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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 24, 2002
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Commission File Number 33-64325
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REUNION INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 06-1439715
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(State of Incorporation) (I.R.S. Employer Identification No.)
11 STANWIX STREET, SUITE 1400
PITTSBURGH, PENNSYLVANIA 15222
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(Address of principal executive offices, including zip code)
(412) 281-2111
----------------------------------------------------
(Registrant's telephone number, including area code)
Page 1 of 46 pages.
Exhibit index is on page 12.
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FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Current Report on Form 8-K contains forward-looking statements as
defined by Section 21E of the Securities Act of 1934, as amended, concerning
the Registrant's expectations about future and pro forma results of
operations, financial position and cash flows, which are dependent upon future
events beyond the Registrant's control. Note that all forward-looking
statements involve risks and uncertainties including, without limitation,
factors which could cause the future results and shareholder values to differ
significantly from those expressed in the forward-looking statements. In
light of the risks and uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be
regarded as a representation by Reunion or any other person that the forward-
looking statements will occur.
- 2 -
ITEM 2. Acquisition or Disposition of Assets.
-------------------------------------
On September 24, 2002, Reunion Industries, Inc. (the "Registrant"),
completed the sale of its Kingway Material Handling division located in
Acworth, Georgia for a purchase price of $32.0 million in cash and a note to
Kingway Acquisition, Inc. ("KAI"), a Delaware corporation. KAI is a portfolio
company of American Capital Strategies, Ltd., headquartered in Bethesda,
Maryland, a lender to and investor in middle market companies.
The sale was consummated pursuant to an Asset Purchase Agreement dated
September 12, 2002 by and between Buyer and Seller. Of the $32.0 million
purchase price, cash proceeds totalled $25.0 million. The remainder is a $7.0
million note, the payment of which is contingent upon KAI's future operating
results over a three year period beginning January 1, 2003. Net cash proceeds
received by the Registrant totalled $24,119,000 after payment of transaction
related fees and expenses. Of the $24,119,000, $18,961,000 was used to reduce
bank revolving credit facility borrowings, $4,108,000 was used to reduce bank
term loans and $1,050,000 was used to repay accrued overadvance fees. Final
determination of the purchase price is subject to a post-closing working
capital adjustment. Specifically, the purchase price shall be adjusted for
the amount by which Kingway's final agreed-to closing date working capital
exceeds or is less than $5,000,000, Kingway's Seller-determined working
capital at September 24, 2002.
ITEM 7. Financial Statement and Exhibits.
---------------------------------
(a) Financial Statements
None.
- 3 -
(b) Pro Forma Financial Information
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated condensed financial
statements and related notes are presented in accordance with the rules and
regulations of the U.S. Securities and Exchange Commission ("SEC") to show the
pro forma effects of the Registrant's Kingway Material Handling division.
The sale of Kingway occurred on September 25, 2002. The net cash
proceeds of $24,119,000 were used to repay bank debt and accrued overadvance
fees.
The unaudited pro forma consolidated condensed balance sheet as of June
30, 2002 includes the effect of the sale and is based on the assumption that
the sale of Kingway was completed on June 30, 2002. The unaudited pro forma
consolidated condensed statement of operations for the six months ended June
30, 2002 and the unaudited pro forma consolidated condensed statement of
operations for the year ended December 31, 2001 is based on the assumption
that the sale of Kingway was completed January 1, 2001.
The Registrant's historical financial information presented in the
unaudited pro forma consolidated condensed balance sheet and statement of
operations at and for the six months ended June 30, 2002 is derived from the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002
filed August 19, 2002. The Registrant's pro forma financial information
presented in the unaudited pro forma consolidated condensed statement of
operations for the year ended December 31, 2001 is derived from the
Registrant's Annual Report on Form 10-K for the year ended December 31, 2001
as filed on April 16, 2002. Note that the Company classified the Kingway
division as a discontinued operation in 2001. Therefore, Kingway's historical
operating results are classified below continuing operations in the "Reunion
Industries Historical" column.
Pro forma data are based on assumptions and include adjustments as
explained in the notes to the unaudited pro forma consolidated condensed
financial statements. The pro forma data are not necessarily indicative of
the financial results that would have occurred had the transactions been
effective on the dates indicated above, and should not be viewed as indicative
of operations in future periods. The unaudited pro forma consolidated
condensed financial statements should be read in conjunction with the
accompanying notes and with the Registrant's financial statements as filed
with the SEC.
- 4 -
REUNION INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT JUNE 30, 2002 (in thousands)
Reunion Less
Industries Kingway Pro Forma Pro Forma
Historical Historical Adjustments Consolid.
---------- ---------- ------------- -----------
ASSETS:
Cash and equivalents $ 385 $ - $ 25,000 (1) $
(881) (1)
(24,119) (2) 385
Receivables, net 12,963 - - 12,963
Advances to employees 213 - - 213
Inventories, net 7,906 - - 7,906
Other current assets 1,212 - 550 (2)
2,731 (3) 4,493
Net assets of discontinued
operations 6,522 (7,851) 1,329 (5) -
-------- -------- -------- --------
Total current assets 29,201 (7,851) 4,610 25,960
Property, net 17,819 - - 17,819
Due from related parties 1,511 - - 1,511
Goodwill, net 11,443 - (436) (4) 11,007
Assets of discontinued
operations 15,380 (15,330) (50) (5) -
Other assets, net 3,003 - - 3,003
-------- -------- -------- --------
Total assets $ 78,357 $(23,181) $ 4,124 $ 59,300
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Debt in default $ 59,640 $ - $ (4,108) (2) $
(18,961) (2) 36,571
Current maturities of debt 87 - - 87
Trade payables 13,707 - - 13,707
Due to related parties 1,839 - - 1,839
Other current liabilities 17,438 - (500) (2) 16,938
Net liabilities of
discontinued operations - - 1,279 (5) 1,279
-------- -------- -------- --------
Total current liabilities 92,711 - (22,290) 70,421
Debt - long-term 4,770 - - 4,770
Debt - related party 4,615 - - 4,615
Other liabilities 1,889 - - 1,889
Intercompany - (23,181) 24,119 (1)
(938) (3) -
-------- -------- -------- --------
Total liabilities 103,985 (23,181) 891 81,695
-------- -------- -------- --------
Common stock 156 - - 156
Paid-in capital 25,064 - - 25,064
Accumulated deficit (49,712) - 3,669 (3)
(436) (4) (46,479)
Accumulated other
comprehensive loss (1,136) - - (1,136)
-------- -------- -------- --------
Stockholder's deficit (25,628) - 3,233 (22,395)
-------- -------- -------- --------
Total liabilities and
stockholders' deficit $ 78,357 $(23,181) $ 4,124 $ 59,300
======== ======== ======== ========
- 5 -
REUNION INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(in thousands, except per share amounts)
Reunion Less
Industries Kingway Pro Forma Pro Forma
Historical Historical Adjustments Consolid.
---------- ---------- ------------- -----------
Sales $ 36,301 $ - $ - $ 36,301
Operating Costs and
Expenses:
Cost of sales 32,249 - - 32,249
Selling, general and
administrative 7,042 - - 7,042
Other (income) expense (781) - - (781)
-------- -------- -------- --------
Operating profit (loss) (2,209) - - (2,209)
Interest expense 3,902 - (978) (a) 2,924
-------- -------- -------- --------
Loss from continuing
operations before
income taxes (6,111) - 978 (5,133)
Provision for (benefit
from) income taxes - - - -
-------- -------- -------- --------
Loss from continuing
operations $ (6,111) $ - $ 978 $ (5,133)
======== ======== ======== ========
Loss from continuing
operations per common share:
Basic and diluted $ (0.39) $ (0.33)
======== ========
Weighted average number
of common shares
Basic and diluted 15,691 15,691
======== ========
- 6 -
REUNION INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
(in thousands, except per share amounts)
Reunion Less
Industries Kingway Pro Forma Pro Forma
Historical Historical Adjustments Consolid.
---------- ---------- ------------- -----------
Sales $ 99,495 $ - $ - $ 99,495
Operating Costs and
Expenses:
Cost of sales 84,457 - - 84,457
Selling, general and
administrative 15,718 - - 15,718
Provision for restructuring 6,811 - - 6,811
Other (income) expense 1,727 - (898) (b) 829
-------- -------- -------- --------
Operating profit (loss) (9,218) - 898 (8,320)
Interest expense 7,057 - (74) (c) 6,983
-------- -------- -------- --------
Loss from continuing
operations before
income taxes (16,275) - 972 (15,303)
Provision for (benefit
from) income taxes 12,678 - - 12,678
-------- -------- -------- --------
Loss from continuing
operations $(28,953) $ - $ 972 $(27,981)
======== ======== ======== ========
Loss from continuing
operations per common share:
Basic and diluted $ (1.86) $ (1.80)
======== ========
Weighted average number
of common shares:
Basic 15,587 15,587
======== ========
Diluted 15,612 15,612
======== ========
- 7 -
REUNION INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
Note 1. Pro Forma Adjustments to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet
Adjustments to the unaudited pro forma condensed consolidated
balance sheet as of June 30, 2002:
(1) To record the receipt of $25,000,000 of cash proceeds from the
disposition and the payment of a total of $881,000 of transaction related fees
and expenses.
(2) To reflect the use of the net cash proceeds of $24,119,000 to
paydown bank term loan ($4,108,000), bank revolving credit debt ($18,961,000)
and overadvance fees ($1,050,000). Note that at June 30, 2002, $500,000 of
overadvance fees had been accrued. Therefore, the difference between
overadvance fees paid and accrued of $550,000 is recorded as prepaid
overadvance fees in the pro forma balance sheet.
(3) Represents the elimination of the Company's net investment in
Kingway upon disposition and resulting $938,000 gain based on Kingway's June
30, 2002 net asset balances. Note that the Asset Purchase Agreement between
the Buyer and the Company provides for a post-closing adjustment to the
purchase price based Kingway's working capital at the closing date.
Specifically, within 120 days of the closing date, the purchase price shall be
adjusted for the amount by which Kingway's working capital (working capital
defined as in the Asset Purchase Agreement as being current assets less
current liabilities) is more or less than $5,000,000. At the closing on
September 24, 2002, it was determined that Kingway's working capital was
$5,000,000. At June 30, 2002, Kingway's working capital was $7,731,000.
Therefore, had the transaction closed on June 30, 2002 an additional
$2,731,000 on a pro forma basis would be due from the Buyer 120 days
subsequent to the pro forma June 30, 2002 balance sheet.
(4) Represents the write-off of goodwill related to a Kingway
purchase price adjustment not previously classified within net assets of
discontinued operations.
(5) Represents the reclassification of the remaining discontinued
operations net liability to the liability side of the pro forma balance sheet.
Such net liability relates primarily to the Company's discontinued bridges and
cranes operations.
- 8 -
Note 2. Pro Forma Adjustments to the Unaudited Pro Forma Condensed
Consolidated Statements of Operations
Adjustments to the unaudited pro forma condensed consolidated
statements of operations for the six months ended June 30, 2002
and the year ended December 31, 2001:
(a) To record the effect on interest expense for the first six
months of 2002 resulting from the application of sale proceeds to borrowings:
Pro Forma
Average Pro Forma
Annual Rate Balance Interest
------------- -------- --------
Pro Forma Interest Expense:
Senior notes 13% $ 24,855 $ 1,616
Revolving credit facility Prime + 2.50% 1,624 59
Term loan A Prime + 2.75% 10,891 408
Other debt (actual first half 2002
plus estimated unused line fees) 991
--------
Total Pro Forma Cash Interest 3,074
Amortization of deferred financing costs 221
--------
Total Pro Forma Interest 3,295
Less: Pro forma allocation to discontinued operations (371)
Less: Historical interest expense (3,902)
--------
Pro Forma Interest Adjustment $ (978)
========
A 1.0% change in interest rates would affect interest expense by
approximately $63 for the six months ended June 30, 2002.
(b) To reflect the reduction in amortization of goodwill related
to the goodwill disposed of and written-off from the sale.
(c) To record the effect on interest expense for 2001 resulting
from the application of sale proceeds to borrowings:
Pro Forma
Average Pro Forma
Annual Rate Balance Interest
------------- -------- --------
Pro Forma Interest Expense:
Senior notes 13% $ 24,895 $ 3,236
Revolving credit facility Prime + 2.50% 5,711 482
Term loan A Prime + 2.75% 13,654 1,173
Other debt (actual 2001 plus estimated
unused line fees) 2,088
--------
Total Pro Forma Cash Interest 6,979
Amortization of deferred financing costs 1,261
--------
Total Pro Forma Interest 8,240
Less: Pro forma allocation to discontinued operations (1,257)
Less: Historical interest expense (7,057)
--------
Pro Forma Interest Adjustment $ (74)
========
A 1.0% change in interest rates would affect interest expense by
approximately $194 for 2001.
- 9 -
(c) Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
10.46 Asset Purchase Agreement dated September 12, 2002
by and between Reunion Industries, Inc. and
Kingway Acquisition, Inc.
10.47 Side Letter Agreement dated September 20, 2002
by and between Reunion Industries, Inc. and
Kingway Acquisition, Inc.
- 10 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned, hereunto duly authorized.
Date: September 24, 2002 REUNION INDUSTRIES, INC.
------------------ (Registrant)
By: /s/ John M. Froehlich
---------------------
John M. Froehlich
Executive Vice President
of Finance and Chief
Financial Officer
- 11 -
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page
----------- ---------------------- ----
10.46 Asset Purchase Agreement dated 13
September 12, 2002 by and between
Reunion Industries, Inc. and
Kingway Acquisition, Inc.
10.47 Side Letter Agreement dated 46
September 20, 2002 by and between
Reunion Industries, Inc. and
Kingway Acquisition, Inc.
- 12 -
EXHIBIT 10.46
ASSET PURCHASE AGREEMENT
by and between
REUNION INDUSTRIES, INC.,
as Seller,
and
KINGWAY ACQUISITION, INC.,
as Buyer
September 12, 2002
- 13 -
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Definitions.1
1.2 Other Defined Terms.6
1.3 Accounting Principles.7
1.4 Other Definitional Provisions; Construction.7
ARTICLE 2 SALE AND TRANSFER OF ASSETS; CLOSING . . . . . . . . . . . . . . . 7
2.1 Assets To Be Sold.7
2.2 Excluded Assets.8
2.3 Consideration.9
2.4 Liabilities.9
2.5 Closing.10
2.6 Closing Deliverables of Seller.10
2.7 Closing Deliverables of Buyer.11
2.8 Adjustment Amounts.11
2.9 Contingent Notes.12
2.10 Disputes.12
2.11 Allocation of Purchase Price.12
ARTICLE 3 CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.1 Conditions Precedent to Buyer"s Obligation to Close.13
3.2 Conditions Precedent to Seller"s Obligation to Close.15
ARTICLE 4 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . .16
4.1 Representations and Warranties of the Seller.16
4.2 Representations and Warranties of the Buyer.26
ARTICLE 5 COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . .27
5.1 Conduct of Business.27
5.2 No-Shop Provisions.27
5.3 Access and Information.27
5.4 Supplemental Disclosure.28
5.5 Interim Financial Statements.28
5.6 Information for Filings.28
5.7 Fulfillment of Conditions by Seller.28
5.8 Fulfillment of Conditions by Buyer.28
5.9 Assistance After Closing.28
5.10 Publicity.28
5.11 Transaction Costs.29
5.12 Nondisclosure.29
5.13 Noncompetition.29
5.14 Employees.30
ARTICLE 6 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . .30
6.1 Survival.30
6.2 Indemnification and Reimbursement by Seller.30
6.3 Indemnification and Reimbursement by Seller " Environmental
Matters.31
6.4 Indemnification and Reimbursement by Buyer.32
6.5 Right of Set Off.32
6.6 Procedure for Indemnification " Third Party Claims.33
6.7 Procedure for Indemnification " Other Claims.34
6.8 [Intentionally Omitted].34
6.9 No Indemnification or Set-Off For Certain Matters.34
ARTICLE 7 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .35
7.1 Termination.35
7.2 Notices.35
7.3 Attorneys" Fees and Costs.36
7.4 Further Assurances.36
7.5 Counterparts.36
7.6 Assignment.36
7.7 Entire Agreement.37
7.8 Governing Law.37
7.9 Environmental Disputes.37
- 14 -
EXHIBITS AND SCHEDULES
Exhibit A - Form of Contingent Note
Schedule 2.1(b) - Tangible Personal Property
Schedule 2.1(c) - Inventories
Schedule 2.1(d) - Accounts Receivable
Schedule 2.1(i) - Offset and Refund Claims
Schedule 2.2(d) - Excluded Assets
Schedule 3.1(f) - Buyer Government Authorizations
Schedule 3.1(g) - Buyer Government Approvals
Schedule 3.1(h) - Material Consents
Schedule 4.1(c) - Encumbrances
Schedule 4.1(e) - Real Property Leases
Schedule 4.1(f) - Leases
Schedule 4.1(h) - Accounts Receivable with Aging
Reports
Schedule 4.1(i) - Inventories
Schedule 4.1(j) - Conflicts
Schedule 4.1(l) - Litigation
Schedule 4.1(m)(i) - Compliance with Laws
Schedule 4.1(m)(ii) - Governmental Authorizations
Schedule 4.1(n) - Business Outside of Ordinary Course
Schedule 4.1(o)(i) - Division Contracts
Schedule 4.1(o)(ii) - Division Contracts In Default or
Requiring Consents
Schedule 4.1(o)(iii) - Breaches or Potential Breaches of
Division Contracts or Encumbrances
Affecting the Assets
Schedule 4.1(p) - Environmental Issues
Schedule 4.1(r) - Employees
Schedule 4.1(s) - Intellectual Property Assets
Schedule 6.9 - Due Diligence Matters
- 15 -
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of
September 12, 2002, by and between KINGWAY ACQUISITION, INC., a Delaware
corporation ("Buyer"), and REUNION INDUSTRIES, INC., a Delaware corporation
("Seller").
RECITALS
A. Seller operates a division known as Kingway Material Handling (the
"Division").
B. Buyer desires to purchase the Assets (as defined below) of the
Division and assume the Assumed Liabilities (as defined below) of the
Division, and Seller desires to convey the Assets (as defined below) and
Assumed Liabilities to Buyer.
NOW, THEREFORE, the parties hereto, in consideration of the premises and
their mutual covenants and agreements herein set forth and intending to be
legally bound hereby, covenant and agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions.
In addition to other words and terms defined elsewhere in this
Agreement, the following words and terms shall have the meanings set forth
below (and such meanings shall be equally applicable to both the singular and
plural form of the terms defined, as the context may require):
"Accounts Receivable" shall mean (i) all trade accounts receivable and
other rights to payment from customers of the Division and the full benefit of
all security for such accounts or debts, including all trade accounts
receivable representing amounts receivable in respect of goods shipped or
products sold or services rendered to customers of the Division, (ii) all
other accounts or notes receivable of the Division and the full benefit of all
security for such accounts or notes, and (iii) any claims, remedies and other
rights of the Division related to any of the foregoing.
"Affiliate" shall mean with respect to any Person, any other Person
which is directly or indirectly controlling, controlled by or under common
control with such Person or entity or any of its Subsidiaries, and the term
"control" (including the terms "controlled by" and "under common control
with") means having, directly or indirectly, the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership of voting securities or by contract or otherwise. Notwithstanding
anything to the contrary herein, neither Buyer nor any of its Affiliates shall
be deemed to be Affiliates of the Seller by virtue of the transactions
contemplated in this Agreement.
"Benefit Plan" shall mean any plan, agreement, arrangement or commitment
which is an executive or incentive compensation plan, bonus plan, deferred
compensation agreement, employee pension, profit sharing, savings or
retirement plan, employee stock option or stock purchase plan, group life,
health, disability, sick pay or accident insurance or other employee benefit
plan, agreement, arrangement or commitment, including, without limitation,
severance, holiday, vacation, Christmas or other bonus plans (including, but
not limited to, employee benefit plans, as defined in Section 3(3) of ERISA),
maintained for the benefit of employees of Seller, whether or not maintained
by Seller or with respect to which Seller makes or has any obligation to make
contributions.
"Benefit Plan Liabilities" shall mean any Liability of Seller with
respect to vacation, pension, profit-sharing, Welfare Plans or Benefit Plans,
medical, accident and health, life insurance and long-term disability payments
to employees, officers or directors of Seller with respect to the Division on
or prior to the Closing Date, except to the extent such Liability is reflected
on the Interim Balance Sheet.
"Best Efforts" shall mean the efforts that a reasonably prudent Person
desirous of achieving a result would use in similar circumstances to ensure
- 16 -
that such result is achieved as expeditiously as possible; provided,
however,that a Person required to use his Best Efforts under this Agreement
will not be thereby required to take actions that would result in a materially
adverse
change in the benefits to such Person of this Agreement and the Contemplated
Transactions, or to dispose of or make any material change to its business,
expend any material funds or incur any other material burden.
"Breach" shall mean any material violation or breach of, any material
misrepresentation or inaccuracy in, any material default under, or any
material failure to perform or comply with any representation, warranty,
covenant, obligation, or other provision of any Contract, or any event which
with the passing of time or the giving of notice, or both, would constitute
such a material violation, breach, misrepresentation, inaccuracy, default or
failure. When used with respect to this Agreement or any Contract delivered
pursuant to this Agreement, a "Breach" will also be deemed to include any
material claim (by any Person) or other material occurrence or circumstance
that is or was materially inconsistent with any representation, warranty,
covenant, promise, obligation, duty under, or other provision of, this
Agreement or any Contract delivered pursuant to this Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banking institutions in Delaware or Pennsylvania are authorized
or required by law to close.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. 9604, et seq.), as amended, and
rules, regulations and standards properly promulgated thereunder.
"Charter Documents" shall mean the Certificate of Incorporation of the
Seller, including all amendments and supplements thereto.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended or any
successor law, and regulations issued by the IRS pursuant to the Code or any
successor law.
"Consent" shall mean any approval, consent, ratification, waiver or
other authorization.
"Contemplated Transactions" shall mean all of the transactions
contemplated by this Agreement.
"Contingent Note" shall mean the unsecured subordinated promissory note
of Buyer payable to Seller in the principal amount of $7,000,000, in
substantially the form of Exhibit A attached hereto.
"Contract" shall mean any agreement, contract, Lease, consensual
obligation, promise, or undertaking (whether written or oral and whether
express or implied) that is legally binding.
"Division Contract" shall mean any Contract of Seller relating to the
Division (i) under which the Division has or may acquire any rights or
benefits, (ii) under which the Division has or may become subject to any
obligation or liability, or (iii) by which the Division or any of the assets
owned by Seller and used by the Division is or may become bound.
"EBITDA" shall mean, for any period of determination, income from
operations after deducting all expenses other than interest, taxes,
depreciation and amortization, and after eliminating all extraordinary gains
and extraordinary losses.
"Encumbrance" shall mean any charge, claim, community property,
interest, condition, equitable interest, lien, option, pledge, security
interest, mortgage, right of way, easement, encroachment, servitude, right of
first option, right of first refusal or restriction of any kind, including any
restriction on use, voting (in the case of any security), transfer, receipt of
income, or exercise of any other attribute of ownership.
"Environment" shall mean soil, land surface or subsurface strata,
- 17 -
surface waters (including navigable waters and ocean waters), groundwaters,
drinking water supply, stream sediments, ambient air (including indoor air),
plant and animal life, and any other environmental medium or natural resource.
"Environmental Laws" shall mean all past or present United States
federal, state and local laws, statutes, ordinances, and codes which address,
are related to, or are otherwise concerned with environmental issues, and all
regulations, rules, standards, orders and directives of all properly
constituted Governmental Authorities (charged with the responsibility of
implementing or enforcing such laws, statutes, ordinances and codes) which
have been properly promulgated, are in effect and are binding upon the Seller
with respect to the Assets and/or the Division.
"Environmental Liabilities" shall mean any obligations or liabilities
(including any notices, claims, complaints or suits or other assertions of
obligations or liabilities) that are based upon or related to (i) any
provision of Environmental Laws or (ii) any judgment, order, writ, decree,
permit or injunction imposed by any court, administrative agency, tribunal or
otherwise that is related to an environmental condition at, on or under the
Leased Real Property issue (including on-site or off-site contamination by
Pollutants of surface or subsurface soil or water); including (A) fines,
penalties, judgments, awards, settlements, losses, damages (including
foreseeable and unforeseeable consequential damages), costs, fees (including
attorneys" and consultants" fees), expenses and disbursements; (B) defense and
other responses to any administrative or judicial action (including claims,
notice letters, complaints, and other assertions of liability); and (C) any
required demonstration of financial responsibility for (i) cleanup costs and
injunctive relief, including any Removal, Remedial or other Response actions,
and natural resource damages, and (ii) any other compliance or remedial
measures.
"Governmental Authorities" shall mean any federal, state or municipal
court or other governmental department, commission, board, bureau, agency or
instrumentality, governmental or quasi-governmental, domestic or foreign.
"Governmental Authorization" shall mean any consent, license, or permit
issued, granted, given, or otherwise made available by or under the authority
or any Governmental Authority or pursuant to any Law.
"Inventories" shall mean all inventories of the Division, wherever
located, including all finished goods, work in process, raw materials, spare
parts and all other materials and supplies to be used or consumed by the
Division in the production of finished goods.
"IRS" shall mean the Internal Revenue Service and any governmental body
or agency succeeding to the functions thereof.
"Knowledge", "Know", "Knows" and similar words, when used in connection
with Seller, shall mean the actual knowledge of Kimball Bradley, John
Froehlich, Tony Stewart, Kerry Strother, Dave McLain, Dave Mickelsen, John
Heath and Jim McDermott.
"Laws" shall mean all U.S. and foreign federal, state or local statutes,
laws, rules, regulations, ordinances, codes, rules of common law, and the like
that are presently in effect, including any judicial or administrative
interpretations thereof, and any final judicial or administrative orders,
consents, decrees or judgments.
"Lease" shall mean any lease, rental or occupancy agreement, license, or
installment and conditional sale agreement to which Seller is a party with
respect to the Division and any other Division Contract pertaining to the
leasing or use of Leased Real Property or Tangible Personal Property,
including, without limitation, the Real Property Leases;
"Leased Real Property" shall mean the real property leased by Seller as
tenant in connection with the operation of the Division under the Real
Property Leases described in Schedule 4.1(e) together with all buildings,
facilities and other improvements thereon and all licenses, leases, rights,
privileges and appurtenances pertaining thereto.
"Material Adverse Effect" shall mean, as Buyer shall determine in its
sole discretion (reasonably applied), a material adverse effect upon the
business, operations, Leased Real Property, Assets, goodwill or condition
(financial or otherwise) of the Division, either individually or in the
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aggregate. In determining whether any individual event would have a Material
Adverse Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would have
a Material Adverse Effect.
"Ordinary Course of Business" shall mean an action taken that is
consistent in nature, scope and magnitude with past practices of any Person
and is taken in the ordinary course of its normal day-to-day operations.
"Person" shall mean any individual, partnership, limited partnership,
corporation, limited liability company, association, joint stock company,
trust, joint venture, unincorporated organization or governmental entity or
department, agency or political subdivision thereof.
"Pollutant" shall include any "hazardous substance" and any "pollutant
or contaminant" as those terms are defined in CERCLA; any "hazardous waste" as
that term is defined in RCRA; any "air pollutant" as that term is defined in
the Clean Air Act (42 U.S.C. 7401 et seq.); and any "hazardous material" as
that term is defined in the Hazardous Materials Transportation Act (49 U.S.C.
5101 et seq.), as amended (including as those terms are currently defined,
construed, or otherwise used in rules, regulations, standards, guidelines and
publications issued pursuant to, or otherwise in implementation of, said
Environmental Laws); and including, without limitation, any petroleum product
or byproduct, solvent, flammable or explosive material, radioactive material
(except for naturally occurring radioactive materials), asbestos, mold,
polychlorinated biphenyls (PCBs), dioxins, dibenzofurans, heavy metals, and
radon gas; and including any other substance or material that is reasonably
determined to present a threat, hazard or risk to human health or the
environment.
"RCRA" shall mean the Resource Conservation and Recovery Act (42 U.S.C.
6901 et seq.), as amended, and all rules, regulations and standards properly
promulgated thereunder.
"Release" shall mean any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching, or migration on or into the Environment or into or out of
any property.
"Removal," "Remedial" and "Response" actions shall include "removal,
"remedial," "response" and similar types of clean-up activities covered by
CERCLA, RCRA, and other comparable Environmental Laws.
"Subsidiary" of any corporation shall mean any other corporation or
limited liability company of which the outstanding capital stock possessing a
majority of voting power in the election of directors (otherwise than as the
result of a default) is owned or controlled by such corporation directly or
indirectly through Subsidiaries.
"Tangible Personal Property" shall mean all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials, vehicles
and other items of tangible personal property (other than Inventories) of
every kind owned or leased by Seller and used by the Division (wherever
located and whether or not carried on Seller"s books), together with any
express or implied warranty by the manufacturers or sellers or lessors of any
item or component part thereof, and all maintenance records and other
documents relating thereto.
"Tax" shall mean any income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental, windfall profit, customs, vehicle, airplane, boat, vessel or
other title or registration, capital stock, franchise, employees" income
withholding, foreign or domestic withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer, value
added, alternative, add-on minimum, and other tax, fee, assessment, levy,
tariff, charge or duty of any kind whatsoever, and any interest, penalties,
additions or additional amounts thereon, imposed, assessed, collected by or
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under the authority of any Governmental Authority or payable under any tax-
sharing agreement or any other Contract.
"Transaction Documents" shall mean this Agreement, the Contingent Note,
the Bill of Sale, the Intellectual Property Assignment, the Assignment and
Assumption Agreement and the other documents and agreements executed and
delivered in connection with the Contemplated Transactions.
"UST" shall mean an underground storage tank, including as that term is
defined, construed and otherwise used in RCRA and in rules, regulations,
standards, guidelines and publications issued pursuant to RCRA and comparable
state and local laws.
"Welfare Plan" shall mean any "employee welfare benefit plan" as such
term is defined in Section 3(l) of ERISA.
"Working Capital" for any period of determination shall mean an amount
equal to (a) the sum of the following relating to the Division: (i) prepaid
expenses, plus (ii) Inventory, plus (iii) Accounts Receivable, less (b) the
sum of the following relating to the Division: (i) trade payables, plus (ii)
accrued expenses, plus (iii) all other current liabilities assumed by Buyer
pursuant to this Agreement.
1.2 Other Defined Terms.
The following is a list of additional terms used in this Agreement and
a reference to the Section hereof in which such term is defined:
"Actual Net Working Capital" Section 2.8(b)
"Adjustment Amounts" Section 2.8
"Agreement" Preamble
"Assets" Section 2.1
"Assignment and Assumption Agreement" Section 2.6(d)
"Assumed Liabilities" Section 2.4
"Balance Sheet" Section 4.1(b)
"Bill of Sale" Section 2.6(a)
"Business" Section 5.13(a)
"Buyer" Preamble
"Cash Purchase Price" Section 2.3
"Closing Adjustment Amount" Section 2.8(a)
"Closing" Section 2.5
"Confidential Information" Section 5.12
"Damages" Section 6.2
"Due Diligence Matters" Section 6.9
"Estimated Net Working Capital" Section 2.8(a)
"Excluded Assets" Section 2.2
"GAAP" Section 1.3
"Improvements" Section 4.1(g)
"Indemnified Persons" Section 6.2
"Independent Accountants" Section 2.10
"Intellectual Property Assets" Section 4.1(s)
"Intellectual PropertyAssignment" Section 2.6(c)
"Interim Balance Sheet" Section 4.1(b)
"Liabilities" Section 2.4
"Material Consents" Section 3.1(h)
"Permitted Encumbrances" Section 4.1(c)
"Post-Closing AdjustmentAmount" Section 2.8(b)
"Proceeding" Section 3.1(e)
"Purchase Price" Section 2.3
"Real Property Leases" Section 4.1(e)
"Required Working Capital" Section 2.8(a)
"Seller" Preamble
"Shares" Recitals
"Technical Expert" Section 7.9
"Territory" Section 5.13(a)
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1.3Accounting Principles.
The character or amount of any asset, liability, capital account or
reserve and of any item of income or expense to be determined, and any
consolidation or other accounting computation to be made, and the construction
of any definition containing a financial term, pursuant to this Agreement
shall be determined or made in accordance with generally accepted accounting
principles in the United States of America consistently applied ("GAAP").
1.4 Other Definitional Provisions; Construction.
Whenever the context so requires, neuter gender includes the masculine
and feminine, the singular number includes the plural and vice versa. The
words "hereof" "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not in any
particular provision of this agreement, and references to section, article,
annex, schedule, exhibit and like references are references to this Agreement
unless otherwise specified.
ARTICLE 2
SALE AND TRANSFER OF ASSETS; CLOSING
2.1 Assets To Be Sold.
Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, but effective as of 5:00 p.m. (EST) on the Closing
Date, Seller shall sell, convey, assign, transfer and deliver to Buyer, free
and clear of any Encumbrances other than Permitted Encumbrances, and Buyer
shall purchase and acquire from Seller, all of Seller"s right, title and
interest in and to all of the property and assets, real, personal or mixed,
tangible and intangible, of every kind and description, without limitation,
wherever located, of Seller used by, arising from or constituting part of the
Division, including the following:
(a) all leasehold and other title to or interest in all Real
Property Leased, under the Real Property Leases described in Schedule
4.1(e);
(b) all Tangible Personal Property, including, but not limited
to, those items described in Schedule 2.1(b);
(c) all Inventories of the Division, including, but not limited
to those items described in Schedule 2.1(c);
(d) all Accounts Receivable of the Division, including, but not
limited to those items described in Schedule 2.1(d);
(e) all Seller"s rights in, to and under all Division Contracts,
including those listed in Schedule 4.1(o)(i), and all outstanding offers
or solicitations made by or to Seller to enter into any Contract with
respect to the business or operations of the Division;
(f) all Governmental Authorizations with respect to the business
or operations of the Division and all pending applications therefor or
renewals thereof, in each case to the extent transferable to Buyer,
including those listed in Schedule 4.1(m)(ii);
(g) all data and records related to the operations of the
Division, including the Division"s client and customer lists and
records, referral sources, research and development reports and records,
production reports and records, service and warranty records, equipment
logs, operating guides and manuals, financial and accounting records,
creative materials, advertising materials, promotional materials,
studies, reports, correspondence and other similar documents and records
and copies of all personnel records and other records;
(h) all of the intangible rights and property of Seller relating
to the business or operations of the Division, including the Division"s
Intellectual Property Assets, going concern value, good-will, telephone,
telecopy and e-mail addresses, websites and listings including those
items listed in Schedule 4.1(s); and
(i) all rights of Seller relating to deposits and prepaid
expenses of the Division, claims for refunds and rights to offset in
respect thereof which are not listed in Schedule 2.1(i).
All of the foregoing property and assets are herein referred to
collectively as the "Assets". Notwithstanding the foregoing, the transfer of
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the Assets pursuant to this Agreement shall not include the assumption of any
Liability in respect thereof unless the Buyer expressly assumes such Liability
pursuant to Section 2.4.
2.2 Excluded Assets.
Notwithstanding anything to the contrary contained in Section 2.1 or
elsewhere in this Agreement, the following items (collectively, the "Excluded
Assets") are not part of the sale and purchase contemplated hereunder, are
excluded from the Assets, and shall remain the property of Seller after the
Closing:
(a) the minute books, stock records and corporate seal of
Seller;
(b) all personnel records and other records that Seller is
required by law to retain in its possession;
(c) all rights of Seller under this Agreement and the other
Transaction Documents;
(d) the "Reunion" name and permutations thereof and all related
trademarks, trade names, service marks, domain names and other
intellectual property containing the name "Reunion" and permutations
thereof; and
(e) all cash, checking accounts, savings accounts, money market
accounts and other cash or cash equivalent or deposit account.
2.3 Consideration.
The total consideration for the Assets (the "Purchase Price") will be
(a) $25,000,000, (b) plus the Contingent Note, and (c) plus or minus the
Adjustment Amounts. The Purchase Price shall be paid as follows: (x) at the
Closing, $25,000,000 by wire transfer (the "Cash Purchase Price"); (y) the
Adjustment Amounts shall be paid in accordance with Section 2.8; and (z) the
Contingent Note shall be issued in accordance with Section 2.9 and paid in
accordance with its terms.
2.4 Liabilities.
It is understood and agreed that Buyer will not assume any direct or
indirect debts, obligations or liabilities of Seller of any nature, whether
absolute, accrued, contingent, liquidated or otherwise, and whether due or to
become due, asserted or unasserted, known or unknown, including, without
limitation, Environmental Liabilities and Benefit Plan Liabilities
(collectively, "Liabilities"), except for the following specifically
identified liabilities (the "Assumed Liabilities"), which shall be assumed by
Buyer at Closing, but effective as of 5:00 p.m. (EST) on the Closing Date:
(a) any current Liability of the Division, which is not
associated with funded debt, reflected on the Interim Balance Sheet of
the Division which remains unpaid on the Closing Date;
(b) any current Liability of the Division, which is not
associated with funded debt, that is incurred by Seller in the Ordinary
Course of Business between the date of the Interim Balance Sheet and the
Closing Date which remains unpaid on the Closing Date;
(c) any Liability of the Division under Division Contracts;
(d) all Liabilities and obligations of Seller in respect of the
Division Contracts listed or described in Schedule 4.1(o)(i) which
relate to benefits thereunder which are realized or delivered or which
otherwise arise on or after the Closing Date and obligations of Seller
which arise thereunder before the Closing Date but only to the extent
such obligations would be Assumed Liabilities of Buyer under clause (a)
through (c) above and, furthermore, Buyer shall not assume or agree to
pay, discharge or perform any Liabilities or obligations arising out of
any Breach by Seller of or its failure to perform under any such
Contract in accordance with its terms prior to the Closing; and
(e) any Liability of Seller with respect to continuation
coverage under Section 4980B of the Code for employees of the Division.
For purposes of this Agreement, (x) Assumed Liabilities do not include
any Liabilities under a Division Contract resulting from or relating to any
Breach by Seller under such Division Contract and (y) the Assumed Liabilities
shall not include any warranty claims made against any inventory sold by the
Division prior to the Closing Date.
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2.5 Closing.
The consummation of the purchase and sale provided for in this
Agreement (the "Closing") will take place at the offices of Buyer"s counsel at
2001 Ross Avenue, Suite 3000, Dallas, Texas, at 10:00 a.m. (local time) on or
before September 20, 2002, or such other earlier date, time and place as the
parties hereto may agree.
2.6 Closing Deliverables of Seller.
In addition to any other documents to be delivered under other
provisions of this Agreement, at the Closing, Seller shall deliver to Buyer:
(a) a bill of sale for all the Assets, in a form mutually
acceptable to Buyer and Seller (the "Bill of Sale");
(b) for each Real Property Lease, an assignment and assumption
of lease or such other appropriate document or instrument of transfer,
as the case may require, each in form and substance reasonably
satisfactory to Buyer and its legal counsel;
(c) assignments of all Intellectual Property Assets, in a form
mutually acceptable to Buyer and Seller (collectively, the "Intellectual
Property Assignment");
(d) an assignment and assumption agreement, in a form mutually
acceptable to Buyer and Seller (the "Assignment and Assumption
Agreement");
(e) such other bills of sale, assignments, assumptions,
certificates of title, documents and other instruments of transfer and
conveyance as may reasonably be requested by Buyer, each in form and
substance reasonably satisfactory to Buyer and its legal counsel and
executed by Seller;
(f) a certificate executed by Seller as to the accuracy in all
material respects of its representations and warranties as of the date
of this Agreement and as to its compliance in all material respects with
and performance of its covenants and obligations to be performed or
complied with at or before the Closing Date;
(g) a certificate of the Secretary of Seller certifying, as
complete and accurate as of the Closing Date, copies of the Charter
Documents of Seller, certifying all requisite resolutions or actions of
Seller"s board of directors approving the execution and delivery of this
Agreement and the consummation of the Contemplated Transactions and
certifying to the incumbency of the officers of Seller executing this
Agreement and any other Transaction Documents on behalf of Seller; and
(h) a certificate executed by the Chief Operating Officer of
Seller and the Controller of the Division certifying that the Balance
Sheet, Interim Balance Sheet and Projections of the Division are true,
correct and complete, in form and substance acceptable to Buyer in
Buyer"s sole discretion.
2.7 Closing Deliverables of Buyer.
In addition to any other documents to be delivered under other
provisions of this Agreement, at the Closing, Buyer shall deliver or cause to
be delivered to Seller:
(a) the Contingent Note executed by Buyer;
(b) countersigned copies of the Real Estate Lease assignment and
assumption documents delivered by Seller pursuant to Section 2.6(b);
(c) a countersigned copy of the Assignment and Assumption
Agreement;
(d) such other bills of sale, assignments, assumptions,
certificates of title, documents and other instruments of transfer and
conveyance as may be reasonably requested by Seller, each in form and
substance reasonably satisfactory to Seller and its counsel;
(e) a certificate executed by Buyer as to the accuracy in all
material respects of its representations and warranties as of the date
of this Agreement and as to its compliance in all material respects with
and performance of its covenants and obligations to be performed or
complied with at or before the Closing Date; and
(f) a certificate of the Secretary of Buyer certifying, as complete
and accurate as of the Closing Date, copies of the charter documents of
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Buyer, certifying all requisite resolutions or actions of Buyer"s board
of directors approving the execution and delivery of this Agreement and
the consummation of the Contemplated Transactions and certifying to the
incumbency of the officers of Buyer executing this Agreement and any
other Transaction Documents on behalf of Buyer.
2.8 Adjustment Amounts.
The "Adjustment Amounts" are comprised of the Closing Adjustment
Amount and the Post-Closing Adjustment Amount, which shall be determined and
paid as follows:
(a) Closing Adjustment Amount. The Cash Purchase Price shall be
adjusted (up or down) at the Closing by the "Closing Adjustment Amount",
which shall be equal to the amount by which the estimated Working
Capital of the Division ("Estimated Net Working Capital") differs from
$5,000,000 ("Required Working Capital"). The Estimated Net Working
Capital shall be determined by the Seller, and Seller shall provide
Buyer and its certified public accountants with the results of such
determination within at least three (3) Business Days prior to the
Closing, or such later date as otherwise agreed by the parties.
(b) Post-Closing Adjustment Amount. The Purchase Price shall be
adjusted by an amount (the "Post-Closing Adjustment Amount") equal to
(i) the difference, if any, between the Working Capital of the Division
(as determined by Buyer and its certified public accountants on a
consistent basis with Seller"s determination under Section 2.8(a))
calculated within 90 days following the Closing ("Actual Net Working
Capital") and the Estimated Net Working Capital.
(c) Review of Post-Closing Adjustment Amount. Seller shall have
a period of five (5) Business Days to review Buyer"s determination of
the Actual Net Working Capital and provide Buyer with notice of a
dispute with respect thereto. Buyer shall provide Seller and its
certified public accountants with access to all work papers and other
books and records necessary for Seller to review Buyer"s determination
of the Actual Net Working Capital.
(d) Payment of Post-Closing Adjustment Amount. Subject to
Section 2.10, the Post-Closing Adjustment Amount shall be paid as
follows: (i) if the Actual Net Working is less than the Estimated Net
Working Capital, Seller shall pay to Buyer, within three (3) Business
Days of the end of Seller"s five (5) Business Days review period, the
amount of such difference in immediately avoidable funds wired to an
account designated by Buyer; and (ii) if the Actual Net Working Capital
is greater than the Estimated Net Working Capital, Buyer shall pay to
Seller, within three (3) Business Days of the end of Seller"s five (5)
Business Day review period, the amount of such difference in immediately
available funds wired to an account designated by Seller.
2.9 Contingent Notes.
Buyer shall execute and deliver to Seller the Contingent Note.
2.10 Disputes.
Any dispute arising out of the calculation of the amounts determined
under either Section 2.8 or 2.9 (it being understood that this Section 2.10
shall not apply to disputes relating to enforcement or performance of Buyer"s
obligations under the Contingent Note) shall be resolved between Seller and
Buyer; provided, however, that if Seller and Buyer fail to resolve such issues
within ten (10) Business Days, then, Seller and Buyer shall submit such issues
in dispute to a mutually agreeable accounting firm located in St. Louis,
Missouri, or Denver, Colorado (the "Independent Accountants"), for resolution
applying GAAP, and such resolution shall be binding on Buyer and Seller. If
issues remaining in dispute are submitted to the Independent Accountants for
resolution, Seller and Buyer shall furnish or cause to be furnished to the
Independent Accountants such work papers and other documents and information
relating to the disputed issues as the Independent Accountants may request and
are available to that party or its agents and shall be afforded the
opportunity to present to the Independent Accountants any material relating to
the disputed issues and to discuss the issues with the Independent
Accountants. Seller and Buyer will each bear 50% of the fees and costs of the
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Independent Accountants for such determination. Buyer or Seller, as
applicable, shall pay the disputed amount to the other party within three (3)
Business Days of the determination by the Independent Accountant.
2.11 Allocation of Purchase Price.
Buyer and Seller shall agree on an allocation of the Purchase Price
for the filing of Federal Form 8594 and other filings with Governmental
Authorities. This allocation shall assign appropriate values to all tangible
and intangible Assets acquired by Buyer. In any Proceeding to the
determination of any Tax, neither Buyer nor Seller shall contend or represent
that such allocation is not a correct allocation.
ARTICLE 3
CONDITIONS
3.1 Conditions Precedent to Buyer"s Obligation to Close.
Buyer"s obligation to purchase the Assets and assume the Assumed
Liabilities and to take the other actions required to be taken by Buyer at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by Buyer, in whole or in
part):
(a) Accuracy of Representations. All of Seller"s
representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all
material respects as of the time of the Closing as if then made.
(b) Seller"s Performance.
(i) All of the covenants and obligations that Seller is
required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered
collectively), and each of these covenants and
obligations (considered individually), must have been
duly performed and complied with in all material
respects; and
(ii) Seller must have delivered each of the documents
required to be delivered by it pursuant to
Section 2.6.
(c) Closing Documents. Seller shall have caused the documents
and instruments required by Section 2.6 and the following documents to
be delivered (or tendered subject only to Closing) to Buyer:
(i) an opinion of Reed Smith LLP, dated as of the Closing
Date, in a form acceptable to Buyer, Seller and each
of its legal counsel;
(ii) The Charter Documents of Seller, duly certified as of
a recent date by the Secretary of State of the
jurisdiction of Seller"s incorporation;
(iii) Releases of all Encumbrances on the Assets, other than
Permitted Encumbrances;
(iv) Certificate(s) dated as of a recent date as to the
good standing of Seller and payment of all applicable
state franchise Taxes by Seller, executed by the
appropriate officials of the State of Delaware; and
(v) A certificate signed by an officer of Seller
certifying as to the matters required by
Section 3.1(b)(i).
(d) Material Adverse Effect. There shall not have occurred a
Material Adverse Effect in the business or financial condition of the
Division since April 30, 2002; provided, that the Buyer acknowledges
that it is aware of the matters set forth on Schedule 6.9 and that such
matters shall not constitute or give rise to a Material Adverse Effect
in the Division.
(e) No Proceedings. Since the date of this Agreement, there
shall not have been commenced or threatened against Buyer, or against
any Affiliate of Buyer, any action before any Governmental Authority
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("Proceeding") (i) involving any challenge to, or seeking Damages or
other relief in connection with, any of the Contemplated Transactions,
or (ii) that may have the effect of preventing, delaying, making
illegal, imposing material limitations or conditions on, or otherwise
materially interfering with any of the Contemplated Transactions.
(f) Licenses and Permits. Buyer shall have received such
Governmental Authorizations as are necessary to allow Buyer to operate
the Assets from and after the Closing, which Government Authorizations
are described on Schedule 3.1(f).
(g) Governmental Approvals. Buyer shall have obtained
assurances from all of the necessary Governmental Authorities, in form
and substance reasonably satisfactory to Buyer, that Buyer will be
granted all Governmental Authorizations necessary or appropriate for the
operation of the Assets, as previously operated, following the Closing
Date, which Governmental Authorizations are described on
Schedule 3.1(g).
(h) Consents. Each of the Consents identified in Schedule
3.1(h) (the "Material Consents") must have been obtained and must be in
full force and effect.
(i) Environmental Reports. Buyer shall have received reports
covering the Seller"s Leased Real Property in form and substance
satisfactory to Buyer.
(j) Credit Approval. Buyer shall have completed its internal
approval process for the transactions contemplated by this Agreement.
(k) Financing. Buyer shall have entered into certain financing
arrangements, in a form and on terms acceptable to Buyer in Buyer"s sole
discretion, and all conditions precedent to funding of the loans in
connection therewith shall have been met or waived, and the transactions
contemplated thereby, specifically, the lending of money to Buyer, shall
be consummated simultaneously with the Closing.
(l) Due Diligence. Buyer or its representatives or agents shall
have completed its business, legal and accounting due diligence review
of the Contemplated Transactions and related matters, the results of
which will be acceptable to Buyer in its sole discretion.
(m) Tax Allocation. Buyer and Seller shall have agreed upon an
allocation of the Purchase Price and shall agree to abide by such
allocations for all tax reporting purposes.
(n) Interim Balance Sheet. Seller shall have delivered an
unaudited balance sheet of the Division as of August 31, 2002, to Buyer,
which shall be in form and substance acceptable to Buyer, in its sole
discretion (reasonably applied).
3.2 Conditions Precedent to Seller"s Obligation to Close.
Seller"s obligation to sell the Assets and assign the Assumed
Liabilities to Buyer and to take the other actions required to be taken by
Seller at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Seller, in whole or in part):
(a) Accuracy of Representations. All of Buyer"s representations
and warranties in this Agreement (considered collectively), and each of
these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this
Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
(b) Buyer Performance.
(i) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered
collectively), and each of these covenants and
obligations (considered individually), must have been
performed and complied with in all material respects;
and
(ii) Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to
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Section 2.7, and Buyer shall have made the payments
required to be made at Closing by Section 2.3
(c) Additional Documents. Buyer shall have caused the documents
and instruments required by Section 2.7 and the following documents to
be delivered (or tendered subject only to Closing) to Seller:
(i) an opinion of Patton Boggs LLP, in a form acceptable
to Buyer, Seller and each of its legal counsel;
(ii) the charter documents of Buyer, duly certified as of a
recent date by the Secretary of State of the
jurisdiction of Buyer"s incorporation;
(iii) a certificate signed by an officer of Buyer certifying
as to the matters required by Section 3.2(b)(i).
(d) No Proceedings. Since the date of this Agreement, there
shall not have been commenced or threatened against Seller, or against
any Affiliate of Seller, any Proceeding (i) involving any challenge to,
or seeking Damages or other relief in connection with, any of the
Contemplated Transactions, or (ii) that may have the effect of
preventing, delaying, making illegal, imposing material limitations or
conditions on, or otherwise materially interfering with any of the
Contemplated Transactions.
(e) Consents. Each of the Material Consents must have been
obtained and must be in full force and effect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Seller.
As a material inducement to Buyer to enter into this Agreement and
purchase the Assets, the Seller hereby represents and warrants to Buyer as
follows:
(a) Organization and Power.
Seller is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to conduct its business as it is now
being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under
Division Contracts. Seller is duly qualified to do business as a
foreign corporation and is in good outstanding under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except where failure to be
so qualified and in good standing would not have a Material Adverse
Effect.
(b) Financial Statements and Financial Projections.
(i) Financial Statements. Seller has delivered to Buyer:
(A) an unaudited balance sheet of the Division as at
December 31, 2001 (the "Balance Sheet"), and the
related unaudited statements of income and cash flows
for the fiscal year then ended, (B) unaudited balance
sheets of the Division as at December 31 in each of
the years 1999 and 2000, and the related statements of
income and cash flows for each of the fiscal years
then ended, (C) an unaudited balance sheet of the
Division as of July 31, 2002 (the "Interim Balance
Sheet") and the related unaudited statement of income,
and cash flows for the seven (7) months then ended.
Such financial statements fairly present the financial
condition and the results of operations and cash flows
of the Division as at the respective dates of and for
the periods referred to in such financial statements,
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all in accordance with GAAP. The financial statements
referred to in this Section 4.1(b) reflect and will
reflect the consistent application of such accounting
principles throughout the periods involved, except as
disclosed in the notes to such financial statements.
The financial statements have been and will be
prepared from and are in accordance with the books and
records of Seller, which have been prepared in
accordance with this Section 4.1(b).
(ii) Financial Projections. The Seller has delivered to
the Buyer financial projections of the Division for
the period from September 1, 2002 through December 31,
2003 derived from various assumptions of the Seller"s
management (the "Financial Projections"). The
Financial Projections represent a reasonable range of
possible results in light of the history of the
business, present and foreseeable conditions and the
intentions of the Seller"s management.
(c) Title to Assets. Seller has good and marketable title to
all of the Assets and owns all of the Assets free and clear of all
Encumbrances, other than (i) Encumbrances for current Taxes not yet due;
(ii) minor imperfections of title and Encumbrances that do not
materially detract from or interfere with the present use or value of
such Assets; and (iii) Encumbrances described in Schedule 4.1(c). The
execution and delivery of the Transaction Documents by Seller at the
Closing will convey to and vest in Buyer good and marketable title to
the Assets, free and clear of any Encumbrances except the Assumed
Liabilities and the Encumbrances described in clauses (i) and (ii) above
(collectively, the "Permitted Encumbrances").
(d) Condition of Assets. The Assets constitute all assets used
by Seller in the conduct of the business of the Division (other than the
Excluded Assets). All facilities, machinery, equipment, fixtures,
vehicles and other tangible property owned, leased or used by Seller and
used in the operation of the Division are in good operating condition
and repair, normal wear and tear excepted, are reasonably fit and usable
for the purposes for which they are being used. Seller maintains
policies of insurance issued by insurers of recognized responsibility
insuring Seller and its assets and business against such losses and
risks, and in such amounts, as are customary in the case of corporations
of established reputation engaged in the same or similar businesses and
similarly situated.
(e) Real Property Leases. Schedule 4.1(e) sets forth a list of
all Leases of Leased Real Property (the "Real Property Leases").
(f) Leases. Each of the Leases is valid, binding and
enforceable in accordance with its terms and is in full force and
effect, and, except as disclosed on Schedule 4.1(f), to the Knowledge of
Seller, there are no offsets or defenses by either lessor or lessee
thereunder. Except as set forth on Schedule 4.1(f), there are no
existing defaults, and no events or circumstances have occurred which,
with or without notice or lapse of time or both, would constitute
defaults, under any of the Leases. Except as disclosed in
Schedule 4.1(f), no assignment of any Lease by Seller to Buyer will (i)
permit the lessor to accelerate the rent or cause the lease terms to be
renegotiated, (ii) constitute a default thereunder or (iii) require the
consent of the lessor or any third party.
(g) Condition Of Facilities. Use of the Leased Real Property
for the various purposes for which it is presently being used is
permitted as of right under all applicable Laws; (ii) all Improvements
are in material compliance with all applicable Laws; (iii) all
buildings, fixtures and improvements located on the Leased Real
Property, including those under construction ("Improvements") are in
good repair and in good condition, ordinary wear and tear excepted, and
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to the Knowledge of Seller are free from latent and patent defects; (iv)
no part of any Improvement encroaches on any real property not included
in the Leased Real Property and there are no Improvements primarily
situated on adjoining property which encroach on any part of the Leased
Real Property; and (v) to the Knowledge of Seller there is no existing
or proposed plan to modify or realign any street or highway or any
existing or proposed eminent domain proceeding that would result in the
taking of all or any part of any Leased Real Property or that would
prevent or hinder the continued use of any Leased Real Property as
heretofore used in the conduct of the business of the Division.
(h) Accounts Receivable. All Accounts Receivable that are
reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of Seller as of the Closing Date represent or will
represent valid obligations arising from sales actually made or services
actually performed by the Division in the Ordinary Course of Business.
Except to the extent paid prior to the Closing Date, such Accounts
Receivable are or will be as of the Closing Date current and collectible
net of the respective reserves shown on the Balance Sheet or the Interim
Balance Sheet (which reserves are adequate and calculated consistent
with past practice). There is no contest, claim, defense or right of
set-off under any Contract with any account debtor of an Account
Receivable relating to the amount or validity of such Account
Receivable. Schedule 4.1(h) contains a complete and accurate list of
all Accounts Receivable as of the date of the Interim Balance Sheet,
which list sets forth the aging of each such Accounts Receivable.
(i) Inventories. All items included in the Inventories consist
of a quality and quantity usable and saleable in the Ordinary Course of
Business of the Division except for obsolete items and items of below-
standard quality, all of which have been written off or written down to
net realizable value in the Balance Sheet or the Interim Balance Sheet
or on the accounting records of Seller as of the Closing Date, as the
case may be. Except as disclosed on Schedule 4.1(i), with respect to
the Division, Seller is not in possession of any inventory not owned by
Seller, including goods already sold. All of the Inventories have been
priced at the lower of cost or market on a first in, first out basis.
Inventories now on hand that were purchased subsequent to the date of
the Balance Sheet or the Interim Balance Sheet were purchased in the
Ordinary Course of Business of the Division. The quantities of each
item of Inventories (whether raw materials, work-in-process, or finished
goods) are not excessive, but are reasonable in the present
circumstances of the Division. Work-in-process Inventories are now and
will be valued on the Closing Date according to GAAP.
(j) Authorization; No Breach.
(i) This Agreement constitutes the legal, valid, and
binding obligation of Seller, enforceable against
Seller in accordance with its terms. Upon the
execution and delivery by Seller of each other
Transaction Document to which it is a party, such
other Transaction Documents will constitute the legal,
valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms. Except
as set forth in Schedule 4.1(j), Seller has the
absolute and unrestricted right, power and authority
to execute and deliver this Agreement and the other
Transaction Documents to which it is a party and to
perform its obligations under this Agreement and such
other Transaction Documents, and such action has been
duly authorized by all necessary action by Seller"s
board of directors.
(ii) Except as set forth in Schedule 4.1(j), neither the
execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated
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Transactions will, directly or indirectly (with or
without notice or lapse of time):
(A) Breach (1) any provision of any of the Charter
Documents of Seller, or (2) any resolution adopted by the
board of directors of Seller;
(B) Breach or give any Governmental Authority or
other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief
under any Law to which Seller, or any of the Assets, may be
subject;
(C) contravene, conflict with, or result in a
violation or breach of any of the terms or requirements of,
or give any Governmental Authority the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by Seller relating
to the Division or that otherwise relates to the Assets or
to the business of the Division;
(D) Breach any provision of, or give any Person the
right to declare a default or exercise any remedy under, or
to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Division Contract; or
(E) result in the imposition or creation of any
Encumbrance upon or with respect to any of the Assets.
Except as set forth in Schedule 4.1(j), Seller is not required to give
any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
(k) Governmental Approvals. No registration with or consent or
approval of, or other action by, any Governmental Authority is or will
be required in connection with the consummation of the Contemplated
Transactions by the Seller.
(l) Litigation. Except as listed in Schedule 4.1(l), no
litigation, arbitration, investigation or other proceeding of or before
any court, arbitrator or governmental or regulatory official, body or
authority is pending or, to the Knowledge of Seller, threatened against
the Division or the Contemplated Transactions, and Seller does not Know
of any basis for any such litigation, arbitration, investigation or
proceeding. Other than as listed in Schedule 4.1(l), Seller is not a
party to or subject to the provisions of any judgment, order, writ,
injunction, decree or award of any Governmental Authority with respect
to the Division.
(m) Compliance with Laws.
(i) Except as set forth in Schedule 4.1(m)(i):
(A) Seller is in compliance in all material respects
with each Law to which the business, operations, assets or
properties of the Division are subject, including without
limitation, the Occupational Safety and Health Act, and has
obtained and adhered in all material respects to the
requirements of any Governmental Authorization necessary to
the ownership of its assets and properties or to the conduct
of the Division, except where the failure to obtain such
Governmental Authorization would not have a Material Adverse
Effect;
(B) To the Knowledge of Seller, no event has
occurred or circumstance exists that (with or without notice
or lapse of time) may constitute or result in a material
violation by the Division of, or a failure on the part of
the Division to comply with, any Law; and
(C) Seller has not received any written or, to the
Knowledge of Seller, oral notice or other communication from
any Governmental Authority or any other Person regarding any
actual, alleged, possible, or potential violation of, or
failure to comply with, any Law by the Division.
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(ii) Schedule 4.1(m)(ii) contains a complete and accurate
list of each Governmental Authorization that is held
by Seller with respect to the operation of the
Division or that otherwise relates to the Division"s
business or the Assets. Each such Governmental
Authorization listed in Schedule 4.1(m)(ii) is valid
and in full force and effect. Except as set forth in
Schedule 4.1(m)(ii):
(A) Seller has been in compliance in all material
respects with all of the terms and requirements of each
Governmental Authorization identified in Schedule
4.1(m)(ii).
(B) To the Knowledge of Seller, no event has
occurred or circumstance exists that may (with or without
notice or lapse of time) (1) constitute or result directly
or indirectly in a material violation of or a material
failure to comply with any term or requirement of any
Governmental Authorization listed in Schedule 4.1(m)(ii), or
(2) result directly or indirectly in the revocation,
withdrawal. suspension, cancellation, or termination of, or
any modification to, any Governmental Authorization listed
in Schedule 4.1(m)(ii).
(C) Seller has not received any written or, to the
Knowledge of Seller, oral notice or other communication from
any Governmental Authority or any other Person regarding (1)
any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any such
Governmental Authorization, or (2) any actual, proposed,
possible or potential revocation, withdrawal, suspension,
cancellation, termination of or modification to any such
Governmental Authorization.
(D) All applications required to have been filed on
or before the date hereof for the renewal of the
Governmental Authorizations listed in Schedule 4.1(m)(ii)
have been duly filed on a timely basis with the appropriate
Governmental Authorities, and all other filings required to
have been made on or before the date hereof with respect to
such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Authorities.
The Governmental Authorizations listed in Schedule 4.1(m)(ii)
collectively constitute all of the Governmental Authorizations necessary
to permit Seller to lawfully conduct and operate the business of the
Division in the manner it currently conducts and operates such business
and to permit Seller to own and use the Assets of the Division in the
manner in which it currently owns and uses such Assets.
(n) Absence of Certain Changes and Events. Except as set forth
in Schedule 4.1(n), since the date of the Balance Sheet, Seller has
conducted the business of the Division only in the Ordinary Course of
Business and there has not been any:
(i) payment or increases (except in the Ordinary Course of
Business) by Seller of any bonuses, salaries, or other
compensation to any officer or employee of the
Division or entry into any employment, severance, or
similar Contract with any officer or employee of the
Division;
(ii) material damage to or destruction or loss of any
Asset, whether or not covered by insurance;
(iii) sale (other than sales of Inventories in the Ordinary
Course of Business), lease, or other disposition of
any asset or property of the Division including the
sale, lease, or other disposition of any of the
Intellectual Property Assets or the creation of any
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Encumbrance on any Asset;
(iv) material change in the accounting methods used by
Seller; or
(v) agreement, whether oral or written, by Seller to do
any of the foregoing.
(o) Contracts; No Defaults
(i) Schedule 4.1(o)(i) contains an accurate and complete
list, and Seller has delivered to Buyer accurate and
complete copies, of:
(A) each Division Contract that involves performance
of services or delivery of goods or materials by Seller of
an amount or value in excess of $100,000;
(B) each Division Contract that involves performance
of services or delivery of goods or materials to Seller of
an amount or value in excess of $10,000, other than
Inventories in the Ordinary Course of Business;
(C) each Division Contract that was not entered into
in the Ordinary Course of Business and that involves
expenditures or receipts of Seller in excess of $10,000;
(D) each Division Contract affecting the ownership
of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property (except personal
property leases and installment and conditional sales
agreements having a value per item or aggregate payments of
less than $10,000 and with terms of less than one (1) year);
(E) each Division Contract with respect to
Intellectual Property Assets, including agreements with
current or former employees, consultants, or contractors
regarding the appropriation or the non-disclosure of any of
the Intellectual Property Assets;
(F) each Division Contract with any labor union or
other employee representative of a group of employees
relating to wages, hours, and other conditions of
employment;
(G) each Division Contract (however named) involving
a sharing of profits, losses, costs or liabilities by Seller
with any other Person;
(H) each Division Contract containing covenants that
in any way purport to restrict the Division"s business
activity or limit the freedom of the Division to engage in
any line of business or to compete with any Person;
(I) each Division Contract providing for payments to
or by any Person based on sales, purchases, or profits,
other than direct payments for goods;
(J) each power of attorney of Seller applicable to
the Division that is currently effective and outstanding;
(K) each Division Contract entered into other than
in the Ordinary Course of Business that contains or provides
for an express undertaking by Seller to be responsible for
consequential damages;
(L) each Division Contract for capital expenditures
in excess of $10,000;
(M) each Division Contract not denominated in U.S.
dollars;
(N) each written warranty, guaranty and/or other
similar undertaking with respect to contractual performance
extended by the Division other than in the Ordinary Course
of Business; and
(O) each amendment, supplement and modification
(whether oral or written) in respect of any of the
foregoing.
(ii) Except as set forth in Schedule 4.1(o)(ii):
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(A) each Division Contract identified in
Schedule 4.1(o)(i) and which is to be assigned to or assumed
by Buyer under this Agreement is in full force and effect
and is valid and enforceable in accordance with its terms;
and
(B) each Division Contract identified in Schedule
4.1(o)(i) and which is being assigned to or assumed by Buyer
is assignable by Seller to Buyer without the Consent of any
other Person.
(iii) Except as set forth in Schedule 4.1(o)(iii):
(A) Seller is not presently in Breach of any
Division Contract which is being assumed by Buyer;
(B) To the Knowledge of Seller, each other Person
that has any obligation under any Division Contract which is
being assigned to Buyer is not presently in Breach of such
Contract;
(C) To the Knowledge of Seller, no event has
occurred or circumstance exists that (with or without notice
or lapse of time) contravenes, conflicts with, or has
resulted in a Breach of, or give Seller or other Person the
right to declare a default or exercise any remedy under, or
to accelerate the maturity or performance of, or to cancel,
terminate or modify any Division Contract which is being
assigned to or assumed by Buyer;
(D) To the Knowledge of Seller, no event has
occurred or circumstance exists under or by virtue of any
Division Contract that (with or without notice or lapse of
time) would cause the creation of any Encumbrance affecting
any of the Assets; and
(E) Seller has not given to or to the Knowledge of
Seller, received from any other Person any notice or other
communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or Breach
of, or default under, any Division Contract which is being
assigned to or assumed by Buyer.
(iv) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any
material amounts paid or payable to Seller under
current or completed Division Contracts with any
Person having the contractual or statutory right to
demand or require such renegotiation and no such
Person has made written demand for such renegotiation,
other than negotiations in the Ordinary Course of
Business.
(p) Environmental Protection. Except as otherwise disclosed in
Schedule 4.1(p):
(i) With respect to the Assets, and Seller"s operation of
the Division, neither Seller nor, to the Knowledge of Seller, any
prior owner or operators at the Leased Real Property, is now
subject to any Environmental Liabilities or has incurred any
Environmental Liabilities in the past which have not been
resolved.
(ii) With respect to the Assets, and Seller"s operations,
Seller has obtained, possesses, and is in material compliance with
all permits required under any applicable Environmental Laws.
(iii) The Assets are in material compliance with all
applicable Environmental Laws.
(iv) There are no USTs located in, at, on, or under any
applicable Assets.
(v) There are no locations at which Pollutants have been
Released by Seller into the Environment or on Leased Real
Property, or, to the Knowledge of Seller, otherwise have come to
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be located, in, at, on, under, a part of, or otherwise related to
the Leased Real Property.
(q) Taxes. Seller has filed or caused to be filed all material
Federal, state and local tax returns which are required to be filed by
it, and has paid or caused to be paid all material Taxes shown to be due
and payable on such returns or on any assessments received by it,
including payroll Taxes. There are no Encumbrances on any of the Assets
that arose in connection with any failure (or alleged failure) to pay
any Tax, and Seller has no Knowledge of any basis for assertion of any
claims attributable to Taxes which, if adversely determined, would
result in any such Encumbrances.
(r) Labor Matters. Set forth on Schedule 4.1(r) is a complete
list of all current employees of the Division, including date of
employment, current title and compensation, and date and amount of last
increase in compensation. Seller has no severance package or other
similar obligation outstanding with respect to any employee of the
Division. Seller has no collective bargaining, union or labor
agreements, contracts or other arrangements with any group of employees,
labor union or employee representative with respect to the Division.
Seller does not Know of any organization effort currently being made or
threatened by or on behalf of any labor union with respect to employees
of the Division. Seller has not experienced, and Seller does not Know
of any basis for, any strike, material labor trouble, work stoppage,
slow down or other interference with or impairment of the Division. All
accrued and unpaid vacation of each employee of the Division is
reflected and accounted for on the Interim Balance Sheet. Following the
Closing and except for Assumed Liabilities, Buyer will have no
Liabilities whatsoever under or resulting from the employment by Buyer
of any employee of Seller and relating to such employee"s services to or
employment by Seller prior to the Closing.
(s) Intellectual Property Assets; Licenses.
(i) Schedule 4.1(s) accurately lists all of the material
intellectual property owned by Seller and used in
connection with the Division (other than the Excluded
Assets) (the "Intellectual Property Assets").
Schedule 4.1(s) indicates which Intellectual Property
Assets which have been registered with, filed in or
issued by, as the case may be, the United States
Patent and Trademark Office or such other Governmental
Authorities. Unless otherwise indicated in Schedule
4.1(s), Seller owns the entire right, title and
interest in and to the Intellectual Property Assets
(including, without limitation, the exclusive right to
use and license the same) listed in Schedule 4.1(s).
To the Knowledge of Seller, except as indicated in
Schedule 4.1(s), no Person is infringing upon any of
the Intellectual Property Assets listed in Schedule
4.1(s).
(ii) Set forth in Schedule 4.1(s) is a list of all
Intellectual Property Assets owned by third parties
which is licensed to Seller. Except as set forth in
Schedule 4.1(s), there is no pending or, to the
Knowledge of Seller, threatened claim against Seller
or to the Knowledge of Seller, the licensors of such
licensed Intellectual Property Assets asserting that
any of such licensed Intellectual Property Assets or
use thereof, infringes or violates the rights of third
parties.
(iii) The Intellectual Property Assets listed in Schedule
4.1(s) constitutes all of the material Intellectual
Property Assets necessary to conduct the business and
operations of the Division as presently conducted.
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(t) Solvency. After giving effect to the Contemplated
Transactions, (i) the fair value of the assets of Seller, at a fair
valuation, will exceed its debts and liabilities, subordinated,
contingent or otherwise, (ii) the present fair saleable value of the
property of Seller will be greater than the amount that will be required
to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured, (iii) Seller will be able to
pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured, and (iv) Seller
will not have unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted following the Closing Date.
(u) Broker"s or Finder"s Fees. Except Harris Williams & Co.,
which is the sole obligation of Seller, neither Seller nor any of its
officers, directors, employees or agents have incurred any obligation or
liability, contingent or otherwise, for brokerage or finders" fees or
agents" commissions or other similar payment in connection with the sale
of the Division or the Assets or the Contemplated Transactions.
4.2 Representations and Warranties of the Buyer.
Buyer represents and warrants to Seller as follows:
(a) Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware, with full corporate power and authority to conduct
its business as it is now being conducted.
(b) Authority; No Conflict.
(i) This Agreement constitutes the legal, valid, and
binding obligation of Buyer, enforceable against Buyer
in accordance with its terms. Upon the execution and
delivery by Buyer of each other Transaction Document
to be executed or delivered by Buyer at Closing, each
such other Transaction Document will constitute the
legal, valid, and binding obligation of Buyer,
enforceable against Buyer in accordance with its
respective terms. Buyer has the absolute and
unrestricted right, power, and authority to execute
and deliver this Agreement and each other Transaction
Document and to perform its obligations under this
Agreement and such other Transaction Documents, and
such action has been duly authorized by all necessary
corporate action.
(ii) Neither the execution and delivery of this Agreement
by Buyer nor the consummation or performance of any of
the Contemplated Transactions by Buyer will give any
Person the right to prevent, delay, or otherwise
interfere with any of the Contemplated Transactions
pursuant to:
(A) any provision of Buyer"s Charter Documents;
(B) any resolution adopted by the board of directors
or the shareholders of Buyer;
(C) any Law to which Buyer may be subject; or
(D) any Contract to which Buyer is a party or by
which Buyer may be bound.
(c) Certain Proceedings. There is no pending action before any
Governmental Authority that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated
Transactions. To the best of Buyer"s knowledge, no such action before
any Governmental Authority has been threatened.
(d) Consents. Buyer is not and will not be required to obtain
any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of
the Contemplated Transactions.
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ARTICLE 5
COVENANTS AND AGREEMENTS
5.1 Conduct of Business.
Prior to the Closing, Seller will (a) operate the Division in the
Ordinary Course of Business and consistent with past practices and use its
Best Efforts to preserve the goodwill of the Division and of the Division"s
employees, customers, suppliers, Governmental Authorities and others having
business dealings with the Division; (b) except as contemplated by this
Agreement, not permit the Division to engage in any transaction outside the
Ordinary Course of Business; (c) not increase the compensation of any officer
or key employee of the Division except in the Ordinary Course of Business; (d)
maintain all insurance policies and all Governmental Authorizations that are
required for the Division to carry on its business; (e) maintain books of
account and records of the Division in the usual, regular and ordinary manner
and consistent with past practices; and (f) not take any action that would
result in a breach (as of the Closing) of the representations and warranties
set forth in Section 4.1.
5.2 No-Shop Provisions.
Until the earlier of the Closing or September 30, 2002, (a) Seller
will negotiate exclusively and in good faith with Buyer with respect to the
sale of the Division; (b) Seller will not, directly or indirectly (through
agents or otherwise), encourage or solicit any inquiries or accept any
proposals by, or engage in any discussions or negotiations with or furnish any
information to, any other Person concerning a sale of a substantial portion of
the assets or business of the Division (whether through an asset sale, stock
sale, merger or otherwise); and (c) Seller will promptly communicate to Buyer
the material substance of any inquiry or proposal concerning any such
transaction that may be received by Seller.
5.3 Access and Information.
Seller will permit Buyer and its representatives to have reasonable
access to Seller"s officers, employees, agents, assets and properties and all
relevant books, records and documents of or relating to the business and
assets of the Division during normal business hours and upon reasonable prior
notice, and will furnish to Buyer such information, financial records and
other documents relating to the Division and its operations and business as
Buyer may reasonably request. Seller will permit Buyer and its
representatives reasonable access to Seller"s accountants and auditors for
consultation or verification of any information obtained by Buyer and will use
its Best Efforts to cause such Persons to cooperate with Buyer and its
representatives in such consultation and in verifying such information.
5.4 Supplemental Disclosure.
Seller will at least three (3) Business Days prior to the Closing Date
supplement or amend each of the Schedules hereto with respect to any matter
that arises or is discovered after the date hereof that, if existing or known
at the date hereof, would have been required to be set forth or listed in the
Schedules hereto; provided, that for purposes of determining the rights and
obligations of the parties hereunder (other than the obligations of Seller
under this Section 5.4), any such supplemental or amended disclosure will not
be deemed to have been disclosed to Buyer unless Buyer otherwise expressly
consents in writing.
5.5 Interim Financial Statements.
Until the Closing Date, Seller shall deliver to Buyer within 15 days
after the end of each month a copy of the balance sheet, related statement of
income and cash flows for the Division for such month prepared in a manner and
containing information consistent with Seller"s current practices
5.6 Information for Filings.
Seller will furnish Buyer with all information concerning the Division
as is required for inclusion in any application or filing made by Buyer to any
Governmental Authority in connection with the transactions contemplated by
this Agreement.
5.7 Fulfillment of Conditions by Seller.
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Seller agrees not to take any action that would cause the conditions
on the obligations of the parties to effect the transactions contemplated
hereby not to be fulfilled, including, without limitation, by taking or
causing to be taken any action that would cause the representations and
warranties made by Seller herein not to be true and correct in all material
respects as of the Closing. Seller will take all reasonable steps within its
power to cause to be fulfilled the conditions precedent to Buyer"s obligations
to consummate the transactions contemplated hereby that are dependent on the
actions of Seller.
5.8 Fulfillment of Conditions by Buyer.
Buyer agrees not to take any action that would cause the conditions on
the obligations of the parties to effect the transactions contemplated hereby
not to be fulfilled, including, without limitation, by taking or causing to be
taken any action that would cause the representations and warranties made by
Buyer herein not to be true and correct in all material respects as of the
Closing. Buyer will take all reasonable steps within its power to cause to be
fulfilled the conditions precedent to the obligations of Seller to consummate
the transactions contemplated hereby that are dependent on the actions of
Buyer.
5.9 Assistance After Closing.
For a period of 90 days following the Closing, Seller will provide all
assistance reasonably requested by Buyer to assist in the transition of the
Division"s business to Buyer; provided, that Buyer shall reimburse Seller for
any out-of-pocket expenses incurred by Seller in providing such assistance.
5.10 Publicity.
Buyer and Seller will cooperate with each other in the development and
distribution of all news releases and other public disclosures relating to the
transactions contemplated by this Agreement. Neither Buyer, on the one hand,
nor Seller, on the other hand, will issue or make, or allow to have issued or
made, any press release or public announcement concerning the transactions
contemplated by this Agreement without the advance approval in writing of the
form and substance thereof by the other parties, unless otherwise required by
applicable legal or stock exchange requirements.
5.11 Transaction Costs.
The Seller will pay all attorneys", accountants" and other fees, costs
and expenses incurred by Seller in connection with the preparation,
negotiation, execution and performance of this Agreement or any of the
Contemplated Transactions, including without limitation any sales, use,
transfer, excise or other Taxes arising out of the sale of the Assets. Buyer
will pay all attorneys", accountants" and other fees, costs and expenses that
it incurs in connection with the preparation, negotiation, execution and
performance of this Agreement or any of the transactions contemplated by this
Agreement.
5.12 Nondisclosure.
Seller acknowledges and agrees that all customer, prospect and
marketing lists, sales data, intellectual property, proprietary information
and trade secrets of the Division constituting part of the Assets
(collectively, "Confidential Information") are valuable, special and unique
assets and, following the Closing, will be owned exclusively by Buyer. Seller
agrees to treat the Confidential Information as confidential and not to
disclose any Confidential Information to any Person or make use of any
Confidential Information for its own purposes or for the benefit of any other
Person (other than Buyer).
5.13 Noncompetition.
(a) For a period of five (5) years following the Closing, Seller
will not directly or indirectly, on its own behalf or as an officer,
director, employee, consultant or other agent of any Person (other than
Buyer): (i) engage in the sale, manufacture or distribution of
engineered material handling systems, rack shelving and/or related
computer-aided picking software and/or hardware (the "Business") in the
United States, Canada, or Mexico (the "Territory"); (ii) influence or
attempt to influence any customer or potential customer of Buyer in the
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Territory to acquire any services offered by Buyer with respect to the
Business of the Division; (iii) affiliate itself with, or own any
economic interest of any kind in, any business or Person engaged in the
Business in the Territory; (iv) influence or attempt to influence any
employee of the Division who becomes an employee of Buyer to terminate
their employment with Buyer; or (v) finance or advise any Person
involved in the Business within the Territory.
(b) Seller acknowledges and agrees that its obligations under
this Section 5.13 are a material inducement and condition to Buyer"s
entering into this Agreement and performing its obligations hereunder
and that the restrictions and remedies contained in this Section 5.13
are reasonable as to time, geographic area and scope of activity and do
not impose a greater restraint than is necessary to protect the goodwill
and other legitimate business interests of Buyer.
(c) If the provisions of this Section 5.13 are found by a court
of competent jurisdiction to contain unreasonable or unnecessary
limitations as to time, geographic area or scope of activity, then such
court is hereby directed to reform such provisions to the minimum extent
necessary to cause the limitations contained therein as to time,
geographical area and scope of activity to be reasonable and
enforceable.
(d) Seller acknowledges and agrees that Buyer would be
irreparably harmed by any violation of its obligations under this
Section 5.13 and that, in addition to all other rights or remedies
available at law or in equity, Buyer will be entitled to seek injunctive
and other equitable relief to prevent or enjoin any such violation. If
any Person violates Section 5.13, the period of time during which the
provisions thereof are applicable will automatically be extended for a
period of time equal to the time that such Person began such violation
until such violation permanently ceases.
5.14 Employees. Effective as of the Closing Date, Buyer shall hire, or
offer immediate employment to, all employees of the Division, which employment
initially shall be on comparable terms (including salary and benefits) as such
employees are employed by Seller immediately prior to Closing.
Notwithstanding the foregoing, this Agreement shall not be deemed to restrict
the right of Buyer to deal with the employees who are hired by Buyer as
employees-at-will, in the same manner as it would be free to deal with such
employees in the absence of this Agreement.
ARTICLE 6
INDEMNIFICATION
6.1 Survival.
All representations, warranties, covenants and obligations in this
Agreement, the certificates delivered pursuant to Section 2.6 and any other
certificate or document delivered pursuant to this Agreement shall survive the
Closing and the consummation of the Contemplated Transactions for a period of
two (2) years; provided, however, that (a) the representations and warranties
set forth in Sections 4.1(a) and (c) shall survive indefinitely and (b) the
representations and warranties set forth in Section 4.1(p) and (q), and the
indemnification set forth in Section 6.3, shall survive for the lesser of ten
(10) years or the relevant statutory period permitted by applicable law.
Except as set forth in Section 6.9, the waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, reimbursement or other remedy based on such representations,
warranties, covenants and obligations.
6.2 Indemnification and Reimbursement by Seller.
Seller will indemnify and hold harmless Buyer, and its subsidiaries
and Affiliates (collectively, the "Indemnified Persons"), and will reimburse
the Indemnified Persons, for any loss, liability, claim, damage, expense
(including costs of investigation and, subject to Section 6.6, defense and
reasonable attorneys" fees and expenses) or diminution of value, whether or
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not involving a third-party claim (collectively, "Damages"), arising from or
in connection with:
(a) any Breach of any representation or warranty made by Seller
in this Agreement, the certificates delivered pursuant to Section 2.6 as
of the Closing Date as if made on the Closing Date, any transfer
instrument or any other certificate or document delivered by Seller
pursuant to this Agreement;
(b) any Breach of any covenant or obligation of Seller in this
Agreement or in any other Transaction Document delivered by Seller
pursuant to this Agreement;
(c) any claim by any Person for brokerage or finder"s fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Seller
(or any Person acting on its behalf) in connection with any of the
Contemplated Transactions;
(d) any product or component thereof manufactured by or shipped,
or any services provided by, the Division, in whole or in part (with
respect to such part only), prior to the Closing Date;
(e) any Liabilities that are not Assumed Liabilities;
(f) any noncompliance with any bulk sales or fraudulent transfer
law in respect of the Contemplated Transactions, including without
limitation, Section 11-2-102, et. seq., of the Official Code of Georgia
in effect as of the date hereof or any successor statues thereof; and
(g) any Benefit Plan Liabilities (except to the extent any such
Benefit Plan Liabilities are reflected on the Interim Balance Sheet).
Notwithstanding anything to the contrary contained in this Agreement, no
indemnification by Seller shall be required hereunder unless and until the
aggregate of all Damages hereunder, or under Section 6.3, exceeds $100,000.
If the aggregate of all Damages hereunder exceeds $100,000, then Seller will
provide indemnification against Damages only with respect to amounts in excess
of $100,000. For purposes of this paragraph, Damages shall be deemed to have
accrued even in the event that Seller is not liable to pay such Damages as the
result of any relevant standard of materiality. In addition, no claim for
indemnification shall be made, and Seller shall not have any obligation, with
respect to any individual claim which is less than $1,000. In no event will
the aggregate liability of Seller for the breach of one or more
representations, warranties or covenants contained in this Agreement,
including liability for such breach or breaches indemnified against pursuant
to any of the foregoing indemnification provisions, exceed an amount equal to
$20,000,000.
6.3 Indemnification and Reimbursement by Seller " Environmental
Matters.
In addition to the indemnification under Section 6.2, Seller will
indemnify and hold harmless Buyer and the other Indemnified Persons, and will
reimburse Buyer and the other Indemnified Persons, for any Damages (including
costs of cleanup, containment, or other remediation) arising from or in
connection with any Environmental Liabilities arising out of or relating to
the operation by Seller at any time on or prior to the Closing Date of any of
the Leased Real Property, Assets or the business of the Division. Buyer will
be entitled to control any Removal, Remedial and Response actions or any
Proceeding relating to an Environmental Liability, in consultation with the
Seller, and, except as provided in the following sentence, any other
Proceeding with respect to which indemnity may be sought under this Section
6.3; provided, however, that (i) Buyer may in its sole discretion delegate or
assign such responsibilities to Seller, and (ii) any investigation, response
activities or remediation conducted by Buyer shall be limited to such
investigation, response activities or remediation which, Buyer decides in its
sole discretion, is required under applicable Environmental Laws (including
but not limited to the use of deed restrictions, risk based standards, natural
attenuation and engineered or institutional controls). The procedure
described in Section 6.6 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 6.3.
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Notwithstanding anything to the contrary contained in this Agreement, no
indemnification by Seller shall be required under this Section 6.3 unless and
until the aggregate of all Damages hereunder, or under Section 6.2, exceeds
$100,000. For purposes of this paragraph, Damages shall be deemed to have
accrued even in the event that Seller is not liable to pay such Damages as the
result of any relevant standard of materiality. If the aggregate of all
Damages hereunder exceeds $100,000, then Seller will provide indemnification
against Damages only with respect to amounts in excess of $100,000. In
addition, no claim for indemnification shall be made, and Seller shall not
have any obligation, with respect to any individual claim which is less than
$1,000. In no event will the aggregate liability of Seller for the breach of
one or more representations, warranties or covenants contained in this
Agreement, including liability for such breach or breaches indemnified against
pursuant to any of the foregoing indemnification provisions, exceed the
Purchase Price, as adjusted.
6.4 Indemnification and Reimbursement by Buyer.
Buyer will indemnify and hold harmless Seller, and will reimburse
Seller, for any Damages arising from or in connection with:
(a) any Breach of any representation or warranty made by Buyer
in this Agreement or in any other Transaction Document delivered by
Buyer pursuant to this Agreement;
(b) any Breach of any covenant or obligation of Buyer in this
Agreement or in any other Transaction Document delivered by Buyer
pursuant to this Agreement;
(c) any claim by any Person for brokerage or finder"s fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with Buyer (or
any Person acting on Buyer"s behalf) connection with any of the
Contemplated Transactions; or
(d) any Assumed Liabilities.
Notwithstanding anything to the contrary contained in this Agreement, no
indemnification by Buyer shall be required hereunder unless and until the
aggregate of all Damages hereunder exceeds $100,000. If the aggregate of all
Damages hereunder exceeds $100,000, then Buyer will provide indemnification
against Damages only with respect to amounts in excess of $100,000. For
purposes of this paragraph, Damages shall be deemed to have accrued even in
the event that Buyer is not liable to pay such Damages as the result of the
application of any relevant standard of materiality. In addition, no claim
for indemnification shall be made, and Buyer shall not have any obligation,
with respect to any individual claim which is less than $1,000. In no event
will the aggregate liability of Buyer for the breach of one or more
representations, warranties or covenants contained in this Agreement,
including liability for such breach or breaches indemnified against pursuant
to any of the foregoing indemnification provisions, exceed an amount equal to
$20,000,000.
6.5 Right of Set Off.
Upon notice to Seller specifying in reasonable detail the basis for
such claim, Buyer may set off any amount to which it may be entitled under
this Agreement against amounts otherwise payable under the Contingent Note;
provided that Buyer shall have no right to set-off with respect to any of the
Due Diligence Matters.
6.6 Procedure for Indemnification " Third Party Claims.
(a) Promptly after receipt by an Indemnified Person under
Section 6.2, 6.3 (to the extent provided in the last sentence of
Section 6.3) or 6.4 of notice of the commencement of any Proceeding
against it, such Indemnified Person will, if a claim is to be made
against an Indemnified Person under such Section, give notice to the
indemnifying party of the commencement of such Proceeding, but the
failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying
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party"s failure to give such notice.
(b) If any Proceeding referred to in Section 6.6(a) is brought
against an Indemnified Person and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party
will be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to
such Proceeding and the Indemnified Person determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the Indemnified Person of
its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel satisfactory to the indemnified party
and, after notice from the indemnifying party to the Indemnified Person
of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such
defense, be liable to the Indemnified Person under this Article 6 for
any fees of other counsel or any other expenses with respect to the
defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding,
other than reasonable costs of investigation. If the indemnifying party
assumes the defense of a Proceeding, no compromise or settlement of such
claims may be effected by the indemnifying party without the Indemnified
Person"s Consent unless (i) there is no finding or admission of any
violation of Law or any violation of the rights of any Person and no
effect on any other claims that may be made against the Indemnified
Person, and (ii) the sole relief provided is monetary damages that are
paid in full by the indemnifying party. If notice is given to an
indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten (10) days after the Indemnified
Person"s notice is given, give notice to the Indemnified Person of its
election to assume the defense of such Proceeding, the indemnifying
party will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the Indemnified Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its Affiliates other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnified Person may, by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination of a Proceeding so defended for the
purposes of this Agreement or any compromise or settlement effected
without its consent (which may not be unreasonably withheld). If an
Indemnified Person intends to assume the defense of a Proceeding
pursuant to this Section 6.6(c), the Indemnified Person shall notify the
indemnifying person in writing, including a detailed explanation of the
basis on which the Indemnified Person has determined that this Section
6.6(c) applies to such Proceeding.
(d) Notwithstanding the provisions of Section 6.6, Buyer and
Seller hereby consent to the non-exclusive jurisdiction of any court
within the State of Delaware for purposes of any claim that an
Indemnified Person may have under this Agreement with respect to such
Proceeding or the matters alleged therein, and agree that process may be
served on Seller or Buyer with respect to such a claim anywhere in the
world.
(e) With respect to any Proceeding subject to indemnification
under this Article 6:
(i) both the Indemnified Person and the indemnifying
party, as the case may be, shall keep the other party
fully informed of the Proceeding at all stages thereof
where such party is not represented by its own
counsel, and
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(ii) the parties agree (each at its own expense) to render
to each other such assistance as they may reasonably
require of each other and to cooperate in good faith
with each other in order to ensure the proper and
adequate defense of any Proceeding brought by any
third party.
(f) With respect to any Proceeding subject to indemnification
under this Article 6, the parties agree to cooperate in such a manner as
to preserve in full (to the extent possible) the confidentiality of all
confidential business records and the attorney-client and work-product
privileges. In connection therewith, each party agrees that: (i) it
will use its Best Efforts, in any Proceeding in which it has assumed or
participated in the defense, to avoid production of confidential
business records (consistent with applicable law and rules of
procedure), and (ii) all communications between any party hereto and
counsel responsible for or participating in the defense of any
Proceeding shall, to the extent possible, be made so as to preserve any
applicable attorney-client or work-product privilege.
6.7 Procedure for Indemnification " Other Claims.
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
6.8 [Intentionally Omitted].
6.9 No Indemnification or Set-Off For Certain Matters.
Buyer hereby acknowledges that, after execution of the letter of
intent entered into by Buyer and Seller with respect to the Contemplated
Transactions, Buyer identified certain matters relating to the Division, as
described in Schedule 6.9 (the "Due Diligence Matters"). Buyer further
acknowledges that, in response to the Due Diligence Matters, the Purchase
Price was adjusted downward. In consideration of the adjustment of the
Purchase Price, Buyer hereby agrees that it shall have no right to seek or
obtain any remedies, including indemnification under this Article 6, from
Seller for any Damages, claims or other amounts relating to or arising from
the Due Diligence Matters, nor shall Buyer have any right to set-off against
the Contingent Note for any Damages, claims or other amounts relating or
arising from the Due Diligence Matters.
ARTICLE 7
MISCELLANEOUS
7.1 Termination.
This Agreement and the transactions contemplated hereby may be
terminated and abandoned (a) at any time prior to the Closing by mutual
written consent of Buyer and Seller; or (b) by either Buyer or Seller if a
condition to performance by the terminating party hereunder has not been
satisfied or waived prior to September 20, 2002. Notwithstanding the
foregoing clause (b), (i) Buyer may not terminate this Agreement if the event
giving rise to its termination right results from Buyer"s willful failure to
perform or observe any of its covenants or agreements set forth herein or if
Buyer is, at such time, in breach of this Agreement, and (ii) Seller may not
terminate this Agreement if the event giving rise to its termination right
results from the willful failure of Seller to perform or observe any of its
covenants or agreements set forth herein or if Seller is, at such time, in
breach of this Agreement.
7.2 Notices.
All notices that are required or may be given pursuant to this
Agreement must be in writing and delivered personally, by a recognized courier
service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as
any party may provide to the other parties by notice in accordance with this
Section 7.2):
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If to Buyer:
Kingway Acquisition, Inc.
501 East Purnell
Lewisville, Texas 75067
Attention: David Rosenfield
Telecopy: 972-436-7901
With a copy to:
American Capital Strategies, Inc.
2 Bethesda Metro Center
14th Floor
Bethesda, Maryland 20814
Attention: Gordon O'Brien
Telecopy: 301-654-6714
Patton Boggs LLP
2001 Ross Avenue, Suite 3000
Dallas, Texas 75201
Attention: Charles P. Miller, Esq.
Telecopy: 214-758-1550
If to Seller:
Reunion Industries, Inc.
11 Stanwix Street
Suite 1400
Pittsburgh, PA 15222
Attention: Kimball Bradley
Telecopy: 412-281-4747
With a copy to:
Reed Smith LLP
435 Sixth Avenue
Pittsburgh, PA 15219
Attention: Arlie R. Nogay, Esq.
Telecopy: 412-288-3063
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
7.3 Attorneys" Fees and Costs.
If attorneys" fees or other costs are incurred to secure performance
of any obligations hereunder, or to establish damages for the breach thereof
or to obtain any other appropriate relief, whether by way of prosecution or
defense, the prevailing party will be entitled to recover reasonable
attorneys" fees and costs incurred in connection therewith.
7.4 Further Assurances.
Each party agrees to execute any and all documents and to perform such
other acts as may be necessary or expedient to further the purposes of this
Agreement and the transactions contemplated hereby.
7.5 Counterparts.
This Agreement may be executed in one or more counterparts for the
convenience of the parties hereto, all of which together will constitute one
and the same instrument.
7.6 Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder will be assigned or delegated by Seller or Buyer, without the prior
written consent of Buyer. This Agreement is not intended to confer any rights
or benefits to any Person (including, without limitation, any employees of
- 43 -
Seller) other than the parties hereto and American Capital Strategies, Inc.
7.7 Entire Agreement.
This Agreement and the related documents contained as Exhibits and
Schedules hereto or expressly contemplated hereby contain the entire
understanding of the parties relating to the subject matter hereof and
supersede all prior written or oral and all contemporaneous oral agreements
and understandings relating to the subject matter hereof. This Agreement
cannot be modified or amended except in writing signed by the parties hereto.
The Exhibits and Schedules to this Agreement are hereby incorporated by
reference into and made a part of this Agreement for all purposes. Unless
otherwise expressly stated in this Agreement, no right or remedy described or
provided in this Agreement is intended to be exclusive or to preclude a party
from pursuing other rights and remedies to the extent available under this
Agreement, at law or in equity.
7.8 Governing Law.
This Agreement will be governed by and construed and interpreted in
accordance with the substantive laws of the State of Delaware, without giving
effect to any conflicts of law rule or principle that might require the
application of the laws of another jurisdiction.
7.9 Environmental Disputes.
(a) If the parties do not agree concerning a particular factual
matter that is relevant to a determination of either party's rights
and/or obligations under this Agreement with respect to any matter
governed by, or otherwise relevant to a determination concerning,
environmental issues (specifically including matters covered by
Section 3.1(i)), and if it is necessary to resolve such factual dispute
in order to establish any rights and/or obligations pursuant to this
Agreement, the parties, after good faith negotiations between their
respective officials (lasting no more than 30 Business Days), shall
resolve the dispute in the following manner:
(i) Within ten (10) Business Days, the parties shall
mutually agree on one (1) person who has the technical
background and expertise necessary to resolve the
environmental matter in dispute (a "Technical Expert")
(not a current or former employee or agent of either
party); or, failing such agreement, the parties shall
each designate one such Technical Expert and, within
15 Business Days after such designation, the two (2)
Technical Experts shall designate a third Technical
Expert (not a current or former employee or agent of
either party or of their respective Technical
Experts);
(ii) Within 30 Business Days after designation of the
Technical Expert(s) in subsection (i), such Technical
Expert(s) shall independently consider all information
relevant to the determination and resolution of the
factual matter(s) that is the subject of dispute
between the parties. Each party shall have a
reasonable opportunity to provide timely input to the
Technical Expert(s);
(iii) Within 40 Business Days after the designation of the
Technical Expert(s) in subsection (i), the Technical
Expert(s) shall decide the factual matter(s) that is
the subject of dispute (with a vote of two (2) being
necessary to reach this decision if three (3)
Technical Experts have been designated).
(b) Decisions of the Technical Expert(s) under this Section 7.9
shall be exclusive, final and binding upon the parties as to the factual
matters thereby decided.
(c) This Section 7.9 shall apply only to the resolution of
disputes between the parties concerning factual matters as described in
clause (a) above.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
KINGWAY ACQUISITION, INC.,
as Buyer
By: . . . . . . . . . . . . . . .
Name:. . . . . . . . . . . . . . .
Title: . . . . . . . . . . . . . .
REUNION INDUSTRIES, INC.,
as Seller
By: . . . . . . . . . . . . . . .
Name:. . . . . . . . . . . . . . .
Title: . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
- 45 -
EXHIBIT 10.47
Reunion Industries, Inc.
11 Stanwix Street
Suite 1400
Pittsburgh, PA 15222
September 20, 2002
Kingway Acquisition, Inc.
501 East Purnell
Lewisville, TX 75067
Re: Side Letter re Certain Matters
Gentlemen:
Reference is made to that certain Asset Purchase Agreement (the
"Agreement") dated September 12, 2002 between Reunion Industries, Inc. and
Kingway Acquisition, Inc. Capitalized terms are used herein as defined in the
Agreement.
This letter will confirm our agreement that:
(i) the time period for calculation of the Actual Net Working Capital
under Section 2.8(b) of the Agreement shall be 120 days following the Closing
(rather than 90 days);
(ii) notwithstanding Section 3.1(m) of the Agreement, Buyer and Seller
shall agree upon the Tax Allocation Schedule within 60 days following the
Closing; and
(iii) the provision in Section 6.2 of the Agreement which states that "no
claim for indemnification shall be made, and Seller shall not have any
obligation, with respect to any individual claim which is less than $1,000"
shall not apply to health care coverage liabilities, it being agreed that
Seller is responsible for paying all health care reimbursements under its
self-insured plan through the Closing Date; and
(iv) the date referred to in Sections 2.5 and 7.1 of the Agreement is
changed from September 20, 2002 to September 24, 2002.
Buyer and Seller acknowledge and agree that, subject to the changes set
forth in this letter, the terms and conditions of the Agreement shall continue
in full force and effect.
Please acknowledge Buyer's agreement with the foregoing by having an
authorized representative execute this letter on the signature line provided
below.
Very truly yours,
REUNION INDUSTRIES, INC.
By:
Title:
ACCEPTED AND AGREED:
KINGWAY ACQUISITION, INC.
By:
Title:
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