EXHIBIT 2.1
_________________________________________________________________
ASSET PURCHASE AGREEMENT
BETWEEN
APPLIED POWER INC. AND
WRIGHT LINE INC., ON THE ONE HAND
AND
EVEREST ELECTRONIC EQUIPMENT, INC., WALLACE H. TWEDT,
TERRY D. WELLS AND ROBERT L. WELLS, ON THE OTHER HAND
August 27, 1996
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TABLE OF CONTENTS
Page
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ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Affiliate Real Estate Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Annual Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Assumed Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Assumed Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Bill of Sale, Assignment and Assumption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 Buyer's Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 Closing Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 Closing Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 Employee Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 Employee Benefit Plan of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.26 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.27 Environmental Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.28 Environmental Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.29 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.30 Environmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.31 Environmental Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.33 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.34 Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.35 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.36 Estimated Cash Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.37 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.38 Final Cash Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.39 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.40 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.41 Guarantor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.42 Guaranty Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.43 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.44 Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.45 Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.46 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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1.47 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.48 Inventory Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.49 Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.50 Leased Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.51 Leasehold Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.52 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.53 Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.54 Material Adverse Effect; Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.55 Material or Materially . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.56 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.57 Net Current Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.58 Noncompetition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.59 Ordinary Course of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.60 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.61 Post-Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.62 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.63 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.64 Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.65 Product Liability Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.66 Product Warranty Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.67 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.68 Real Estate Lease (Anaheim Facility) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.69 Real Estate Lease (Garden Grove Facility) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.70 Real Estate Lease (Orange Facility) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.71 Recent Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.72 Seabrook Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.73 Seller's Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.74 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.75 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.76 Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.77 Ultimate Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II
PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV
PURCHASE PRICE; MANNER OF PAYMENT; PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Amount; Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Final Cash Purchase Price Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLER AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2 Authorization, Validity, Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.6 Good Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.7 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.8 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.9 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.10 Equipment; Location of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.11 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.12 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.13 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.14 Litigation and Other Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.15 Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.16 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.17 Employment Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.18 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.19 Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.20 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.21 Compliance With Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.23 Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.24 All Necessary Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.25 Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.26 Brokerage; Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.27 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.28 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.29 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.30 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.2 Authorization, Validity, Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.3 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.5 Litigation and Other Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.6 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2 Access to Books and Records following the Closing . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.3 Covenant to Satisfy Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.4 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.5 Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6 Conduct of Business Pending the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.9 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.10 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.11 Personnel Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.12 Unemployment Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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7.13 Product Warranty Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.14 Hart-Scott-Rodino Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.15 Consents and Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.16 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.17 Offsite Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.18 Use of Seller's Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.19 Bulk Sales Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.20 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.21 Sales and Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.22 Name Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.23 Post-Closing Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.24 Seabrook Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF
BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.1 Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.3 No Proceeding or Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.4 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.5 Deliveries At or Prior to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.6 Hart-Scott-Rodino Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.7 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.8 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.9 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.1 Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.3 No Proceeding or Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.4 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.5 Deliveries At or Prior to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.6 Hart-Scott-Rodino Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.3 Indemnification Covenants of Seller and Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 45
10.4 Indemnification Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.5 Claims for Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE XI
TERMINATION; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.1 Right To Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.2 Rights on Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XII
-iv-
GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XIII
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.1 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.2 Waiver of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.4 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
13.6 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
13.7 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.9 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.10 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.11 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.13 Shareholder Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
-v-
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of this 27th day of August, 1996, by and
between WRIGHT LINE INC., a Massachusetts corporation ("Buyer"), APPLIED POWER
INC., a Wisconsin corporation ("Guarantor"), EVEREST ELECTRONIC EQUIPMENT,
INC., a California corporation ("Seller"), and WALLACE H. TWEDT ("Twedt"),
TERRY D. WELLS ("Terry Wells") and ROBERT L. WELLS ("Robert Wells")
(individually referred to herein as "Shareholder" and collectively referred to
herein as "Shareholders").
R E C I T A L S :
A. Seller is engaged in the Business (as hereinafter defined); and
B. Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, substantially all of the assets, property and business of Seller,
upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
DEFINITIONS
In addition to the other definitions contained herein, the following
definitions shall apply for purposes of this Agreement:
1.1 Accounts Payable. "Accounts Payable" means all trade accounts
payable of Seller incurred in the Ordinary Course of Business.
1.2 Accrued Expenses. "Accrued Expenses" means those accrued
expenses of the Seller incurred in the Ordinary Course of Business and of the
general type described on Exhibit 1.2 attached hereto, including without
limitation accrued vacation pay, and accrued bonuses due Employees which are
being accrued at the rate of $110,000 per month, in each case to the extent
shown on the Closing Balance Sheet.
1.3 Accounts Receivable. "Accounts Receivable" means all trade
accounts receivable of Seller.
1.4 Affiliate. "Affiliate," when such term is used with respect
to another Person which is a legal entity, means (a) any
Person who directly or indirectly controls, is controlled by or is under common
control with such other Person, (b) any Person who is a director or officer of,
member in or trustee of, or who serves in a similar capacity with respect to,
such other Person, or (c) any Person who directly or indirectly is the
beneficial owner of 10% or more of any securities of such other Person. When
the term "Affiliate" is used with respect to another Person who is an
individual, it means (i) any family member of such Person, or (ii) any
corporation, partnership, limited liability company, trust or other entity of
which such other Person serves as an officer, director, general partner,
manager, trustee or in a similar capacity. Control means the ownership of or
right to vote more than fifty percent (50%) of the voting stock or other
interests of an entity or the legal or contractual right to elect a majority of
an entity's Board of Directors or other supervisory body.
1.5 Affiliate Real Estate Leases. "Affiliate Real Estate Leases"
means the Real Estate Lease (Anaheim Facility) and the Real Estate Lease
(Garden Grove Facility).
1.6 Ancillary Agreements. "Ancillary Agreements" means all of the
agreements being executed and delivered pursuant to this Agreement.
1.7 Annual Financial Statements. "Annual Financial Statements"
means the unaudited balance sheet of Seller as of December 31 of each of the
years 1995, 1994 and 1993, and the statement of income of Seller for the
periods then ended, including the notes thereto, all attached hereto as Exhibit
1.7.
1.8 Assumed Contracts. "Assumed Contracts" means all of Seller's
rights and interests in and to (a) agreements between Seller and its customers,
suppliers, dealers and distributors, including without limitation open purchase
orders received by Seller from its customers, and open purchase orders issued
by Seller to its suppliers, (b) the Real Estate Lease (Orange Facility), and
(c) those other agreements and commitments, if any, described on Exhibit 1.8
attached hereto.
1.9 Assumed Indebtedness. "Assumed Indebtedness" means the
Accounts Payable and the Accrued Expenses as of the Effective Time. In no
event shall Assumed Indebtedness include that certain $250,000 bonus to be paid
to Terry Wells at or following the Closing or any fees for attorneys,
accountants or other professionals incurred in connection with the transactions
contemplated by this Agreement.
1.10 Assumed Liabilities. "Assumed Liabilities" means (a) the
liabilities and obligations of Seller under the Assumed Contracts, but only to
the extent such liabilities and obligations arise from and after the Effective
Time and relate to the period following the
2
Effective Time, (b) the Assumed Indebtedness as of the Effective Time, and (c)
Cobra Obligations (as defined in Section 7.11)
1.11 Bill of Sale, Assignment and Assumption Agreement. "Bill of
Sale, Assignment and Assumption Agreement" means the agreement in substantially
the form of Exhibit 1.11 attached hereto.
1.12 Books and Records. "Books and Records" means Seller's books,
records, files and correspondence relating to the Business, including, without
limitation, customer and supplier lists, prospective customer and supplier
lists to the extent maintained by Seller, sales, promotional and advertising
materials, warranty records, personnel records, payroll records and engineering
records.
1.13 Business. "Business" means Seller's business of designing,
manufacturing, marketing, packaging and selling sheet metal, plastic casings
and electronic casements and chassis of various shapes, sizes and forms used in
the computer, health or telecommunication industries or otherwise and other
products or services, and all activities relating or incidental thereto.
1.14 Buyer's Legal Opinion. "Buyer's Legal Opinion" means a legal
opinion of Buyer's counsel in substantially the form attached hereto as Exhibit
1.14.
1.15 CERCLA. "CERCLA" has the meaning specified in Section 5.22(f)
hereof.
1.16 Closing. "Closing" means the closing of the transactions
provided for in this Agreement, which shall take place on the Closing Date at
the offices of Everest Electronic Equipment, Inc., 2100 East Orangewood,
Anaheim, California, or such other place as the parties may agree upon.
1.17 Closing Date. "Closing Date" the date on which the Closing
occurs, which shall be as soon as reasonably practicable following the
satisfaction of the conditions set forth in Sections 8.6 and 9.6, but in no
event later than the Ultimate Closing Date.
1.18 Closing Balance Sheet. "Closing Balance Sheet" has the
meaning specified in Section 4.3(a).
1.19 Closing Schedule. "Closing Schedule" has the meaning specified
in Section 4.3(a).
1.20 Code. "Code" means the Internal Revenue Code of 1986, as
amended.
1.21 Disclosure Schedule. "Disclosure Schedule" means the
disclosure schedule dated the date of this Agreement which has been
3
executed and delivered by Seller and Shareholders to Buyer contemporaneously
with the execution and delivery of this Agreement, as the same may be amended
from time to time after the date of this Agreement and prior to the Closing
Date in accordance with the terms of this Agreement.
1.22 Effective Time. "Effective Time" means the close of business
on the day immediately preceding the Closing Date.
1.23 Employee Benefit Plan. "Employee Benefit Plan" has the
meaning specified in Section 5.16(a) hereof.
1.24 Employee Benefit Plan of Seller. "Employee Benefit Plan of
Seller" has the meaning specified in Section 5.16(a) hereof.
1.25 Employees. "Employees" means all of the employees of Seller.
1.26 Employment Agreement. "Employment Agreement" means the
employment agreement to be entered into between Buyer and Terry Wells in
substantially the form of Exhibit 1.26 attached hereto.
1.27 Environmental Claim. "Environmental Claim" has the meaning
specified in Section 5.22(a)(i) hereof.
1.28 Environmental Hazardous Materials. "Environmental Hazardous
Materials" has the meaning specified in Section 5.22(a)(iii) hereof.
1.29 Environmental Laws. "Environmental Laws" has the meaning
specified in Section 5.22(a)(ii) hereof.
1.30 Environmental Permits. "Environmental Permits" has the
meaning specified in Section 5.22(a)(iv) hereof.
1.31 Environmental Release. "Environmental Release" has the
meaning specified in Section 5.22(a)(v) hereof.
1.32 Equipment. "Equipment" means all of Seller's fixed assets,
including, without limitation, machinery and equipment used in the design or
manufacture of Seller's products, tools, dies, molds, patterns, supplies,
furniture, office supplies, business machines, video security systems,
vehicles, computer systems (including software), telephone systems, and all
related spare, replacement and maintenance parts.
1.33 ERISA. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.34 Escrow Agent. "Escrow Agent" means Bank One Wisconsin Trust
Company, N.A.
4
1.35 Escrow Agreement. "Escrow Agreement" means the agreement in
the form attached hereto as Exhibit 1.35.
1.36 Estimated Cash Purchase Price. "Estimated Cash Purchase
Price" means $51,700,000.00.
1.37 Excluded Assets. "Excluded Assets" means (a) cash, (b) all of
Seller's rights and interests in and to all agreements between Seller and third
parties, other than those constituting the Assumed Contracts, (c) any insurance
policies and prepaid premiums relating thereto, any prepaid expenses or
deposits paid by Seller under agreements which are not Assumed Contracts, (d)
any rights under Licenses and Permits which are not transferable to Buyer, (e)
Seller's corporate minute book, stock record books and corporate seal, and tax
returns and tax reports, and (f) tax refunds due Seller for periods prior to
the Effective Date.
1.38 Final Cash Purchase Price. "Final Cash Purchase Price" means
$51,700,000.00, plus or minus any adjustment pursuant to Section 4.3(c).
1.39 GAAP. "GAAP" means generally accepted accounting principles
in the United States, consistently applied.
1.40 Goodwill. "Goodwill" means the goodwill and going concern
value of the Business.
1.41 Guarantor. "Guarantor" means Applied Power Inc., a Wisconsin
corporation.
1.42 Guaranty Agreement. "Guaranty Agreement" shall mean that
guaranty agreement executed by Guarantor, in the form attached hereto as
Exhibit 1.42.
1.43 HSR Act. "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
1.44 Indemnified Party. "Indemnified Party" has the meaning
specified in Section 10.1 hereof.
1.45 Indemnifying Party. "Indemnifying Party" has the meaning
specified in Section 10.1 hereof.
1.46 Intellectual Property. "Intellectual Property" means all of
the federal, state and foreign intellectual property rights owned by
Seller, used in the Business or relating to the Purchased Assets, including
without limitation all patents, and any divisions, continuations,
continuations-in-part, extensions, reexaminations or reissues of patents,
pending patent applications, trademarks (whether or not registered), trademark
registrations, pending trademark registration applications, copyrights (whether
or
5
not registered), copyright registrations and applications for registrations of
copyrights, service marks, brand names and trade names (including the trade
name Everest), inventions, trade secrets, discoveries, technical assistance,
formulas, drawings, designs, blueprints, specifications and other proprietary
know-how (whether or not patentable), including all licenses relating to any of
the foregoing, together with the goodwill associated with any of the foregoing,
and the right to sue for past or future infringement thereof.
1.47 Inventory. "Inventory" means all inventory used in the
Business, including without limitation all raw materials, packaging materials,
work in process and finished goods.
1.48 Inventory Report. "Inventory Report" has the meaning specified
in Section 4.3(c).
1.49 Law. "Law" means any domestic (federal, state or local) or
foreign statute, ordinance, rule, regulation, order, judgment or decree.
1.50 Leased Real Estate. "Leased Real Estate" means the land and
improvements to be leased by Buyer pursuant to the Real Estate Lease (Anaheim
Facility), Real Estate Lease (Garden Grove Facility) and Real Estate Lease
(Orange Facility).
1.51 Leasehold Improvements. "Leasehold Improvements" means all
improvements to real estate made by Seller.
1.52 Licenses and Permits. "Licenses and Permits" means all
licenses, permits, approvals and certifications issued to Seller by any
governmental Person or certification organization.
1.53 Lien. "Lien" means, with respect to any asset, (a) any
mortgage, pledge, lien, charge, claim, restriction, condition, easement,
covenant, lease, encroachment, title defect, imposition, security interest or
encumbrance of any kind, excluding liens for taxes not due and payable, and (b)
the interest of a vendor or lessor under any conditional sale agreement,
financing lease or other title retention agreement relating to such asset.
1.54 Material Adverse Effect; Material Adverse Change. "Material
Adverse Effect" or "Material Adverse Change" means any effect or change,
respectively, which is, or which is reasonably likely to be, Materially adverse
to the Business, or Seller's operations, properties (including intangible
properties), condition (financial or otherwise), liabilities (whether or not
contingent).
1.55 Material or Materially. "Material" or Materially" as applied
to any fact, matter or circumstance means one having an impact of at least
$15,000.
6
1.56 Name. "Name" means the name "Everest Electronic Equipment,
Inc."
1.57 Net Current Assets. "Net Current Assets" has the meaning
specified in Section 4.3(b).
1.58 Noncompetition Agreements. "Noncompetition Agreements" means
the agreements to be entered in substantially the form of Exhibit 1.58-1,
1.58-2 and 1.58-3, attached hereto, one between Buyer and Wallace H. Twedt, one
between Buyer and Terry Wells and one between Buyer and Robert Wells.
1.59 Ordinary Course of Business. "Ordinary Course of Business"
means the ordinary course of business consistent with past custom and practice,
including with respect to quantity, amount and frequency, as adjusted for
seasonal fluctuation relative to the Business and the industry in which it
operates.
1.60 Person. "Person" means a natural person, corporation, trust,
partnership, limited liability company, limited liability partnership,
governmental entity, authority or other regulatory or administrative agency or
commission, including agency, branch or department thereof, or any other legal
entity.
1.61 Post-Closing Documents. "Post-Closing Documents" shall mean
the Closing Balance Sheet, Closing Schedule and Inventory Report.
1.62 Purchase Price. "Purchase Price" means the Final Cash
Purchase Price plus the Assumed Indebtedness.
1.63 Purchased Assets. "Purchased Assets" means all of the
following assets and rights of Seller existing as of the Effective Time,
expressly excluding the Excluded Assets:
(a) all prepaid expenses and deposits;
(b) the Accounts Receivable and employee advances;
(c) the Equipment;
(d) the Intellectual Property;
(e) the Inventory;
(f) the Name;
(g) the Supplies;
(h) all of Seller's rights and interests in and to the Assumed
Contracts;
7
(i) all of Seller's rights and interests in and to the Licenses
and Permits, to the extent transferable to Buyer;
(j) the Books and Records;
(k) the Goodwill;
(l) the Leasehold Improvements; and
(m) all other assets and rights of Seller.
1.64 Product. "Product" means any product (including parts and
components) currently or previously manufactured, assembled or sold by Seller.
1.65 Product Liability Claim. "Product Liability Claim" means any
claim (whether such claim is based on a tort theory or other theory) alleging
that bodily injury, property damage or both has been caused by, or has
otherwise arisen out of or is incidental to, any defect in or other act or
omission with respect to a Product manufactured, assembled or sold by Seller
prior to the Effective Time, including, without limitation, failure to warn of
hazards associated with a Product.
1.66 Product Warranty Claim. "Product Warranty Claim" means any
claim for the return, repair or replacement of a Product manufactured or sold
by Seller prior to the Effective Time.
1.67 Real Estate. "Real Estate" means the Leased Real Estate and
the Leasehold Improvements.
1.68 Real Estate Lease (Anaheim Facility). "Real Estate Lease
(Anaheim Facility)" means the lease agreement to be entered between Buyer on
the one hand and the Robert Wells Family Partnership, a California Limited
Partnership, and the Twedt Family Partnership, a California Limited
Partnership, each as to an undivided one-half interest as tenants in common, on
the other hand, in the form of Exhibit 1.68 attached hereto.
1.69 Real Estate Lease (Garden Grove Facility). "Real Estate Lease
(Garden Grove Facility)" means the lease agreement to be entered between Buyer
and WT, LLC, a California limited liability company, in the form of Exhibit
1.69 attached hereto.
1.70 Real Estate Lease (Orange Facility). "Real Estate Lease
(Orange Facility)" means the lease agreement between Seller and Willard P. and
Jeanenne Wong, a copy of which is attached as Exhibit 1.70 hereto.
1.71 Recent Financial Statements. "Recent Financial Statements"
means the unaudited balance sheet of Seller as of
8
June 30, 1996 (the "Recent Balance Sheet"), and the statement of income of
Seller for the six (6) months then ended, including the notes thereto, if any,
attached as Exhibit 1.71.
1.72 Seabrook Facility. "Seabrook Facility" means the facility
located in Seabrook, New Hampshire which is leased by Seller from John V.
Craven and Richard C. Boswell.
1.73 Seller's Legal Opinion. "Seller's Legal Opinion" means a
legal opinion of Seller's counsel in substantially the form attached hereto as
Exhibit 1.73.
1.74 Supplies. "Supplies" means all office and production supplies
of Seller used in the Business.
1.75 Taxes. "Taxes" means all federal, state, local and foreign
income, gross receipts, capital stock, franchise withholding, social security,
unemployment, disability, real property, personal property, stamp, excise,
occupation, sales, use, transfer, value added, alternative minimum, estimated
or other taxes, including any interest, penalty or addition thereto.
1.76 Third Party Claim. "Third Party Claim" has the meaning
specified in Section 10.5(b) hereof.
1.77 Ultimate Closing Date. "Ultimate Closing Date" means the
latest to occur of (a) the second business day following the satisfaction of
the conditions set forth in Sections 8.6 and 9.6, (b) the thirty-fifth (35th)
day following the date of this Agreement or (c) the Applicable Date (as
hereafter defined). If by the later to occur of (a) the second business day
following the satisfaction of the conditions set forth in Sections 8.6 and 9.6
or (b) the thirty-fifth (35th) day following the date of this Agreement, Buyer
has been unable to locate, lease and take possession of a facility to serve as
a replacement for the Seabrook Facility so as to enable Buyer to commence
removal of the Purchased Assets from the Seabrook Facility as contemplated by
Section 7.24, then Buyer and Seller shall negotiate in good faith towards the
preparation and execution of a supply agreement pursuant to which Seller shall
produce products at the Seabrook Facility of the type produced there as of the
date of this Agreement and supply such products to Buyer on terms and
conditions to be agreed upon. The term of such supply agreement shall not
extend beyond one hundred twenty (120) days following the date hereof or, if
earlier, such time as Buyer is in a position to commence removal of the
Purchased Assets from the Seabrook Facility as contemplated by Section 7.24.
If Buyer and Seller are unable to negotiate the terms of such supply agreement
by the end of the thirty-fifth (35th) day following the date of this Agreement
(or such later date as the parties hereafter agree upon in writing), then the
Ultimate Closing Date shall automatically be extended to a date (the
"Applicable
9
Date") which is the earlier of the sixty-fifth (65th) day following the date of
this Agreement or such time as Buyer is in a position to commence removal of
the Purchased Assets from the Seabrook Facility as contemplated by Section
7.24.
ARTICLE II
PURCHASE AND SALE
At the Closing, upon the terms and subject to the conditions contained
herein, Seller shall sell, transfer, assign, convey and deliver to Buyer, and
Buyer shall purchase from Seller, all of the Purchased Assets, free and clear
of all Liens.
ARTICLE III
ASSUMPTION OF LIABILITIES
At the Closing, upon the terms and subject to the conditions contained
herein, Buyer will assume and agree to fully pay, timely perform and timely
discharge the Assumed Liabilities. Except for the Assumed Liabilities, Buyer
will assume no past, present or future obligations or liabilities of Seller,
including, without limitation, (a) liabilities or obligations to Employees
relating to services performed prior to the Effective Time, including, without
limitation, liabilities or obligations under any Employee Benefit Plan of
Seller, (b) any obligations for Taxes, (c) any Product Liability Claim, or (d)
any Product Warranty Claim. Buyer will pay all Accounts Payable (and Accrued
Expenses to the extent due) within thirty (30) days following the Closing,
except for those amounts which Buyer is disputing or contesting in good faith.
ARTICLE IV
PURCHASE PRICE; MANNER OF PAYMENT; PROCEDURE
4.1 Amount; Allocation. As consideration for the Purchased
Assets, Buyer will assume the Assumed Liabilities as provided in Article III at
the Closing, and will pay to Seller an amount equal to the Final Cash Purchase
Price in the manner set forth in Section 4.2. The Purchase Price shall be
allocated among the Purchased Assets in accordance with Exhibit 4.1 attached
hereto.
4.2 Payments.
(a) At the Closing, Buyer shall pay the Estimated Cash Purchase
Price in cash as follows:
(i) $51,700,000.00 less the amount to be deposited in escrow
pursuant to Section 4.2(a)(ii) shall be paid to Seller; and
10
(ii) $2,000,000 shall be delivered to the Escrow Agent under
the Escrow Agreement.
(b) Within five (5) business days after the Final Cash Purchase
Price is finally agreed upon or determined pursuant to Section 4.3:
(i) If the Final Cash Purchase Price exceeds the
Estimated Cash Purchase Price, such excess shall be paid by Buyer to
Seller in cash; or
(ii) If the Estimated Cash Purchase Price exceeds the Final
Cash Purchase Price, such excess shall be paid by Seller to Buyer in
cash.
(c) All payments pursuant to this Article IV shall be made by wire
transfer of immediately available funds to an account designated by the
recipient.
4.3 Final Cash Purchase Price Determination.
(a) Within five (5) business days following the Closing Date, Buyer
at its expense shall conduct a physical count of the Inventory as of the
Effective Time using appropriate cut-off procedures. Seller and its
accountants shall be permitted at their expense to observe the taking of such
physical count. Following the completion of such physical count, and in any
event within fifteen (15) business days following the Closing, Buyer shall
prepare and deliver to Seller an inventory report incorporating the results of
such physical count and setting forth the quantities of the items of Inventory
by category, the extended amount for each category of such items and the total
value thereof. The amounts of the Inventory reflected on the inventory report
shall be determined in accordance with GAAP, using the lower of cost (first-in,
first-out method) or market basis, and to the extent consistent with GAAP, in
accordance with Seller's past accounting practices for Inventory as reflected
in the December 31, 1995 balance sheet included in the Annual Financial
Statements. The inventory report as finally agreed upon or determined in
accordance with Section 4.3(b) is referred to as the "Inventory Report."
(b) Within fifteen (15) business days following the Closing, Buyer at
its expense shall prepare a balance sheet of Seller and a schedule of Net
Current Assets, both as of the Effective Time. Such balance sheet and schedule
as finally agreed upon or determined as provided in this Section 4.3(b) are
referred to herein as the "Closing Balance Sheet" and "Closing Schedule,"
respectively. The Closing Balance Sheet shall be prepared in accordance with
GAAP, and to the extent consistent with GAAP in accordance with Seller's past
accounting practices used in preparing its December 31 balance sheet included
in the Annual
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Financial Statements. "Net Current Assets" means, as of the Effective Time,
the amount of (i) Seller's Accounts Receivable, Inventory (as shown on the
Inventory Report), prepaid expenses relating to the Assumed Contracts and
employee advances, minus (ii) the amount of the Assumed Indebtedness, in each
case as shown on the Closing Balance Sheet. The Post-Closing Documents shall
be delivered to Seller within fifteen (15) days following the Closing.
Seller at its expense may review and examine the Post-Closing
Documents. Seller shall have complete access to the workpapers used by Buyer
in preparing the Post-Closing Documents. Seller shall have the right to
object, by written notice to Buyer, to the Post-Closing Documents to the extent
relevant in calculating the Net Current Assets; provided, however, that if
Seller does not give Buyer such notice of objection by the end of the tenth
business day following Seller's receipt from Buyer of the Post-Closing
Documents, Seller shall be deemed to have accepted Buyer's calculation of the
Net Current Assets shown on the Closing Schedule and such calculation shall be
final and conclusive. If within twenty (20) business days following receipt by
Buyer of Seller's notice of objection, Seller and Buyer are unable to resolve
any disagreements regarding the determination of the Post-Closing Documents to
the extent relevant in calculating the Net Current Assets, all such
disagreements at the written request of Seller or Buyer shall be referred for
resolution to the independent certified public accounting firm of Arther
Andersen LLP (at its largest office in Orange County). In such event, each
party shall submit a written determination of the Net Current Assets to such
accounting firm and such accounting firm shall within forty-five (45) days of
referral to it of the disagreements, deliver to Seller and Buyer a written
report in which it shall set forth its determination of the Net Current Assets
and its determination shall be conclusive and binding on the parties hereto.
Buyer and Seller shall cooperate fully with such accounting firm in connection
with such determination hereunder and shall provide it with full access to
their respective books, records, employees and facilities to the extent
relevant to such resolution. The costs and expenses of retaining such
accounting firm shall be borne by the party whose written determination of Net
Current Assets is the larger cumulative variance from the determination of the
Net Current Assets made by such accounting firm.
(c) The Final Cash Purchase Price will be equal to the following:
(i) If Net Current Assets as finally agreed upon or
determined pursuant to Section 4.3(b) is at least $4,700,000.00 but
not more than $5,700,000.00, the Final Cash Purchase Price shall be
equal to the Estimated Cash Purchase Price;
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(ii) If Net Current Assets as finally agreed upon or
determined pursuant to Section 4.3(b) exceeds $5,700,000.00, the Final
Cash Purchase Price shall be equal to the Estimated Cash Purchase
Price plus the amount of such excess; and
(iii) If $4,700,000.00 exceeds Net Current Assets as finally
agreed upon or determined pursuant to Section 4.3(b), the Final Cash
Purchase Price shall be equal to the Estimated Cash Purchase Price
minus the amount of such excess.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLER AND SHAREHOLDERS
Seller and Shareholders hereby jointly and severally make all of the
following representations and warranties to Buyer as of the date hereof and as
of the Closing, except to the extent otherwise disclosed on the Disclosure
Schedule; provided, however, that Buyer's remedy for inaccuracies or breaches
of the representations and warranties set forth in this Article V is subject to
the limitations set forth in Article X.
Terms used in the Disclosure Schedule and not otherwise defined
therein have the same meanings as set forth in this Agreement.
From time to time prior to the Closing, Seller will promptly
supplement or amend the Disclosure Schedule by written notice to Buyer with
respect to any matter arising after the date of this Agreement which, if
existing or occurring on the date of this Agreement, would have been required
to be set forth or described in the Disclosure Schedule so as to make the
representations and warranties in this Article V accurate. Any such supplement
or amendment which is promptly made with respect to a matter arising after the
date of this Agreement shall be deemed to modify the representations and
warranties to which such disclosure pertains, and such representations and
warranties shall not be considered breached by virtue of such matter which is
subsequently disclosed.
For purposes of this Article V, references to the "knowledge of
Seller" means those facts and matters which are known or which reasonably
should be known by the management of Seller or any Shareholder through the
exercise of due diligence.
5.1 Organization.
(a) Seller is a corporation validly existing and in good standing
under the Laws of the State of California. Seller has all requisite corporate
power and corporate authority to carry on the
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Business as it is now being conducted and to own and lease the properties and
assets of the Business it now owns and leases.
(b) Seller is duly qualified to do business as a foreign
corporation in each of the states listed in the Disclosure Schedule.
(c) Seller is duly qualified to do business as a foreign
corporation in each state in which the failure to be so qualified would have a
Material Adverse Effect on the Business or any of the Purchased Assets.
5.2 Authorization, Validity, Enforceability.
(a) Seller has all requisite corporate power and corporate
authority to enter into this Agreement and any Ancillary Agreement to which it
is or will be a party and to carry out the transactions contemplated hereby and
thereby.
(b) Seller's Board of Directors and its shareholders have duly
authorized its execution and delivery of this Agreement and any Ancillary
Agreement to which it is a party and the Seller's consummation of the
transactions contemplated hereby and thereby, and no other corporate action by
Seller is required by Law, its charter documents or otherwise to authorize the
execution and delivery by Seller of this Agreement and any Ancillary Agreement
to which it is a party, or the consummation by it of the transactions
contemplated hereby or thereby.
(c) This Agreement is a valid and binding agreement of Seller and
Shareholders enforceable against Seller and Shareholders in accordance with its
terms, and each Ancillary Agreement to be executed by the Shareholders and/or
Seller will be the valid and binding agreement of such party or parties
enforceable against such party or parties in accordance with their terms,
except that:
(i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or
hereafter in effect relating to creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding
therefor may be brought.
5.3 Compliance. To the knowledge of Seller, neither the execution
or delivery of this Agreement by Seller nor the consummation by Seller of the
transactions contemplated hereby or thereby, will result in any violation of or
be in conflict with, or constitute a default under, any provision of its
charter documents
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or any Material Assumed Contract, any Law or give any third party any right to
terminate or cancel any Material Assumed Contract.
5.4 Consents and Approvals. To the knowledge of Seller:
(a) Except for the HSR Act, no consent, approval or authorization
of, or declaration, filing or registration with, any governmental Person,
whether federal, state or local, is required of Seller in connection with the
execution or delivery by Seller of this Agreement, any Ancillary Agreement to
which it is a party, or the consummation by Seller of any of the transactions
contemplated hereby or thereby.
(b) No consent of any Person is required in connection with the
execution or delivery by Seller of this Agreement, any Ancillary Agreement to
which it is a party, or the consummation by Seller of any of the transactions
contemplated hereby or thereby, including, without limitation, consents from
any party to the assignment of any Material Assumed Contract.
5.5 Financial Statements. Except as disclosed in the Disclosure
Schedule:
(a) The Annual Financial Statements have been prepared in
accordance with GAAP, and fairly present the financial position of Seller as of
December 31, 1995 and the results of its operations for the year then ended.
(b) The Recent Financial Statements have been prepared from the
books and records of Seller in accordance with the accounting principles used
in the preparation of the Annual Financial Statements, except for normal,
recurring year-end adjustments which are not Material in the aggregate. Except
for normal, recurring year-end audit adjustments which are not Material in the
aggregate, the Recent Financial Statements fairly present the financial
position of Seller as of June 30, 1996 and the results of its operations for
the six (6) months then ended.
(c) The books, records and accounts of Seller accurately and
fairly reflect in all Material respects the activities and transactions of
Seller. The balance sheet of Seller comprising part of the Annual or Recent
Financial Statements does not include any assets owned by any Affiliate of
Seller or any other Person.
5.6 Good Title. The Purchased Assets are owned by Seller, free
and clear of all Liens.
5.7 Bank Accounts. The Disclosure Schedule sets forth the names
and locations of all banks, trust companies, savings and loan associations and
other financial institutions at which Seller maintains a safe deposit box, lock
box or checking, savings,
15
custodial or other account of any nature, the type and number of each such
account and the signatories therefor, a description of any compensating balance
arrangements, and the names of all individuals authorized to draw thereon, make
withdrawals therefrom or otherwise have access thereto.
5.8 Accounts Receivable. To the knowledge of Seller:
(a) except as set forth in the Disclosure Schedule, all
Accounts Receivable as of the date hereof represent valid claims for bona-fide,
arms-length sales of goods or services made by Seller in the Ordinary Course of
Business and none of such Accounts Receivable is subject to any set-off or
counterclaim or is in dispute;
(b) all Accounts Receivable, employee advances and
returnable deposits as of the Closing will be current and collectible in the
Ordinary Course of Business using normal collection practices at the aggregate
recorded amounts thereof, net of any reserve for uncollectible accounts;
(c) Seller has delivered to Buyer an accounts receivable
aging schedule as of the date of the Recent Balance Sheet, and such schedule as
of such date is true, correct and complete; and
(d) except as set forth in the Disclosure Schedule, no
Account Receivable has been outstanding for more than 90 days as of the date of
this Agreement (or such date identified in the Disclosure Schedule which is not
earlier than June 30, 1996), except items in dispute as identified in the
Disclosure Schedule.
5.9 Inventory. The Inventory of Seller (a) is accounted for on a
lower of cost (using the first-in, first- out method) or market basis in
accordance with GAAP, and (b) does not include any Material amount (either in
quantity or value) of items which are obsolete or of a quantity or quality not
usable or salable in the Ordinary Course of Business. The quantities and types
of inventories (whether raw materials, work-in-process or finished goods) are
reasonable and warranted in the present circumstances of the Business. The
Disclosure Schedule sets forth the amount of any Inventory of Seller which has
been purchased back from a customer together with the amount of any rework cost
in connection therewith.
5.10 Equipment; Location of Assets. Seller has delivered to Buyer
a true, correct and complete list of all items of Equipment owned by Seller (or
leased by Seller and capitalized on Seller's books) reflected on the Recent
Balance Sheet, showing the original cost and accumulated depreciation thereof,
date acquired, and indicating whether owned or leased. Except as set forth in
the Disclosure Schedule, each of the assets comprising the Equipment,
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and any tangible personal property leased by Seller, is in good working
condition, normal wear and tear excepted, free from known defects, there are no
repairs which are currently required with respect to any of such assets other
than routine maintenance and there are no planned or required modifications to
any such assets, except for repairs or defects which are not Material in the
aggregate. All of the tangible Purchased Assets (excluding Inventory in
transit and motor vehicles, if any) are located at the Leased Real Estate.
5.11 Real Estate.
(a) The Disclosure Schedule sets forth a complete legal description of
the Leased Real Estate, together with a summary description of the buildings,
structures and other improvements thereon including the Leasehold Improvements
and the zoning classification of each parcel. Except as set forth in the
Disclosure Schedule, and subject to the terms of the Real Estate Leases, Seller
has good title to the Leasehold Improvements free and clear of all Liens,
defects in title and other burdens and restrictions. Except as set forth in
the Disclosure Schedule, the respective lessors in the case of the Affiliate
Real Estate Leases, and to the knowledge of Seller the lessor of the Real
Estate Lease (Orange Facility), have good title to the Real Estate leased to
Seller, free and clear of all Liens, defects in title and other burdens and
restrictions.
(b) Neither the whole nor any portion of the Leased Real Estate which
is the subject of the Affiliate Real Estate Leases, and to Seller's knowledge
neither the whole nor any portion of the Leased Real Estate which is the
subject of the Real Estate Lease (Orange), has been condemned, requisitioned or
otherwise taken by any public authority. No written notice of such
condemnation, requisition or taking has been served upon Seller, any lessor of
the Leased Real Estate which is the subject of the Affiliate Real Estate
Leases, or to Seller's knowledge the lessor of the Leased Real Estate which is
the subject of the Real Estate Lease (Orange Facility), and to Seller's
knowledge no such condemnation, requisition or taking is threatened or
contemplated.
(c) None of the Real Estate which is the subject of the Affiliate
Real Estate Leases, and to the knowledge of Seller none of the Real Estate
which is the subject of the Real Estate Lease (Orange Facility), is located in
a flood plain, wetlands or lakeshore erosion area within the meaning of any
Law, except that the Seller is aware that the Anaheim Facility may be in a one
hundred (100) year flood plain; provided, however, that in the event there is
any damage or destruction to the Anaheim Facility, Seller is permitted under
existing Law to repair, rebuild or replace the Anaheim Facility.
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(d) Seller has not received notice that any public improvements have
been commenced and to Seller's knowledge none is planned which may result in
special assessments against any of the Real Estate.
(e) Seller has no notice or knowledge of any increase in real estate
taxes or assessed valuations for any of the Real Estate except for any
prospective increase in real estate tax rates. No challenges or appeals are
pending regarding real estate taxes or assessed valuations for any of the Real
Estate which is the subject of the Affiliate Real Estate Leases, and no special
arrangements or agreements exist with any governmental Person with respect
thereto. To Seller's knowledge no challenges or appeals are pending regarding
real estate taxes or assessed valuations for the Real Estate which is the
subject of the Real Estate Lease (Orange Facility), and to Seller's knowledge
no special arrangements or agreements exist with any governmental Person with
respect thereto.
(f) Neither Seller nor any lessor of the Leased Real Estate which
is the subject of the Affiliate Real Estate Leases is subject to any judgment
or decree of a court of competent jurisdiction which would limit or restrict
Seller's right to enter into and carry out this Agreement or to consummate the
transactions contemplated by this Agreement, or which would otherwise have a
Material Adverse Effect on such Leased Real Estate or Seller. To the knowledge
of Seller, neither Seller nor the lessor of the Leased Real Estate which is the
subject of the Real Estate Lease (Orange Facility) is subject to any judgment
or decree of a court of competent jurisdiction which would limit or restrict
Seller's right to enter into and carry out this Agreement or to consummate the
transactions contemplated by this Agreement, or which would otherwise have a
Material Adverse Effect on such Leased Real Estate or Seller.
(g) There are no outstanding construction or mechanics' liens or
rights to claim a construction or mechanics' lien in favor of any contractor,
materialman or laborer or any other Person in connection with the Real Estate
relating to work requested or authorized by Seller, except those that will be
fully satisfied by the Closing.
(h) The improvements to the Leased Real Estate, including without
limitation, the roof, loadbearing walls and structures, as to which Seller
bears the cost of repairing, are not subject to any condition which would
render them Materially unfit for the continued use in the manner in which they
are presently being used.
(i) There is full and free vehicular access to and from public
highways and roads to the Leased Real Estate.
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(j) All water, sewer, gas, electric, telephone and drainage
facilities and all other utilities required by Law or by the normal operation
of the Leased Real Estate are available to and located in a capacity so as to
adequately serve the Leased Real Estate in a manner required by Law and
consistent with the normal operation of the Business. All utility companies
providing services to the Leased Real Estate have, to the knowledge of Seller,
adequate rights of access to provide the services necessary for Seller's
current use of the Leased Real Estate, and Seller has no knowledge of any fact
or condition that could result in termination or limitation of such access.
(k) The ownership and operation of Seller's assets and the
Business in the manner in which they are now owned and operated do not violate
in any Material respect any zoning, building, use or other similar statute,
ordinance or regulation of any governmental Person (and no such non-violation
is dependent upon any non-conforming use or other exception).
(l) There are no mortgages on the Leased Real Estate which is the
subject of the Affiliate Real Estate Leases.
5.12 Absence of Certain Changes or Events. Since the date of the
Annual Financial Statements, the Business has been conducted solely in the
Ordinary Course of Business, and, without limiting the foregoing, and except as
set forth in the Disclosure Schedule:
(a) there has not been any Material Adverse Change in the assets,
financial condition or operation of Seller or in the Business;
(b) Seller has not waived, disposed of or permitted to lapse any
rights which are Material to the Business;
(c) Seller has not granted any Material increase in the wages,
salaries or bonuses or other compensation arrangements or benefit programs of
any of its officers or other employees;
(d) there has not been any damage, destruction or loss (whether or
not covered by insurance) which individually or in the aggregate has a Material
Adverse Effect;
(e) Seller has not entered into or terminated any Material agreement,
lease, license or commitment which relates to the Business or Seller's assets,
except for purchase orders accepted by Seller from its customers and purchase
orders issued by Seller to its suppliers in the Ordinary Course of Business,
none of which has been canceled;
(f) Seller has not disposed of or purchased any item of Equipment
with a value in excess of $50,000 or items with a value
19
exceeding $250,000 in the aggregate, and Seller has not disposed of or
purchased any item of Intellectual Property with a value in excess of $10,000
or items with a value exceeding $25,000 in the aggregate;
(g) Seller has not made any Material change in any method of
accounting or accounting practice;
(h) Except as provided in the Recent Financial Statements reflecting
dividends since the Annual Financial Statements of $3,334,000, and dividend
distributions in an aggregate amount equal to the aggregate federal and state
income taxes imposed on the Shareholders by reason of Seller's income from the
date of the Recent Balance Sheet to the Closing, Seller has not declared or
paid any dividend or other distribution with respect to its capital stock or
purchased any shares of its capital stock;
(i) Seller has made no payments of any form or kind to any
Shareholder or other Affiliate of Seller other than the payment of compensation
and reimbursement of expenses to Terry Wells, payments referred to in Section
5.12(h), payments under the Real Estate Lease (Anaheim) and Real Estate Lease
(Garden Grove) and payments of deferred compensation to Wallace H. Twedt and
Robert Wells in complete satisfaction of the liability shown in the December
31, 1995 balance sheet included in the Annual Financial Statements, in each
case in the Ordinary Course of Business; and
(j) Seller has not agreed, whether in writing or otherwise, to take
any action described in this Section.
5.13 Contracts and Commitments. Section 5.13 of the Disclosure
Schedule sets forth a true, correct and complete list of the Assumed Contracts,
excluding purchase orders received by Seller from its customers and purchase
orders issued by Seller to its suppliers in the Ordinary Course of Business and
a true, correct and complete copy of each such Assumed Contract listed in
Section 5.13 of the Disclosure Schedule has been delivered to Buyer. Except as
set forth in the Disclosure Schedule, each of the Assumed Contracts is valid,
binding, enforceable and is in full force and effect. Seller is not and to
Seller's knowledge no other party is in breach or default under the Assumed
Contracts, and to Seller's knowledge no event has occurred which constitutes,
or with the lapse of time or the giving of notice, or both, would constitute
such a breach or default thereunder, except for breaches and defaults which are
not Material in the aggregate. Seller is in compliance in all Material
respects under those Assumed Contracts which are with governmental Persons.
Except as set forth in the Disclosure Schedule, Seller is not a party to any
agreement or commitment which was not entered into in the Ordinary Course of
Business, or is a party to any of the following agreements, whether or not
entered into in the Ordinary Course of Business:
20
(a) any purchase order from a customer which by its terms is in
excess of the normal, ordinary and usual requirements of the Business or
requires the payment of $100,000 or more;
(b) any purchase order issued by Seller which by its terms
provides for a price for products which is not in the Ordinary Course of
Business or requires the payment of $100,000 or more;
(c) any agreement with any Employee, agent, consultant, advisor,
salesperson, sales agent, sales representative, distributor or dealer, any
agreement for the consignment of Inventory, or any agreement or arrangement
providing for the payment of any bonus or commission based on sales or earnings
in excess of $100,000;
(d) any collective bargaining agreement or other contract or
agreement with any union representing any Employees;
(e) except for Seller's standard limited warranty, any agreement
requiring Seller to accept the return of inventory or merchandise in the
possession of wholesalers, distributors, retailers or other customers;
(f) any agreement requiring Seller to assign any interest in any
trade secret or prohibiting or restricting Seller from competing in any
business or geographical area or soliciting customers or otherwise restricting
it from carrying on the Business anywhere in the world;
(g) any agreement for the advertisement, display or promotion of
any of the Products in excess of the normal, ordinary and usual requirements of
the Business;
(h) any performance, bid or completion bond, letter of credit or
power of attorney;
(i) any agreement for the transportation, treatment or disposal of
hazardous wastes or toxic substances or materials;
(j) any agreement with any railroad or other transportation
company in excess of the normal, ordinary and usual requirements of the
Business;
(k) any lease pursuant to which a Seller leases (as lessor or
lessee) any real estate or personal property;
(l) any agreement, arrangement or program pursuant to which Seller
has offered or made available to its customers (including its distributors) any
volume discount, rebate or advertising or promotional credit or allowance in
excess of the normal, ordinary and usual requirements of the Business;
21
(m) any agreement with a customer which provides for a rebate in
excess of the normal, ordinary and usual requirements of the Business;
(n) any agreement with any foreign, federal, state or local
governmental Person in excess of the normal, ordinary and usual requirements of
the Business; or
(o) any other agreement or commitment, other than the Assumed
Contracts, which is Material to the Purchased Assets or the conduct of the
Business.
5.14 Litigation and Other Proceedings. No action, suit, proceeding
or investigation has been commenced by or against Seller or any Shareholder in
the past three (3) years, or is currently pending against Seller or any
Shareholder or to Seller's knowledge is threatened against Seller, which
involves the Business, the Purchased Assets or the consummation by Seller of
the transactions contemplated by this Agreement, before any court, arbitrator
or governmental Person.
5.15 Related Party Transactions. The Disclosure Schedule sets
forth each agreement between Seller, on the one hand, and any Affiliate of
Seller, on the other hand. Except as disclosed in the Disclosure Schedule,
except with respect to ownership of less than five percent (5%) of the
outstanding stock of any public corporation, no Affiliate of Seller (a) is a
competitor, customer, supplier, lessor, lessee, licensor or licensee of Seller
or otherwise has business dealings with Seller other than as an Employee, (b)
owns any interest in or performs services for any Person which is such a
competitor, customer, supplier, lessor, lessee, licensor or licensee, (c) is a
creditor or debtor of Seller, or (d) has any ownership interest in any of the
assets shown on the balance sheet included in the Annual Financial Statements
or Recent Financial Statements or acquired by Seller since the date thereof.
Seller does not own (and has not agreed to acquire) any equity or ownership
interest in any Person.
5.16 Employee Benefit Plans.
(a) For purposes of this Section, "Employee Benefit Plan" means (a)
any Employee Pension Benefit Plan within the meaning of Section 3(2) of ERISA,
(b) any Employee Welfare Benefit Plan within the meaning of Section 3(1) of
ERISA, or (c) any bonus, stock option, deferred compensation, severance,
retirement, vacation pay, sick pay, health, dental, disability, life insurance
or other fringe benefit plan, arrangement or practice, whether formal or
informal, which is not an Employee Pension Benefit Plan or Employee Welfare
Benefit Plan. "Employee Benefit Plan of Seller" means any Employee Benefit
Plan sponsored or maintained by Seller, or any
22
Employee Benefit Plan to which any Seller contributes or is required to
contribute.
(b) Except for its health and dental insurance plan as set forth
in Seller's written personnel policies, a true and current copy of which has
been delivered to Buyer, or except as specifically referenced in the Disclosure
Schedule, Seller has no Employee Benefit Plans. As of the date of the Recent
Balance Sheet, Seller has no Material liability for vacation pay except to the
extent reserved for in the Recent Balance Sheet. Seller has not made any
written or verbal commitment to make any severance or similar payment to any
Employee upon the termination of his or her employment.
(c) Seller has not made any commitment, whether formal or
informal, to create any new Employee Benefit Plan.
(d) Neither Buyer nor any of the Purchased Assets will be, as a
result of this Agreement or the consummation of the transactions contemplated
hereby, subject to any claim, liability or obligation under or arising out of
any Employee Benefit Plan of Seller, except for any Assumed Liability.
5.17 Employment Practices. No Employees are represented by a labor
organization. There does not exist, and to Seller's knowledge there is not
threatened or contemplated, any strike, slow-down, picketing or work stoppage
by any of its Employees. Seller is not currently engaged in any unfair labor
practice, no unfair labor practice complaint has been asserted or is pending or
to Seller's knowledge is threatened against Seller, and no grievance or any
arbitration proceeding is pending or to Seller's knowledge is threatened
against Seller. There is no claim asserted against Seller or to Seller's
knowledge threatened against Seller, no suit or proceeding is pending against
Seller or to Seller's knowledge is threatened against Seller, alleging
discrimination of any past or present employee of Seller based on age, sex,
sexual preference, national origin, marital status, religion or race. The
Disclosure Schedule sets forth as of the date of this Agreement (a) all
Employees on worker's compensation leave or disability leave, and (b) all
Employees who have been on medical leave, family leave or other leave of
absence for more than thirty (30) days.
5.18 Licenses and Permits. To Seller's knowledge, the Licenses and
Permits set forth in the Disclosure Schedule include all licenses, permits and
certifications of all governmental Persons and certification organizations
which are required for the ownership of the Purchased Assets or the conduct of
the Business as it is presently being conducted. Except as set forth in the
Disclosure Schedule, all such licenses, permits and certifications are in full
force and effect, and are fully transferable to Buyer.
23
5.19 Product Warranty. The Disclosure Schedule contains a true,
correct and complete copy of Seller's standard warranty or warranties for sales
of Products and, except for such warranty or warranties, there are no
warranties, commitments or Material obligations of Seller with respect to the
return, repair or replacement of Products. The Disclosure Schedule sets forth
the estimated aggregate annual cost to Seller of performing warranty
obligations for customers of the Business for each of the three (3) preceding
fiscal years and the current fiscal year to the date of the Recent Balance
Sheet. There are no pending or to Seller's knowledge threatened Product
Warranty Claims other than those incurred in the Ordinary Course of Business
which are included in the annual warranty cost on the Disclosure Schedule, and
there is no single Product Warranty Claim which exceeds $50,000.
5.20 Product Liability. The Disclosure Schedule sets forth all
Product Liability Claims (whether or not covered by insurance) which are
pending or which to Seller's knowledge are threatened, or which have been
asserted or commenced against Seller within the last three (3) years. Except
as disclosed in Section 5.20 of the Disclosure Schedule none of the Products
has been the subject of any recall campaign and, to Seller's knowledge, no
facts or conditions exist which could reasonably be expected to result in such
a recall campaign.
5.21 Compliance With Law. Seller is in compliance with all Laws in
all Material respects. Without limiting the generality of the foregoing:
(a) Seller has made all required payments to its unemployment
compensation reserve accounts with the appropriate governmental departments of
the states where it maintains or is required to maintain such accounts, and
each of such accounts has a positive balance; and
(b) The Disclosure Schedule sets forth true and correct copies of
all reports of Seller for the past three (3) years and the current fiscal year
to the date of the Recent Financial Statements which are required under the
Federal Occupational Safety and Health Act of 1970, as amended, and under all
other applicable health and safety Laws and regulations. The deficiencies, if
any, noted on such reports have been corrected in all Material respects.
5.22 Environmental Matters.
(a) As used in this Section 5.22:
(i) "Environmental Claim" shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, Liens, investigations, proceedings or
notices of noncompliance or
24
violation (written or verbal) by any Person alleging potential
liability (including, without limitation, potential liability for
enforcement, investigatory costs, cleanup costs, governmental response
costs, removal costs, remedial costs, natural resources damages,
property damages, personal injuries or penalties) arising out of,
based on or resulting from: (1) the presence, or release into the
environment, of any Environmental Hazardous Materials at any location,
whether or not owned by Seller; or (2) any circumstances forming the
basis of any violation or alleged violation of any Environmental Law;
or (3) any and all claims by any Person seeking damages, contribution,
indemnification, costs, recovery, compensation or injunctive relief
resulting from the presence or Environmental Release of any
Environmental Hazardous Materials.
(ii) "Environmental Laws" shall mean all Laws relating to
pollution or protection of human health or the environment (including
without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including, without limitation, Laws
relating to Environmental Releases or threatened Environmental
Releases of Environmental Hazardous Materials, or otherwise relating
to the manufacture, promotion, distribution, use, treatment, storage,
disposal, transport or handling of Environmental Hazardous Materials.
(iii) "Environmental Hazardous Materials" shall mean: (1)
any petroleum or petroleum products, radioactive materials, asbestos
in any form that is or could become friable, urea formaldehyde foam
insulation, and transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls (PCBs)
and radon gas; and (2) any chemicals, materials or substances which
are now defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," or words of similar import, under any
Environmental Law; and (3) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated by
any governmental Person.
(iv) "Environmental Permits" shall mean all environmental,
health and safety permits and governmental authorizations.
(v) "Environmental Release" shall mean any release,
spill, emission, leaking, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the atmosphere, soil, surface
water, groundwater or property.
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(b) To Seller's knowledge, Seller is in compliance with all
applicable Environmental Laws, and has not received any communication (written
or verbal) from a governmental Person that alleges that Seller is not in
compliance with applicable Environmental Laws.
(c) To Seller's knowledge, Seller has obtained all Environmental
Permits necessary for its operations. All such Environmental Permits are in
good standing in all Material respects and Seller is in compliance in all
Material respects with all terms and conditions of its Environmental Permits.
(d) There is no Environmental Claim pending or to Seller's
knowledge threatened against Seller, and to Seller's knowledge there is no
Environmental Claim pending or threatened against any Person whose liability
for such Environmental Claim Seller has or may have retained or assumed either
contractually or by operation of Law.
(e) There have been no Environmental Releases of any Environmental
Hazardous Materials by Seller or to Seller's knowledge by any other Person on
or under any of the Leased Real Estate.
(f) None of the Real Estate is currently listed on the National
Priorities List or the Comprehensive Environmental Response, Compensation and
Liability Information System, both promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA"),
or on any comparable state list, and neither Seller nor the lessors of the
Leased Real Estate which is the subject of the Affiliate Real Estate Leases or
to Seller's knowledge any the lessor of the Leased Real Estate which is the
subject of the Real Estate Lease (Orange Facility) has received any written
notice from any Person under or relating to CERCLA or any comparable state or
local Law with respect thereto.
(g) To Seller's knowledge, no off-site location at which Seller
has disposed or arranged for the disposal of any waste is listed on the
National Priorities List or on any comparable state list and Seller has not
received any written notice from any Person with respect to any off-site
location, of potential or actual liability or a written request for information
from any Person under or relating to CERCLA or any comparable state or local
Law.
5.23 Personnel. The Disclosure Schedule sets forth a true, correct
and complete list of:
(a) The names, current salaries and other compensation and fringe
benefits (excluding de minimis fringe benefits) of each salaried Employee; and
26
(b) The wage rates for non-salaried Employees by job
classification.
5.24 All Necessary Assets. The Purchased Assets, Leased Real
Estate and the Seabrook Facility constitute all of the tangible and intangible
property and rights necessary for Buyer to carry on the Business as of the
Effective Date in the same manner in which it has heretofore been conducted by
Seller.
5.25 Accounts Payable and Accrued Expenses. Seller has delivered
to Buyer a listing of all Accounts Payable and Accrued Expenses as of the date
of the Recent Financial Statements, which listing is true, correct and complete
in all Material respects.
5.26 Brokerage; Fees. Neither Seller nor any Shareholder has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated
by this Agreement.
5.27 Intellectual Property.
(a) The Disclosure Schedule contains a true, correct and complete
list of (i) all patents held by Seller and all re-examinations, re-issues,
divisions, continuations, continuations in part and extensions thereof and all
pending patent applications by Seller, including for each such patent the
serial or patent number, country, filing and expiration date and title, (ii)
all registered trademarks of Seller and pending trademark registrations by
Seller, including, for each such trademark, the registration number, country,
filing and expiration date, mark and class, (iii) all registered copyrights of
Seller and copyright applications by Seller, including the registration number,
country and filing and expiration date of each such copyright and (iv) all
service marks, trade names and brand names of Seller used in the Business
(whether or not registered). All such patents, trademarks and copyrights are
properly registered, any applications therefor have been properly made, and all
annuity, maintenance, renewal and other fees in connection with any of the
foregoing are current.
(b) The Disclosure Schedule lists all Material licenses, contracts
and commitments (including, without limitation, confidentiality agreements) to
which Seller is a party or otherwise subject relating to the Intellectual
Property, including, without limitation, computer software (except for standard
licensing agreements or provisions from the seller or licensor of such
software). Except as set forth in the Disclosure Schedule, during the
preceding three (3) fiscal years and the current fiscal year to date, no claim
or allegation of infringement has been made by or against Seller, whether
relating to any item of Intellectual Property or any of the Products or
otherwise, no claim or allegation of misappropriation or misuse of any item of
27
Intellectual Property has been made by or against Seller, and no claim or
allegation has been asserted against Seller by any Person with respect to the
ownership or use of any of the Intellectual Property by Seller or challenging
or questioning the validity or effectiveness of any such license, contract or
commitment, and there does not exist to Seller's knowledge any valid basis for
any such claim or allegation.
(c) Except for the licenses, contracts and commitments referred to in
the Disclosure Schedule, Seller has good and valid title to, or otherwise
possesses rights to use, the Intellectual Property.
5.28 Taxes. Except as set forth in the Disclosure Schedule:
(a) Seller has properly and timely filed all Tax reports and returns
required to be filed by it, and all Taxes and other charges due or claimed to
be due from it by all federal, state, local and foreign taxing authorities have
been timely paid. Such reports and returns reflect all Taxes due and payable
with respect to the periods covered thereby, there are no other liabilities for
Taxes payable with respect to such periods, and no taxing authority has
asserted against Seller any claim for additional Taxes which are unpaid or
contested.
(b) The reserves for Taxes reflected in the balance sheet included in
the Recent Financial Statements are in the aggregate adequate for the payment
of all Taxes which may be asserted against Seller in the future relating to
periods ending on or before the date of the Recent Balance Sheet, and no
liability for Taxes has been incurred by Seller since such date except in the
Ordinary Course of Business. To Seller's knowledge, no state of facts exists
or has existed which would constitute grounds for the assessment of any
liability for Taxes with respect to the periods which have not been audited by
the Internal Revenue Service or any state tax authority. To Seller's
knowledge, no issue has been raised in any prior audit which, by application of
the same or similar principles, could result in a proposed deficiency for any
other period not so examined.
(c) There are no liens for Taxes upon any property or assets of
Seller except liens for current Taxes not yet due and payable.
(d) Seller has delivered to Buyer copies of all income tax returns
and reports of Seller filed for all periods not barred by the applicable
statute of limitations, and such copies are true, correct and complete. No
examination or audit of any Tax return or report for any period not barred by
the applicable statute of limitations has occurred, no such examination is in
progress or to Seller's knowledge is planned, and there are no outstanding
28
agreements or waivers extending the statutory period of limitations applicable
to any Tax return or report.
(e) Seller has properly withheld and timely paid all withholding and
employment Taxes which it is required to withhold and pay relating to salaries,
compensation and other amounts heretofore paid to its employees or other
Persons. All forms W-2 and 1099 required to be filed have been timely and
properly filed.
(f) Seller is an S corporation (within the meaning of Section
1361(a)(1) of the Code).
5.29 Insurance. The Disclosure Schedule contains a description of
each policy of fire and casualty, general liability, worker's compensation,
medical, life and other insurance policies owned or held by Seller or by any
other Seller for Seller's benefit, specifying the insurer, amount of coverage,
type of insurance, expiration date and policy number. All such insurance is in
full force and effect, all premiums with respect thereto for all periods up to
and including the date hereof have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies
are sufficient for compliance in all Material respects with all requirements of
Laws and with all Assumed Contracts.
5.30 Customers and Suppliers. The Disclosure Schedule sets forth a
list of the ten (10) largest customers of Seller in terms of dollar volume of
sales for the three (3) preceding fiscal years and for the current fiscal year
to the date of the Recent Balance Sheet, showing the approximate total dollar
amount of sales to each such customer during each such fiscal year. The
Disclosure Schedule sets forth a list of the ten (10) largest suppliers to
Seller in terms of dollar volume of purchases for the three (3) preceding
fiscal years and for the current fiscal year to the date of the Recent Balance
Sheet, showing the approximate total dollar amount of purchases from each
supplier during each such fiscal year. Since the date of the Recent Balance
Sheet, Seller has not received any notice from and has not otherwise been
informed or made aware that any of such ten (10) largest suppliers or customers
will be terminating or curtailing its business with Seller in a manner that
would have a Material Adverse Effect on Seller. To Seller's knowledge, since
the date of the Recent Balance Sheet to the date of this Agreement, there has
been no Material Adverse Change in the business relationship of Seller with its
customers taken as a whole and with its suppliers taken as a whole. The
estimated backlog of purchase orders received by Seller from its customers as
of June 30, 1996, or more recent date is set forth in the Disclosure Schedule.
29
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer hereby represents and warrants to Seller as follows:
6.1 Corporate Organization. Buyer is a corporation validly
existing and in good standing under the Laws of the State of Massachusetts, and
has all requisite corporate power and corporate authority to carry on its
business as it is now being conducted and to own and lease the properties and
assets it now owns and leases.
6.2 Authorization, Validity, Enforceability. Buyer has all
requisite corporate power and corporate authority to enter into this Agreement
and any Ancillary Agreements to which it is or will become a party and to carry
out the transactions contemplated hereby and thereby. Buyer's Board of
Directors and its sole shareholder have taken all action required by Law,
Buyer's charter documents or otherwise required to be taken by Buyer or its
shareholder to authorize the execution and delivery by Buyer of this Agreement
and the Ancillary Agreements to which it is or will become a party and the
consummation by Buyer of the transactions contemplated hereby and thereby. No
other corporate action is required to be taken by Buyer in connection with the
execution or delivery by Buyer of this Agreement, the Ancillary Agreements or
the consummation by Buyer of the transactions contemplated hereby and thereby.
This Agreement and each Ancillary Agreement to be executed and delivered by
Buyer hereunder will when executed and delivered by Buyer be a valid and
binding agreement of Buyer enforceable against it in accordance with its terms,
except that (a) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar Laws now or hereafter in effect
relating to creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
6.3 Compliance. Neither the execution or delivery by Buyer of
this Agreement or any Ancillary Agreement to which it is a party, nor the
consummation by Buyer of the transactions contemplated hereby or thereby, will
result in any violation of or be in conflict with, or constitute a default
under, any provision of its charter documents, or any Law or Material agreement
to which Buyer is a party or by which Buyer is bound.
6.4 Consents and Approvals. Except for the HSR Act, no consent,
approval or authorization of, or declaration, filing or registration with, any
governmental Person, whether federal, state or local, is required of Buyer in
connection with the execution or delivery by Buyer of this Agreement, any
Ancillary Agreement to
30
which it is a party or the consummation by Buyer of any of the transactions
contemplated hereby or thereby.
6.5 Litigation and Other Proceedings. No action, suit, proceeding
or investigation is pending against Buyer or any Affiliate of Buyer or to
Buyer's knowledge is threatened against Buyer or any Affiliate of Buyer which
would adversely affect the consummation by Buyer of the transactions
contemplated by this Agreement, before any court, arbitrator or governmental
Person.
6.6 Brokerage. Buyer has not employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement.
6.7 Representations and Warranties of Guarantor. The
representations and warranties set forth in Section 6.1 through Section 6.6 are
hereby deemed to be made by, and are true and correct, with respect to, the
Guarantor (except with respect to its state of incorporation), including,
without limitation, the execution, validity and enforceability of the Guaranty
Agreement.
ARTICLE VII
COVENANTS
7.1 Full Access. From the date hereof to the Closing, during
reasonable times, during normal business hours and upon reasonable advance
notice, Seller will give Buyer and its representatives access to, and will
cooperate as Buyer may request in making available to it, (a) all books,
records and other information and materials directly and reasonably relating to
the Purchased Assets, the Assumed Liabilities or the Business, and (b) Seller's
customers, suppliers, Employees and other third parties having business
dealings with Seller, except as prohibited by any Law or any agreement
requiring confidentiality.
7.2 Access to Books and Records following the Closing. Following
the Closing, for a period of seven (7) years, during reasonable times during
normal business hours, Buyer shall make the Books and Records available to
Seller at the Anaheim Facility for inspection by Seller or its representatives
with respect to Seller's operation of the Business prior to the Closing. Such
purposes shall include but not be limited to Seller's tax and accounting
matters. As used in this Section 7.2, the right of inspection includes the
right to make abstracts and copies.
7.3 Covenant to Satisfy Conditions. Seller and Shareholders will
use their best efforts to ensure that the conditions set forth in Article VIII
hereof are satisfied, including, without limitation, making or causing the
deliveries to Buyer provided for
31
therein to be made. Buyer will use its best efforts to ensure that the
conditions set forth in Article IX hereof are satisfied, including, without
limitation, making or causing the deliveries to Seller provided for therein to
be made.
7.4 Publicity. Each party will consult with the other party prior
to issuing any press release or otherwise making any public statement with
respect to the transactions contemplated by this Agreement, and will not issue
any such release or make any such statement over the reasonable objection of
the other party, except as required by Law or in the case of Buyer by the rules
and regulations of the New York Stock Exchange.
7.5 Noncompetition. As part of Closing, each of the Shareholders
shall individually execute their respective Noncompetition Agreements.
7.6 Conduct of Business Pending the Closing. From the date of
this Agreement to the Closing, and except as otherwise expressly consented to
or approved by Buyer in writing:
(a) Seller will not institute any new or unusual methods of
manufacture, license, sale, lease, purchase, distribution, management,
accounting or method of operation, and will not, except in the Ordinary Course
of Business, engage in any transaction or activity or enter into any agreement,
lease, license or commitment;
(b) Seller will not grant any increase in the salaries or rates of
pay of any Employee or except as provided in the Disclosure Schedule pay any
bonus to any Employee, establish any Employee Benefit Plan, grant any increase
in benefits to any Employee under any existing Employee Benefit Plan, or make
any commitment to effectuate the foregoing;
(c) Seller will not create any indebtedness or incur any
obligation or liability other than in the Ordinary Course of Business, or
subject any of the Purchased Assets to any Lien of any nature;
(d) Seller will maintain all of its property, casualty, liability
and other insurance in effect as of the date hereof through the Closing Date;
(e) Seller will use, operate, maintain and repair the Purchased
Assets owned by it only in a normal business manner;
(f) Seller will use its best efforts to preserve its business
organization intact and to preserve for Buyer the present relationships of
Seller with the suppliers, customers, licensors, licensees, lessors, lenders,
Employees and others having business relations with it;
32
(g) Seller will not purchase or acquire, or enter into any
contract to purchase or acquire, any Inventory, fixed asset, services or other
assets except in the Ordinary Course of Business, or dispose of any asset of
the Business except in the Ordinary Course of Business;
(h) Seller will maintain in effect all of the Assumed Contracts
and the Licenses and Permits other than those which terminate or expire by
their terms as a result of performance or lapse of time, and will not breach or
commit a default (without curing it within the prescribed grace period) under
any of the foregoing;
(i) Seller will maintain its accounting books and records through
the Closing Date in the Ordinary Course of Business;
(j) Seller will not dispose of or permit to lapse any rights to
the use of any patent, registered trademark or registered copyright (or any
application therefor) used in the Business;
(k) Seller will not take or omit to take any action which would
create a breach or inaccuracy of the representations and warranties of Seller
and Shareholders set forth in Article V, or which could be reasonably
anticipated to have a Material Adverse Effect;
(l) Seller will make no payments of any form or kind to any
Shareholder or other Affiliate of Seller other than the payment of compensation
and reimbursement of expenses to Terry Wells, payments under the Real Estate
Lease (Anaheim Facility) and Real Estate Lease (Garden Grove Facility), and
dividend distributions in an aggregate amount equal to the aggregate federal
and state income taxes imposed on the Shareholders by reason of Seller's income
from the date of the Recent Balance Sheet to the Closing, in each case in the
Ordinary Course of Business; and
(m) Shareholders will take any and all action necessary to cause
Seller to comply with this Section 7.6.
7.7 Confidentiality. Each party to this Agreement will hold in
confidence all documents and information concerning the other party furnished
to it in connection with the transactions contemplated by this Agreement and
not otherwise lawfully available to it, and will use such information only in
connection with such transactions and, after the consummation of such
transactions, only in the conduct of its business. No party will release or
disclose such documents or information to any other Person, except to its
attorneys, accountants and other outside consultants in connection with this
Agreement and its business, except to the extent such party can demonstrate
such information was previously known by it, in the public domain through no
fault of such party, disclosed to
33
it by a third party having no confidentiality obligation to the other party, or
required by Law to be disclosed. If the transactions contemplated by this
Agreement are not consummated, such confidence shall be maintained and such
information and documents shall not be used to the detriment of the disclosing
party or otherwise in any manner and all such documents (including copies and
extracts thereof) shall be returned to the disclosing party immediately upon
its request.
7.8 Further Assurances. Each party will execute such further
documents, and perform such further acts as may be reasonably necessary for
Seller to sell, transfer, assign, convey and deliver the Purchased Assets to
Buyer on the terms herein contained, and as may be reasonably necessary for
Buyer to assume the Assumed Liabilities on the terms herein contained, and to
otherwise consummate the transactions contemplated by this Agreement in
accordance with the terms hereof.
7.9 Reporting. Following the Closing, each party will file all
income and other tax returns and reports, including IRS Form 8594 as required
by Section 1060 of the Internal Revenue Code of 1986, as amended, consistent
with the allocation of the Purchase Price set forth in Exhibit 4.1 hereto.
Prior to filing Form 8594, such party shall send a copy of its proposed Form
8594 to the other party and permit the other party at least ten (10) days to
review and approve same, such approval not to be unreasonably withheld. Any
failure to give notice of disapproval within such ten (10) day period shall be
deemed to be approval. If Buyer determines to allocate a portion of the
Purchase Price to the Equipment in an amount which exceeds the sum of the net
book value of the Equipment set forth on the Closing Balance Sheet plus
$1,500,000, Buyer shall promptly pay to Seller (or to Shareholders if so
directed by them) an aggregate amount equal to ten percent (10%) times the
amount of such excess, and such payment shall be allocated to Goodwill.
7.10 Accounts Receivable. If following the Closing any payment of
an Accounts Receivable purchased by Buyer is made to Seller, Seller will
promptly remit such payment to Buyer and, if such payment is in the form of a
check, such check shall be endorsed by Seller to Buyer.
7.11 Personnel Matters. Prior to the Closing, Buyer shall make
offers of employment to each of Seller's Employees (excluding Shareholders) who
are actively employed at the Effective Time, at his or her current salary, to
the extent such Employees may in Buyer's reasonable judgment be lawfully
employed by Buyer. Buyer will grant the Employees seniority in terms of
layoffs consistent with Seller's past practices. It is acknowledged that until
Buyer locates a substitute facility for the Seabrook Facility and is ready to
operate at such facility, the Employees at such facility may not begin working
for Buyer. Buyer will provide past service
34
credit to the Employees for purposes of vacation under Seller's vacation plan
to the extent Seller's vacation plan gives credit for past service but not for
purposes of any retirement plans of Buyer except to the extent the plans so
require. Buyer will maintain the salary levels of Employees in effect as of
the Closing for a period of at least one (1) month. Buyer shall assume all of
Seller's obligations (collectively, "COBRA Obligations") under Part 6 of
Subtitle B of Title I of ERISA and of Section 4980B of the Code (known as
COBRA) to Employees employed by Seller as of the Effective Time whether hired
or not hired by Buyer and to former Employees of Seller (regardless of date of
termination) who at the Effective Time are receiving or are eligible to receive
COBRA continuation benefits under Seller's health insurance plan. Nothing
contained herein shall require Buyer to retain any Employee after hiring him or
her. Prior to the Closing, Buyer may require the Employees to complete
employment applications, Forms I-9 and other relevant documentation.
7.12 Unemployment Compensation. Seller shall, upon the request of
Buyer, cooperate with Buyer in any efforts by Buyer to obtain the transfer of
Seller's unemployment compensation account applicable to Employees hired by
Buyer, to the extent Buyer is legally permitted and elects to receive such a
transfer. In connection therewith, Seller will execute such documents as Buyer
may reasonably request in order to effectuate such transfers.
7.13 Product Warranty Claims. For a period of one (1) year after
Closing, Seller or Buyer, upon receipt of a Product Warranty Claim, in which
the customer is seeking replacement of a Product pursuant to Seller's standard
limited warranty, such party may give the other party written notice of such
Product Warranty Claim ("Warranty Notice"). If Buyer in its reasonable
judgment is able to make such a replacement based on its then current product
line and products on hand, Buyer shall proceed to do so and it shall submit an
invoice to Seller for the amount of the replacement. If the Product Warranty
Claims shall exceed $50,000 during the one (1) year following Closing, then
Seller shall pay the amount of such invoice within fifteen (15) days following
receipt of such invoice. The amount of each such replacement shall be equal to
the cost to Buyer of making the replacement (net of the benefit received by
Buyer by reason of a return of product from the customer) plus 15% of the net
amount, plus freight costs, if any, incurred by Buyer in effectuating such
replacement. Each invoice shall be accompanied by information regarding the
replacement made and the calculation of the amount of the replacement.
"Buyer's cost" of a replacement means Buyer's standard cost of direct
materials, direct labor and overhead of such replacement.
7.14 Hart-Scott-Rodino Act. Prior to the Closing, each of Seller
and Buyer will file any notification and report forms and related material
which it may be required to file with the Federal
35
Trade Commission and the Antitrust Division of the United States Department of
Justice under the HSR Act, will use its best efforts to obtain an early
termination of the applicable waiting period and will make such further filings
pursuant thereto that may be necessary, proper or advisable. Buyer will pay
the applicable filing fees for the filings.
7.15 Consents and Releases. At or prior to the Closing, Seller and
Shareholders shall use their best efforts to obtain written consents and
releases from all parties whose consent or release is necessary to the
consummation of the transactions contemplated hereby, including without
limitation, such documents as may be necessary to obtain releases of any Liens
on the Purchased Assets and consents to assignment by Seller to Buyer of the
Assumed Contracts (or novations if required with respect to any Assumed
Contract with any governmental Person); provided, however, that Buyer shall be
responsible for obtaining the issuance of any air quality permits in the name
of Buyer. Buyer will use its best efforts (without agreeing to a change in
terms) to cause the lessor under the Real Estate Lease (Orange Facility) to
release Seller from its obligations thereunder. Seller will use its best
efforts to obtain a non- disturbance agreement from the mortgagee of the lessor
of the Real Estate Lease (Orange Facility), and in connection therewith Buyer
will agree to attorn to such mortgagee or its transferee.
7.16 Third Party Claims. The parties shall cooperate with each
other with respect to the defense of any claim made or litigation commenced by
a third party subsequent to the Closing which is not subject to the
indemnification provisions contained in Article X, provided that the party
requesting cooperation shall reimburse the other party for such other party's
reasonable out-of-pocket costs of furnishing such cooperation.
7.17 Offsite Assets. If as of the Closing any Equipment or
Inventory (other than motor vehicles or Inventory in storage at public
warehouses or in transit) would not, except for the provisions of this Section,
be located at the Leased Real Estate or the Seabrook Facility, Seller will, at
Buyer's option, either (a) move such assets to such location of Seller as Buyer
designates or (b) in the case of any assets at vendors or licensees, obtain
from the party in possession of such asset written acknowledgement, reasonably
satisfactory to Buyer, stating that such party has no legal interest in such
assets and that Buyer upon its request shall have the right to immediate
possession of such assets following the Closing.
7.18 Use of Seller's Name. Following the Closing, neither Seller
nor any Affiliate of Seller shall, without the prior written consent of Buyer,
make any use of the name "Everest Electronic Equipment, Inc." or any other name
confusingly similar thereto,
36
except as may be necessary for Seller to pay its liabilities, prepare tax
returns and other reports, and to otherwise wind up and conclude its business.
7.19 Bulk Sales Compliance. The parties hereby agree to comply
with the provisions of any applicable bulk sales Law or bulk transfer Law of
the State of California. Seller shall bear the out-of-pocket costs associated
therewith.
7.20 Exclusivity. Seller and the Shareholders acknowledge that
Buyer will incur significant costs in reviewing and analyzing the business of
Seller. Therefore, unless this Agreement has been terminated in accordance
with the provisions of Section 11.1, Seller and the Shareholders will not
directly or indirectly solicit, make or entertain any offer or proposal from or
to a third party regarding the sale or possible sale of Seller's business or
its shares of capital stock, discuss in any manner any such sale with any third
party or provide any information concerning Seller to any third party
prospective purchaser in connection with such a sale. In the event Seller or
the Shareholders receives any inquiry from a third party prospective purchaser
with respect to such a sale or possible sale, Seller or the Shareholders will
inform such party of their obligations under this Section (without disclosing
the identity of Buyer).
7.21 Sales and Transfer Taxes. Seller and Buyer shall equally
share the applicable state sales and use taxes associated with the transfer of
the tangible personal property from Seller to Buyer pursuant to this Agreement.
Seller shall prepare the sales tax return and submit it to Buyer at least seven
(7) business days before its due date. Buyer shall have five (5) business days
to approve the return, such approval not to be unreasonably withheld. Failure
to disapprove during such five (5) business day period shall be deemed
approved. Seller will provide Buyer with an invoice for Buyer's portion which
shall be paid within five (5) business days after receipt of the invoice,
reflecting one-half of the agreed upon sales tax due. Buyer's payment shall be
in the form of Buyer's check for such one-half amount payable to the proper
governmental entity, which shall be remitted to such entity by Seller with the
return. Subject to timely receipt of such payment, Seller shall be obligated
to timely pay the tax. Failure by either party to timely pay its share of the
sales tax (or failure of Seller to timely file the return) shall result in such
party bearing the penalties and interest associated with such late payment or
filing.
7.22 Name Change. Within fifteen (15) days following the Closing,
Seller will change its name to one which is not confusingly similar to its
current name, and will provide Buyer reasonable evidence that it has done so.
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7.23 Post-Closing Services. Following the Closing for a period of
ninety (90) days, the present Controller of Seller may continue to provide
accounting and related services to Seller on such terms as the Seller and the
Controller may agree on, provided that such services are performed outside of
Buyer's normal working hours. Buyer will have no responsibility for these
services.
7.24 Seabrook Facility.
(a) As soon as practicable following the Closing, but in any event
within forty-five (45) days following the Closing, Buyer at its expense shall
remove from the Seabrook Facility the Purchased Assets located at the Seabrook
Facility, other than those Leasehold Improvements the removal of which is
prohibited by the terms of the lease for the Seabrook Facility or those
Leasehold Improvements which Seller under the terms of such lease is permitted
to leave (without cost or penalty to Seller) at the termination or expiration
of lease. Upon completion of such removal, the premises will be made by Buyer
in "broom swept" and clean condition. Without eliminating Buyer's obligation
to remove such Purchased Assets, any Purchased Assets not removed during such
forty-five (45) day period shall be deemed abandoned by Buyer and thereupon
Buyer shall have no ownership or other rights with respect thereto. Such
removal may be made over a period of time during such forty-five (45) day
period. Buyer shall be solely responsible for transporting such assets to
Buyer's facility. Buyer shall be solely responsible for any damage to the
Seabrook Facility caused by such removal and shall indemnify Seller for any
such damage. Seller will give Buyer reasonable access to the Seabrook Facility
to permit Buyer to effectuate the foregoing removal, and Seller shall have the
right to monitor and supervise such removal. Notwithstanding any provision
herein to the contrary, in the event that Buyer does not complete removal of
such Purchased Assets in accordance with this Section within thirty (30) days
following Closing, Buyer shall reimburse Seller for all rent and other
recurring charges (e.g., taxes, insurance, and utilities) due under such lease
from the Closing Date until the completion of such removal.
(b) At all times during the removal process, Buyer shall not take any
action which would cause a violation of or default under the terms of the lease
for the Seabrook Facility. Buyer will maintain in effect during such
forty-five (45) day period policies of workers' compensation insurance covering
Buyer's employees at the Seabrook Facility and general liability insurance
covering Buyer's activities at the Seabrook Facility. Such policies shall name
Seller as a named insured under such policies during such forty-five (45) day
period. At Closing, Buyer shall provided Seller with certificates of insurance
evidencing such coverage.
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(c) Commencing on the date hereof to the Closing, Buyer shall use
reasonable commercial efforts to locate, lease and take possession of a
facility to serve as a replacement for the Seabrook Facility so as to enable
Buyer to commence removal of the Purchased Assets from the Seabrook Facility as
contemplated by this Section 7.24. It is acknowledged that Buyer intends to
have conducted a phase one environmental site assessment in connection with
such leasing of a replacement facility and that the results of the report
provided in connection with such assessment must be satisfactory to Buyer.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF
BUYER
Each and every obligation of Buyer under this Agreement to be
performed at or before the Closing by Buyer shall be subject to the
satisfaction, at or before the Closing, of each of the following conditions,
unless waived in writing by Buyer:
8.1 Representations and Warranties True. Except as provided in
the third (3rd) paragraph of Article V and Section 11.1(c), each and every
representation and warranty of Seller and the Shareholders contained in this
Agreement, in any Ancillary Agreement to which any Shareholder or Seller is or
will become a party, and in each certificate and other document delivered or to
be delivered by Seller, any Shareholder or any of their representatives
pursuant hereto or in connection with the transactions contemplated hereby or
thereby, shall be true and accurate in all Material respects as of the date
when made and as of the Closing as though such representation and warranty were
made by Seller and Shareholders on the Closing Date.
8.2 Performance. Seller and Shareholders shall have performed and
complied in all Material respects with each and every covenant and obligation
required by this Agreement to be performed or complied with by them at or prior
to the Closing.
8.3 No Proceeding or Litigation. As of the Closing, no suit,
action, investigation, inquiry or other proceeding by or before any court or
governmental Person requesting or looking toward an order, judgment or decree
shall be threatened, instituted or pending which questions the validity or
legality of this Agreement or the consummation of the transactions contemplated
hereby.
8.4 No Injunction. As of the Closing, there shall not be any
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein or any of them
39
not be consummated as so provided or imposing any condition on the consummation
of any of the transactions contemplated hereby.
8.5 Deliveries At or Prior to Closing. Seller and Shareholders
shall have delivered or caused to be delivered the following to Buyer at or
prior to the Closing, all in form reasonably satisfactory to Buyer's counsel:
(a) Copies of resolutions of Seller's Board of Directors and the
Shareholders dated on or before the date of this Agreement, authorizing the
execution, delivery and performance by Seller of this Agreement and the
Ancillary Agreements to which it is a party and the consummation by Seller of
the transactions contemplated hereby and thereby, and authorizing Seller's
officers, employees and agents to carry out and perform the terms and
provisions hereof and thereof, certified by the secretary or assistant
secretary of Seller;
(b) A closing certificate of the President or a Vice President of
Seller certifying the fulfillment of the conditions set forth in Sections 8.1
and 8.2;
(c) A copy of the Articles of Incorporation of Seller, as amended
to date, certified by the Secretary of State of California and dated as of a
date not more than thirty (30) days prior to the Closing Date, and a copy of
the By-Laws of Seller, certified by the secretary or an assistant secretary of
Seller;
(d) A certificate of good standing of Seller issued by the
Secretary of State of California, dated not more than thirty (30) days prior to
the Closing Date;
(e) The Bill of Sale, Assignment and Assumption Agreement, duly
executed by Seller;
(f) Certificates of title for any motor vehicles included in the
Purchased Assets, endorsed by Seller;
(g) One or more commitments to issue policies of title insurance on
the most recent ALTA form from a reputable title insurance company reasonably
satisfactory to Buyer, in amounts reasonable satisfactory to Buyer, insuring
Buyer's leasehold interests in the Leased Real Estate to be free and clear of
all Liens. Such title insurance commitments (the expense thereof to be borne
by Buyer) shall be delivered to Buyer at least fifteen (15) business days prior
to the Closing Date. To the extent commercially available, such commitments
and policies shall have all standard exceptions (but not survey related
exceptions) shown thereon deleted at or prior to the Closing, shall include an
ALTA zoning endorsement, shall have coverage extended to the Closing through a
gap coverage endorsement or otherwise and shall include
40
an extended coverage endorsement. Buyer shall have five (5) business days
after receipt of the commitment (including legible copies of all the documents
which are recorded exceptions) to provide written comments of objection to the
Seller; otherwise, the commitment will be deemed acceptable. To the extent
objections to the commitments are received by the Seller, the Seller shall then
have ten (10) business days to correct the objections to the extent they are
Material;
(h) Seller's Legal Opinion;
(i) The Employment Agreement, executed by Terry Wells;
(j) The Noncompetition Agreements for each of the Shareholders,
executed by each Shareholder;
(k) The Escrow Agreement, executed by Seller, Shareholders and the
Escrow Agent;
(l) The Real Estate Lease (Anaheim Facility), executed by the
lessor;
(m) The Real Estate Lease (Garden Grove Facility), executed by the
lessor;
(n) An estoppel certificate from the lessor under the Real Estate
Lease (Orange Facility);
(o) All required consents to assignments of Assumed Contracts, and
assignments of any Licenses and Permits necessary to conduct the Business as
heretofore conducted, or the issuance to Buyer of any new license or permit in
lieu thereof on comparable terms and conditions, excluding any assignment or
issuance of any air quality permits; and
(p) All other instruments and documents required by this Agreement
to be delivered by Seller to Buyer, and such other instruments and documents
which Buyer or its counsel may reasonably request not inconsistent with the
provisions hereof.
8.6 Hart-Scott-Rodino Act. All applicable waiting periods and any
extensions thereof under the HSR Act shall have expired or otherwise been
terminated.
8.7 No Adverse Change. From the date of this Agreement to the
Closing Date, (a) there shall not have occurred and there shall not exist on
the Closing Date, any condition or fact which has, or is reasonably expected to
have, a Material Adverse Effect, and (b) there shall not have occurred a
Material Adverse Change.
41
8.8 Consents. Buyer shall have received all necessary permits,
licenses, consents, approvals and the like from third parties and governmental
Persons necessary for Buyer's conduct of the Business as presently conducted.
8.9 Employees. Buyer shall have received from at least ninety
percent (90%) of the Employees to whom Buyer makes offers of employment Forms
I-9 and related proofs of identity and eligibility for employment in conformity
with applicable immigration Law.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER AND SHAREHOLDERS
Each and every obligation of Seller and Shareholders under this
Agreement to be performed at or before the Closing by Seller and Shareholders
shall be subject to the satisfaction, at or before the Closing, of each of the
following conditions, unless waived in writing by Seller and Shareholders:
9.1 Representations and Warranties True. Each and every
representation and warranty of Buyer contained in this Agreement, in any
Ancillary Agreement to which Buyer is or will become a party and in each
certificate or other document delivered or to be delivered by Buyer or its
representatives pursuant hereto or in connection with the transactions
contemplated hereby, shall be true and accurate in all Material respects as of
the date when made and as of the Closing as though such representation and
warranty were made by Buyer on the Closing Date.
9.2 Performance. Buyer shall have performed and complied in all
Material respects with each and every covenant and obligation required by this
Agreement to be performed or complied with by Buyer at or prior to the Closing.
9.3 No Proceeding or Litigation. As of the Closing, no suit,
action, investigation, inquiry or other proceeding by or before any court or
governmental Person requesting or looking toward an order, judgment or decree
shall be threatened, instituted or pending against Seller which questions the
validity or legality of this Agreement or the transactions contemplated hereby.
9.4 No Injunction. As of the Closing, there shall not be any
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein or any of them not be consummated as so
provided or imposing any condition on the consummation of any of the
transactions contemplated hereby.
9.5 Deliveries At or Prior to Closing. Buyer shall have delivered
or caused to be delivered the following to Seller or the
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Shareholders, as applicable, at or prior to the Closing, all in form reasonably
satisfactory to Seller's counsel:
(a) Copies of resolutions of Buyer's Board of Directors dated on
or before the date of this Agreement authorizing the execution, delivery and
performance by Buyer of this Agreement and the Ancillary Agreements to which
Buyer is a party, and the consummation by Buyer of the transactions
contemplated hereby and thereby, and authorizing Buyer's officers, employees
and agents to carry out and perform the terms and provisions hereof and
thereof, certified by the corporate secretary or assistant secretary of Buyer;
(b) A closing certificate of the President or a Vice President of
Buyer certifying the fulfillment of the conditions set forth in Sections 9.1
and 9.2;
(c) Payment by Buyer of the Estimated Cash Purchase Price as
provided in Section 4.2 hereof;
(d) A copy of the Articles of Incorporation of Buyer, as amended
to date, certified by the Secretary of State of Massachusetts and dated not
more than thirty (30) days prior to the Closing Date;
(e) A Certificate of Status or Good Standing of Buyer issued by the
Secretary of State of Massachusetts, and dated not more than thirty (30) days
prior to the Closing Date;
(f) Buyer's Legal Opinion;
(g) The Bill of Sale, Assignment and Assumption Agreement,
executed by Buyer;
(h) The Noncompetition Agreements for each Shareholder, each
executed by Buyer;
(i) The Employment Agreement, executed by Buyer;
(j) The Escrow Agreement, executed by Buyer and Escrow Agent;
(k) The Real Estate Lease (Anaheim Facility), executed by Buyer,
together with the Guaranty referred to therein, executed by Guarantor;
(l) The Real Estate Lease (Garden Grove Facility), executed by
Buyer, together with the Guaranty referred to therein, executed by Guarantor;
(m) The certificates of insurance referred to in Section 7.24; and
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(n) All other instruments and documents required by this Agreement
to be delivered by Buyer to Seller or Shareholders, and such other instruments
and documents which Seller or its counsel may reasonably request not
inconsistent with the provisions hereof.
9.6 Hart-Scott-Rodino Act. All applicable waiting periods (and
any extensions thereof) under the HSR Act shall have expired or otherwise been
terminated.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
10.1 General. From and after the Closing, the parties shall
indemnify each other as provided in this Article X. The party or parties
seeking indemnification are sometimes referred to herein as the "Indemnified
Party" and the party or parties against which indemnification is sought are
sometimes referred to as the "Indemnifying Party." The rights to
indemnification hereunder shall be the exclusive monetary remedy available to a
party hereto following the Closing with respect to a breach or inaccuracy of a
warranty, representation, covenant or agreement of another party hereto
contained in this Agreement or in any Ancillary Agreement (excluding the
Employment Agreement, the Affiliate Leases, and the Noncompetition Agreements
which are not subject to the provisions of this Article X). If the Closing
occurs, the covenants set forth in Sections 7.1, 7.3, 7.6, 7.14, 7.15, 7.17,
7.19 and 7.20 shall be deemed discharged and satisfied.
10.2 Survival.
(a) Regardless of any investigation by any party to this
Agreement, all representations, warranties, covenants and agreements of a party
contained in this Agreement, in any Ancillary Agreement to which it is a party
or in any certificate or other document delivered in connection with the
transactions contemplated hereby or thereby shall survive the Closing Date and
shall not terminate except as otherwise provided in Section 10.2(b).
(b) Any representation and warranty set forth in Article V or
Article VI (other than those contained in Sections 5.1, 5.2, 5.6, 5.22, 5.28,
6.1 and 6.2 which, subject to Section 10.7, shall survive the Closing Date for
the applicable statute of limitations) shall terminate on the first anniversary
date of the Closing Date, unless the notice referred to in Section 10.5(a)
shall have been given to the Indemnifying Party with respect to any breach or
inaccuracy of such representation and warranty on or before such date.
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10.3 Indemnification Covenants of Seller and Shareholders. Seller
and Shareholders shall jointly and severally indemnify Buyer for and hold Buyer
harmless from and against any and all losses, damages, taxes, costs, expenses,
liabilities, obligations and claims of any kind, including without limitation,
reasonable attorneys' fees and disbursements, interest or penalties sustained
or incurred by Buyer as a result of, arising out of or incidental to:
(a) any breach or inaccuracy of any representation or warranty
made by Seller or any Shareholder to Buyer in this Agreement, in any Ancillary
Agreement to which Seller or a Shareholder is a party or in any certificate or
other document delivered by Seller or any Shareholder to Buyer in connection
with the transactions contemplated hereby or thereby;
(b) any failure of Seller or any Shareholder to comply with, or
any breach or nonfulfillment by Seller or any Shareholder of, any covenant,
agreement or obligation of Seller or any Shareholder set forth in this
Agreement, any Ancillary Agreement to which Seller or any Shareholder is a
party or in any certificate or other document delivered by Seller or any
Shareholder to Buyer in connection with the transactions contemplated hereby or
thereby;
(c) except for the Assumed Liabilities, any actual or alleged
liability or obligation of Seller (including without limitation any actual or
alleged liability or obligation of Seller for debts or other monetary amounts
owed to third parties or any actual or alleged liability or obligation of
Seller for Taxes except to the extent of Buyer's obligation pursuant to Section
7.21 hereof);
(d) any Environmental Claim arising out of or relating to any activity
of Seller prior to the Closing, (ii) any Environmental Release of any
Environmental Hazardous Materials by Seller, or by any other Person on or under
any of the Leased Real estate, which has occurred prior to the Closing; or
(iii) Seller's failure to comply with any Environmental Law; and in any such
case Buyer's damages shall include without limitation all costs and expenses of
response or cleanup incurred by Buyer which result therefrom or relate or are
incidental thereto, including, without limitation, all costs of obtaining
inspections, samplings, reviews and audits; or
(e) any suit, action or other proceeding brought by any Person and
arising out of or in any way related to any of the matters referred to in
Section 10.3(a), 10.3(b), 10.3(c) or 10.3(d).
References to Buyer in this Section 10.3 includes its shareholders and
other Affiliates, officers, directors, agents and successors.
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10.4 Indemnification Covenants of Buyer. Buyer shall indemnify
Seller for and hold Seller harmless from and against any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind,
including without limitation reasonable attorneys' fees and disbursements,
sustained or incurred by Seller as a result of, arising out of or incidental
to:
(a) any breach or inaccuracy of any representation or warranty
made by Buyer to Seller in this Agreement, in any Ancillary Agreement to which
Buyer is a party or in any certificate or other document delivered by Buyer to
Seller in connection with the transactions contemplated hereby or thereby;
(b) any failure of Buyer to comply with, or any breach or
nonfulfillment by Buyer of, any covenant, agreement or obligation of Buyer set
forth in this Agreement, in any Ancillary Agreement to which Buyer is a party
or in any certificate or other document delivered by Buyer to Seller in
connection with the transactions contemplated hereby or thereby;
(c) any failure of Buyer to timely pay, perform or discharge any
Assumed Liability; or
(d) any suit, action or other proceeding brought by any Person and
arising out of or in any way related to any of the matters referred to in
Section 10.4(a), 10.4(b) or 10.4(c).
References to Seller in this Section 10.4 includes its shareholders
and other Affiliates, officers, directors, agents and successors.
10.5 Claims for Indemnification.
(a) Promptly upon the Indemnified Party obtaining knowledge of any
facts causing it to believe that it has a claim for indemnification against the
Indemnifying Party hereunder, the Indemnified Party shall give written notice
of such claim to the Indemnifying Party. Such written notice shall set forth
the nature and (to the extent then known) the amount of the claim.
Notwithstanding the foregoing, the Indemnified Party's right of indemnification
hereunder shall not be affected by its failure to give or by its delay in
giving such notice unless, and then only to the extent that, the rights of the
Indemnifying Party are prejudiced as a result of such failure or delay.
(b) The Indemnified Party shall tender to the Indemnifying Party
the defense of any claim, suit, proceeding, action or assessment brought by any
third party (hereinafter "Third Party Claim"). The Indemnifying Party shall
have the right at its expense to assume the defense thereof using counsel
reasonably acceptable to the Indemnified Party. The Indemnifying Party shall
46
elect to assume the defense of any such Third Party Claim by notifying the
Indemnified Party within ten (10) business days following notice from the
Indemnifying Party. Failure by the Indemnifying Party to assume such defense
shall be deemed a waiver by the Indemnifying Party of its right to so defend.
If the Indemnifying Party assumes such defense, the obligations of the
Indemnifying Party hereunder as to such Third Party Claim shall include taking
all steps reasonably necessary in the defense or settlement thereof. Except
with the written consent of the Indemnified Party, the Indemnifying Party, in
the defense of any such Third Party Claim, shall not consent to the entry of
any judgment against or adversely affecting the Indemnified Party (other than a
judgment of dismissal on the merits and without costs) or enter into any
settlement unless such settlement provides that the Indemnified Party is fully
released from all liability by the third party as to such Third Party Claim.
The Indemnified Party shall have the right to participate, at its expense, in
the defense of any such Third Party Claim.
(c) If the Indemnifying Party does not assume the defense of any
Third Party Claim as provided herein, the Indemnified Party may defend against
such Third Party Claim in such manner that the Indemnified Party deems
advisable or appropriate and may settle such Third Party Claim or consent to
the entry of judgment with respect thereto upon such terms as it deems
advisable or appropriate (subject to the prior written consent of the
Indemnifying Party, such consent not to be unreasonably withheld or delayed),
and in such event the Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of such settlement or judgment and for any and
all amounts recoverable pursuant to Section 10.3 or 10.4, including all
damages, costs and expenses sustained or incurred by the Indemnified Party
which result from, arise out of or are incidental to the defense or settlement
of such Third Party Claim.
(d) The parties shall cooperate with each other in connection with
any Third Party Claim and provide each other with access to relevant personnel,
books, records and other information in its possession.
(e) The parties agree that any indemnification claim by Buyer
shall be recoverable first from the amount held by the Escrow Agent pursuant to
the Escrow Agreement, to the extent such escrow amount is sufficient therefor,
but Buyer's rights to indemnification hereunder shall not be limited to such
escrow amount.
10.6 Limitation on Liability.
(a) Notwithstanding anything to the contrary contained herein, Buyer
shall not be entitled to indemnification pursuant to Section 10.3(a) (and
Section 10.3(e) to the extent it relates to
47
Section 10.3(a) by reason of an unintentional breach or inaccuracy of a
representation or warranty contained in Article V (other than Sections 5.1, 5.2
and 5.6):
(i) until the aggregate of the indemnification
obligations of Seller and Shareholders to Buyer pursuant to Section 10.3(a)
(and Section 10.3(e) to the extent it relates to Section 10.3(a)), determined
without regard to this Section 10.6(a)(i), exceeds $750,000 (net of any damages
incurred by Buyer as described in Section 11.1(c), in which event Seller and
Shareholders shall be liable only for the amount of such indemnification
obligations in excess of $750,000 (net of any damages incurred by Buyer as
described in Section 11.1(c); and
(ii) unless the related indemnification claim is asserted
by Buyer in writing within one (1) year following the Closing Date.
(b) In no event shall Buyer's total recovery from Seller and
Shareholders pursuant to Sections 10.3(a) and 10.3(d) (and Section 10.3(e) to
the extent it relates to Sections 10.3(a) and 10.3(d)) exceed in the aggregate
$7,000,000. Buyer's right to indemnification pursuant to this Article X,
including this Section 10.6(b), for any Environmental Claim, Environmental
Release of any Environmental Hazardous Materials or Seller's failure to comply
with any Environmental Law as described in Section 10.3(d) (collectively,
"Environmental Matters") shall constitute Buyer's exclusive monetary remedy
with respect to any such Environmental Matter, and shall be in lieu of any
other remedy, including without limitation any right to contribution, indemnity
or other recovery under common law, Environmental Laws or otherwise; provided,
however, that the foregoing limitation on Buyer's right to recovery shall not
prevent or be construed to prevent Buyer from joining Seller or Shareholders as
third party defendants in any action or proceeding brought by any Person in
connection with any Environmental Matter, for the purpose of having the court
determine whether Buyer or Seller is responsible for such liability or
obligation under relevant Law.
10.7 Time to Commence Action. Notwithstanding anything to the
contrary contained herein, neither party shall be entitled to indemnification
for any claim pursuant to Section 10.3(a) or 10.4(a) unless such party has
commenced a legal action or proceeding against the other party with respect to
such claim within four (4) years following the Closing Date.
10.8 Certain Exceptions to Joint Liability. Notwithstanding the
foregoing, any liability of the parties to the Employment Agreement shall be
determined solely under the terms of the Employment Agreement, any liability of
the parties to the Affiliate Leases shall be determined solely under the terms
of the Affiliate Leases, and any liability of the parties to the Noncompetition
48
Agreements shall be determined solely under the terms of such Agreement, and in
each case shall not be subject to the provisions of this Article X.
ARTICLE XI
TERMINATION; REMEDIES
11.1 Right To Terminate.
(a) Anything to the contrary herein notwithstanding, and subject to
Section 11.1(c), this Agreement and the transactions contemplated hereby may be
terminated at any time after the Ultimate Closing Date (or if applicable such
later date on which the ten (10) business day cure period referred to in
Section 11.1(b) shall have expired), if the Closing has not occurred by such
Ultimate Closing Date (or such later date if applicable), time being of the
essence:
(i) By the mutual written agreement of the parties;
(ii) By Buyer, if any condition set forth in Article VIII
has not been satisfied; or
(iii) By Seller and Shareholders, if any condition set forth
in Article IX has not been satisfied.
(b) If Buyer desires to terminate this Agreement pursuant to Section
11.1(a)(ii) due to the breach by Seller and/or Shareholders of any of its or
their warranties, representations, covenants, agreements or obligations
hereunder, or if Seller and Shareholders desire to terminate this Agreement
pursuant to Section 11.1(a)(iii) due to the breach by Buyer of any of its
warranties, representations, covenants, agreements or obligations hereunder,
then such terminating party or parties shall first give written notice to the
breaching party or parties and the breaching party or parties shall have ten
(10) business days to cure such breach (time being of the essence).
(c) If Seller unintentionally fails to disclose one or more matters
which were required to be disclosed in the Disclosure Schedule so as to make
the representations and warranties in this Article V accurate as of the date of
this Agreement, and Seller subsequently discloses such matters to Buyer by
amending or supplementing the Disclosure Schedule by written notice given to
Buyer as soon as reasonably practicable after such failure is discovered, then:
(i) if the damages to Buyer caused by such breach or breaches
do not exceed $50,000 in the aggregate, then Buyer shall nonetheless
be required to close (provided that the
49
conditions to Buyer's obligation to close set forth in Article VIII
are otherwise satisfied), in which case Buyer shall be deemed to have
waived such breach or breaches; and
(ii) if the damages to Buyer caused by such breach or breaches
exceed $50,000 in the aggregate, then Buyer's sole remedy shall be to
terminate this Agreement in accordance with this Section 11.1 (and in
such event Buyer shall not be entitled to liquidated damages as
provided by Section 11.2 by reason of such breach or breaches), or to
proceed to close the transactions contemplated by this Agreement in
which case Buyer shall be deemed to have waived such breach or
breaches; provided, however, that in the event of such termination
Seller shall promptly reimburse Buyer for all out-of-pocket costs and
expenses, including without limitation attorneys' fees and the HSR Act
filing fee, incurred by Buyer in connection with the transactions
contemplated by this Agreement, but in no event in excess of $250,000.
11.2 Rights on Termination. If this Agreement is terminated
pursuant to Section 11.1, all liabilities and obligations of the parties under
this Agreement shall terminate, except for those liabilities and obligations
contained in Section 7.7, Section 11.1(c)(ii), Section 13.3, and this Section
11.2, and except as follows:
(a) SUBJECT TO SECTION 11.1(c)(ii), IN THE EVENT OF TERMINATION BY
BUYER PURSUANT TO SECTION 11.1(a)(ii), DUE TO THE BREACH BY SELLER AND/OR
SHAREHOLDERS OF ANY OF ITS WARRANTIES, REPRESENTATIONS, COVENANTS, AGREEMENTS
OR OBLIGATIONS HEREUNDER, SELLER SHALL PAY TO BUYER $2,500,000.00 AS LIQUIDATED
DAMAGES, AND NOT AS A PENALTY, TOGETHER WITH REASONABLE FEES AND DISBURSEMENTS
OF ATTORNEYS INCURRED BY BUYER IN ENFORCING THIS SECTION 11.2(a), AND THE
COLLECTION OF SUCH AMOUNT SHALL BE IN LIEU OF ANY AND ALL OTHER REMEDIES WHICH
ARE OR MAY BE AVAILABLE TO SELLER AND SHAREHOLDERS AT LAW OR IN EQUITY.
(b) IN THE EVENT OF TERMINATION BY SELLER AND SHAREHOLDERS
PURSUANT TO SECTION 11.1(a)(iii), DUE TO THE BREACH BY BUYER OF ANY OF ITS
WARRANTIES, REPRESENTATIONS, COVENANTS, AGREEMENTS OR OBLIGATIONS HEREUNDER,
BUYER SHALL PAY TO SELLER $2,500,000.00 AS LIQUIDATED DAMAGES, AND NOT AS A
PENALTY, TOGETHER WITH REASONABLE FEES AND DISBURSEMENTS OF ATTORNEYS INCURRED
BY SELLER IN ENFORCING THIS SECTION 11.2(b), AND THE COLLECTION OF SUCH AMOUNT
SHALL BE IN LIEU OF ANY AND ALL OTHER REMEDIES WHICH ARE OR MAY BE AVAILABLE TO
SELLER AND SHAREHOLDERS AT LAW OR IN EQUITY.
________ ________ ________ ________ ________ ________
INITIALS INITIALS INITIALS INITIALS INITIALS INITIALS
50
ARTICLE XII
GUARANTEE
Guarantor does hereby agree to execute the Guaranty Agreement
contemporaneously with the execution of this Agreement.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Amendment and Modification. This Agreement, the Disclosure
Schedule, and any Exhibit attached hereto may be amended, modified and
supplemented prior to the Closing only by written agreement of the parties
hereto or as otherwise provided herein.
13.2 Waiver of Compliance. Any failure of Buyer or Seller to
comply with any obligation, covenant, agreement or condition contained herein
may be expressly waived in writing by Seller or Buyer, respectively, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
13.3 Fees and Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, and except as otherwise
provided in this Agreement, all fees and expenses incurred by a party in
connection with this Agreement or any Ancillary Agreement shall be borne by
such party, including, without limitation, all fees of its counsel, consultants
and accountants. Seller shall be liable for and pay all transfer taxes,
intangibles taxes and other Taxes incurred in connection with the consummation
of the transactions contemplated by this Agreement; provided, however, that
Seller and Buyer shall bear equally any sales or use taxes imposed on or with
respect to the purchase and sale of the Purchased Assets as provided in Section
7.21 hereof.
13.4 Risk of Loss. The risk of loss or damage by fire or other
casualty to the Purchased Assets shall, until the Closing, be borne by Seller.
Seller shall promptly notify Buyer of such loss or damage. In the event of any
loss or damage prior to the Closing which in Buyer's reasonable judgment has a
Material Adverse Effect, whether or not covered by insurance, Buyer shall have
the option, exercisable by written notice within ten (10) days after it
receives notice from Seller:
(a) To terminate this Agreement and not complete the transactions
provided for herein, in which case all obligations of each party hereunder
shall forthwith terminate with no liability to the other party whatsoever; or
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(b) To complete the transactions provided for herein, in which
event all proceeds of any insurance to the extent relating to the Purchased
Assets shall be payable to Buyer and all rights and claims of Seller to any
such proceeds shall be assigned to Buyer at the Closing.
13.5 Notices. Each notice, request, demand or other communication
by either party to the other party required or permitted by this Agreement
(collectively, a "Notice"), shall be in writing and shall be (a) personally
delivered, (b) sent by U.S. certified mail, return receipt requested, postage
prepaid, (c) by a nationally recognized overnight commercial courier, charges
prepaid, or (d) by facsimile transmission (but each such facsimile transmission
shall be confirmed by sending a copy thereof to the other party by certified
mail or commercial courier as provided herein no later than the following
business day), addressed as set forth below or to such other address as such
party shall have communicated to the other party in accordance with this
Section. Any Notice given in the manner described herein shall be deemed to
have been given and received when personally delivered, on the date of sending
when sent by facsimile transmission, on the third day following the date of
sending when sent by certified mail or on the first day following the date of
sending when sent by commercial courier.
(a) If to Buyer, to:
Wright Line Inc.
160 Gold Star Boulevard
P.O. Box 2028
Worcester, MA 01615-2028
Attn: President
Fax: (508)852-1560
with a required copy to:
Anthony W. Asmuth III, Esq.
Quarles & Brady
411 East Wisconsin Avenue
Suite 2550
Milwaukee, WI 53202-4497
Fax: (414)271-3552
(b) If to Seller, to:
Everest Electronic Equipment, Inc.
c/o Robert L. Wells
3500 Ocean Boulevard
Corona Del Mar, CA 92625
Fax: (714) 675-7348
52
with a required copy to:
Timothy R. Busch, Esq.
The Busch Firm
2532 Dupont Drive
Irvine, CA 92612-1254
Fax: (714)474-7732
(c) If to Shareholders, to:
Mr. Robert L. Wells
3500 Ocean Boulevard
Corona Del Mar, CA 92625
Fax: (714) 675-7348
Mr. Terry D. Wells
639 Virginia Park Drive
Laguna Beach, CA 92651
Mr. Wallace H. Twedt
13151 Hillview Dr. South
Chino, CA 91710
with a required copy to:
Timothy R. Busch, Esq.
The Busch Firm
2532 Dupont Drive
Irvine, CA 92612-1254
Fax: (714)474-7732
13.6 No Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, but neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other party, whether by
operation of Law or otherwise; provided, however, that Buyer may assign all of
its rights hereunder to a wholly-owned subsidiary or other affiliate of Applied
Power Inc., but only if Buyer unconditionally guarantees (in form and substance
reasonably satisfactory to Seller's counsel) all of such subsidiary's or
affiliate's obligations relating to the transactions contemplated hereby; and
further provided, however, that Seller may liquidate and assign to the
Shareholders all of its rights in and to this Agreement and the Ancillary
Agreements to which it is a party. Seller shall promptly give Buyer written
notice of such assignment and liquidation.
53
13.7 Governing Law; Submission to Jurisdiction. This Agreement and
the legal relations among the parties hereto shall be governed by and construed
in accordance with the internal Laws of the State of California, without regard
to principles of conflict of Laws. Each of the parties hereto (a) submits to
the exclusive jurisdiction of the state courts located in the County of Orange,
State of California, and the U.S. Federal District Court for the Central
District of the State of California with respect to any action or proceeding
arising out of or relating to this Agreement or any Ancillary Agreement; (b)
agrees that any claims with respect to such action or proceeding may be heard
or determined only in any such court; and (c) waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought.
Any party may make service on any other party by sending or delivering a copy
of the process to the party to be served at the address and in the manner
provided in Section 13.5 above. Nothing in this Section 13.7 shall, however,
affect the right of any party hereto to serve legal process in any other manner
permitted by Law.
13.8 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13.9 Entire Agreement. This Agreement, including the Exhibits hereto,
the Disclosure Schedule (which constitutes a part of this Agreement as if set
forth in full herein) and the other documents and certificates delivered
pursuant to the terms hereof, sets forth the entire agreement and understanding
of the parties hereto in respect of the subject matter contained herein, and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto.
13.10 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any Person other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason of this
Agreement.
13.11 Construction. Whenever in this Agreement the context so
suggests, references to the masculine shall be deemed to include the feminine
and the neuter, references to the singular shall be deemed to include the
plural, and references to "or" shall be deemed to be disjunctive but not
necessarily exclusive. No provision of this Agreement or any Ancillary
Agreement shall be construed in favor of or against any party hereto by reason
of the extent to which such party or its counsel participated in the drafting
thereof. References to Sections herein include all subsections which are
subsidiary to the Section referred to. The headings and captions of the
Sections and Articles of this
54
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
13.12 Severability. The invalidity of any provision of this Agreement
or portion of a provision shall not affect the validity of any other provision
of this Agreement or the remaining portion of the applicable provision.
13.13 Shareholder Trusts. The parties acknowledge (and the
Shareholders warrant and represent) that the shareholders of record of Seller
consist entirely of the Wallace H. Twedt and Wilma Jean Twedt Living Trust
dated May 14, 1991 ("Twedt Trust"), Robert L. Wells and Lynne Rene Wells Living
Trust dated April 5, 1991 ("Wells Trust") (collectively the "Trusts") and Terry
D. Wells. Twedt represents that he and his spouse, Wilma Jean Twedt, are the
sole grantors and sole current trustees of the Twedt Trust, and that the Twedt
Trust is revocable by them and at the Closing will be revocable by them except
as otherwise provided by the terms of the Twedt Trust as presently in effect.
Roberts Wells represents and warrants that he and his spouse, Lynne Rene Wells,
are the sole grantors of, and that Robert Wells is the sole current trustee of,
the Wells Trust and that the Wells Trust is revocable and at the Closing will
be revocable by them except as otherwise provided by the terms of the Wells
Trust as presently in effect. Each of Twedt and Robert Wells covenant and
agree that any judgment against him may be satisfied from the assets of the
Twedt Trust and Wells Trust, respectively as well as from his individual
assets. Contemporaneously with the execution of this Agreement, each of Twedt
and Robert Wells are delivering to Buyer a copy of the trust agreement for the
Twedt Trust and Wells Trust, respectively, and any amendments thereto,
certified by him in his capacity as trustee of such Trust that such trust
agreement and any amendments thereto now and at the Closing will constitute the
entire trust agreement for such Trust. Twedt and Robert Wells covenant and
agree on behalf of the Twedt Trust and Wells Trust, respectively, that such
Trust is bound by the provisions of this Section 13.13 and that such Trusts are
subject to the provisions of Section 13.7.
[remainder of this page is intentionally blank]
55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the day and year first above written.
WRIGHT LINE INC., EVEREST ELECTRONIC EQUIPMENT,
a Massachusetts corporation INC., a California corporation
By: /s/ PHILIP T. BURKART By: /s/ WALLACE H. TWEDT
----------------------------- --------------------------
PHILIP T. BURKART WALLACE H. TWEDT
Its: President Its: President
By: /s/ ROBERT L. WELLS
-----------------------------
ROBERT L. WELLS
Its: Secretary
APPLIED POWER INC., /s/ TERRY D. WELLS
a Wisconsin corporation -----------------------------
TERRY D. WELLS
By: /s/ PHILIP T. BURKART /s/ WALLACE H. TWEDT
------------------------- ----------------------------------
PHILIP T. BURKART WALLACE H. TWEDT, individually
Its: Vice President and in his capacity as co-
trustee of the Wallace H.
Twedt and Wilma Jean Twedt
Living Trust dated May 14,
1991
/s/ WILMA JEAN TWEDT
----------------------------------
WILMA JEAN TWEDT, individually
and in her capacity as co-
trustee of the Wallace H.
Twedt and Wilma Jean Twedt
Living Trust dated May 14,
1991
/s/ ROBERT L. WELLS
---------------------------------
ROBERT L. WELLS, individually
and in his capacity as sole
trustee of the Robert L. Wells
and Lynne Rene Wells Living
Trust dated April 5, 1991
56
LIST OF EXHIBITS
Exhibit Description
- - ------- -----------
1.2 Accrued Expenses
1.7 Annual Financial Statements
1.8 Assumed Contracts
1.11 Bill of Sale, Assignment and
Assumption Agreement
1.14 Buyer's Legal Opinion
1.26 Employment Agreement
1.35 Escrow Agreement
1.42 Guaranty Agreement
1.58-1, 1.58-2 and
1.58-3 Noncompetition Agreement
1.68 Real Estate Lease (Anaheim
Facility)
1.69 Real Estate Lease (Garden Grove
Facility)
1.70 Real Estate Lease (Orange Facility)
1.71 Recent Financial Statements
1.73 Seller's Legal Opinion
4.1 Allocation of Purchase Price