's Great Bend Manufacturing
subsidiary ("Great Bend") and the balance of the net proceeds as
cash. Pro forma adjustments do not reflect the proceeds from the
sale as a reduction in long-term debt. Such proceeds were utilized
to acquire substantiallly all of the assets and certain of the
liabilities of Astro Air, Inc., effective April 26, 1998. Pro forma
information regarding the acquisition of Astro Air is not available
as the date of this report. Such pro forma information will be
filed as an amendment hereto.
(b) Reflects the gain on the sale of Great Bend and the related tax
liability.
(c) Reflects the use of a portion of the proceeds for the payment of
liabilities not assumed by the buyer and costs of the transaction.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OWOSSO CORPORATION
Date: May 8, 1998 By: /s/ John H. Wert, Jr.
-----------------------
John H. Wert, Jr.
Senior Vice President - Finance,
Chief Financial Officer, and
Treasurer and Secretary
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Asset Purchase Agreement, dated March 27, 1998, by and among
Owosso Corporation, Great Bend Manufacturing Company, Inc. and
Allied Products Corporation. (Certain exhibits and schedules
have been omitted in accordance with Item 610(b)(2) of
Regulation S-K. A copy of such exhibits and schedules shall be
furnished supplementally to the Securities and Exchange
Commission upon request.)
2.2 Asset Purchase Agreement, dated April 2, 1998, by and among
Owosso Corporation, Astro Air Acquisition Corporation, Astro
Air, Inc., Rex Dacus and Dacus Properties, Inc. (Certain
exhibits and schedules have been omitted in accordance with
Item 610(b)(2) of Regulation S-K. A copy of such exhibits and
schedules shall be furnished supplementally to the Securities
and Exchange Commission upon request.)
<PAGE>
Exhibit 2.1
Asset Purchase Agreement, dated March 27, 1998, by and among Allied Products
Corporation, Great Bend Manufacturing Company, and Owosso Corporation.
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement (the "Agreement") is made and entered
into as of the close of business on this 27th day of March, 1998, by and among
Allied Products Corporation, a Delaware corporation ("Buyer"), Great Bend
Manufacturing Company, Inc., a Kansas corporation ("Seller"), and Owosso
Corporation, being the sole shareholder of Seller (the "Shareholder").
In consideration of the mutual representations, warranties, covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I.
ACQUISITION OF ASSETS
---------------------
1.1. Purchased Assets. Upon the terms and subject to the conditions
of this Agreement, on the Closing Date (as defined in Section 1.7 hereof),
Seller shall sell, transfer, assign, convey and deliver to Buyer, and Buyer
shall acquire from Seller, free and clear of all liens, claims, charges,
encumbrances and security interests except for the Assumed Liabilities (as
defined in Section 1.3), all of the assets of the Seller used in the Seller's
Business (the "Business"), including without limitation, those set forth in
the Closing Balance Sheet (as defined in Section 1.5(d), excluding Excluded
Assets as defined in Section 1.2, but including, without limitation, the
following assets of Seller, wherever located, existing as of that date:"
(a) All accounts and notes receivable (the "Receivables") of
Seller;
(b) All raw materials, work-in-process and finished goods
inventory (the "Inventory") located on Seller's premises at Great
Bend, Kansas (the "Premises") and at all other locations, or in
transit thereto, or in transit therefrom including in transit from
suppliers;
(c) All fixed and moveable assets (the "Fixed Assets")
including, without limitation, machinery, equipment, fork lifts, bob
cats, trucks, automobiles, furniture and fixtures, supplies, tools,
dies, spare and replacement parts, hardware, racks, accessories and
similar assets, including, without limitation, those Fixed Assets set
forth on Exhibit 1.1(c) hereof;
(d) All rights under contracts, leases and agreements of
Seller which are specifically identified on Schedule 2.18, are not
required to be identified in Schedule 2.18, or are entered into by
Seller in the ordinary course of business between the date hereof and
Closing Date (the "Contracts");
(e) The real property located in Great Bend, Kansas, more
specifically identified on Exhibit 1.1(e) hereof (the "Owned Real
Property");
<PAGE>
(f) All intellectual property, including all trade secrets,
patents, copyrights, business methods, trade names, trademarks,
service marks, corporate names, inventions, specifications, research
and development, improvements, processes, mailing lists, know-how and
proprietary and confidential information (the "Intellectual
Property");
(g) All transferable permits, licenses, approvals, waivers,
variances, registrations, certifications, and authorizations issued
to Seller or used in connection with the Business (the "Permits");
(h) The deferred tax assets of Seller in the amounts
reflected on the books and records of the Company relating to the
vacation pay accrual, the bad debt reserve and the warranty reserve
("Deferred Tax Assets"); and
(i) Seller's corporate name, trade names, trademarks,
prepaid expenses and deposits, goodwill, and all originals or copies
of books and records associated with the Purchased Assets other than
the Excluded Assets (collectively the "Other Assets"). (All
Receivables, Inventory, Fixed Assets, Contracts, Owned Real Property,
Deferred Tax Assets, Intellectual Property, Permits and Other Assets
shall constitute the "Purchased Assets.").
1.2. Excluded Assets. Notwithstanding anything herein to the
contrary, the Purchased Assets shall not include, and Seller shall retain, the
following assets of Seller (collectively, the "Excluded Assets"):
(a) Any amounts owing from Shareholder to Seller or any
Affiliate ("Affiliate" shall have the same meaning as defined in the
Securities Act of 1934, as amended) of Seller, other than Receivables
for products purchased in the ordinary course of business.
(b) Minute books and other corporate records.
(c) cash and cash equivalents, including cash in bank
accounts;
(d) all deferred tax assets of Seller to the extent not
included in 1.1(h); and
(e) any refund received arising from the Seller's pending
appeal of county property taxes.
1.3. Assumed Liabilities. Buyer agrees to assume and be obligated to
pay and perform as of the Closing Date solely and only (a) liabilities set
forth in the Closing Balance Sheet except Excluded Liabilities as defined in
Section 1.4, (b) the liabilities and obligations under the Contracts to the
extent relating to periods after the Closing, (c) liabilities and obligations
relating to dealer returns and warranty obligations (but not including
warranty claims under product liability claims) and (d) Seller's obligations
to its employees for holiday pay and vacation pay (the "Assumed Employee
Liabilities") (collectively, the "Assumed Liabilities").
-2-
<PAGE>
1.4. Excluded Liabilities. Except for the Assumed Liabilities which
shall be assumed by Buyer in Section 1.3 above, Buyer shall not assume or be
obligated for any other liability, obligation or commitment of Seller, direct
or indirect, known or unknown, absolute or contingent whenever arising, and,
by way of illustration but not limitation, for any of the following
liabilities, obligations or commitments of Seller (the "Excluded
Liabilities"):
(a) Any foreign, federal, state, county or local income tax
applicable to the Seller (the "Income Taxes");
(b) Any liability of Seller to any of its Affiliates except
for those arising from the purchase of products in the ordinary
course of business at fair market value;
(c) Any liabilities in respect of injury to or death of any
person or damage to or destruction of any property, whether based on
negligence, strict liability, enterprise liability or any other legal
or equitable theory, arising in respect of any products manufactured
or sold by Seller or any of Seller's predecessors on or prior to the
Closing Date, whether or not such liabilities are described, listed
or referred to on any schedule hereto;
(d) Any liability, obligation, or commitment of Seller to
any of its employees (other than the Assumed Employee Liabilities)
including compensation, medical and workers' compensation and benefit
payments and any liability, obligation, or commitment of Seller under
any Employee Plan as defined in Section 2.17, including, but not
limited to, any Employee Plan listed on Schedule 2.17;
(e) Any cost, broker's or finder's fee or expense incurred
by Seller incident to its negotiation and preparation of this
Agreement and its performance and compliance with the agreements and
conditions contained herein;
(f) Any liability for any sales or transfer taxes incident
to the transactions contemplated hereby;
(g) Any liability, obligation or commitment incurred by
Seller after the Closing Date;
(h) Any liability for that certain Employment Agreement by
and between the Seller and Max Bennett (the "Bennett Agreement"); and
(i) Any other liability, obligation or commitment not
expressly assumed by Buyer hereunder, whether arising prior to, on,
or after the Closing except to the extent such liability, obligation
or commitment is an Assumed Liability.
1.5. Purchase Price Computation, Payment and Post-Closing
Adjustments.
(a) Purchase Price. The purchase price (the "Purchase
Price") shall be the sum of (i) the Net Asset Book Value (as defined
below), and (b) Three Million Dollars
-3-
<PAGE>
($3,000,000). The Net Asset Book Value shall equal the Purchased Assets
less the Assumed Liabilities, as reflected on the Closing Balance Sheet
established pursuant to Section 1.5(d). The Closing Balance Sheet will
contain reasonably adequate reserves for bad debt, inventory, and
warranties.
(b) Estimated Purchase Price. Seller shall prepare an
estimated balance sheet (the "Estimated Balance Sheet") on the basis
of the most recent monthly income statement and balance sheet
(collectively, the "Financial Statements"), but shall include only
the Purchased Assets and the Assumed Liabilities and shall reflect
the Seller's estimate of the Net Asset Book Value. Seller shall
prepare each item and the Estimated Balance Sheet in accordance with
generally accepted accounting principles and consistent with Seller's
prior practices in preparing the Financial Statements. The Estimated
Purchase Price shall equal the Seller's estimate of the Net Asset
Book Value plus Three Million Dollars ($3,000,000). Seller shall
provide Buyer with the Estimated Balance Sheet not fewer than five
(5) business days prior to the Closing Date.
(c) Payment. At the Closing, Buyer shall pay to Seller by
wire transfer of immediately available funds to an account or
accounts designated in writing by Seller an amount equal to the
Estimated Purchase Price.
(d) Preparation of Draft Closing Balance Sheet. Within 45
days after the Closing Date, the Seller will prepare and deliver to
the Buyer a balance sheet (the "Draft Closing Balance Sheet") as of
the close of business on the Closing Date determined on a pro forma
basis as though the parties had not consummated the transactions
contemplated by this Agreement. The Draft Closing Balance Sheet shall
include only the Purchased Assets and the Assumed Liabilities and
shall reflect the Net Asset Book Value. The Seller will prepare each
item on the Draft Closing Balance Sheet in accordance with generally
accepted accounting principles and consistent with Seller's prior
practices in the preparation of the Financial Statements. The
Inventory shall be determined by the parties in accordance with the
principles set forth on Exhibit 1.5(d) based on a physical inventory
in which Buyer may participate. The "Adjusted Purchase Price" shall
be the sum of the Net Asset Book Value as set forth in the Draft
Closing Balance Sheet and Three Million Dollars ($3,000,000).
(e) Adjustment Dispute Resolution. If Buyer advises Seller
that it has no objections to Seller's determination of the Draft
Closing Balance Sheet and the Adjusted Purchase Price, the Draft
Closing Balance Sheet shall be the Closing Balance Sheet and Seller's
determination of the Adjusted Purchase Price shall become the
Purchase Price. If Buyer has objections, Buyer will deliver a
detailed statement describing its objections to the Seller within 45
days after receiving the Draft Closing Balance Sheet. The Buyer and
Seller will use reasonable efforts to resolve any such objections
themselves. If the parties do not obtain a final resolution within 45
days after the Seller has received the statement of objections,
however, the disputes shall be submitted to an independent public
accounting firm of national recognition mutually selected by Seller
and Buyer (the "Accountants"). Promptly, but not later than thirty
(30) days after the acceptance of its
-4-
<PAGE>
appointment, the Accountants will determine (based solely on
presentations by the Seller and Buyer to the Accountants and not by
independent review) only those items in dispute and will render a
report as to its resolution of such items and the resulting calculation
of the items which are reflected in the determination of the Closing
Balance Sheet and the Purchase Price. The written decision of the
Accountants shall be determinative of the Closing Balance Sheet and the
Purchase Price and shall be final and binding on the parties hereto and
shall not be subject to dispute or review. Any fees or expenses payable
to the Accountants shall be shared equally between Seller and Buyer.
(f) Payment of Purchase Price. If the Purchase Price as
reflected in the Closing Balance Sheet is less or more than the
Estimated Purchase Price, Seller or Buyer, as applicable, shall pay
the amount of the difference immediately to the other (or, if subject
to dispute in accordance with this subsection, immediately upon the
resolution of such dispute) and interest shall accrue at the rate of
9% per annum on any such payments from the date of delivery of the
Draft Closing Balance Sheet by Seller to Buyer to the date of
payment.
1.6. Closing Date. The completion of the purchase of the Purchased
Assets shall be on April 30, 1998 at 10:00 a.m. or, if earlier, three (3) days
following the satisfaction or waiver of all conditions to the obligations of
the parties to consummate the transactions contemplated hereby, unless such
time is extended or shortened as may be agreed upon by the Buyer and Seller
after the conditions set forth in Articles VI and VII have been satisfied, at
the offices of Gardner, Carton & Douglas, 321 North Clark, Chicago, Illinois
60610, or at such other place or at such other time as shall be agreed upon by
the Buyer and Seller (such date and time being hereafter called the "Closing"
or "Closing Date").
1.7. Closing Date Deliveries.
(a) Seller's Deliveries. On the Closing Date, Seller shall
deliver to Buyer the following: (i) a warranty deed in a form
customary for warranty deeds in the State of Kansas and a bill of
sale in the form of Exhibit 1.7(a)(i), (ii) an assignment of
Contracts, together with any necessary consents and estoppel letters
in order to transfer the Contracts to Buyer, (iii) assignments of
Intellectual Property trade names or trademarks of Seller, (iv) a
good standing certificate of Seller from the Secretary of State and a
copy of Seller's Articles of Incorporation certified by the Secretary
of State, both dated not more than two (2) weeks prior to the Closing
Date, (v) all of the documents, instruments and opinions required to
be delivered by Seller pursuant to Article VI, (vi) an amendment to
Seller's Articles of Incorporation, changing Seller's corporate name
to a name not similar to "Great Bend," (vii) a purchase price
allocation schedule in the form attached hereto as Schedule 1.7
(a)(vii) which schedule shall be agreed upon by Buyer and Seller
prior to Closing, (viii) the ALTA Form B-1992 Owner's Title Insurance
Policy or marked up unconditional binder for such insurance,
including all required endorsements, dated as of the Closing Date and
showing title to the Owned Real Property in the name of Buyer, all as
provided in Section 4.6 hereof; (ix) all required real estate
transfer declaration or exemption certificate and any other documents
as may be otherwise necessary to transfer
-5-
<PAGE>
title to the Owned Real Property to Buyer; (x) all affidavits and
other statements of Seller as may be required by the title insurance
company in order to issue the title insurance policy contemplated by
Section 4.6 hereof, (xi) such other bills of sale, assignments, and
other instruments of transfer or conveyance as Buyer may reasonably
request or as may be otherwise necessary to evidence and effect the
sale and delivery of the Purchased Assets to Buyer, (xii) a written
receipt acknowledging Seller's receipt of the Estimated Purchase
Price, and (xiii) all Schedules to this Agreement updated through the
Closing Date. All deliverables by Seller to Buyer hereunder shall be
consistent with this Agreement, customary with transactions of this
nature, and in form and substance reasonably satisfactory to counsel
for Seller and Buyer in good faith.
(b) Buyer's Deliveries. On the Closing Date, Buyer shall
deliver to Seller (i) immediately available funds equal to the
Estimated Purchase Price, (ii) an assumption of the Assumed
Liabilities, and (iii) all of the documents, instruments and opinions
required to be delivered by Buyer pursuant to Article VII. All
deliverables by Buyer to Seller shall be consistent with this
Agreement, customary with transactions of this nature, and in form
and substance reasonably satisfactory to Buyer and Seller in good
faith.
1.8. Further Assurances. On the Closing Date, Seller shall (i)
deliver to the Buyer such other bills of sale, endorsements, assignments and
other good and sufficient instruments of conveyance and transfer, in form
reasonably satisfactory to the Buyer and its counsel, as the Buyer may
reasonably request or as may be otherwise reasonably necessary to vest in the
Buyer all the right, title and interest of Seller in, to or under any or all
of the Purchased Assets and (ii) take all steps as may be reasonably necessary
to put the Buyer in actual possession and control of all the Purchased Assets.
From time to time following the Closing, Seller shall execute and deliver, or
cause to be executed and delivered, to the Buyer such other instruments of
conveyance and transfer as the Buyer may reasonably request or as may be
otherwise necessary to more effectively convey and transfer to, and vest in,
the Buyer and put the Buyer in possession of, any part of the Purchased
Assets, and, in the case of licenses, certificates, approvals, authorizations,
agreements, contracts, leases, easements and other commitments included in the
Purchased Assets which cannot be transferred or assigned effectively without
the consent of third parties which consent has not been obtained prior to the
Closing, to cooperate with the Buyer at its request in endeavoring to obtain
such consent promptly.
1.9. Books and Records. Buyer agrees to afford to Seller reasonable
access, during normal business operations, to all of Seller's books and
records transferred to Buyer under this Agreement. Seller may, at its own cost
and expense, make copies of such books and records. Buyer shall notify Seller
prior to removing or destroying said books and records at no cost. Seller
shall give Buyer similar rights and access to the books and records which are
not transferred to Buyer hereunder.
-6-
<PAGE>
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
--------------------------------------------
SELLER AND SHAREHOLDER
----------------------
As an inducement to the Buyer to enter into this Agreement, and to
consummate the transactions contemplated hereby, Seller and the Shareholder,
jointly and severally, represent, warrant and covenant to Buyer and agree as
follows, except as set forth in the Schedules attached to this Agreement and
any additional Schedules delivered to Buyer within ten (10) business days
after the execution of this Agreement:
2.1. Organization of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Kansas
and is duly qualified to transact business as a foreign corporation and is in
good standing in each of the jurisdictions requiring such qualification and in
which the ownership or leasing of the Purchased Assets or the conduct or
nature of the Business requires such qualification, each of which
jurisdictions is listed in Schedule 2.1, except where such qualification would
not have a material adverse effect, individually or in the aggregate, on
Seller's assets, business, operations or financial condition ("Material
Adverse Effect"). Seller has full corporate power and authority to own, lease
or otherwise hold and to operate and use the Purchased Assets and to carry on
the Business as now conducted. The Shareholder constitutes the only person who
owns, beneficially or of record, any shares of capital stock of Seller.
2.2. Subsidiaries and Investments. Seller has no subsidiaries or
interests in any corporation, partnership, joint venture or other association.
2.3. Authority. The Seller and the Shareholder have full corporate
power and authority to enter into this Agreement, to consummate the
transactions contemplated hereby and to comply with the terms, conditions and
provisions hereof.
The execution, delivery and performance of this Agreement by Seller
and Shareholder, including, without limitation, the deliveries and other
agreements of Seller contemplated hereby, have been duly authorized and
approved by the Boards of Directors of Seller and of the Shareholder and do
not require any further authorization or consent of any third party. This
Agreement is, and each other agreement or instrument of Seller or Shareholder
contemplated hereby will be, the legal, valid and binding agreement of Seller
and Shareholder, enforceable in accordance with their respective terms, except
as enforceability may be limited by creditors' rights and the discretion of
the courts (the "Enforceability Exception").
Except as set forth on Schedule 2.3, neither the execution nor the
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will conflict with or result in any violation of or
constitute a default under any term of the Articles of Incorporation or
By-Laws of Seller or Shareholder, or any agreement, mortgage, debt instrument,
indenture, franchise, license, permit, authorization, lease or other
instrument, judgment, decree, order, or to Seller's knowledge, any law or
regulation by which Seller or Shareholder is bound, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the
Purchased Assets
-7-
<PAGE>
except where such violation, default or creation would not have a Material
Adverse Effect.
2.4. Financial Statements. Seller has heretofore delivered the
following financial statements (collectively, the "Financial Statements") to
Buyer: unaudited balance sheets and statements of income for the fiscal years
ended October 28, 1995, October 27, 1996 and October 26, 1997 and (ii)
unaudited balance sheets and statements of income as of and for the four
months ended February 28, 1998. The Financial Statements have been prepared in
conformity with generally accepted accounting principles consistently applied
and present fairly in all material respects the assets, liabilities, financial
position and results of operations of Seller as of their respective dates and
for the respective periods covered thereby.
2.5. Operations Since October 26, 1997.
(a) Since October 26, 1997, there has been (i) no material
adverse change in the Purchased Assets (in the aggregate) or the
Business, and no related fact or related condition exists or, to
Seller's knowledge, is contemplated or threatened which might
reasonably be expected to cause such a change in the future other
than Buyer's purchase and use of the Purchased Assets and (ii) no
damage, destruction, loss or claim, whether or not covered by
insurance, or condemnation or other taking adversely affecting in any
material respect the Purchased Assets (taken as a whole) or the
Business.
(b) Except as set forth on Schedule 2.5(b), since October
26, 1997, Seller has conducted the Business in all material respects
in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing, since October 26, 1997,
Seller has not:
(i) sold, leased, transferred or otherwise disposed
of (except in the ordinary course of business), or mortgaged
or pledged, or imposed or suffered to be imposed any lien,
charge or encumbrance on, any of the Purchased Assets;
(ii) canceled any debts owed to, or claims held by,
Seller (including the settlement of any claims or
litigation) other than in the ordinary course of the
Business consistent with past practice;
(iii) canceled or terminated any material contract,
relationship, lease or agreement (except to the extent
terminated by lapse of time and not by default) or entered
into and become bound by any material contract,
relationship, lease or agreement except for customer
contracts entered into in the ordinary course of business;
(iv) delayed payment of any account payable or
other liability of the Business beyond the date when such
liability would have been paid in the ordinary course of the
Business consistent with the past practice; or
-8-
<PAGE>
(v) made any agreements, written or oral, to
perform any of the above, other than as contemplated or set
forth in this Agreement.
2.6. No Undisclosed Liabilities. Seller is not subject to any
liability (including, without limitation, unasserted claims whether known or
unknown), whether absolute, contingent, accrued or otherwise of a nature
required to be set forth on financial statements prepared in accordance with
generally accepted accounting principles, except for (i) liabilities set forth
in the balance sheet included in the Financial Statements as of October 26,
1997 and (ii) liabilities incurred in the ordinary course of business since
the date thereof, of the same general type and amount as those reflected on
the Financial Statements as of October 26, 1997, and entered on Seller's books
and records.
2.7. Taxes. Seller and Shareholder (with respect to the Business)
have filed or will timely file all required federal, state, county and local
income, excise, withholding, property, franchise and other tax returns,
declarations and reports which are required to be filed on or before the date
hereof and the Closing, and have paid or reserved for all taxes which have
become due pursuant to such returns or pursuant to any assessment which has
become payable. All monies required to be withheld by Seller from employees of
Seller for income taxes, social security and other payroll taxes have been
collected or withheld, and either paid to the respective governmental
agencies, set aside in accounts for such purpose, or accrued, reserved against
and entered upon the books of Seller. The returns, declarations and reports
referred to in the previous sentences of this Section are or will be true and
correct and, to Seller's and Shareholder's knowledge, reflect or will reflect
accurately all taxable income or tax liabilities for the periods covered
thereby. Seller has not received a notice that any examination of, or
proceeding with respect to, any tax return or report has been scheduled or
conducted. There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any tax return of Seller.
2.8. Availability of Assets and Legality of Use. With respect to the
tangible Purchased Assets, no notice of any violation of any applicable laws,
regulations, rules, ordinances, codes, licenses, franchises and permits
(including, without limitation, electrical, building, zoning, environmental
and occupational safety and health requirements) has been received by Seller.
The Purchased Assets constitute all of the assets used in and necessary for
the operation of the Business in the manner conducted by Seller.
2.9. Inventory. Subject to all applicable reserves, the Inventory is
of good, merchantable and usable quality, is salable in the ordinary course of
business of Seller and is reflected on the Financial Statements at the lower
of cost (on a first-in, first-out basis) or market value. The inventory
obsolescence policies of the Seller are appropriate to the nature of the
products sold and marketing methods used by the Seller and the reserve for
inventory obsolescence contained in the Financial Statements fairly reflects
the amount of excess, obsolete, defective, damaged, used, overstock and slow
moving inventory in accordance with the principles set forth on Exhibit
1.5(d). All Inventory which is work-in-process: (i) has been subjected to and
has passed all appropriate tests and inspections; (ii) (with respect to those
products which will be completed before Closing) may be sold in conformance
with
-9-
<PAGE>
specifications and industry standards; and (iii) to Seller's knowledge, in the
aggregate will be convertible (or has been converted) into Receivables.
2.10. Real and Personal Property Leases. Schedule 2.10 lists each
lease or other agreement or right which is contained in the Contracts, whether
written or oral, under which Seller is lessee of, or hold or operates, any
real estate (including the Premises), machinery, equipment, vehicle or other
real or personal property owned by a third party (including any of the
Shareholder or affiliates thereof) and which asset is used by the Seller.
2.11. Real Property. (a) Seller has good, valid and marketable title
to the Owned Real Property, free and clear of all liens, claims and
encumbrances, except for the lien for current taxes not yet due and payable
and except for those liens, claims, restrictions of record and other
encumbrances appearing in the Title Commitment, none of which materially
interfere with the use, access on ownership of the Owned Real Estate as it is
currently used ("Permitted Liens"). The Owned Real Property is not subject to
any leases or tenancies. To Seller's knowledge, none of the buildings,
structures, improvements, or parcels of real estate comprising the Owned Real
Property is in material violation of, or is the subject of any complaint or
notice of violation of, any applicable zoning ordinance, building code or
restrictive covenant.
(b) All violations of law or municipal ordinances, orders,
requirements or regulations currently existing of record noted in or
issued by the departments of buildings, fire, labor, health or other
federal, state, county, municipal and other governmental departments
and agencies having jurisdiction against or affecting the Owned Real
Property as of the Closing, and any outstanding work orders and
requirements of any company now or then insuring the Owned Real
Property against casualty loss, which work orders or requirements, if
not performed or satisfied, would have a material adverse effect on
the Business or the use of the Owned Real Property, shall be remedied
by Seller, at its sole cost and expense, prior to the Closing, Seller
shall furnish Buyer with an authorization to make the necessary
violation searches, and Buyer and its authorized representatives
shall have the right to enter upon and inspect the Owned Real
Property from time to time on and before the date of the Closing.
Seller shall not be required to remedy any violation caused by Buyer.
(c) Seller has no ground leases, space leases, licenses, or
agreements permitting others to utilize or occupy the Owned Real
Property.
(d) Except for the Permitted Liens, the Owned Real Property
is not affected by any special or other assessment for public
improvements or otherwise.
(e) Except for the Permitted Liens, the occupation and
condition of the Owned Real Property and its use in the Business do
not, and will not, violate any applicable deed restrictions,
easements or other covenants, restriction, agreements or urban
redevelopment plans of record or known to Seller, or any site plan
approvals or zoning or subdivision regulations as they exist at the
Closing, and Seller has received no notice of any such violation,
except as set forth in the Title Commitment.
-10-
<PAGE>
(f) No written notices of violation of law or ordinances,
orders, requirements or regulations of any federal, state, county,
municipal or other governmental or quasi-governmental department,
agency or authority relating to the Owned Real Property have been
received by Seller.
(g) The Owned Real Property is served by water, septic
system, gas, electricity, and telephone services.
(h) Seller has provided Buyer with copies of all
construction, service or maintenance contracts, or management
agreements (any such contracts and agreements being hereinafter
collectively referred to as the "Service Contracts"), and will cause
any Service Contracts to be terminated at Closing, at Buyer's request
upon 10 days' prior notice provided that no penalty is involved.
(i) Seller shall remove or satisfy any and all liens of
record any and all liens affecting the Owned Real Property prior to
the Closing, except for Permitted Liens.
(j) Prior to Closing, Seller will deliver true copies of any
certificates of occupancy, licenses and permits required for the use,
operation and occupancy of the Owned Real Property. The use of the
Owned Real Property is permitted by and is in substantial compliance
with such certificates of occupancy, licenses and permits.
(k) Seller has not received any written notice that the
Owned Real Property, or any interest therein, is or will be subject
to or affected by any condemnation, eminent domain or similar
proceeding.
(l) Seller has no knowledge and has received no notice of
any material structural defects in the improvements which are a part
of the Owned Real Property. To Seller's knowledge no latent effects
exist in any such improvements.
2.12. Intellectual Property. Seller owns, licenses or otherwise has
rights to use all of the Intellectual Property required for the operation of
the Business listed on Schedule 2.12 free and clear of all liens, claims,
security interests, encumbrances and restrictions and has not been licensed to
any person. Seller has not, to its knowledge, infringed on any Intellectual
Property of another. There is no claim pending, or to the knowledge of Seller
and the Shareholder, threatened against the Seller with respect to alleged
infringement of any Intellectual Property owned by another nor, to the
knowledge of Seller and the Shareholder, does the operation of the Business in
the manner in which it has been operated give rise to any such claim.
2.13. Receivables. All Receivables have arisen from bona fide
transactions by Seller in the ordinary course of Business, and, to Seller's
knowledge, except to the extent not in excess of the reserve for doubtful
accounts reflected on the Financial Statements, is in dispute, and to Seller's
knowledge, there is no basis for any of the foregoing or for any account
debtor to return any goods shipped by Seller. All Receivables (net of reserves
for uncollectible receivables set forth on the Closing Balance Sheet) are
collectable within one hundred twenty (120) days of Closing.
-11-
<PAGE>
2.14. Fixed Assets. To Seller's knowledge, all Fixed Assets are free
from material defects have been maintained in accordance with Seller's
historical practices which are appropriate under the circumstances and are
sufficient for the conduct of the Business, as it is currently conducted.
2.15. Title to Property. Except as set forth on Schedule 2.15, Seller
has good and marketable title to all of the Purchased Assets free and clear of
all liens, claims, charges, encumbrances, security interests, mortgages,
pledges, easements, defects in title, covenants and other restrictions of any
kind, which would materially adversely affect Seller's use of such assets
other than the Assumed Liabilities or the Permitted Encumbrances (defined
below). Delivery to the Buyer on the Closing Date of the instruments of
transfer contemplated hereunder will thereby transfer to the Buyer good and
marketable title to the Purchased Assets, subject to no liens, claims,
charges, encumbrances, security interests, mortgages, pledges, easements,
defects in title, covenants or other restrictions of any kind, other than
Permitted Encumbrances. "Permitted Encumbrances" as used herein means those
encumbrances, liens, charges, assessments, imperfections and exceptions set
forth on Schedules 2.15. Any items set forth on the form of title commitment
attached to Schedule 2.15 which cannot be identified as a permitted
encumbrance without the survey contemplated in Section 4.6 below, shall only
be deemed a Permitted Encumbrance if, after delivery of such survey it is
determined by Buyer that such item would not materially adversely affect
Buyer's use of the Owned Real Property.
2.16. Employee Relations. Seller is not a party and has never been a
party to any collective bargaining agreements. Seller has complied in all
material respects with all applicable laws, rules and regulations which relate
to prices, wages, hours, discrimination in employment and collective
bargaining and to the operation of the Business and is not liable for any
arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing. To the of Seller's knowledge, there has been no union
organizing effort within the last five (5) years. There have been no strikes,
lockouts, slowdowns or similar work stoppages affecting Seller's employees and
none is pending or to Seller's knowledge, threatened. Schedule 2.16 lists all
employment agreements, policy manuals and other written understandings with
employees (including covenants not to compete). Seller has previously
delivered to Buyer a true and complete list setting forth the name, job title,
years of employment, salary and other cash compensation for fiscal 1997 for
all salaried employees. Schedule 2.16 sets forth all worker's compensation
claims outstanding against the Seller.
2.17. Employee Benefit Plans
(a) Except as described in Schedule 2.17, (i) the Seller
(either directly or indirectly through any other person or entity)
does not sponsor, maintain, contribute to or is not obligated under
any Employee Plan (as defined in paragraph (b) below) on behalf of
its employees; and (ii) each Employee Plan that is intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), has received a favorable determination
letter from the Internal Revenue Service stating that the plan is so
qualified and that the trust associated with the plan is tax-exempt
under Section 501(a) of the Code.
-12-
<PAGE>
(b) The term "Employee Plan" includes any pension,
retirement, savings, disability, medical, dental, health, life
(including, without limitation, any individual life insurance policy
under which an employee of the Seller is the named insured and as to
which the Seller makes premium payments, whether or not the Seller is
the owner, beneficiary or both of such policy), death benefit, group
insurance, profit-sharing, deferred compensation, stock option, stock
purchase, bonus, incentive, vacation pay, severance pay, or other
employee benefit plan, trust, arrangement, contract, agreement,
policy or commitment (including, without limitation, any pension plan
as defined in Section 3(2) of ERISA ("Pension Plan"), and any welfare
plan as defined in Section 3(1) of ERISA ("Welfare Plan"), whether or
not any of the foregoing is funded or insured and whether written or
oral, which is intended to provide or does in fact provide benefits
to any employees of the Seller, and to which the Seller is a party or
by which the Seller (or any of the rights, properties or assets of
the Seller) is bound. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
(c) Each Welfare Plan which is a group health plan (within
the meaning of Section 5000(b)(1) of the Code) complies with, and has
been maintained and operated in accordance with, each of the health
care continuation requirements of Section 162(k) of the Code as in
effect for years beginning prior to 1989, Section 4980B of the Code
for years beginning after December 31, 1988, and Part 6 of Title I,
Subtitle B of ERISA, except for any noncompliance which does not have
and will not have a material adverse effect.
(d) Except as disclosed in Schedule 2.17, the Seller has no
liabilities for postretirement welfare benefits, including retiree
medical benefits, except for continuation coverage as may be required
by Section 4980B of the Code or similar state laws.
(e) No lawsuits, claims (other than routine claims for
benefits) or complaints to, or by, any person or governmental entity
have been filed, are pending or, to the knowledge of the Seller have
been threatened, and no facts or contemplated events exist that
reasonably could be expected to give rise to any such lawsuit, claim
(other than a routine claim for benefits) or complaint, with respect
to any Employee Plan.
(f) Except as disclosed on Schedule 2.17 (i) each Employee
Plan, the administrator and fiduciaries of each Employee Plan, and
Seller have at all times complied in all material respects with the
applicable requirements of ERISA (including, but not limited to, the
fiduciary responsibilities imposed by Part 4 of Title I, Subtitle B
of ERISA), the Code and any other applicable legal requirements
(including regulations and rulings thereunder) governing each
Employee Plan, and (ii) each Employee Plan has at all times been
properly administered in all material respects in accordance with all
such legal requirements, and in accordance with its terms to the
extent consistent with all such legal requirements.
-13-
<PAGE>
(g) Except as disclosed on Schedule 2.17, the Seller is not
delinquent as to contributions or payments to or in respect of any
Employee Plan as to which it is in any way obligated to make
contributions.
2.18. Status of Contracts. Schedule 2.18 is a true and complete list
of every Contract and agreement to which Seller is a party, or by which it is
bound, obligating Seller to make annual expenditures in excess of $50,000.00
or, if less, are otherwise material to the Business, individually or in the
aggregate, including, without limitation, all agreements relating to the
borrowing of money (unless otherwise set forth on the Financial Statements),
employment and collective bargaining, the purchase of materials, supplies,
equipment, machinery, parts, products or services (other than purchase orders
in the ordinary course of business) enabling a third party to distribute
Seller's products whether or not such contracts and agreements include items
besides the Contracts (said contracts, agreements, etc. are hereinafter
referred to as the "Seller Agreements"). Each of the Seller Agreements
constitutes a legal, valid and binding obligation of the Seller and, to
Seller's knowledge, the other party thereto, subject to the Enforceability
Exception, and is in full force and effect, may be transferred to the Buyer
(if Buyer so desires) pursuant to this Agreement and will continue in full
force and effect thereafter, in each case without breaching the terms thereof
or resulting in the forfeiture or impairment of any rights thereunder and
without the consent, approval or act of, or the making of any filing with, any
other party. Seller is not in, or alleged to be in, breach or default under,
nor is there or is there alleged to be any basis for termination of, any of
the Seller Agreements and, to the knowledge of Seller, no other party to any
of the Seller Agreements has breached or defaulted thereunder, and no event
has occurred and no condition or state of facts exists which, with the passage
of time or the giving of notice or both, would constitute such a default or
breach by Seller or, to the of the knowledge of Seller, by any such other
party. Seller is not currently renegotiating any of the Seller Agreements and
is not paying liquidated damages in lieu of the performance thereunder. Seller
will use its reasonable efforts to deliver true and complete copies of each of
the Seller Agreements to Buyer and will deliver each of the Seller Agreements
specifically requested by Buyer.
2.19. No Violations, Litigation or Regulatory Action.
(a) Except as disclosed on Schedule 2.20, to Seller's
knowledge, Seller has complied in all respects with all laws,
regulations, rules, writs, injunctions, ordinances, franchises,
decrees or orders of any court or of any foreign, federal, state,
municipal or other government, governmental department, commission,
board, bureau, agency or instrumentality which are applicable to the
Purchased Assets, Seller Agreements, or the Business;
(b) there are no lawsuits, claims, suits, proceedings or
investigations pending or, to Seller's knowledge, threatened against
or affecting Seller and the Shareholder, and there are no lawsuits,
claims, suits or proceedings pending in which Seller is the plaintiff
or claimant; and
-14-
<PAGE>
(c) there is no action, suit or proceeding pending or, to
Seller's knowledge, threatened which questions the legality or
propriety of the transactions contemplated by this Agreement.
2.20. Environmental Matters. Except as disclosed on Schedule 2.20:
the Seller is conducting (and has conducted) the Business in compliance with
all Environmental Legal Requirements (as defined below) and there is no
pending or, to the knowledge of the Seller or the Shareholder, threatened,
civil or criminal litigation, notice of violation, notice as a "potentially
responsible party" (as such term is defined under the United States
Comprehensive Environmental Response, Compensation and Liability Act, as
amended) or lien, or administrative proceeding relating to Environmental Legal
Requirements involving the Seller; Seller has delivered to Buyer a true and
correct copy of a Phase I environmental site assessment of the Owned Real
Property conducted upon Seller's acquisition of the property; since the Phase
I environmental site assessment, dated April 14, 1995, by Groundwater
Technology, Seller has not materially changed the operation of its Business;
the Seller has not transported, either on-site or off-site, Hazardous
Substances (as defined below) or arranged for the transportation of such
Hazardous Substances to any location which is the subject of Federal, state or
local enforcement, removal or remedial actions, inquiries or other
investigations; the Seller has not treated, stored or disposed of in material
violation of any applicable Environmental Legal Requirement, Hazardous
Substances on any property now or previously owned or leased by the Seller,
nor, to its knowledge, has anyone else treated, stored or disposed of in
material violation of any applicable environmental Legal Requirement,
Hazardous Substances on any property now or previously owned or leased by the
Seller. The term "Environmental Legal Requirement" shall mean any applicable
federal, state or local law, statute, rule, regulation or ordinance relating
to public health, safety or the environment, including, without limitation,
relating to releases, discharges or emissions to air, water, land or
groundwater, to the withdrawal or use of groundwater, to the use and handling
of polychlorinated biphenyls or asbestos, to the disposal, treatment, storage
or management of solid or Hazardous Substances or to exposure to toxic or
Hazardous Substances, or to the handling, transportation, discharge or release
of gaseous or liquid substances. The term "Hazardous Substance" shall mean any
hazardous or toxic material, substance or waste, including petroleum or any
fraction thereof, which is defined by those or similar terms or is regulated
as such under any federal, state or local authority having jurisdiction over
the Premises or its use. Notwithstanding anything herein to the contrary, any
representations or warranties by Seller in this Agreement relating to the
Business' compliance with Environmental Legal Requirements shall be deemed to
be made to the knowledge of Seller and Shareholder to the extent such
representation or warranty relates to the Business prior to Shareholder's
ownership of Seller.
2.21. Insurance. Schedule 2.21 sets forth a list and brief
description (including policy numbers, insurers, nature of coverage, limits,
deductibles, premiums, carriers, claims pending under any other insurance
policy, and effective and termination dates) of all policies of insurance
maintained, owned or held by Seller on the Purchased Assets on the date
hereof. Seller shall use commercially reasonable efforts to keep such
insurance or comparable insurance in full force and effect through the Closing
Date. Seller has complied in all respects with each of such insurance
policies, and has not failed to give any notice or present any claim
thereunder in a due and timely
-15-
<PAGE>
manner. Seller has delivered to the Buyer true and complete copies of each such
insurance policy or the certificates with respect thereto.
2.22. Broker or Finder. Except as set forth on Schedule 2.22, neither
Seller nor any party acting on its behalf has paid or become obligated to pay
any fee or commission to any broker, finder or intermediary for or on account
of the transactions contemplated by this Agreement. Notwithstanding
disclosure, Seller shall remain liable for the fees and commissions set forth
on Schedule 2.22.
2.23. Dealers and Original Equipment Manufacturer Customers. Schedule
2.23 contains a list of names of all dealers and original equipment
manufacturer ("OEM") customers (measured by dollar volume of business) of
Seller and the percentage of Seller's business which each such dealer and/or
OEM customer represented during the fiscal year 1997 and the top twenty (20)
customers measured by dollar volume for fiscal year 1996. Except as set forth
on Schedule 2.23, there exists no actual or, to Seller's and Shareholder's
knowledge, threatened termination, cancellation or litigation of, or any
significant adverse modification or change (other than seasonal or cyclical
business changes) in the business relationship of Seller with any dealer or
OEM customer listed in Schedule 2.23 and, to Seller's knowledge, there exists
no present condition or state of facts or circumstances, involving dealers or
any OEM customer which would materially adversely affect the Business or
prevent the Buyer from conducting the business after the consummation of the
transactions contemplated by this Agreement in essentially the same manner in
which it has heretofore been conducted by Seller, except as affected by the
transactions contemplated hereby or by Buyer's express actions.
2.24. Suppliers. Schedule 2.24 is a true and complete list by dollar
volume of purchases made during the 1997 fiscal year from the fifteen (15)
largest suppliers to Seller, exclusive of insurance and utilities. In the last
twelve (12) months, no such supplier has canceled or otherwise terminated, or
threatened in writing to cancel or otherwise terminate, its relationship with
the Seller. The Seller or the Shareholder has not received any written notice
and is not aware that any such supplier intends to cancel or otherwise modify
its relationship with the Seller, which cancellation or modification would
have a material adverse effect on the Seller.
2.25. Permits. Except as disclosed on Schedule 2.20, Seller and the
Business possess all Permits to conduct the Business except to the extent that
the failure to obtain or maintain any such Permits would not have a Material
Adverse Effect. The Permits are listed on Schedule 2.25 and those which are
not transferable are also designated in said Schedule. The Permits are in full
force and effect and, to Seller's knowledge, there are no defaults or
breaches, or events which but for notice or lapse of time or both would
constitute a breach or default under the Permits and all Permits are
transferable without obtaining the consent of the issuing body.
2.26. Product Warranties. To Seller's knowledge, the products
manufactured, sold, leased, and delivered by Seller have conformed in all
material respects with all applicable contractual commitments and all express
and implied warranties and, to Seller's knowledge, the warranty reserve on its
Financial Statements fairly reflects all obligations of Seller for replacement
or repair thereof or other damages in connection therewith. Substantially all
of the
-16-
<PAGE>
products manufactured, sold, leased, and delivered by Seller are subject to
standard terms and conditions of sale or lease. Schedule 2.26 generally
describes the warranty experience of the Business for the past nine years.
2.27. Product Liability. Seller has no liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due) arising out of any injury to individuals or property as
a result of the ownership, possession, or use of any product manufactured,
sold, leased, or delivered by Seller. Schedule 2.27 contains a true and
complete schedule of all product liability claims currently outstanding and
all such claims asserted against Seller during the fiscal years 1995-1997.
2.28. Sales by Product and by State. Schedule 2.28 is a complete list
by dollar volume of sales by product and by state made during the fiscal years
1996 and 1997.
2.29. Representations and Warranties at Closing. The representations
and warranties of Seller set forth in this Agreement shall be true on and as
of the Closing Date as though such representations and warranties were made on
and as of such date.
2.30. Disclosure. None of the representations or warranties of Seller
contained herein, and none of the information contained in the Schedules and
Exhibits referred to in Article II, is false or misleading in any material
respect or omits to state a fact here or therein necessary to make the
statements herein or therein not misleading in any material respect.
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYER
------------------------------------------------------
As an inducement to Seller and the Shareholder to enter into this
Agreement and to consummate the transactions contemplated hereby, the Buyer
hereby represents, warrants and covenants to Seller and agrees as follows:
3.1. Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has full corporate power and authority to own, lease or
otherwise hold its properties and assets and to carry on its business as now
conducted.
3.2. Authority of the Buyer. The Buyer has full power and authority
to enter into this Agreement, to consummate the transactions contemplated
hereby and to comply with the terms, conditions and provisions hereof.
The execution, delivery and performance of this Agreement by the
Buyer, including, without limitation, the deliveries and other agreements of
the Buyer contemplated hereby, have been duly authorized and approved by its
Board of Directors and do not require any further authorization or consent of
the Buyer or its shareholders. This Agreement is, and each other agreement or
instrument of the Buyer contemplated hereby will be, the legal, valid and
binding agreement of the Buyer, enforceable in accordance with its terms.
-17-
<PAGE>
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will conflict with or
result in any violation of or constitute a default under any term of the
Articles of Incorporation of Buyer, or any material agreement, mortgage, debt
instrument, indenture, franchise, license, permit, authorization, lease or
other instrument, judgment, decree, order, law or regulation by which Buyer is
bound.
3.3. No Broker or Finder. Neither the Buyer nor any party acting on
its behalf has paid or become obligated to pay any fee or commission to any
broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement.
3.4. Financial Capability. Buyer has the financial resources to
consummate the transactions contemplated hereby.
ARTICLE IV.
ACTIONS PRIOR TO THE CLOSING DATE
---------------------------------
The respective parties hereto covenant and agree to take the
following actions between the date hereof and the Closing Date:
4.1. Investigation of Seller by the Buyer. Seller shall afford the
officers, employees and authorized representatives (including, without
limitation, independent public accountants and attorneys) (collectively,
"Agents") of the Buyer and its financing sources reasonable access during
normal business hours and opportunity to complete an acquisition review,
including, without limitation, a review of Seller's books and records, leases,
contracts and other agreements, income tax returns, physical inspection of the
Purchased Assets, and the right to contact and communicate with Seller's
employees, customers, vendors, suppliers, independent contractors,
representatives and others having a business relationship with Seller
(provided that Buyer shall discuss these contacts with Seller prior to any
such contacts and will allow Seller to participate in such contacts and
communications). Seller and the Shareholder shall furnish to the Buyer and its
Agents such additional information concerning the Purchased Assets and the
Business as shall be reasonably requested, including all such information as
shall be necessary to enable the Buyer and its Agents to verify the accuracy
of the representations and warranties contained in Article II, and to
determine whether the conditions set forth in Article IV have been satisfied.
4.2. Preserve Accuracy of Representations and Warranties. Each of the
parties hereto shall use commercially reasonable efforts to refrain from
taking any action which would render any representation, warranty or covenant
contained in this Agreement inaccurate as of the Closing Date. Each party
shall promptly notify the other of any (a) event or condition which would
render any representation or warranty set forth in Article II or III to be
untrue or in breach or would cause any covenant in Article II or III to be
unfulfilled or (b) any action, suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or otherwise challenge the
legality of any transaction contemplated by this Agreement. Not in limitation
of the foregoing, between the date of execution of this Agreement and the
Closing
-18-
<PAGE>
Date, Seller shall conduct the Business in the ordinary course and shall not,
without the prior written consent of the Buyer which will not be unreasonably
withheld and subject to applicable law, in connection with the Business, (a)
move its offices, warehouses or plant facilities or enter into any purchase
contract or lease for any site, (b) significantly change billing practices or
rates, (c) increase salaries, bonuses or compensation structure of any employee
(or contracted for employee) other than in the ordinary course of business and
consistent with past practices, (d) terminate or move any employee to another of
Seller's operations, except for cause, or (e) commit to make or make capital
expenditures in excess of $10,000 in the aggregate except as listed on Schedule
4.2. Between the date hereof and the Closing Date, Seller will update monthly
and provide updated balance sheets and statements of income and loss to the
Buyer, and such updates and current statements shall be subject to the same
representations and warranties as contained in Section 2.4.
4.3. Consents and Approvals. Seller shall use commercially reasonable
efforts promptly to obtain all consents and amendments from parties to
Contracts and all consents, amendments or Permits from governmental
authorities which are required by the terms thereof, this Agreement or
otherwise for the due and punctual consummation of the transactions
contemplated by this Agreement, provided that Seller shall not be required to
pay any sums to obtain such consents. Seller shall also cooperate with and
assist the Buyer and its authorized representatives through the Closing in
order to provide an efficient transfer of the control and management of the
Business and to avoid any undue interruption in the activities and operations
of the Business following the Closing Date except for the transactions
contemplated hereby.
4.4. No Public Announcements. Neither of the parties hereto shall,
without the approval of the other party (which may not be unreasonably
withheld), make any press release or other public announcement concerning the
transactions contemplated by this Agreement, except as and to the extent that
such party shall be so obligated by law, in which case the other party shall
be advised and the parties shall use their best efforts to cause a mutually
agreeable release or announcement to be issued.
4.5. Exclusive Dealing. Seller and its Affiliates shall deal
exclusively with the Buyer with respect to the sale of Seller and shall not
solicit, encourage or entertain offers or inquiries (nor shall Seller or any
of its Affiliates authorize or permit any director, officer, employee,
attorney, accountant or other representative or agent to solicit, encourage or
entertain offers or inquiries) from other possible acquiring companies,
persons or entities, provide information to or participate in any discussions
or negotiations with any companies, persons or entities with a view to an
acquisition of all or substantially all of Seller's assets or stock or any
interest therein.
4.6. Conveyance and Transfer of Owned Real Property. At the Closing,
Seller shall deliver a warranty deed to the Owned Real Property in the form
attached hereto as Exhibit 4.6 with good and marketable title, free and clear
of all Encumbrances, except for Permitted Encumbrances and Permitted Liens.
Five (5) days prior to Closing, Seller shall furnish to Buyer, at Seller's
expense, a commitment for title insurance from a title insurance company
reasonably acceptable to Buyer showing title to the Owned Real Property to be
conveyed to be good,
-19-
<PAGE>
indefeasible and vested in Seller free and clear of all liens, claims and
encumbrances, exceptions, reservations, or restrictions except as Permitted
Liens and Permitted Encumbrances.
Five (5) days prior to the Closing Date, Seller shall furnish to
Buyer and to the title insurance company, at the joint expense of Seller and
Buyer, a survey dated not more than thirty (30) days prior to the Closing Date
prepared by a licensed or registered public surveyor acceptable to the title
company. The survey shall be prepared in accordance with American Land Title
Association standards or applicable state standards and shall include but not
be limited to: (a) a metes and bounds or a lot and block legal description of
the subject property including a calculation and certification by the surveyor
of the number of gross square feet contained within the boundaries and a
certification by the surveyor that the legal description of the property
closes; (b) location of all improvements on the property; (c) the location of
all utility and other easements of record on the date of the survey and a
reference to their recording; (d) all applicable building setback lines, if
any, and setback requirements and a certificate by the surveyor that no
buildings encroach beyond said setback lines except as indicated thereon; (e)
the surveyor's certificate identifying any encroachments upon the subject
property by adjoining property owners and any encroachments of the subject
improvements upon other property not to be conveyed hereunder; (f) explanation
of discrepancies between the survey and the recorded legal description; (g) an
identification of any portion of the property within a 100 year flood plain or
flood hazardous area designated by governmental authority; and (h)
identification of all underground storage tanks that the surveyor can locate
by an on-the-ground inspection of the property.
ARTICLE V.
OTHER AGREEMENTS
----------------
5.1. Supply Agreement. At the Closing, Buyer and DewEze
Manufacturing, Inc., a wholly-owned subsidiary of Shareholder ("DewEze") shall
enter into a Supply Agreement in the form attached hereto as Exhibit 5.1
providing for the manufacture and sale by Buyer for a period of twelve months
of running gear for the Parker division of DewEze.
5.2. Non-Competition Agreement. At the Closing, Buyer shall enter
into a Non-Competition Agreement with Shareholder and Seller, in the form
attached as Exhibit 5.2 (the "Non-Competition Agreement"). In addition, Seller
and Shareholder agree to timely make all payments under the Bennett Agreement.
5.3. Seller's Employees. On and as of the Closing Date, Seller will
take all action necessary to terminate the employees of the Business and to
terminate all Employee Plans as they apply to such employees. Buyer shall
offer employment to at least two-thirds of the employees of the Business on
terms substantially similar to those offered by Seller and waive insurance
waiting periods to the extent allowed by the Buyer's insurer. Neither the
Seller or Shareholder shall directly or indirectly, for itself or on behalf of
any other entity, hire any current employee of Seller, or induce or attempt to
induce any such employee to leave his or her employment with Buyer, at any
time within five years from the Closing Date. Seller shall at or prior to
Closing, terminate its Incentive Bonus Plan.
-20-
<PAGE>
5.4. Environmental Site Assessment. Buyer shall, at its sole cost and
expense, engage an environmental consulting firm to conduct an environmental
site assessment of the Premises (the "Environmental Review") to determine what
remedial actions, if any, are reasonably necessary to cause Seller to be in
compliance with the Environmental Legal Requirements. Buyer shall promptly
furnish copies of all drafts and final Environmental Review reports to Seller.
If such Environmental Review indicates that any remedial actions are
reasonably necessary to comply with the Environmental Legal Requirements, (a)
Buyer shall notify Seller in writing of the actions required and the estimated
costs of such actions ("Remediation Costs"), (b) Buyer shall promptly engage,
at its sole cost and expense, reputable and recognized environmental engineers
to conduct all requisite or desired testing to determine whether Seller is in
compliance with all Environmental Legal Requirements, and (c) Seller shall pay
all reasonable and necessary Remediation Costs required to comply with all
applicable Environmental Legal Requirements; provided, however, that if the
total Remediation Costs exceed $75,000 and the remediation associated
therewith cannot be completed in all material respects by the Closing, Seller
may terminate this Agreement and its obligations hereunder without any
liability, cost or penalty whatsoever.
5.5. Software. Shareholder agrees to provide to Buyer the right to
use for six months after Closing, the software currently used by the Seller.
Such usage shall be free for thirty (30) days and $7,000 per month for five
months thereafter.
5.6. Cooperation. Seller agrees to cooperate with and to assist Buyer
in its efforts to obtain any permits or to install any pollution control
equipment required by law for the continued operations of the Owned Real
Property or to comply with applicable environmental standards, including but
not limited to assisting Buyer in the preparation and submission of a full and
complete permit application for a Class I or Class II, as applicable, air
operating permit pursuant to the requirements of Title 28, Article 19 of the
Kansas Administrative Regulations, and assisting any subsequent actions
necessary to obtain the issuance of said air operating permit with terms and
conditions acceptable to Buyer. Without limiting the generality of the
undertakings pursuant to this Section, Seller agrees to take or cause to be
taken the following actions: (i) provide promptly any relevant information and
documents requested by Buyer or by any Government Entity; (ii) provide Buyer
or its representatives access to the Owned Real Property during normal
business hours; (iii) allow Buyer or its representatives access to and
cooperation from any employee of Seller having relevant knowledge; and (iv) if
requested by Buyer or any government entity, to attend any meetings with any
government entity. The obligations under this Section 5.6 shall not be
included in calculating the $75,000 threshold contemplated in Section 5.4.
Buyer agrees to (a) use its best efforts to file any necessary air permit
applications written ninety (90) days of Closing, (ii) allow Seller to attend
and participate in any meetings with any governmental entity with respect
thereto and (iii) provide notice of any governmental or enforcement
proceedings with respect thereto. Seller and Buyer agree to use commercially
reasonable efforts to obtain the air permits contemplated herein in order to
reasonably minimize any indemnifiable damages arising under Section 8.1(c)
below so that the Business may operate in a manner consistent with its current
operation.
-21-
<PAGE>
ARTICLE VI.
CONDITIONS PRECEDENT TO OBLIGATION OF BUYER
-------------------------------------------
The obligations of the Buyer under this Agreement shall be subject to
the satisfaction, on or prior to the Closing Date, of the conditions set forth
below.
6.1. No Misrepresentation or Breach of Covenants and Warranties. All
of Seller's or Shareholder's covenants and agreements contained herein shall
have been performed or fulfilled in all material respects; each of the
representations and warranties of Seller or Shareholder contained or
referenced herein shall be true and correct in all materials respects on the
Closing Date as though made on the Closing Date, except for (a) those
representations and warranties set forth in Section 2.1, 2.2, 2.3 and 2.15
which shall be true and correct in all respects and (b) those representations
and warranties already qualified by materiality, and except for changes
therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by the Buyer and; and there
shall have been delivered to the Buyer a certificate or certificates to that
effect, dated the Closing Date, signed on behalf of the Shareholder by its
President and, on behalf of Seller, by its President.
6.2. Corporate Action. Seller and Shareholder shall have taken all
corporate action necessary to approve the transactions contemplated by this
Agreement, and Seller shall have furnished the Buyer with certified copies of
the resolutions adopted by the Boards of Directors of Seller and Shareholder,
in form and substance reasonably satisfactory to counsel for the Buyer, in
connection with such transactions. Buyer's Board of Directors shall have
approved such transactions at their meeting on February 4, 1998.
6.3. No Restraint or Litigation. No action, suit, investigation or
proceeding shall have been instituted or threatened by any third party,
governmental or regulatory agency to restrain, prohibit or otherwise challenge
the legality or validity of the transactions contemplated hereby which, in the
reasonable opinion of Buyer's Board of Directors based on advice of counsel,
has a substantial likelihood of success.
6.4. Necessary Consents and Permits. Seller shall have received
consents and estoppel certificates, in form and substance reasonably
satisfactory to the Buyer, to the transactions contemplated hereby from all
appropriate governmental authorities and any requisite third parties under the
Contracts being transferred to Buyer, including without limitation, consents
required under that certain lease for the Owned Real Property, by and between
the City of Great Bend, Kansas and Seller dated as of March 1, 1994. Buyer
shall also have obtained any Permits required to conduct the Business in its
own name, the absence of which would not have a Material Adverse Effect.
6.5. Legal Opinions. Buyer shall have received (i) a satisfactory
opinion from Pepper Hamilton LLP, counsel to Seller and Shareholder and (ii)
an opinion of bond counsel reasonably satisfactory to Buyer, to the effect
that the consummation of the transactions contemplated herein will not result
in an Event of Taxability, as such term is defined in that certain Indenture
-22-
<PAGE>
governing the Industrial Revenue Refunding and Improvement Bonds Series A,
1994 and Series B, 1994.
6.6. Other Documentation. Buyer shall have received all of the
executed agreements, documents and showings required to be delivered by (a)
the Seller at the Closing pursuant to Sections 1.7 and 1.8 hereof and (b) the
Shareholder as set forth in Sections 5.1 and 5.2 hereof.
ARTICLE VII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
---------------------------------------------
The obligations of Seller and Shareholder under this Agreement shall
be subject to the satisfaction, on or prior to the Closing Date, of the
conditions set forth below.
7.1. No Misrepresentation or Breach of Covenants and Warranties. All
of Buyer's covenants and agreements contained herein shall have been performed
or fulfilled in all material respects; each of the representations and
warranties of the Buyer contained or referred to herein shall be true and
correct on the Closing Date as though made on the Closing Date except for
changes therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Seller or any transaction
contemplated by this Agreement; and there shall have been delivered to Seller
a certificate or certificates to such effect, dated the Closing Date, and
signed on behalf of the Buyer.
7.2. Corporate Action. The Buyer shall have taken all corporate
action necessary to approve the transactions contemplated by this Agreement,
and the Buyer shall have furnished Seller with certified copies of resolutions
adopted by the Board of Directors of the Buyer, in form and substance
reasonably satisfactory to counsel for Seller, in connection with such
transactions.
7.3. No Restraint or Litigation. No action, suit or proceeding shall
have been instituted or threatened by any third party or governmental agency
to restrain, prohibit or otherwise challenge the legality or validity of the
transaction contemplated hereby which, in the reasonable judgment of
Shareholder's Board of Directors based on advice of counsel, has a substantial
likelihood of success.
7.4. Legal Opinion. Seller shall have received a satisfactory opinion
from Gardner, Carton & Douglas, counsel to Buyer.
7.5. Other Documentation. (a) Seller shall have received the payment
of the Purchase Price, (b) Shareholder shall have received the executed Supply
Agreement referred to in Section 5.1, and (c) Seller and Shareholder shall
have received the executed the Non-Competition Agreement.
-23-
<PAGE>
ARTICLE VIII.
INDEMNIFICATION
---------------
8.1. Indemnification by Seller and Shareholder. Seller and
Shareholder, jointly and severally, together with their respective successors
and assigns, shall indemnify and hold Buyer harmless from, against or in
respect of the aggregate of all indemnifiable damages of Buyer. For this
purpose, the term "indemnifiable damages" of Buyer means the aggregate, of any
and all damage, loss, deficiency, liability, expense (including, but not
limited to, any reasonable expert witness fees, reasonable attorney's fees,
court costs and expenses), action, suit, proceedings, demand, assessment or
judgment to or against Buyer arising out of or in connection with:
(a) The Excluded Liabilities;
(b) Any inaccuracy, breach or violation of, or
non-performance by, Seller of any of its representations, warranties,
covenants or agreements contained in this Agreement or in any
documents, certificates or Schedules required to be furnished
pursuant to this Agreement (in each case without regard to the
applicability of the Enforceability Exception);
(c) (i) all fines, penalties, civil suits and costs of
government mandated shut down of the Owned Real Property arising from
the failure to obtain, and (ii) all costs, expenses and fees,
including reasonable permitting, attorneys and consultant fees
incurred by Buyer in order to obtain, any air permit currently
required by law for Seller's operations, including a full and
complete application for the appropriate air operating permit
pursuant to the requirements of Title 28, Article 19 of the Kansas
Administrative Regulations, and any subsequent actions necessary to
obtain the issuance of said air operating permit with terms and
conditions acceptable to Buyer provided however that all such costs,
expenses and fees shall be approved by Seller, prior to authorization
to incur such costs, fees or expenses, such approval not to be
unreasonably withheld;
(d) Any liability with respect to the Business resulting
from the failure to comply with any Environmental Legal Requirement
to the extent such failure (i) occurred during Shareholder's
ownership of the Seller or (ii) occurred prior to Shareholder's
ownership of Seller to the extent Seller or Shareholder had knowledge
thereof; and
(e) Notwithstanding anything to the contrary herein to the
extent any liability for a violation of any Environmental Legal
Requirement is a continuing violation (other than a violation
contemplated in Section 8.1(c) for which Seller shall be responsible)
to which both Buyer and Seller have contributed, the Buyer and Seller
shall cooperate to apportion such liability between them based on
their relative culpability.
8.2. Indemnification by the Buyer. Buyer and its successors and
assigns shall indemnify and hold harmless Seller from and with respect to all
indemnifiable damages suffered by Seller, together with its successors and
assigns, arising out of or in connection with:
(a) Any Assumed Liability;
-24-
<PAGE>
(b) Any breach or violation of, or non-performance by, Buyer
of any of its representations, warranties, covenants or agreements
contained in this Agreement or in any document, certificate or
schedule required to be furnished pursuant to this Agreement (in each
case without regard to the applicability of the Enforceability
Exception); and
(c) Buyer's operation of the Business after Closing,
including without limitation, any violations of Environmental Legal
Requirements by Buyer.
8.3. Notice of Claims. If any claim is made against a party which, if
sustained, would give rise to a liability of the other hereunder, the party
seeking indemnification (the "claiming party") shall promptly (but no later
than 10 business days from receipt, or sooner if urgent action is required by
the claim) cause notice of the claim to be delivered to the other party (the
"non-claiming party") and shall afford the non-claiming party and its counsel,
at its sole expense, the opportunity to defend or settle the claim (provided
that the claiming party and its counsel may participate at their sole cost and
expense). Any notice of a claim shall state specifically the representations,
warranty, covenant or agreement with the alleged basis for the claim, and the
amount of liability asserted against the other party by reason of the claim.
If such notice and opportunity are not given, or if any claim is compromised
or settled without notice to and consent of the non-claiming party, no
liability shall be imposed on the non-claiming party by reason of such claim;
but if notice is given and the non-claiming party receiving the notice fails
to assume the defense of the claim or fails to admit in writing its liability
with respect to such claim, the claim may be defended, compromised or settled
by the claiming party without its consent and the non-claiming party shall
remain liable under this Article VIII. If and to the extent the non-claiming
party assumes control, the non-claiming party has no further obligation to pay
the costs incurred by the claiming party after such assumption in connection
with the defense of such claim. Notwithstanding anything contained herein to
the contrary, the claiming party may retain control over the defense of any
claim hereunder if such claim is non-monetary or is for injunctive or other
equitable relief. In the event that the parties cannot resolve their
differences and settle any claim brought by one party against another, the
claiming party shall file suit within one hundred and twenty (120) days of the
expiration of the survival period, or such claim shall forever be barred.
8.4. Limitation of Damages. The foregoing obligations described in
Sections 8.1 and 8.2 shall be subject to and limited by the following principles
and limitations:
(a) All representations and warranties contained in Articles
II and III of this Agreement shall survive the consummation of the
transactions contemplated by this Agreement from the Closing Date
through the date that is eighteen (18) months following the Closing
Date, and shall thereafter terminate; provided, however, that,
notwithstanding the foregoing, the representations and warranties
contained in (i) Sections 2.1, 2.3, 2.15 and 2.20 shall be of
unlimited duration; and (ii) Section 2.7 shall terminate thirty (30)
days after the expiration of the applicable statute of limitations.
Claims first asserted within a thirty (30) day period after the
period referred to above shall not be barred and shall survive
indefinitely until such claims are resolved.
-25-
<PAGE>
(b) Seller and Shareholder shall not be responsible to Buyer
under Section 8.1(a) with respect to breaches of representations and
warranties unless and until the aggregate of all indemnifiable
damages with respect to breaches of representations and warranties
suffered by Buyer under this Agreement exceeds in the aggregate
$150,000 and then Seller and Shareholder shall be responsible to
fully indemnify Buyer for all indemnifiable damages in excess of such
threshold, provided, however, that this provision shall not apply to
breaches of the representations and warranties contained in Sections
2.1, 2.3, 2.7, 2.15 (on an absolute basis, without regard to any
exceptions set forth on Schedule 2.15), 2.20 and 2.22 for which Buyer
shall be fully indemnified notwithstanding the amount of
indemnifiable damages. The indemnifiable damages required to be paid
by Seller pursuant to this Article VIII shall in no event exceed the
amount of the Purchase Price; provided, that Seller and Shareholder
shall be fully responsible for Excluded Liabilities without regard to
any limitations herein. Buyer agrees to first seek recovery against
the title insurance company in the event of claims under Sections
2.11(a) and 2.15 prior to seeking recourse against Seller or
Shareholder. Seller and Shareholder shall not be responsible to Buyer
under Section 8.1(b) with respect to Excluded Liabilities which are
not known to Seller or Shareholder which are asserted against Buyer
unless and until the aggregate of such unknown Excluded Liabilities
suffered by Buyer exceeds in the aggregate $50,000 and then Seller
and Shareholder shall be responsible to fully indemnify Buyer for all
indemnifiable damages in excess of such threshold.
(c) Prior to the Closing Date, Buyer and Seller shall give,
or cause the appropriate party to give the other party prompt written
notice of any development affecting Seller or Buyer which might cause
the representations and warranties of the Buyer or Seller, as the
case may be, to be inaccurate or the covenants and agreements of
Buyer or Seller, as the case may be, to be unfulfilled. The party
receiving such notice shall have the shorter of the number of days to
Closing or twenty (20) days after receipt of any such notice to
exercise any rights it may have to terminate this Agreement without
penalty. Unless this Agreement is terminated in the aforementioned
period, the written notice of such development will be deemed to have
qualified the representations and warranties contained herein, and to
have cured any misrepresentation or breach of warranty that otherwise
might have existed hereunder by reason of the material development.
(d) After the Closing, Buyer's sole remedy against Seller
and Shareholder shall be the right to seek indemnifiable damages
pursuant to this Article VIII, which shall not include consequential,
punitive or special damages.
(e) Whenever the term "knowledge" or words of similar import
have been used throughout this Agreement, this shall mean the
knowledge of such items as a reasonably prudent controlling
shareholder or officer of a corporation would have based on
reasonable due diligence.
-26-
<PAGE>
ARTICLE IX.
TERMINATION
-----------
9.1. Termination. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated at any time prior
to the Closing Date:
(a) By the mutual written consent of the Buyer and Seller;
(b) By the Buyer upon the material breach by Seller or
Shareholder of any of its covenants, agreements, representations or
warranties contained in Article II or Article IV (i) after 30 days'
notice and opportunity to cure and (ii) provided that the terminating
party is also not in material breach;
(c) By Seller upon the material breach by the Buyer of any
of its covenants, agreements or representations or warranties
contained in Article III or Article IV (i) after 30 days' notice and
opportunity to cure and (ii) provided that the terminating party is
also not in material breach;
(d) By the Buyer, if any of the conditions set forth in
Article VI of this Agreement have not been satisfied on or before May
30, 1998 (subject to the right to extend the Closing), and such
condition or conditions have not been waived in writing by the Buyer;
and
(e) By Seller, if any of the conditions set forth in Article
VII of this Agreement have not been satisfied on or before May 30,
1998 (subject to the right to extend the Closing), and such condition
or conditions have not been waived in writing by Seller.
9.2. Remedies.
(a) By Seller. In the event of the existence of Seller's
right to terminate pursuant to Section 9.1(c) or (e) hereof, Seller
may at its sole election (i) waive such right and close, (ii)
terminate the Agreement and/or (iii) seek all remedies entitled by
law.
(b) By Buyer. If Buyer terminates this Agreement pursuant to
Sections 9.1(b) or 9.1(d), Buyer shall at its election either (i)
waive such right and close, (ii) terminate the Agreement and/or (iii)
seek all remedies entitled by law, including the remedy of specific
performance, it being acknowledged that the Purchased Assets and the
Business are unique and monetary damages would not be wholly
adequate.
(c) Other. In the event that this Agreement shall be
terminated pursuant to Section 9.1(a) or the failure of the
conditions set forth in Sections 6.4 or 7.3 all further obligations
of the parties under this Agreement (other than Sections 10.2 an
10.9) shall be terminated without further liability of any party to
the other, provided that nothing herein shall relieve any party from
liability for its willful breach of this Agreement.
-27-
<PAGE>
9.3. Risk of Loss. The risk of any loss to the Purchased Assets and
all liability with respect to injury and damage occurring in connection
therewith shall be the sole responsibility of Seller until the completion of
the Closing. If any material part of such properties shall be damaged by fire
or other casualty prior to the completion of the Closing hereunder and such
properties were material to the operations of the Business and its present
capacity needs, Buyer shall have the right and option:
(a) to terminate this Agreement, without liability to Seller
or Buyer; or
(b) to proceed with the Closing hereunder, in which event
such casualty shall not constitute a breach by Seller of any
representation, warranty or covenant in this Agreement, and Buyer
shall be entitled to receive and retain the insurance proceeds
arising from such casualty; or
(c) delay the Closing, while the affected Purchased Assets
are being restored or repaired, not to exceed three (3) months;
provided, however, if Buyer elects option (c) and the cost of such
restoration or repair exceeds the insurance proceeds payable with
respect thereto, or would be reasonably expected to exceed three
months, then Seller may terminate this Agreement under Section
9.3(a).
ARTICLE X.
GENERAL PROVISIONS
------------------
10.1. Survival of Obligations. All representations, warranties,
covenants and agreements contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement subject to the
limitations set forth in Section 8.4.
10.2. Confidential Nature of Information. Each party hereto agrees
that it will treat and will cause its Agents to treat in confidence all
documents, materials and other information which it shall have obtained
regarding any other party during the course of the negotiations leading to the
consummation of the transactions contemplated hereby, the investigation
provided for herein and the preparation of this Agreement and other related
documents, and, in the event the transactions contemplated hereby shall not be
consummated, all copies of nonpublic documents and materials which have been
furnished in connection therewith shall be promptly returned to the party
furnishing the same, shall continue to be treated as confidential information
and shall not be used for the benefit of the party who returned such
confidential information. Each party is responsible for changes caused by its
Agents.
10.3. Governing Law. This Agreement shall be governed by and construed
in accordance with laws of the State of Kansas.
10.4. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, by
overnight courier, fare prepaid, by legible facsimile transmission (with
regular mail follow-up), or by registered or certified mail, postage prepaid,
addressed as follows:
-28-
<PAGE>
If to the Seller and Shareholder, to:
Owosso Corporation
The Triad Building
2200 Renaissance Boulevard, Suite 150
King of Prussia, PA 19406
Attn: George B. Lemmon, Jr., President
Fax: 610-275-5122
with a copy to:
Pepper, Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103
Attn: Elam M. Hitchner, III, Esquire
Fax: 215-981-4750
If to the Buyer, to:
Allied Products Corporation
10 South Riverside Plaza - Suite 400
Chicago, IL 60606
Attn: Vice President and General Counsel
Fax: 312-454-9608
with a copy to:
Gardner, Carton & Douglas
Suite 3400 - Quaker Tower
321 North Clark Street
Chicago, Illinois 60610-4795
Fax No.: 312-644-3381
Attn: William L. Morrison
or to such address as such party may indicate by a notice delivered to the
other parties hereto. Notices shall be deemed given and delivered hereunder on
the date of receipt thereof, which is deemed to be the same day (in the case
of personal delivery), the next business day (in the case of overnight
delivery or legible facsimile transmission), or three (3) days later (in the
case of certified or registered mail).
10.5. Successors and Assigns.
(a) The rights of the parties under this Agreement shall not
be assignable.
-29-
<PAGE>
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors, and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended
or shall be construed to confer upon any person other than the
parties and their successors.
10.6. Entire Agreement; Amendments. This Agreement and the Exhibits
and Schedules referred to herein and the documents delivered pursuant hereto,
contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior
agreements, understanding, or intent between or among any of the parties
hereto, but excluding any correspondence between the parties regarding Buyer's
due diligence investigation. The parties hereto, by mutual agreement in
writing, may amend, modify and supplement this Agreement.
10.7. Interpretation. Article titles and headings to Sections herein
are inserted for convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement. The
Exhibits and Schedules referred to herein shall be construed with and as an
integral part of this Agreement to the same extent as if they were set forth
verbatim herein.
10.8. Waivers. Any term or provision of this Agreement may be waived,
or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. The failure of any party hereto to enforce at
any time any provision of this Agreement shall not be construed to be a waiver
of such provision, nor in any way to affect the validity of this Agreement or
any part hereof or the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach. The respective
representations and warranties of Buyer, Seller and Shareholder contained
herein or in any certificates or other documents delivered prior to or as of
the Closing Date shall not be deemed waived or otherwise affected by any
investigation made by any party hereto.
10.9. Expenses. Each party hereto will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel and accountants.
10.10. Partial Invalidity. Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provision or provisions had never
been contained herein unless the deletion of such provision or provisions
would result in such a material change as to cause completion of the
transactions contemplated hereby to be unreasonable.
10.11. Execution of Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be
-30-
<PAGE>
considered an original instrument, but all of which shall be considered one and
the same agreement, and shall become binding when one or more counterparts have
been agreed upon by each of the parties and delivered to Seller and the Buyer.
-31-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.
SELLER:
------
GREAT BEND MANUFACTURING
COMPANY, INC.
By: /s/ Stephen B. Hughbanks
---------------------------------------
Name: Stephen B. Hughbanks
Its: President
SHAREHOLDER:
-----------
OWOSSO CORPORATION
By: /s/ Harry Holiday III
---------------------------------------
Name: Harry Holiday III
Its: Chief Operating Officer
BUYER:
-----
ALLIED PRODUCTS CORPORATION
By: /s/ Robert Fleck
---------------------------------------
Name: Robert Fleck
Its: VP Accounting, Chief Accounting
and Administrative Officer
-32-
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBITS
- --------
Exhibit 1.1(c) Fixed Assets
Exhibit 1.1(e) Owned Real Property
Exhibit 1.5(d) Inventory Policy
Exhibit 1.7(a)(i) Bill of Sale
Exhibit 4.6 Warranty Deed
Exhibit 5.1 Supply Agreement
Exhibit 5.2 Non-Competition Agreement
SCHEDULES
- ---------
Schedule 1.7(a)(vii) Purchase Price Allocation
Schedule 2.1 Jurisdictions
Schedule 2.3 Authority
Schedule 2.10 Real and Personal Property Leases
Schedule 2.12 Intellectual Property
Schedule 2.15 Title to Property
Schedule 2.16 Employee Relations
Schedule 2.17 Employee Benefit Plan
Schedule 2.18 Status of Contracts
Schedule 2.20 Environmental
Schedule 2.21 Insurance
Schedule 2.22 Broker or Finder
Schedule 2.23 Dealers and Original Equipment Manufacturer Customers
Schedule 2.24 Suppliers
Schedule 2.25 Permits
Schedule 2.26 Product Warranty Claims
Schedule 2.27 Product Liability Claims
Schedule 2.28 Sales by Product and by State
Schedule 2.5(b) Operations since October 26, 1997
Schedule 4.2 Capital Expenditures
-33-
<PAGE>
Schedule 1.7(a)(vii)
Purchase Price Allocation
The Purchase Price shall be allocated to the Purchased Assets and Assumed
Liabilities based on the figures set forth on the Closing Balance Sheet;
provided, however, that to the extent a third party appraisal of any of the
Fixed Assets or Owned Real Property reflects a valuation materially different
from the figures reflected on the Closing Balance Sheet, the allocation of the
Purchase Price shall reflect such appraised valuation. Valuation of
Intellectual Property will initially be based on net book value which will be
assessed as to whether there has been a permanent impairment in the value of
such property. Such assessment will include obsolescence, demand, new
technology, competition and other pertinent economic factors and trends that
may have an impact on the value of the remaining useful life of the
Intellectual Property
-34-
<PAGE>
=================================================================
ASSET PURCHASE AGREEMENT
AMONG
OWOSSO CORPORATION
ASTRO AIR ACQUISITION CORP.
ASTRO AIR, INC.
REX DACUS
and
DACUS PROPERTIES, INC.
DATED: April 2, 1998
=================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
BACKGROUND........................................................................................................1
ARTICLE 1 - SALE AND PURCHASE OF ASSETS; PURCHASE PRICE...........................................................1
1.1. Purchase and Sale of Assets........................................................................1
1.2. Purchase Price. ..................................................................................3
1.3. Liabilities. .....................................................................................3
1.4. Allocation of Purchase Price. ....................................................................3
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF SELLER..............................................................4
2.1. Organization, Power, Standing and Qualification....................................................4
2.2. Power and Authority................................................................................4
2.3. Validity of Contemplated Transactions..............................................................4
2.4. Government and Third-Party Approvals...............................................................5
2.5. Title to Purchased Assets and Related Matters......................................................5
2.6. Other Representations Regarding Purchased Assets...................................................5
2.7. Financial Statements...............................................................................6
2.8. Absence of Undisclosed Liabilities.................................................................6
2.9. Certain Tax Matters................................................................................7
2.10. Litigation; Compliance with Laws..................................................................7
2.11. Employees.........................................................................................7
2.12. Overtime, Back Wage, Vacation, Discrimination, and Occupational Safety Claims.....................8
2.13. Insurance.........................................................................................8
2.14. Contracts.........................................................................................8
2.15. Other Transactions...............................................................................10
2.16. Product Liability Claims.........................................................................10
2.17. No Changes.......................................................................................10
2.18. Copies of Articles and Bylaws....................................................................11
2.19. Hazardous Substances.............................................................................11
2.20. Relationship With Customers and Suppliers........................................................11
2.21. Transactions With Affiliates.....................................................................11
2.22. Capital Expenditures.............................................................................12
2.23. Veracity of Statements...........................................................................12
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................12
3.1. Power and Authority...............................................................................12
3.2. Conflict With Authority, Bylaws, Etc..............................................................12
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 4 - ACTIVITIES PRIOR TO CLOSING BY SELLER................................................................13
4.1. Operation of Business.............................................................................13
4.2. Access to Information.............................................................................14
4.3. Best Efforts......................................................................................14
4.4. Consents to Assignment............................................................................14
4.5. Benefit Plans.....................................................................................14
4.6. Notice of Change..................................................................................15
4.7. No Discussions....................................................................................15
4.8. Publicity.........................................................................................15
ARTICLE 5 - ACTIVITIES PRIOR TO CLOSING BY BUYER.................................................................15
5.1. Best Efforts......................................................................................15
5.2. Access to Information.............................................................................15
5.3. Confidentiality...................................................................................15
5.4. Employees.........................................................................................16
5.5. Transfer of Licenses..............................................................................16
ARTICLE 6 - CONDITIONS PRECEDENT TO CLOSING......................................................................16
6.1. Conditions to Obligation of Buyer to Close........................................................16
6.2. Conditions to Obligation of Seller to Close.......................................................18
ARTICLE 7 - INDEMNIFICATION......................................................................................19
7.1. By Seller.........................................................................................19
7.2. By Buyer..........................................................................................19
7.3. Procedures........................................................................................20
ARTICLE 8 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES...........................................................20
ARTICLE 9 - THE CLOSING..........................................................................................21
9.1. Time and Place....................................................................................21
9.2. Conduct at Closing................................................................................21
ARTICLE 10 - CONDUCT OF SELLER AND BUYER AFTER CLOSING...........................................................22
10.1. Post-Closing Conduct Generally...................................................................22
10.2. Non-Competition..................................................................................23
10.3. Insurance........................................................................................24
ARTICLE 11 - BROKERAGE; EXPENSES.................................................................................24
ARTICLE 12 - TAXES...............................................................................................24
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 13 - TERMINATION.........................................................................................25
13.1. Events of Termination............................................................................25
13.2. Consequences of Termination......................................................................25
13.3. Expenses if No Closing...........................................................................26
ARTICLE 14 - MISCELLANEOUS.......................................................................................26
14.1. Entire Agreement; Amendments.....................................................................26
14.2. Headings.........................................................................................26
14.3. Gender; Number...................................................................................26
14.4. Exhibits and Schedules...........................................................................26
14.5. Severability.....................................................................................26
14.6. Notices..........................................................................................26
14.7. Waiver...........................................................................................27
14.8. Assignment.......................................................................................27
14.9. Successors and Assigns...........................................................................28
14.10. Governing Law...................................................................................28
14.11. No Benefit to Others............................................................................28
14.12. Counterparts....................................................................................28
</TABLE>
-iii-
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement (the "Agreement") is made this
2nd day of April, 1998, by and among OWOSSO CORPORATION, a Pennsylvania
corporation ("Parent"), ASTRO AIR ACQUISITION CORP., a wholly-owned subsidiary
of Parent ("Buyer"), ASTRO AIR, INC., a Texas corporation (the "Seller"),
DACUS PROPERTIES, INC., a Texas corporation ("Dacus Properties"), and REX
DACUS, an individual residing in the State of Texas ("Dacus").
BACKGROUND
----------
Seller is engaged in the business of manufacturing
evaporator, condenser, and heater coils (the "Business"). Dacus Properties
owns the majority of the issued and outstanding shares of capital stock of
Seller.
Parent, through Buyer, desires to purchase, and Seller
desires to sell, substantially all of the assets and the liabilities of Seller
used in carrying out the Business of Seller, all upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises and covenants herein contained, and intending to be legally
bound, Parent, Buyer, Seller, Dacus Properties and Dacus agree as follows:
ARTICLE 1
SALE AND PURCHASE OF ASSETS; PURCHASE PRICE
-------------------------------------------
1.1. Purchase and Sale of Assets.
1.1..1. Purchased Assets. Subject to the terms and
conditions contained in this Agreement, at the Closing on the Closing Date (as
such terms are defined in Section 9.1 below), Seller shall sell, assign,
transfer, and deliver to Buyer and Buyer shall purchase from Seller, free and
clear of all security interests, liens, claims, and encumbrances (except those
which the Buyer has expressly agreed to assume herein) all of the assets that
are owned by or used in the Business as they shall exist at the Closing Date
(as defined in Section 9.1) (collectively "Purchased Assets") and excluding
only the Retained Assets as defined in Section 1.1.2. Without limiting the
generality of the foregoing, the "Purchased Assets" shall include the
following:
(a) Tangible Personal Property. All of Seller's
furniture, fixtures, machinery, equipment, tools, replacement parts and other
tangible personal property, wherever located (the "Purchased Tangible Personal
Property");
<PAGE>
(b) Inventory. All of Seller's inventory
(including, without limitation, all raw materials, work in progress and items
in transit), wherever located (the "Purchased Inventory");
(c) Cash. All of Seller's cash and cash
equivalents, wherever located, including but not limited to bank and mutual
fund accounts and securities;
(d) Accounts Receivable. All of Seller's accounts
receivable and notes receivable created or arising in respect of the sale of
products or other assets of Seller;
(e) Customer Lists. All of Seller's customer lists
(the "Purchased Customer Lists");
(f) Existing Contracts. All of Seller's existing
contracts which relate to the Purchased Assets or the Business (the "Existing
Contracts");
(g) Leases. All of Seller's real estate and other
lease agreements, including any and all rights thereunder including, security
deposits (the "Purchased Leases");
(h) Name. Seller's corporate name "Astro Air"; and
(i) Intangible Assets. All of Seller's right,
title, and interest in and to Seller's industrial and intellectual property
rights, including but not limited to patents, patent applications, patent
rights, trademarks, trademark registrations, trademark registration
applications, trade names, service marks, copyrights, computer programs, trade
secrets, product related artwork, designs, shop drawings, models, production
procedures, technology and proprietary processes, and formulae, all franchise,
permits, and licenses (to the extent such are assignable), telephone numbers,
supplier and referral lists, advertising materials and data, blueprints,
methods and other similar know-how or rights or intangible assets used in the
operation of the Business, together with copies of all books, exclusive of
corporate records, minute books, and stock transfer ledgers, records, computer
software, files, papers, and other data of Seller relating to the operation of
the Business (the "Purchased Intangible Assets").
1.1..2. Retained Assets. The term "Retained Assets" shall
mean the following assets, which shall be retained by Seller and not sold to
Buyer, anything herein to the contrary notwithstanding:
(a) Corporate Records. Seller's corporate seal,
minute books, stock books and other records relating exclusively to the
corporate organization of Seller and all tax returns and tax records;
(b) Automobiles. Seller's 1994 Volvo and 1995 Chevy
Blazer;
-2-
<PAGE>
(c) Promissory Note. The promissory note executed
by Dacus in favor of Seller on February 1, 1996; and
(d) Notes Receivable. Seller's notes receivable,
identified on Seller's financial statements as "Accounts Receivable-Other" and
representing promissory notes executed by Dacus Properties in favor of Seller
in the amount identified on Seller's balance sheet at Closing.
1.2. Purchase Price. The purchase price (the "Purchase Price") to be
paid by Buyer to Seller at the Closing for the Purchased Assets shall be Ten
Million Dollars less the value of the note described in Section 1.1.2(d)
herein, plus the assumption by Buyer of the Assumed Liabilities payable in
cash by delivery of a certified check at Closing. Buyer shall pay to Seller as
a deposit for application against the Purchase Price at Closing the amount of
$1,000,000 (the "Deposit") on April 13, 1998. If Closing has not occurred on
or before May 15, 1998 for any reason other than the failure to fulfill one of
the conditions to Buyer's obligation to consummate the transactions
contemplated by this Agreement contained in Section 6.1 (a "Buyer Condition")
and Seller elects to terminate this Agreement pursuant to Section 13.1.2,
13.1.4 or 13.1.5, Seller shall retain the Deposit as liquidated damages. If
the Agreement is terminated by Buyer pursuant to Section 13.1.2 or 13.1.3,
Seller shall promptly refund the Deposit to Buyer.
1.3. Liabilities. At the Closing, Buyer will assume all of Seller's
liabilities identified on Seller's 1997 Financial Statements (as defined
below), together with all Employee Liabilities, as defined hereinafter, and
all other liabilities of Seller arising between December 31, 1997 and the
Closing Date in the ordinary course of Seller's business excluding state and
federal income taxes, less all liabilities of Seller paid and discharged
between December 31, 1997 and the Closing Date in the ordinary course of
Seller's business, and less liabilities for the retained automobiles (the
"Assumed Liabilities"). Except for those Assumed Liabilities, Buyer shall not
assume any liabilities of Seller, contingent or otherwise, known or unknown,
arising from or related to the operation or activities of Seller, its
shareholders, directors, officers, agents or otherwise (the "Retained
Liabilities").
Employee Liabilities shall include all liabilities owed or owing to
Seller's employees, including but not limited to liabilities for wages,
employee benefits and related taxes, severance pay and related obligations.
1.4. Allocation of Purchase Price. Seller and Buyer agree that the
Purchase Price shall be allocated among the Purchased Assets in the manner
specifically set forth in or determined pursuant to Schedule 1.4, as
negotiated by the parties. Seller and Buyer further agree that each will
prepare and file their federal and any state or local income tax returns and
will prepare and file any notices or other filings required pursuant to
Section 1060 of the Internal Revenue Code of 1986, and that any such returns,
notices, or filings will be prepared based upon such allocation of the
Purchase Price.
-3-
<PAGE>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller, Dacus Properties and Dacus, jointly and severally
(except where otherwise indicated), represent and warrant and, where
applicable, covenant as follows:
2.1. Organization, Power, Standing and Qualification. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of Texas, and has full corporate power and authority to
carry on its business as it is now being conducted and to own and operate the
properties and assets now owned and operated by it. Seller is duly qualified
to do business and is in good standing in all jurisdictions where the failure
to qualify or to be in good standing would have a material adverse effect upon
its financial condition, the conduct of its business or the ownership of its
property and assets, such jurisdictions being listed on Schedule 2.1 hereto.
2.2. Power and Authority. Seller, Dacus Properties and Dacus have the
power and authority to execute, deliver and perform this Agreement and the
other documents, instruments and agreements contemplated herein (the
"Collateral Documents") to which the Seller, Dacus Properties or Dacus (as the
case may be) is a party. Each of this Agreement and the Collateral Documents
is a valid and binding obligation of Seller, Dacus Properties and Dacus,
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium, or similar laws
affecting the enforcement of creditors' rights generally.
2.3. Validity of Contemplated Transactions. Except with respect to
those consents required to be obtained in connection with the following and
set forth in Schedule 2.3 hereto, the execution, delivery and performance of
this Agreement and the Collateral Documents and the consummation of the
transactions contemplated hereby and thereby do not and will not contravene
any provision of the Articles of Incorporation or Bylaws of Seller; nor
violate, be in conflict with, or constitute a default under, cause the
acceleration of any payments pursuant to, or otherwise impair the validity or
effectiveness of any agreement, contract, indenture, lease, or mortgage, or
subject any property or asset of Seller, Dacus Properties or Dacus to any
indenture, mortgage, contract, commitment, or agreement, other than this
Agreement, to which Seller, Dacus Properties or Dacus is a party or by which
Seller or any of its assets is bound; or violate any provision of law, rule,
regulation, order, permit, or license to which Seller, Dacus Properties or
Dacus is subject.
-4-
<PAGE>
2.4. Government and Third-Party Approvals. Except for those approvals
set forth on Schedule 2.4 hereto, no consent by, approval or authorization of
or filing, registration or qualification ("Consent") with any federal, state
or local authority, or any corporation, person or other entity (including any
party to any contract or agreement with Seller) is required (i) for the
execution, delivery or performance of this Agreement by Seller, (ii) in
connection with Seller's consummation of the transactions contemplated hereby,
or (iii) in order to vest in Buyer good and marketable title in and to all of
the Purchased Assets upon the Closing.
2.5. Title to Purchased Assets and Related Matters. Except as
disclosed on Schedule 2.5 hereto, Seller has good, valid and marketable title
to all of the Purchased Assets, and all such Purchased Assets are held free
and clear of mortgages, liens, pledges, claims, charges, security interests,
or other encumbrances or limitations of any nature whatsoever, except (a)
liens for current taxes not delinquent or being contested in good faith by
appropriate proceedings (which, in the latter case, are disclosed on Schedule
2.5 hereto), and (b) mechanics', workmen's, materialmen's or other like liens
arising in the ordinary course of business with respect to obligations which
are not due (collectively "Permitted Liens").
2.6. Other Representations Regarding Purchased Assets.
2.6..1. Fixed Assets. The Purchased Fixed Assets are, and on
the Closing Date will be, free of latent defects known to Seller.
2.6..2. Inventory. Except as described on Schedule 2.6.2
hereto, the Purchased Inventory is of a quality usable or salable in the
ordinary course of business within two (2) years from the date hereof and all
items of inventory of raw materials are of a quality usable in the ordinary
course of business within one (1) year from the date hereof, in each instance
based upon Seller's historic performance. The value at which the Purchased
Inventory is carried on the books and records of Seller reflects the normal
inventory valuation policy utilized by Seller and is in accordance with
generally accepted accounting principles, consistently applied, and is stated
at the lower of cost or market. Seller does not hold any items of Purchased
Inventory on consignment or have title to any items of inventory in the
possession of others except as disclosed on Schedule 2.6.2.
2.6..3. Existing Contracts. Schedule 2.6.3 contains a true,
correct, and complete list of each of the Existing Contracts to be assumed by
Seller, together with any and all amendments thereto.
2.6..4. Customer Lists. The Purchased Customer Lists are,
and on the Closing Date will be, true and correct lists of Seller's customers
and include all customers to whom products are and have been sold within the
six (6) months preceding the execution of this Agreement.
-5-
<PAGE>
2.6..5. Leases. Schedule 2.6.5 contains a true, correct, and
complete list of each of the Purchased Leases to be assigned to Buyer on the
Closing Date, together with any and all amendments thereto. Except as
previously disclosed to Buyer in writing, there are no verbal understandings
that are not evidenced in writing in the Purchased Leases. Seller has not
received any notice of noncompliance with any applicable federal, state, local
or other law, rule, regulation, or procedure relating to the Purchased Leases.
All Purchased Leases of real property permit the Seller to use the premises to
operate the Business, and such use does not violate the terms of the Purchased
Leases. The information relating to the Purchased Leases attached hereto as
Schedule 2.6.5 setting forth the name of the lessor, the rent, and other
charges payable thereunder, including escalation or percentage rent,
advertising requirements, and other lease required expenses and the expiration
date thereof including any and all renewal options is true and correct in all
material respects taken as a whole.
2.6..6. Intangible Assets. The Purchased Intangible Assets
constitute all of Seller's intangible assets related to operation of the
Business. No claim is pending or threatened to the effect that (i) the present
or past operations of the Business infringe upon or conflict with the asserted
rights of any other person in respect of any intangible asset or (ii) any
intangible asset is invalid or unenforceable. No contract, agreement or
understanding with any party exists that would impede or prevent the
assignment to Buyer of the entire right, title, and interest of Seller in and
to the Purchased Intangible Assets. None of the patents, trademarks, trade
names, service marks, copyrights, computer programs, trade secrets or
proprietary processes, and formulae included within the Purchased Intangible
Assets infringes on the rights of third parties.
2.7. Financial Statements. Seller has delivered to Buyer financial
statements consisting of a balance sheet as of December 31, 1997, 1996, 1995,
and for the years then ended, income statements and statements of cash flow
(such balance sheets, income statements and statements of cash flow being
referred to herein collectively as the "Financial Statements"). Each of the
Financial Statements has been or, with respect to the year ended December 31,
1997, (the "1997 Financial Statements"), will be audited by Hugh L.
Goodpasture, P.C., independent certified public accountants. The Financial
Statements are true and correct in all material respects, are in accordance
with the applicable books and records of Seller and, to the Knowledge of
Seller, as defined hereinafter, have been prepared in conformity with
generally accepted accounting principles, consistently applied during the
related periods, and present fairly the financial condition of Seller and the
results of its operations for the respective periods ended on such dates.
Insofar as it applies to Seller, the term "Knowledge" shall mean the
actual knowledge of Seller and its executive officers and such information as
any of such individuals would have in the event such individual exercised due
and diligent inquiry into said matter.
2.8. Absence of Undisclosed Liabilities. To the Knowledge of Seller,
Seller has no material liabilities or obligations except for (i) those
reflected or reserved against (which reserves are adequate) in the Financial
Statements, (ii) those incurred, consistent with past business practices,
reasonably and in the ordinary course of its business, since December 31, 1997
-6-
<PAGE>
(the "Financial Statement Date") and (iii) those which are specifically
disclosed in this Agreement or in Schedule 2.8 hereto. There is no basis for
the assertion against Seller as of the Financial Statement Date of any
material liability not reflected or reserved against in Seller's balance
sheets as of such date or as disclosed by this Agreement.
2.9. Certain Tax Matters. For any period ending on or before the
Closing (as defined in Section 9.1), Seller has duly and timely filed or will
file all federal, state, and local tax returns, declarations, and reports,
estimates, information returns and statements (collectively, "Returns")
required to be filed or sent by it or on its behalf and all such Returns are
or will be true, correct and complete, true, correct and complete copies of
which Returns have been delivered to Buyer prior to the date hereof. Seller
has paid in full all Taxes (as defined hereafter) and any penalties with
respect to the Returns and any penalties entered with respect thereto, due and
payable for any period ending on or before the Financial Statement Date.
Except as set forth in Schedule 2.9, no deficiencies for any Taxes have been
asserted in writing or assessed against Seller which remain unpaid and which
individually or in the aggregate are material to the financial condition of
Seller or which constitute or which with the passage of time may constitute a
lien or charge against the Purchased Assets.
As used herein, the term "Taxes" shall include all federal, state,
and local taxes, including income, excise, withholding, property, franchise,
gross receipt and other taxes.
2.10. Litigation; Compliance with Laws. Except as set forth in
Schedule 2.10 attached hereto, there is no suit, action, claim, arbitration,
administrative or legal or other proceeding, or governmental or other
investigation pending or, to Seller's Knowledge, threatened against or
affecting Seller, whether or not covered by insurance; nor does there exist
any failure to comply with, nor any default under, any law, ordinance,
requirement, regulation, or order applicable to Seller, nor any violation of
or default with respect to any order, writ, injunction, judgment, or decree of
any court or federal, state or local department, official, commission,
authority, board, bureau, agency, or other instrumentality issued or pending
against Seller which might have a material adverse effect on the financial
condition, business, results of operations, or the Purchased Assets. Seller
has obtained all permits, licenses, zoning variances approvals, and other
authorization necessary for the complete operation of its business as
presently operated, and there are none. There have been no illegal kickbacks,
bribes or political contributions made by the Seller.
2.11. Employees. Seller employs only those full-time and part-time
employees, and retains only those contractors, whose names, positions, and
salaries are listed on Schedule 2.11. Seller does not have any written, or to
the best of its knowledge oral or implied, employment contracts with any of
its employees and, unless otherwise disclosed prior to Closing, no bonus,
profit sharing, pension, group insurance, or other employee benefit plans of
any kind. Seller has no collective bargaining or other agreements with any
labor union or similar employee group with regard to the Business, and no
union has been certified as a bargaining agent for its employees.
-7-
<PAGE>
2.12. Overtime, Back Wage, Vacation, Discrimination, and Occupational
Safety Claims. Except as disclosed on the attached Schedule 2.12, there are no
outstanding claims against Seller (whether under federal or state law, under
any employment agreement, or otherwise) asserted by any present or former
employee of Seller on account of or for (i) overtime pay, other than overtime
pay for work done during the current payroll period; (ii) wages or salary for
any period other than the current payroll period; (iii) any amount of vacation
pay or pay in lieu of vacation time, other than vacation time or pay in lieu
thereof earned in or in respect of the current fiscal year; or (iv) any
violation of any statute, ordinance or regulation relating to minimum wages or
maximum hours of work. No person or party has asserted or threatened to assert
any claims against Seller under or arising out of any statute, ordinance or
regulation relating to discrimination or occupational safety in employment or
employment practices (including, without limitation, the Occupational Safety
and Health Act of 1970, as amended, the Fair Labor Standards Act, as amended,
Title VII of the Civil Rights Act of 1964, as amended, or the Age
Discrimination in Employment Act of 1967, as amended).
2.13. Insurance. All inventories, machinery, equipment, buildings,
improvements, and other tangible assets owned or leased by Seller are, and
between the date hereof and the Closing Date (as defined in Section 9.1) will
be, insured against fire and casualty under the policies and in the amounts
and types of coverage set forth in Schedule 2.13 attached hereto and such
policies are, and between the date hereof and the Closing Date will be,
outstanding and duly in force and the premiums thereon fully paid when and as
the same are due and payable. Schedule 2.13 attached hereto is a true and
correct schedule of all policies of fire, liability, and other forms of
insurance, pursuant to which Seller or any of its assets are insured (whether
or not held by Seller) or with respect to which Seller directly or indirectly
pays all or part of the premium.
2.14. Contracts. Except as listed and described on Schedule 2.14,
Seller is not a party to any written or oral:
2.14..1. Agreement or commitment with any present or former
shareholder, director, officer, employee, or consultant or for the employment
of any person, including any consultant;
2.14..2. Agreement, commitment, or arrangement with any
labor union or other representative of employees;
2.14..3. Agreement or commitment to sell or supply products
or to perform services which obligates Seller to sell products or perform
services on terms not limited as to quantity but limited as to price which is
not cancelable on thirty (30) days notice or less without penalty;
2.14..4. Representative, distribution, or sales agency
agreement, contract or commitment;
-8-
<PAGE>
2.14..5. Note, debenture, mortgage, pledge, charge, security
agreement, bond, conditional sale agreement, equipment trust agreement, letter
of credit agreement, loan agreement, or other contract or commitment for
borrowing or lending of money (including, without limitation, loans to or from
officers, directors or any member of their immediate families), agreement or
arrangements for a line of credit or guarantee, pledge or undertaking of the
indebtedness of any other person;
2.14..6. Agreement, contract or commitment limiting or
restraining it from engaging or competing in any lines of business with any
person;
2.14..7. License, franchise, distributorship or other
similar agreement, including those which relate in whole or in part to any
patent, trademark, trade name, service mark, or copyright or to any ideas,
technical assistance or other know-how of or used by Seller;
2.14..8. Profit sharing, stock purchase, stock option,
pension, retirement, long-term disability, hospitalization, insurance, or
similar material plans providing employee benefits;
2.14..9. Other agreement requiring payments or other
consideration by or from Seller in excess of Ten Thousand Dollars ($10,000.00)
during the remainder of its term; or
2.14..10. Other material agreement, contract, or commitment
not made in the ordinary course of business.
(All of the foregoing agreements, contracts, commitments,
leases, and other instruments, documents and undertakings being called the
"Contracts").
Except as disclosed on Schedule 2.14, to the Knowledge of
Seller (i) each of the Contracts is valid and enforceable in accordance with
its terms, (ii) the parties thereto are in compliance with the provisions
thereof, (iii) no party is in default in the performance, observance or
fulfillment of any obligation, covenant or condition contained therein, (iv)
no event has occurred which with or without the giving of notice or lapse of
time, or both, would constitute a default thereunder and (v) Seller's rights
under the Contracts are transferable by Seller to Buyer without restriction
except for the Consents. None of the Contracts contains any provisions which
would cause Buyer to be liable to the other party thereto for any amount (or
any increased price for goods or services being provided by the other party
thereto) in the event Buyer either does not assume such Contract from Seller
or does assume such Contract from Seller and thereafter terminates such
Contract, or, in the case of a supply contract with a vendor, reduces
purchases from such vendor in comparison with past purchases by Seller. To
Seller's Knowledge, none of the terms or provisions of any of the Contracts
materially adversely affects the prospects, conditions, affairs, or operations
of Seller or the Business, including restrictions on Seller's ability to
compete.
-9-
<PAGE>
2.15. Other Transactions. Except as disclosed on Schedule 2.15
hereto, Seller has not, since the Financial Statement Date, (a) operated its
business except in the ordinary course of business, (b) incurred any debts,
liabilities or obligations except in the ordinary course, (c) discharged or
satisfied any liens or encumbrances, or paid any debts, liabilities or
obligations, except in the ordinary course of business, (d) mortgaged, pledged
or subjected to lien or other encumbrance any of its assets, tangible or
intangible, except in the ordinary course of business, (e) sold or transferred
any of its tangible assets, or canceled any debts or claims, except, in each
case, in the ordinary course of business, or (f) suffered any extraordinary
losses or waived any rights of substantial value.
2.16. Product Liability Claims. Seller has delivered to Buyer a
narrative of incidents, events and claims under all policies of product
liability insurance relating to the Business. Seller is an insured under all
policies of insurance relating to product liability listed on Schedule 2.16
for and against covered claims for product liability based on events occurring
prior to the Closing Date (as defined in Section 9.1), which insurance
coverage will continue in effect after the Closing Date. The above-described
coverage is adequate considering Seller's claims history and the industry
taken as a whole.
2.17. No Changes. Since the Financial Statement Date, and except as
disclosed to Buyer in writing as soon as any such events have occurred, there
has not been:
2.17..1. Any materially adverse change in the financial or
other condition, assets, liabilities or business of Seller, except changes
described in Schedule 2.17 hereto, none of which individually or in the
aggregate has been materially adverse to the Business;
2.17..2. Any damage, destruction or loss (whether or not
covered by insurance) or any condemnation by governmental authorities which
has or may adversely affect the business, prospects or any property of Seller;
2.17..3. Any strike, lockout, labor trouble or any event or
condition of similar character adversely affecting the business or prospects
of Seller;
2.17..4. Any declaration, setting aside or payment of any
dividend or other distribution in respect of any of Seller's shares of stock,
or any direct or indirect redemption, purchase or other acquisition of any
such shares; or
2.17..5. Any increase in the compensation payable or to
become payable by Seller to any of its officers, employees or agents, or any
known payment or arrangement made to or with any thereof, other than salary
reviews and increases taking effect after the Financial Statement Date, all of
which were consistent with Seller's past practices, except as disclosed to
Buyer in writing as soon as any such events have occurred.
-10-
<PAGE>
2.18. Copies of Articles and Bylaws. Seller's Articles of
Incorporation (certified by the Secretary of State of the jurisdiction of
incorporation) and Bylaws (certified by the Secretary of Seller) to which
Buyer has been provided copies, are correct and remain in effect as at the
date of this Agreement. Except as set forth in Schedule 2.18, there are no
other material books and records of Seller to which Buyer has not been
provided access.
2.19. Hazardous Substances. Except as listed on Schedule 2.19 to
Seller's Knowledge: (i) none of Seller's assets has been used for the
manufacture, storage, transportation, deposit, disposal, treatment, handling,
production, processing or recycling of toxic, dangerous or hazardous
substances nor is there any tank or facility for the storage of hazardous
substances located on or in Seller's assets; (ii) there are no asbestos
materials on or in Seller's assets creating, or likely to create, a hazardous
condition; (iii) there is not now nor has there been any activity on or in
Seller's assets which would subject Seller or the Buyer to liens, damages,
penalties, injunctive relief or cleanup costs under any federal, state or
local law, or under any civil action respecting hazardous substances; (iv)
Seller has complied with each, and is not in violation of any, federal, state
or local law, statute, regulation, permit provision or ordinance, relating to
the generation, handling, storage, transportation, treatment or disposal of
chemicals, substances (the "Environmental Laws"); and (v) Seller has obtained
and complied with all necessary permits and other approvals, including interim
status under the Reserve Conservation and Recovery Act, as amended ("RCRA"),
necessary to store, treat, dispose of and otherwise handle hazardous wastes
and hazardous substances. To Seller's Knowledge, no portion of Seller's assets
constitutes any of the following "environmentally sensitive areas": (1) a
wetland or other "water of the United States" for purposes of Section 404 of
the Federal Clean Water Act, 33 U.S.C. section 1344, or any similar area
regulated under any state law; (2) a 100-year floodplain; or (3) a portion of
the coastal zone for purposes of the federal Coastal Zone Management Act, 16
U.S.C. sections 1451-1464. To Seller's knowledge, the assets of Seller are
free from the presence of unacceptable levels of radon gas or the presence of
the radioactive decay products of radon. A "hazardous substance" shall mean
that term as defined in the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. section 9601, et seq., as amended, and dangerous,
regulated toxic or hazardous substances, petroleum products, or similar terms
under any other applicable state, federal or local law and any regulations
thereunder.
2.20. Relationship With Customers and Suppliers. None of Seller's
customers has given notice terminating, canceling, materially reducing, or
threatening to terminate, cancel, or materially reduce any contract or
purchase or relationship with Seller, and Seller is not aware of any material
deterioration of any such relationship. None of Seller's suppliers for the
past two fiscal years has given notice terminating, canceling, materially
reducing, or threatening to terminate, cancel, or materially reduce any
contract or supply relationship with the Seller, and Seller is not aware of
any material deterioration of any such relationship.
2.21. Transactions With Affiliates. Except as set forth in Schedule
2.21, no employee or affiliate of Seller, nor any officer or director of the
company or any affiliate thereof, (i) owns or has a material interest in any
asset used by Seller in the operation of the Business, (ii) has any direct or
indirect interest of any nature whatsoever in any person which markets or
provides the
-11-
<PAGE>
same type of services as those which Buyer will provide by purchasing the
Business, (iii) provides or causes to be provided any assets, services or
facilities used or held for use in connection with the Business.
2.22. Capital Expenditures. Except as set forth in Schedule 2.22, no
capital expenditures are required in connection with the Business or the
assets owned by Seller in order for Seller to operate the Business in the
manner in which it is currently being operated.
2.23. Veracity of Statements. No representation or warranty by
Seller, Dacus Properties or Dacus contained in this Agreement and no statement
contained in any certificate, schedule or other instrument furnished to Buyer
pursuant hereto or in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact or omits to state a material
fact to Seller's, Dacus Properties' or Dacus' Knowledge.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Parent and Buyer hereby represent and warrant jointly and
severally (except where otherwise indicated), and, where applicable, covenant
as follows:
3.1. Power and Authority. Parent and Buyer each have full power and
authority to enter into this Agreement and the Collateral Documents to which
Parent or Buyer (as the case may be) is a party and to perform all covenants
and undertakings herein and therein set forth; the execution and delivery of
this Agreement and the Collateral Documents to which Parent or Buyer (as the
case may be) is a party, and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the
part of Parent and Buyer; and each of this Agreement and the Collateral
Documents to which Parent or Buyer (as the case may be) is a party is a valid
and binding obligation of such party, enforceable in accordance with their
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting the rights of creditors
generally.
3.2. Conflict With Authority, Bylaws, Etc. Neither the execution and
delivery of this Agreement and the Collateral Documents to which Parent or
Buyer (as the case may be) is a party, nor the consummation of the
transactions contemplated hereby and thereby in the manner herein provided
will violate, be in conflict with, constitute a default under, cause the
acceleration of any payments pursuant to, or otherwise impair the good
standing, validity, and effectiveness of any lease, license, permit,
authorization, or approval applicable to Parent or Buyer (as the case may be)
or violate any provision of law, rule, regulation, order, or permit to which
Parent or Buyer is subject.
-12-
<PAGE>
ARTICLE 4
ACTIVITIES PRIOR TO CLOSING BY SELLER
-------------------------------------
4.1. Operation of Business. Prior to the Closing Date (as defined in
Section 9.1), Seller shall conduct its business only in the ordinary course
and in connection therewith and, to the extent consistent therewith, shall use
its best efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees and business
associates. Between the date of this Agreement and the Closing, except as
agreed by prior written consent of Buyer:
4.1..1. Seller shall conduct its business, operations,
activities, and practices in the usual and ordinary course, consistent with
past practices;
4.1..2. Seller shall not take or suffer or permit any action
which would render untrue any of the representations or warranties of Seller
herein contained, and shall not omit to take any action the omission of which
would render untrue any such representation or warranty;
4.1..3. Seller shall preserve its business organization
intact; keep available to itself and to Buyer the present services of its
employees (other than employees who are terminated or who resign in the
ordinary course of business); preserve for itself and Buyer the goodwill of
Seller's suppliers and customers and others with whom business relationships
exist; maintain its tangible property in substantially the same condition as
it now exists, ordinary wear and tear excepted; maintain the insurance
policies identified on Schedule 3.18 in full force and effect; and maintain in
full force and effect all agreements, licenses, permits, authorizations and
approvals necessary for the operation of the Business; and refrain from hiring
or newly employing any additional technical or sales personnel;
4.1..4. Seller shall not grant or otherwise make, or agree
to grant or otherwise make, any increase in the compensation payable or to
become payable by it to any of its employees except in the ordinary course of
business, consistent with past practices;
4.1..5. Seller shall not declare or make any dividend or
other payment or distribution, directly or indirectly, on or with respect to
its capital stock or redeem or otherwise acquire, directly or indirectly, any
shares of its capital stock;
4.1..6. Seller shall not sell or dispose of (otherwise than
in the ordinary course of business) any of its assets (other than obsolete
assets or assets to be replaced concurrently with such disposition);
4.1..7. Seller shall not merge or consolidate with any other
corporation or entity; acquire or agree to acquire any corporation,
association, partnership, joint venture, or other entity; or enter into any
agreement not in the ordinary course of business; and
-13-
<PAGE>
4.1..8. Seller shall not cancel, waive, or modify any claims
or rights owned by, or running in favor of, Seller, which claims or rights
will be transferred to Buyer.
4.2. Access to Information. Prior to Closing (as defined in Section
9.1), Seller, Dacus Properties and Dacus will cooperate fully with Buyer and
shall provide Buyer and its accountants, counsel, and other representatives,
during normal business hours, full access to the books, records, and Purchased
Assets and full opportunity to discuss Seller's business, affairs, assets,
industrial processes, and trade secrets with its officers, employees,
customers, suppliers and independent accountants, and furnish to Buyer and its
representatives copies of such documents, records, and information with
respect to the affairs of Seller as Buyer or its representatives may
reasonably request. In addition to the foregoing right of access and
information, Buyer may designate on-site observers of the business and
operations of Seller, which observers shall be permitted such access to
Seller's business and operations as Buyer may reasonably request and shall be
fully informed by it concerning all of its assets, operation, and business
affairs.
4.3. Best Efforts. Subject to the other provisions of this Agreement,
Seller, Dacus Properties and Dacus will use their best efforts to cause the
conditions listed in Section 6.1 hereof to be satisfied on the Closing Date
(as defined in Section 9.1).
4.4. Consents to Assignment. Prior to the Closing Date, Seller shall
obtain all Consents required for the effective and valid assignment of the
Purchased Leases and Existing Contracts to permit them to be assumed by Seller
and assigned to Buyer hereunder. On or before the Closing Date, Seller shall
have paid or made provision for the payment of all amounts owed by Seller as
of the Closing Date under the terms of such leases and contracts and otherwise
cured any and all defaults thereunder.
4.5. Benefit Plans. Between the date hereof and the Closing Date,
Seller shall maintain in full force and effect the Benefit Plans as they
pertain to Seller's employees or former employees subject to modification
based upon Buyer's due diligence, and, in connection therewith:
4.5..1. Plan Changes. Except as may be required by law or as
may be necessary to continue the qualified status under Section 401 of the
Code, Seller shall not adopt, terminate, amend, extend, or otherwise change
any Benefit Plan without the prior written consent of Buyer, and Seller shall
give Buyer prior written notice of Seller's intention to take any such action
required by law or necessary to continue the qualified status of any Benefit
Plans as they pertain to Seller's employees or its former employees; and
4.5..2. Contributions and Payments. Seller shall not make,
cause to be made, or agree to make any contribution, award, or payment under
any Benefit Plans as they pertain to Seller's employees or former employees,
except at the time and to the extent required by the written terms thereof,
without the prior written consent of Buyer.
-14-
<PAGE>
4.6. Notice of Change. Seller, Dacus Properties and Dacus will
promptly notify Buyer of the existence or happening of any fact, event or
occurrence prior to the Closing Date and of which Seller or any of its
employees, officers, directors, stockholders, or other representatives, Dacus
Properties or Dacus has Knowledge which may alter the accuracy of completeness
of any representation or warranty contained in Article 2 of this Agreement.
4.7. No Discussions. Unless and until this Agreement is terminated
pursuant to Article 13 hereof, Seller, Dacus Properties and Dacus will not,
and will not authorize or permit any of Seller's employees, officers,
directors, or other representatives to, enter into, participate in, request,
solicit or engage in any discussions, negotiations, understandings, agreements
or other communications with any person or entity other than Buyer relating to
offers, inquiries, negotiations or proposals with respect to the sale of the
assets or any capital stock of Seller, or any type of business combination
transaction. Seller will promptly notify Buyer of any such offer, inquiry,
negotiation or proposal which it may receive.
4.8. Publicity. The initial press release relating to the
transactions contemplated hereby shall be a joint press release and thereafter
Seller and Buyer shall consult with each other in issuing any press releases
or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or state
governmental or regulatory agency. The parties hereto shall not issue any such
press release or make any such public statement or filing prior to such
consultation, except as may be required by law.
ARTICLE 5
ACTIVITIES PRIOR TO CLOSING BY BUYER
------------------------------------
5.1. Best Efforts. Subject to the other conditions of this Agreement,
Parent and Buyer will use their best efforts to cause the conditions listed in
Section 6.2 hereof to be satisfied on the Closing Date (as defined in Section
9.1).
5.2. Access to Information. Buyer shall provide Seller with
information concerning Buyer's financing arrangements as well as other
information reasonably requested by Seller regarding Buyer's ability to
consummate the transactions contemplated herein, as may be. Seller shall not
disclose any such information to any other person or entity without the prior
written consent of Buyer.
5.3. Confidentiality. Except as otherwise required by law, or as may
be necessary or appropriate to enforce Parent's or Buyer's rights hereunder,
Parent and Buyer shall retain in confidence, and shall cause its advisors to
retain in confidence, all information obtained pursuant to investigations made
by Buyer or its advisors pursuant to Section 5.2 hereof (the "Confidential
Information"). The parties agree that the Confidential Information shall not
include information which (i) was or becomes generally available to the public
other than as a result of a disclosure by Buyer or its advisors, (ii) was or
becomes available to Buyer of its advisors on a non-
-15-
<PAGE>
confidential basis from a source other than Seller or Seller's
representatives, provided that such source is not bound by a confidentiality
agreement or (iii) was, or in the future is, developed independently by Buyer
or its advisors without reference to the information furnished by Seller or
Seller's representatives. The parties understand and agree that all of the
Confidential Information supplied to Buyer or its advisors is provided on the
understanding that such Confidential Information remains the property of
Seller and that all copies and originals will be returned to Seller promptly
upon its request after termination of this Agreement pursuant to Article 13
hereof. This Section 5.3 shall terminate upon consummation of the transaction
contemplated hereby.
5.4. Employees. Buyer intends to offer employment to all or
substantially all of Seller's employees and shall provide Seller prior to
Closing a list of current employees of Seller to whom Buyer intends to offer
employment. Seller shall continue to pay all Employee Liabilities until
Closing.
5.5. Transfer of Licenses. Buyer assumes responsibility for taking
all necessary action, at its own expense, to obtain, transfer, or continue any
licenses, permits, or other governmental approvals necessary to the operation
of the Business. Seller agrees to cooperate fully in the obtaining,
transferring, or continuing of such licenses, permits, or approvals.
ARTICLE 6
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
6.1. Conditions to Obligation of Buyer to Close. The obligation of
Buyer to consummate the transaction contemplated under this Agreement on the
Closing Date (as defined in Section 9.1) shall be subject to the satisfaction
or the waiver by Buyer of the following conditions on or prior to the Closing
Date:
6.1..1. Representations and Warranties; Compliance with
Agreement. The representations and warranties of Seller, Dacus Properties and
Dacus set forth in this Agreement shall be true and correct as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, and Seller shall have performed all covenants and agreements to
be performed by it under this Agreement on or prior to the Closing Date and
shall have delivered to the Buyer a certificate to such effect, dated the
Closing Date, which certificate shall be in form and substance satisfactory to
Buyer and its counsel;
6.1..2. Opinion of Counsel for the Seller. Norman, Thrall,
Angle & Guy, counsel for Seller, shall have delivered to Buyer their favorable
opinion, dated the Closing Date and in the form set forth in Exhibit 6.1.2;
-16-
<PAGE>
6.1..3. Opinion of Accountants. Deloitte and Touche LLP,
accountants for the Buyer, shall have reviewed Seller's 1997 Financial
Statements and shall have delivered to Buyer their favorable opinion, dated
the Closing Date, concluding that the Financial Statements have been prepared
in conformity with generally accepted accounting principles, consistently
applied, and present fairly the condition of Seller and the results of its
operations for the period represented;
6.1..4. Litigation Affecting Closing. On the Closing Date,
no proceeding shall be pending or threatened before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby, and no investigation that might result in
any such suit, action or proceeding shall be pending or threatened;
6.1..5. Required Consents. The parties (other than Seller)
to any other contract, commitment or agreement to which Seller is a party, any
governmental agency or body or any other person, firm or corporation which
owns or has authority to grant any franchise, license, permit, easement, right
or other authorization necessary for the business or operations of Seller, and
any governmental body or regulatory agency having jurisdiction over Buyer or
Seller, to the extent that their consent or approval is required under the
pertinent debt, lease, contract, commitment or agreement or other document or
instrument or under applicable laws, rules or regulations for the consummation
of the transaction contemplated hereby in the manner herein provided, shall
have granted such consent or approval, which shall include all Consents;
6.1..6. No Material Damage to Business. The Purchased Assets
shall not have been and shall not be threatened to be materially adversely
affected in any way as a result of fire, explosion, earthquake, disaster,
accident, labor dispute, any action by any governmental authority, flood,
drought, embargo, riot, civil disturbance, uprising, activity of armed forces
or act of God;
6.1..7. Approval of Buyer; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved by Buyer, in the exercise of its reasonable judgment, and Buyer
or its counsel shall have been furnished with certified copies, satisfactory
in form and substance to Buyer in the exercise of its reasonable judgment, of
all such corporate records of Seller, and of the proceedings of such persons
authorizing the execution, delivery and performance of this Agreement as Buyer
shall reasonably require;
6.1..8. Hart-Scott-Rodino Compliance. To the extent
applicable, Seller must have complied with the filing requirements of the
Hart-Scott-Rodino Act (the "HSR Act") as modified by the Bankruptcy Code, and
either (i) the Federal Trade Commission or the Antitrust Division shall have
taken no action in respect to such filing, and the waiting period prescribed
by the HSR Act, as modified by the Bankruptcy Code, shall have expired, or
(ii) the Federal Trade Commission and/or Antitrust Division shall have
otherwise indicated their consent to the transactions contemplated hereby;
-17-
<PAGE>
6.1..9. Review of Records. Prior to Closing, Buyer shall
have been permitted access to the facilities, books, and records of Seller,
including, without limitation, the opportunity to observe and verify the fixed
assets and to review purchase orders and sales commitments open on the Closing
Date pursuant to which Seller is purchasing services, supplies, or other goods
from third parties or pursuant to which Seller is designing, manufacturing,
selling, or providing services, products, or other goods to third parties,
respectively, and the obligations of Seller under which Buyer is assuming;
6.1..10. Limit on Debt. The amounts owing on Seller's
outstanding third party bank or similar institutional debt shall not exceed
$3,100,000; and
6.1..11. Real Estate Lease. Dacus Properties shall have
entered into an agreement with Buyer to lease 1653 North Bolton Street and
1488 North Bolton Street, both of Jacksonville, Texas to Buyer under the terms
and provisions of the lease agreement attached in Exhibit 6.1.11 hereto.
6.1..12. Audited 1997 Financial Statements. Seller shall
have delivered the audited 1997 Financial Statements which shall conform in
all material respects with the unaudited 1997 Financial Statements.
6.2. Conditions to Obligation of Seller to Close. The obligation of
Seller to consummate the sale of it assets on the Closing Date (as defined in
Section 9.1) shall be subject to the satisfaction of the following conditions
on or prior to the Closing Date:
6.2..1. Representations and Warranties. The representations
and warranties of Buyer set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date, Buyer shall have performed all covenants and
agreements to be performed by it under this Agreement on or prior to the
Closing Date, and Buyer shall have delivered to Seller a certificate to such
effect, dated the Closing Date, which certificate shall be in form and
substance satisfactory to Seller and its counsel;
6.2..2. Opinion of Counsel for the Buyer. Pepper Hamilton
LLP, counsel for Buyer, shall have delivered to Seller their opinion, dated
the Closing Date and in the form set forth in Exhibit 6.2.2;
6.2..3. Litigation Affecting Closing. On the Closing Date,
no proceeding shall be pending or threatened before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of the
transaction contemplated hereby, and no investigation that might eventuate in
any such suit, action or proceeding shall be pending or threatened;
-18-
<PAGE>
6.2..4. Approval of Seller; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved on the Closing Date by Seller, in the exercise of their
reasonable judgment, and Seller shall have been furnished with certified
copies, satisfactory in form and substance to Seller in the exercise of their
reasonable judgment, of all such records of Buyer and Seller and of the
proceedings of Buyer and Seller authorizing their execution, delivery and
performance of this Agreement as Seller shall reasonably require;
6.2..5. Consulting Agreement. Buyer shall have entered into
an agreement with Dacus Properties to retain Dacus Properties as a management
consultant under the terms and provisions of the consulting agreement attached
in Exhibit 6.2.5 hereto; and
6.2..6. Real Estate Lease. Buyer shall have entered into an
agreement with Dacus Properties to lease 1653 North Bolton Street and 1488
North Bolton Street, both of Jacksonville, Texas from Dacus Properties under
the terms and provisions of the lease agreement attached in Exhibit 6.1.11
hereto.
ARTICLE 7
INDEMNIFICATION
---------------
7.1. By Seller. To the extent and in the manner herein provided,
Seller, Dacus Properties and Dacus (collectively, the "Indemnitors") shall,
jointly and severally, indemnify, defend, and hold harmless Buyer from and
against any and all damages, losses, obligations, deficiencies, liabilities,
claims, encumbrances, penalties, costs, and expenses, including expenses
related to investigation and defense including reasonable attorneys' fees
(collectively, "Losses"), which Buyer may suffer or incur, resulting from,
related to, or arising out of (i) any misrepresentation, breach of warranty or
nonfulfillment of any of the covenants of Seller, Dacus Properties or Dacus in
this Agreement or from any misrepresentation in or omission from any Schedule
to this Agreement, certificate, financial statement, or from any other
document furnished or to be furnished to Buyer hereunder; (ii) any claims for
the payment of Taxes in excess of the respective amounts specifically reserved
therefor on 1997 Financial Statements or have previously been paid; (iii) any
claims asserted against the Buyer or the Purchased Assets and alleged to arise
out of any act, omission, obligation, or liability of Seller's or any of its
officers, employees, or other agents; and (iv) the Retained Liabilities.
7.2. By Buyer. From and after the Closing Date (as defined in Section
9.1), Buyer agrees to indemnify, defend, and hold harmless Seller from and
against (i) any and all Losses, which Seller may suffer or incur, resulting
from, related to, or arising out of any misrepresentation, breach of warranty,
or nonfulfillment of any of the covenants or agreements of Buyer in this
Agreement; (ii) any misrepresentation in or omission from any certificate or
document furnished or to be furnished to Seller hereunder and any and all
suits, actions, investigations, proceedings, demands, assessments, audits,
judgments, and claims arising out of any of the foregoing; (iii) any
-19-
<PAGE>
and all Losses resulting from, related to, or arising out of the operation of
the Business after Closing Date; and (iv) any and all Losses resulting from,
related to, or arising out of the Assumed Liabilities.
7.3. Procedures. Promptly after acquiring knowledge of any such
Losses or Claims against which Indemnitors have indemnified Buyer or against
which Buyer has indemnified Seller, or as to which either Buyer or Seller
(herein, a "Party") may be liable, Indemnitors or Buyer, as the case may be,
shall give to the other Party written notice thereof; provided, however, that
failure to give notice shall not relieve the indemnifying Party of any
liability it may have to the indemnified Party if such failure does not
materially prejudice the indemnifying Party. In the event of any such Loss or
Claim, (i) the indemnifying Party shall have the right to assume the defense
thereof and shall not be liable to such indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by such
indemnified Party in connection with the defense thereof, provided however
that the indemnifying Party shall have waived its right to contest its
obligation to indemnify the indemnified Party for all Losses or damages with
respect to such Claim; (ii) if the indemnifying Party fails to assume such
defense or counsel for the indemnifying Party advises that there are issues
which raise conflicts of interest between the indemnifying Party, on the one
hand, and the indemnified Party, on the other hand, the indemnified Party may
retain one counsel satisfactory to it, and the indemnifying Party shall pay
all reasonable fees and expenses of such counsel promptly as statements
therefor are received; (iii) the indemnifying Party shall receive from the
indemnified Party all necessary and reasonable cooperation in said defense
including, but not limited to, the services of employees who are familiar with
the transactions out of which any such Loss or Claim may have arisen; and (iv)
the indemnifying Party shall not be liable for any settlement effectuated
without its prior written consent.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
All representations and warranties made by Seller and Buyer
in this Agreement or pursuant hereto shall survive the Closing (as defined in
Section 9.1) hereunder, notwithstanding any investigation made by or on behalf
of Seller or Buyer prior to or after the Closing Date (as defined in Section
9.1).
-20-
<PAGE>
ARTICLE 9
THE CLOSING
-----------
9.1. Time and Place. The closing (the "Closing") of the transactions
contemplated hereby (the "Closing Date") shall be held on or before May 15,
1998 at 9:00 a.m., at the offices of Pepper Hamilton LLP, 3000 Two Logan
Square, 18th & Arch Streets, Philadelphia, Pennsylvania 19103, or at such
earlier time as the conditions to closing in Article 6 shall have been
satisfied and at such other place as shall be mutually agreeable to the Buyer
and the Seller.
9.2. Conduct at Closing.
9.2..1. Conduct of Seller. Subject to the fulfillment of all
of the conditions set forth in Section 6.2 and the delivery of all
certificates and opinions required thereby, except such conditions,
certificates, and opinions as may be waived by Buyer in writing, Seller shall
deliver to Buyer:
(a) the Purchased Customer Lists;
(b) such bills of sale, assignments and other
instruments of transfer or conveyance in form and substance reasonably
satisfactory to Buyer's counsel, as Buyer may reasonably request to convey to
Buyer good and marketable title to the Purchased Assets owned by Seller and
otherwise to transfer all of Seller's right, title and interest in and to the
Purchased Assets;
(c) an amendment to Seller's Articles of
Incorporation certified by the Secretary of State amending the corporate name
of Seller to a name dissimilar to "Astro Air" or Articles of Merger, adopted
by Seller and Dacus Properties and certified by the Secretary of State,
merging Seller into Dacus Properties;
(d) the certificate required by Section 6.1.1 hereof;
(e) the opinion of counsel required by Section
6.1.2 hereof; and
(f) a certificate dated the Closing Date and signed
on behalf of Seller by its Secretary attaching (a) (i) a true and correct copy
of the Company's Articles of Incorporation, (ii) a true and correct copy of
the By-Laws of Seller, (iii) the resolutions by the Board of Directors and the
stockholders of Seller authorizing the actions taken and authorizing the
officers of Seller to execute all documents and instruments to be executed and
delivered by Seller in connection with the purchase of the assets, and (iv)
certificates of good standing certified by the Secretaries of State or other
appropriate officials of those states in which Seller does business; and (b)
specimen signatures of the incumbent officers of Seller executing this
Agreement and the documents executed and delivered pursuant to or in
connection with this Agreement.
-21-
<PAGE>
9.2..2. Conduct of Buyer. Subject to the fulfillment of all
of the conditions set forth in Section 6.1 and the delivery of all
certificates and opinions required thereby, except such conditions as may be
waived by the Seller in writing, on the Closing Date, Buyer shall deliver to
Seller:
(a) evidence of the payment provided for in Section
1.2 hereof;
(b) such assumption agreements, in form and
substance reasonably satisfactory to Seller's counsel, as Seller may
reasonably request to evidence and effect Buyer's assumption of the Assumed
Liabilities;
(c) the certificate required by Section 6.2.1
hereof;
(d) the opinion of counsel required by Section
6.2.2 hereof;
(e) the executed consulting agreement required by
Section 6.2.6 hereof;
and
(f) a certificate dated the Closing Date and signed
on behalf of Buyer by its Secretary attaching (a) (i) a true and correct copy
of Buyer's Articles of Incorporation, (ii) a true and correct copy of the
By-Laws of Buyer, (iii) the resolutions by the Board of Directors of Buyer
authorizing the actions taken and authorizing the officers of Buyer to execute
all documents and instruments to be executed and delivered by Buyer in
connection with the purchase of the assets, and (iv) certificates of good
standing certified by the Secretary of State of the Commonwealth of
Pennsylvania; and (b) specimen signatures of the incumbent officers of Buyer
executing this Agreement and the documents executed and delivered pursuant to
or in connection with this Agreement.
ARTICLE 10
CONDUCT OF SELLER AND BUYER AFTER CLOSING
-----------------------------------------
10.1. Post-Closing Conduct Generally. Buyer and Seller will cooperate
upon and after the Closing Date in effecting the orderly transfer of the
Purchased Assets to Buyer. In addition, after the Closing Date, at the request
of either Party and at the requesting Party's expense, but without additional
consideration, the other Party shall execute and deliver from time to time
such further instruments of assignment, conveyance and transfer, shall
cooperate in the conduct of litigation and the processing and collection of
insurance claims, and shall take such other actions as may reasonably be
required to convey and deliver more effectively to Buyer the Purchased Assets
or to confirm and perfect the Buyer's title to the Purchased Assets, and
otherwise to accomplish the orderly transfer of ownership of the Purchased
Assets to Buyer as contemplated by this Agreement.
-22-
<PAGE>
10.2. Non-Competition. For a period of five (5) years from and after
the Closing Date (the "Restricted Period"), Dacus Properties and Dacus
individually and collectively covenant and agree and shall sign and deliver to
Buyer at Closing an Acknowledgment and Agreement to that effect that, without
the prior written consent of Buyer, they shall not do any of the following
directly or indirectly:
10.2..1. engage or participate in any business activity
competitive with the Business, as same are conducted during the Restricted
Period;
10.2..2. become interested in (as owner, stockholder,
lender, partner, co-venturer, director, officer, employee, agent, consultant
or otherwise) any person, firm, corporation, association or other entity
engaged in any business that is competitive with the Business as conducted
during the Restricted Period or become interested in (as owner, stockholder,
lender, partner, co-venturer, director, officer, employee, agent, consultant
or otherwise) any portion of the business of any person, firm, corporation,
association or other entity where such portion of such business is competitive
with the Business as conducted during the Restricted Period with respect to
any employment hereunder with respect to any period thereafter.
Notwithstanding the foregoing, neither Dacus Properties nor Dacus may hold
more than five percent (5%) of the outstanding securities of any class of any
publicly-traded securities of a company that is engaged in activities
referenced in Section 10.2 hereof;
10.2..3. influence or attempt to influence any supplier,
customer or potential customer of Seller to terminate or modify any written or
oral agreement or course of dealing with Seller; or
10.2..4. influence or attempt to influence any person to
either (i) terminate or modify his employment, consulting, agency,
distributorship or other arrangement with Seller, or (ii) employ or retain, or
arrange to have any other person or entity employ or retain, any person who
has been employed or retained by Seller as an employee, consultant, agent or
distributor at anytime during the twelve (12) month period immediately
preceding the termination of the Restricted Period.
It is further understood and agreed that the obligations
under this Section shall remain in effect for the entire five-year period
indicated, notwithstanding any termination of this Agreement during such
period due to a breach hereof by the Seller.
It is also understood and agreed that, in the event of a
continuing material breach of this Section, Buyer shall be entitled to an
injunction restraining such breach. The exercise by Buyer of any or all such
rights shall not be construed as prohibiting Buyer from pursuing any other
right or remedy it may have with respect to such breach, including the
recovery of damages.
If any of the provisions of this Section 10.2 are held to be
in any respect an unreasonable restriction upon Dacus Properties or Dacus,
then they shall be deemed to extend only over the maximum period of time,
geographic area, or range of activities as to which they
-23-
<PAGE>
may be enforceable. In the event that Dacus Properties or Dacus (as the case
may be) shall be in violation of the restrictive covenants in this Section
10.2, then the Restricted Period shall be extended for a period of time equal
to the period of time during which such breach shall occur; and, in the event
that Buyer should be required to seek relief from such breach in any court,
board of arbitration or other tribunal, then the Restricted Period shall be
extended for the period of time required for the pendency of such proceedings,
including all appeals.
10.3. Insurance. To the extent that claims pending under Seller's
property, occupational hazard or other insurance policies prior to Closing are
not transferrable and to the extent that Seller, or Dacus Properties if Seller
is merged into Dacus Properties, receives distribution on such pending claims
after Closing, Seller or Dacus Properties (as the case may be) shall
immediately turn over any and all such distributions to Buyer together with
any and all related correspondence from the insurer.
ARTICLE 11
BROKERAGE; EXPENSES
-------------------
Neither of the Parties, nor, where applicable, any of their
respective shareholders, officers, directors, or employees, has employed or
will employ any broker, agent, finder, or consultant or has incurred or will
incur any liability for any brokerage fees, commissions, finders' fees, or
other fees, in connection with the negotiation or consummation of the
transactions contemplated by this Agreement.
Except as otherwise expressly provided in this Agreement,
each Party agrees to bear all the respective costs, fees and expenses of any
character incurred by such Party including all attorneys' fees and expenses,
in connection with this Agreement or the transactions contemplated hereby.
ARTICLE 12
TAXES
-----
Seller shall pay any applicable sales, documentary, use,
filing, transfer, and other taxes payable as a result of the transfer of the
Purchased Assets.
-24-
<PAGE>
ARTICLE 13
TERMINATION
-----------
13.1. Events of Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated by written notice
of termination at any time before the Closing Date only as follows:
13.1..1. Mutual Consent. By mutual consent of Seller and
the Buyer;
13.1..2. Prior to Closing Date. By Seller or Buyer if the
other shall have (a) misstated any representation or been in breach of any
warranty contained herein or (b) been in breach of any covenant, undertaking
or restriction contained herein and such misstatement of breach has not been
cured by the earlier of (i) thirty (30) days after the giving of notice to
such party of such misstatement or breach of (ii) the Closing Date, and in any
event such other party shall not be in breach of such other party's
obligations hereunder;
13.1..3. By Buyer. Provided that the Buyer is not in
material default hereunder, if all of the conditions precedent set forth in
Section 6.2 hereof have not been met prior to May 15, 1998;
13.1..4. By Seller. Provided that the Seller is not in
material default hereunder, if all of the conditions precedent set forth in
Section 6.1 hereof have not been met prior to May 15, 1998; and
13.1..5. By Either Party. Provided that such party is not in
material default hereunder, by either party if the Closing does not occur on
or before May 15, 1998.
13.2. Consequences of Termination. If this Agreement is validly
terminated pursuant to Section 14.1 and the transactions contemplated hereby
are not consummated as described above, this Agreement shall become void and
of no further force and effect except for the provisions in Section 1.2
respecting the retention or refund of the Deposit; provided, however, that if
Buyer terminates this Agreement because any of the conditions contained in
Section 6.1 have not been satisfied or if Seller terminates this Agreement
because any of the conditions contained in Section 6.2 have not been satisfied
then the terminating party shall have the right to pursue all of its legal
remedies for breach of contract and damages; provided further that if this
Agreement is validly terminated pursuant to Section 13.1 and the transactions
contemplated hereby are not consummated as described above, the provisions of
Section 5.3 relating to the obligation of Buyer to keep confidential and not
to use certain information obtained by it from Seller and to return documents
and copies thereof to Seller and the provisions of Section 13.3 relating to
responsibility for expenses shall survive. No party hereto shall have any
liability to any other party in respect of a valid termination of this
Agreement pursuant to Section 13.1, except to the extent set forth above and
in Section 1.2.
-25-
<PAGE>
13.3. Expenses if No Closing. If the Closing does not occur and the
transactions contemplated hereby are not consummated, then, subject to the
right of a non-defaulting party to recover costs and expenses from a
defaulting party pursuant to Section 13.2, all costs and expenses incurred in
connection with this Agreement shall be paid by the person incurring such
expenses, i.e., by Buyer if incurred by Buyer and by Seller if incurred by
Seller.
ARTICLE 14
MISCELLANEOUS
-------------
14.1. Entire Agreement; Amendments. This Agreement, together with the
Collateral Documents, constitutes the entire understanding among the Parties
with respect to the subject matter contained herein and supersedes any prior
understandings and agreements among them respecting such subject matter. This
Agreement may be amended, supplemented, and terminated only by a written
instrument duly executed by all of the Parties.
14.2. Headings. The headings in this Agreement are for convenience of
reference only and shall not affect its interpretation.
14.3. Gender; Number. Words of gender may be read as masculine,
feminine, or neuter, as required by context. Words of number may be read as
singular or plural, as required by context.
14.4. Exhibits and Schedules. Each Exhibit and Schedule referred to
herein is incorporated into this Agreement by such reference.
14.5. Severability. If any provision of this Agreement is held
illegal, invalid, or unenforceable, such illegality, invalidity, or
unenforceability will not affect any other provision hereof. This Agreement
shall, in such circumstances, be deemed modified to the extent necessary to
render enforceable the provisions hereof.
14.6. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given to the person if delivered personally
or upon sending a copy thereof by first class or express mail, postage
prepaid, or by telegram (with messenger service specified), or reputable
courier services, charges prepaid, or by facsimile, to such party's address
(or to such party's facsimile number).
-26-
<PAGE>
If to Parent or Buyer, to:
Owosso Corporation
The Triad Building
2200 Renaissance Boulevard, Suite 150
King of Prussia, PA 19406
Attention: George B. Lemmon, Jr., President
Fax Number: (610) 275-5122
With a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103
Attention: Elam M. Hitchner, III, Esq.
Fax Number: (215) 981-4750
If to Seller, Dacus Properties or Dacus, to:
Rex Dacus, President
Astro Air, Inc.
P.O. Box 1988
Jacksonville, TX 75766
Fax Number: (903) 586-7355
With a copy to:
Norman, Thrall, Angle & Guy
P.O. Box 1870
Jacksonville, TX 75766
Attention: Mr. Joseph Angle, Esq.
Fax Number: (903) 586-0524
Notice of any change in any such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the Party entitled to receive such notice.
14.7. Waiver. The failure of any Party to insist upon strict
performance of any of the terms or conditions of this Agreement will not
constitute a waiver of any of its rights hereunder.
14.8. Assignment. No Party may assign any of its rights or delegate
any of its obligations hereunder without the prior written consent of the
other Parties hereto.
-27-
<PAGE>
14.9. Successors and Assigns. This Agreement binds, inures to the
benefit of, and is enforceable by the successors and assigns of the Parties,
and does not confer any rights on any other persons or entities.
14.10. Governing Law. This Agreement shall be construed and enforced
in accordance with the law of the Commonwealth of Pennsylvania.
14.11. No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit
of the parties hereto and their successors and assigns, and they shall not be
construed as conferring and are not intended to confer any rights on any other
persons.
14.12. Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. The execution of this Agreement by any party hereto will not
become effective until counterparts hereof have been executed by all the
parties hereto. It shall not be necessary in making proof of this Agreement or
any counterpart hereof to produce or account for any of the other
counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
OWOSSO CORPORATION
/s/ George B. Lemmon, Jr.
By:____________________________
Title: President
ASTRO AIR ACQUISITION CORP.
/s/ George B. Lemmon, Jr.
By:____________________________
Title: President
ASTRO AIR, INC.
/s/ Rex Dacus
By:____________________________
Title: President
[EXECUTIONS CONTINUED ON NEXT PAGE]
-28-
<PAGE>
DACUS PROPERTIES, INC.
/s/ Rex Dacus
By:____________________________
Title: President
/s/ Rex Dacus
-------------------------------
Rex Dacus
-29-
