STOCK PURCHASE AGREEMENT
AMONG
GOSHEN RUBBER COMPANIES, INC.,
WILLIAM P. JOHNSON,
AND THE OTHER SHAREHOLDERS IDENTIFIED IN SCHEDULE A,
-------------------
AND
WYNN'S INTERNATIONAL, INC.
OCTOBER 20, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE I
SALE OF SHARES
1.1 Transfer of the Shares by the
Shareholders..........................................1
1.2 Purchase of the Shares by
Buyer.....................................................1
1.3 Payment for the
Shares..............................................................2
1.4 Determination of the Closing Payment Amount and Deferred Purchase
Price.............2
1.5 Final Determination of Purchase
Price...............................................3
1.6 Interest on and Payment of Deferred Purchase
Price..................................3
1.7 The
Closing.........................................................................
4
1.8 Further
Assurances..................................................................4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
2.1 Capital
Stock.......................................................................5
2.2 Subsidiaries and
Investments........................................................5
2.3 Corporate Organization;
Etc.........................................................6
2.4 Authorization, Etc.; No
Violation...................................................6
2.5 Consents; No Violation of
Agreements................................................6
2.6 Books and
Records...................................................................7
2.7 Bank Accounts and Powers of
Attorney................................................7
2.8 Financial
Statements................................................................7
2.9 Title to Properties;
Encumbrances...................................................7
2.10 Real
Property.......................................................................8
2.11 Absence of Certain
Changes..........................................................8
2.12 Trade Accounts and Other
Receivables................................................9
2.13
Leases..........................................................................
....9
2.14 Property, Plant and
Equipment......................................................10
2.15 Patents, Trademarks, Trade Names,
Etc..............................................10
2.16 Contracts, Commitments and Bid
Proposals...........................................11
2.17 Customers and
Suppliers............................................................12
2.18 Labor
Difficulties.................................................................13
2.19
Personnel.......................................................................
...13
2.20 Employee Benefit
Plans.............................................................13
2.21
Litigation......................................................................
...16
2.22 Compliance with
Law................................................................17
2.23
Permits.........................................................................
...17
2.24 Dividends and Other
Distributions..................................................17
2.25
Liabilities.....................................................................
...17
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TABLE OF CONTENTS
(CONTINUED)
PAGE
2.26
Taxes...........................................................................
...17
2.27
Insurance.......................................................................
...18
2.28 Environmental Laws and
Regulations.................................................18
2.29 Absence of Certain
Payments........................................................19
2.30 Insider
Interests..................................................................19
2.31 Brokers and
Finders................................................................20
2.32
Inventory.......................................................................
...20
2.33 Year 2000
Compliance...............................................................20
2.34
Disclosure......................................................................
...20
2.35 Product Warranties and Product
Returns.............................................21
2.36 Product
Liability..................................................................21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS RELATING TO THE
SHARES
3.1
Ownership.......................................................................
...21
3.2
Title...........................................................................
...21
3.3 Right to
Transfer..................................................................21
3.4 All
Shares.........................................................................2
1
3.5 Binding
Agreement..................................................................21
3.6
Conflicts.......................................................................
...22
3.7 Brokers and
Finders................................................................22
3.8 Power of Attorney and Custody
Agreement............................................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Corporate Organization;
Etc........................................................22
4.2 Authorization;
Etc.................................................................22
4.3 No
Violation.......................................................................
23
4.4 Brokers and
Finders................................................................23
4.5 Purchase Entirely for Own
Account..................................................23
4.6 Investment
Experience..............................................................23
4.7 Accredited
Investor................................................................23
4.8 Restricted
Securities..............................................................23
4.9 Insurance
Requirements.............................................................23
ARTICLE V
COVENANTS WITH RESPECT TO CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO
CLOSING
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TABLE OF CONTENTS
(CONTINUED)
PAGE
5.1
Access..........................................................................
...24
5.2 Material Adverse Changes; Interim Financial
Statements.............................24
5.3 Conduct of
Business................................................................25
5.4 Notification of Certain
Matters....................................................26
5.5 Permits and
Approvals..............................................................26
5.6 Preservation of Business Prior to the Closing
Date.................................27
5.7 Certain
Filings....................................................................27
ARTICLE VI
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
6.1 Indemnification of
Buyer...........................................................27
6.2 Article III
Indemnification........................................................28
6.3 Appointment of
Representative......................................................28
6.4 Offset Against Deferred Purchase
Price.............................................29
6.5 Indemnification of
Shareholders....................................................29
6.6 Procedure for Third-Party
Claims...................................................29
6.7
Survival........................................................................
...31
6.8 Notice by the
Shareholders.........................................................32
6.9 Not Exclusive
Remedy...............................................................32
6.10 Indemnification
Limitations........................................................32
6.11 Payment of Indemnity
Claims........................................................33
6.12
Arbitration.....................................................................
...34
ARTICLE VII
NONDISCLOSURE OF PROPRIETARY DATA
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 General Conditions; No Orders; Legal
Proceedings...................................35
8.2 Conditions to Obligations of
Buyer.................................................35
8.3 Conditions to Obligations of the
Company...........................................37
ARTICLE IX
TERMINATION OF OBLIGATIONS; SURVIVAL
9.1 Termination of
Agreement...........................................................37
9.2 Effect of
Termination..............................................................38
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and
Modifications........................................................38
10.2 Waiver of
Compliance...............................................................38
10.3
Expenses........................................................................
...38
10.4 Transfer
Taxes.....................................................................38
10.5 Good Faith Efforts; Further
Assurances.............................................38
10.6 Remedies;
Waiver...................................................................39
10.7
Notices.........................................................................
...39
10.8
Assignment......................................................................
...40
10.9
Publicity.......................................................................
...40
10.10 Governing
Law......................................................................40
10.11
Counterparts....................................................................
...40
10.12
Headings........................................................................
...40
10.13 Entire
Agreement...................................................................40
10.14 Third
Parties......................................................................40
10.15 Attorneys'
Fees....................................................................41
10.16 Specific
Performance...............................................................41
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of October 20, 1999, between Wynn's International, Inc., a
Delaware corporation ("Buyer"), and Goshen Rubber Companies, Inc., an Indiana
corporation (the "Company"), and each of the shareholders of the Company listed
on Schedule A hereto (individually a "Shareholder," and collectively the
"Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders own all of the issued and outstanding
shares of Class A common stock, $5.00 par value per share, of the Company (the
"Class A Common Shares"), all of the issued and outstanding shares of Class B
common stock, $5.00 par value per share, of the Company (the "Class B Common
Shares," and together with the Class A Common Shares, the "Common Shares") and
all of the issued and outstanding shares of Class C preferred stock, $100 par
value per share, of the Company (the "Preferred Shares," and together with the
Common Shares, the "Shares"); and
WHEREAS, the Shares owned by the Shareholders represent all of
the issued and outstanding capital stock of the Company; and
WHEREAS, the Shareholders desire to sell, and Buyer desires to
buy, the Shares for the consideration described herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
SALE OF SHARES
1.1 TRANSFER OF THE SHARES BY THE SHAREHOLDERS. Subject to the
terms and conditions of this Agreement, and in reliance upon the
representations, warranties and agreements herein contained, each Shareholder
shall sell to Buyer all of the Shares owned by such Shareholder and shall
deliver the certificates evidencing the Shares owned by such Shareholder to
Buyer on the Closing Date (as defined in Section 1.7). The certificates
evidencing the Shares shall be properly endorsed for transfer to, or accompanied
by a duly executed stock power in favor of, Buyer or its nominee and otherwise
in a form acceptable for transfer on the books of the Company.
1.2 PURCHASE OF THE SHARES BY BUYER. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations,
warranties and agreements herein contained, Buyer shall acquire the Shares from
the Shareholders on the Closing Date. The aggregate consideration payable for
all of the Shares is an amount equal to the Net Worth (as defined below) of the
Company as of the Closing Date (as defined below) plus $24.0 million (the
"Purchase Price"). "Net Worth" means the book value of the Company's assets less
its liabilities as reflected in the Closing Balance Sheet (as defined in Section
1.5) as determined in conformity with generally accepted accounting principles
consistently applied ("GAAP"); provided, that for
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calculation of the purchase price for the Shares the Company shall not be
required to reduce the Net Worth for the following items (except to the extent
of normal amortization of such items in the ordinary course of business up to
June 30, 1999 and for the period between June 30, 1999 and the Closing Date)
regardless of whether Net Worth is required to be so reduced by GAAP, as of the
Closing Date: (a) any unamortized balance of capitalized loan and credit
facility costs relating to the current and prior credit facilities of the
Company reflected on the Balance Sheet (as defined in Section 2.8) as of the
Balance Sheet Date; (b) any capitalized software costs reflected on the Balance
Sheet as of the Balance Sheet Date; (c) capitalized leased property under lease
obligations with respect to the Company's South Carolina leased facility
reflected on the Balance Sheet as of the Balance Sheet Date; (d) any adjustments
to the book value of the leased assets reflected on the Balance Sheet as of the
Balance Sheet Date leased from Amplicon, Inc. under that certain Lease Agreement
dated October 28, 1994, as amended March 23, 1995, as a result of the
termination of that lease; and (e) any adjustments to the accounts receivable
reflected in the Balance Sheet as of the Balance Sheet Date or the reserves
therefor based on the account receivable and note receivable in the aggregate
amount of $631,000 from Advanced Performance Technology, Inc. All costs,
expenses and fees of the Company (or to be paid by the Company) related to the
transactions contemplated by this Agreement incurred prior to the Closing shall
have been expensed as of the Closing Date, and the effect of such expensing
shall be reflected in the Closing Balance Sheet.
1.3 PAYMENT FOR THE SHARES.
In full consideration of the purchase by Buyer of the Shares,
Buyer shall make the following payments:
(a) Buyer shall pay to Shareholder' Agent (as defined in Section
1.5), for the account of the Shareholders, at the Closing (as defined in Section
1.7) the Closing Payment Amount (as defined in Section 1.4) by wire transfer of
immediately available funds to a custodial account (the "Account") to be
designated by the Shareholders' Agent in writing not later than three business
days prior to the Closing.
(b) In the event that the Purchase Price (as finally determined)
is greater than the Closing Payment Amount, then the Deferred Purchase Price (as
defined in Section 1.4) shall be increased by such difference. In the event that
the Purchase Price (as finally determined) is less than the Closing Payment
Amount, then the Deferred Purchase Price (as defined in Section 1.4) shall be
reduced by such difference.
1.4 DETERMINATION OF THE CLOSING PAYMENT AMOUNT AND DEFERRED
PURCHASE Price. At least five business days prior to the Closing Date, the
Company shall submit to Buyer a calculation setting forth the estimated closing
payment amount (the "Estimated Closing Payment Amount"), together with
supporting documents used by the Company in calculating the Estimated Closing
Payment Amount and such other documents reasonably requested by Buyer to support
the calculation. The Estimated Closing Payment Amount shall be an amount equal
to the estimated Net Worth of the Company as of the Closing Date plus Nineteen
Million Five Hundred Thousand Dollars ($19,500,000), but in no event shall the
Estimated Closing Payment Amount exceed Forty-Two Million Dollars ($42,000,000).
Unless Buyer shall object at least one day prior to the Closing Date in writing
to the Estimated Closing Payment Amount, the payments contemplated by Section
1.3(a) to be made on the Closing Date shall be based on the Estimated Closing
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Payment Amount, and the same shall hereafter be referred to as the "Closing
Payment Amount." The difference between the Purchase Price and the Closing
Payment Amount shall be deferred and paid in accordance with Section 1.6 below
(the "Deferred Purchase Price").
1.5 FINAL DETERMINATION OF PURCHASE PRICE. As soon as practicable
following the Closing Date but in any event not more than 90 days after the
Closing Date, Buyer or its representative shall prepare a balance sheet of the
Company, dated the Closing Date (the "Closing Balance Sheet"), and statements of
income and retained earnings covering the period from July 1, 1999 to the
Closing Date (the "Closing Date Financial Statements"). The Closing Date
Financial Statements shall be prepared in conformity with GAAP. Based upon the
Closing Date Financial Statements, Buyer shall prepare a statement (the
"Purchase Price Statement") setting forth the calculation of the Purchase Price
and the Deferred Purchase Price and deliver the Purchase Price Statement to
William P. Johnson, in his capacity as representative of each of and for the
accounts of the Shareholders (the "Shareholders' Agent"). Shareholders' Agent
will then have fifteen (15) business days from the date of receipt of the
Purchase Price Statement to object to any items or calculations on the Purchase
Price Statement. If Shareholders' Agent does not object to the Purchase Price
Statement within such 15-day period, such Purchase Price Statement shall be
deemed final and conclusive with respect to the determination of the Purchase
Price and the Deferred Purchase Price and shall be binding on all parties
hereto, including all Shareholders, for such purpose. In the event that
Shareholders' Agent objects to any item or calculation on the Purchase Price
Statement and such objection cannot be resolved by the parties hereto within
twenty business days following such objection, such objection shall be resolved
by Arthur Andersen LLP (the "Arbitrating Accountant"), who shall resolve all
such objections as soon as practicable and make any necessary changes or
revisions to the Purchase Price Statement. In resolving such objections, the
Arbitrating Accountant shall determined whether the Purchase Price Statement was
prepared in accordance with this Agreement and whether the Closing Date
Financial Statements upon which the Purchase Price Statement was based were
prepared in conformity with GAAP. Within five days of completion, the
Arbitrating Accountant shall deliver the Purchase Price Statement to Buyer and
Shareholders' Agent. The Purchase Price Statement as finalized by the
Arbitrating Accountant shall be deemed final and conclusive with respect to the
determination of the Purchase Price and the Deferred Purchase Price and shall be
binding on all the parties hereto, including all Shareholders, for such
purposes. The fees and expenses of the Arbitrating Accountant in resolving all
such objections shall be borne one-half by Buyer, on the one hand, and one-half
by the Shareholders on the other hand, and such one-half may be deducted by
Buyer pro rata based on the percentage interests in the Company from the
Deferred Purchase Price remaining payable to all Shareholders.
1.6 INTEREST ON AND PAYMENT OF DEFERRED PURCHASE PRICE.
(a) Subject to the provisions of Section 6.4, Buyer shall pay
interest on the amount of any then outstanding Deferred Purchase Price from and
after the Closing Date until paid in full at a rate of 5.5% per annum, payable
semi-annually, in arrears on January 1 and July 1 of each year, with the first
payment due on January 1, 2000. Interest payments due on a Saturday, Sunday or
national holiday, shall be deemed timely paid if paid on the next succeeding
business day after such Saturday, Sunday or national holiday. Interest shall be
payable to the
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Shareholders' Agent, for the account of the Shareholders, who shall be
responsible for allocating and distributing interest payments to the
Shareholders. Any late interest payment or late repayment of any outstanding
Deferred Purchase Price shall accrue interest at the rate of 9% per annum
commencing the day after the due date for such payment.
(b) Subject to the indemnification limits set forth in Section
6.10, Buyer shall be entitled to offset permanently against the Deferred
Purchase Price amounts that have been (i) consented to by the Shareholders'
Agent or (ii) finally determined in accordance with the procedures set forth in
Article VI with respect to indemnification claims payable by the Shareholders
("Offset Amounts"), and from and after the date of any such offset that Offset
Amount shall no longer constitute a portion of the Deferred Purchase Price.
(c) On January 1, 2003, Buyer shall pay to the Shareholders'
Agent, for the account of the Shareholders, a portion of the Deferred Purchase
Price equal to the Deferred Purchase Price plus any accrued but unpaid interest
thereon less the sum of (i) Offset Amounts finally determined on or prior to
January 1, 2003, (ii) the amount of any asserted, but unresolved claims, against
the Deferred Purchase Price, asserted on or prior to January 1, 2003 and (iii)
Three Million Dollars ($3,000,000). The Shareholders' Agent, or a designee
thereof, shall be responsible for allocating and distributing the payment of a
portion of the Deferred Purchase Price to the Shareholders.
(d) On the fifth anniversary of the Closing Date, Buyer shall pay
to the Shareholders' Agent, for the account of the Shareholders, the balance of
the Deferred Purchase Price plus any accrued but unpaid interest thereon, not
previously paid or distributed to the Shareholders' Agent less any Offset
Amounts not previously offset against the Deferred Purchase Price less the
amount of any asserted, but unresolved claims, against the Deferred Purchase
Price, asserted on or prior to fifth anniversary of the Closing Date. The amount
of the Deferred Purchase Price then subject to a pending claim for
indemnification shall be distributed in the manner described in Section 6.4(b).
1.7 THE CLOSING. The consummation of the sale and purchase of the
Shares referred to in Section 1.1 (the "Closing") shall take place at 10:00
a.m., local time, on the later of (i) five business days after satisfaction or
waiver of the conditions to closing set forth in Article VIII and (ii) December
17, 1999 at the offices of Baker & Daniels, 300 North Meridian Street, Suite
2700, Indianapolis, Indiana 46204, or at such other time and date as the parties
hereto shall by written instrument designate. Such time and date are herein
referred to as the "Closing Date."
1.8 FURTHER ASSURANCES. From time to time after the Closing Date,
the Shareholders shall, at the request of Buyer but without further
consideration, execute and deliver such other and further instruments of sale,
assignment, transfer and conveyance and take such other and further action as
Buyer may reasonably request in order to vest in Buyer or its assigns and put
Buyer or its assigns in possession of the Shares and to carry out and implement
the transactions contemplated herein.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
The Company has delivered to Buyer at least five days before
execution of this Agreement by Buyer, a disclosure schedule (the "Disclosure
Schedule") containing information about the Company and its subsidiaries and
identifying certain documents relating to the Company and its subsidiaries. The
word "subsidiary" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, of which such party
or any other subsidiary of such party is a general partner or of which at least
a majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporations or other organizations is
directly or indirectly owned or controlled by such party or by any one or more
of the subsidiaries. All references to the Company in this Article II shall be
deemed to include the subsidiaries of the Company unless the context otherwise
requires.
As used in this Article II, "to the Company's and the
Shareholders' knowledge" refers to matters within the actual knowledge of
Shareholders other than William P. Johnson, and matters within the actual
knowledge of William P. Johnson, after Mr. Johnson makes reasonable inquiry of
the Company's employees having primary responsibility for the matters that are
the subject of the representation or warranty being made and Mr. Johnson
thereafter reviews any records identified by such employees (provided, that such
employee has made due inquiry) as affecting the validity of the representation
or warranty. The liability of any Shareholder for a breach of any of the
representations and warranties set forth below shall be governed by the
provisions of Article VI.
The Company and each of the Shareholders (other than Ducks
Unlimited, Inc., University of Notre Dame, St. John's Church and Menonite
Foundation, Inc. (collectively, the "Charitable Shareholders")), jointly and
severally, represent and warrant to Buyer as follows:
2.1 CAPITAL STOCK. The Company has an authorized capitalization
consisting of 15,000 shares of Class A common stock, $5.00 par value per share,
of which 10,513 shares are issued and outstanding, 90,000 shares of Class B
common stock, $5.00 par value per share, of which 71,247 shares are issued and
outstanding, and 15,000 shares of Class C preferred stock, $100 par value per
share, of which 14,496 shares are issued and outstanding. All such outstanding
shares have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in Section 2.1 of the Disclosure Schedule,
there are no outstanding options, warrants, rights, calls, commitments,
conversion rights, rights of exchange, plans or other agreements of any
character providing for the purchase, issuance or sale of any shares of capital
stock of the Company, other than as contemplated by this Agreement. Any equity
securities of the Company that were issued and reacquired by the Company were so
reacquired in compliance with all applicable laws, and the Company has no
outstanding obligation or liability with respect thereto.
2.2 SUBSIDIARIES AND INVESTMENTS. Except as set forth in Section
2.2 of the Disclosure Schedule, the Company does not own, directly or
indirectly, any capital stock or other equity or ownership or proprietary
interest in any corporation, partnership, association, trust,
5
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joint venture or other entity. Section 2.2 of the Disclosure Schedule sets forth
each subsidiary of the Company, the authorized capitalization of such
subsidiary, the Company's ownership interest therein, and, to the knowledge of
the Company, the ownership interests of any other security holders of such
subsidiary.
2.3 CORPORATE ORGANIZATION; ETC. The Company is a corporation
duly organized and validly existing under the laws of the State of Indiana. The
Company has full corporate power and authority to carry on its business as it is
now being conducted and to own the properties and assets it now owns. The
Company is duly qualified to do business and is in good standing, if applicable,
in each jurisdiction in which the Company's facilities, leased properties and
nature of the business conducted by it requires it to be qualified except where
the failure to do so would not have a material adverse effect on the Company.
Section 2.3 of the Disclosure Schedule correctly lists the current directors and
officers of the Company. Each subsidiary of the Company is a corporation duly
organized, validly existing and, if applicable, in good standing under the
respective laws of its jurisdiction of organization. Each subsidiary of the
Company has full corporate power and authority to carry on the respective
business of such subsidiary as it is now being conducted and to own the
properties and assets it now owns. Each subsidiary is duly qualified to do
business and is in good standing, if applicable, in those jurisdictions listed
in Section 2.3 of the Disclosure Schedule. Such jurisdictions are the only
jurisdictions in which the character or location of the properties owned or
leased by such subsidiary or the nature of the business conducted by such
subsidiary makes such qualification necessary other than for those jurisdictions
where the failure to do so would not have a material adverse effect on the
Company. Section 2.3 of the Disclosure Schedule correctly lists the current
directors and officers of each subsidiary.
2.4 AUTHORIZATION, ETC.; NO VIOLATION. The Company has full
corporate power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. The Company has taken all action required by
law, its Articles of Incorporation and Bylaws or otherwise to authorize the
execution and delivery of this Agreement and the transactions contemplated
hereby, and this Agreement is a valid and binding agreement of the Company
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights in general and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of the court before
which any proceeding therefor may be brought. The Board of Directors of the
Company has approved this Agreement and such approval has not been rescinded or
modified since the date of such approval.
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby shall violate any
provisions of the Articles of Incorporation or Bylaws of the Company or any
subsidiary, or violate in any material respect any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority.
2.5 CONSENTS; NO VIOLATION OF AGREEMENTS. Except as set forth in
Section 2.5 of the Disclosure Schedule, no consent of any person is necessary
for the consummation of the transactions contemplated hereby, including, without
limitation, consents from parties to loans, Leases (as defined in Section 2.13),
Licenses (as defined in Section 2.15),
6
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Contracts (as defined in Section 2.16) or other agreements of the Company or any
subsidiary, but excluding purchase orders from the Company's customers, and
consents from governmental agencies, whether federal, state or local, and
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the transactions contemplated hereby will directly or
indirectly (with or without notice or lapse of time) contravene, conflict with,
or result in a material violation or material breach of any provision of, or
give any person the right to declare a material default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel, terminate
or modify, any loans, Leases, Licenses, Contracts or other agreements of the
Company or any subsidiary.
2.6 BOOKS AND RECORDS. The minute books of the Company and each
subsidiary, as previously made available to Buyer and its representatives,
contain (a) true, correct and complete copies of the Company's or such
subsidiary's charter documents, as the case may be, and (b) records, accurate in
all material respects, of all meetings of, and corporate actions (including
actions by written consent) taken by, the shareholders and the Board of
Directors and all committees thereof of the Company or such subsidiary.
2.7 BANK ACCOUNTS AND POWERS OF ATTORNEY. Set forth in Section
2.7 of the Disclosure Schedule is an accurate and complete list showing (a) the
name and address of each bank at which the Company or any subsidiary has an
account or safe deposit box, the number of any such account or any such safe
deposit box, and (b) the names of all persons, if any, holding powers of
attorney from the Company or any subsidiary.
2.8 FINANCIAL STATEMENTS. The Company has heretofore furnished
Buyer with the audited consolidated balance sheets of the Company dated as of
June 30, 1997, 1998 and 1999 and the related consolidated statements of income
or operations and retained earnings and statements of cash flows for the years
then ended. The audited consolidated balance sheet of the Company as of June 30,
1999 shall hereinafter be referred to as the "Balance Sheet." Such financial
statements, including the notes thereto, except as indicated therein, have been
prepared in accordance with GAAP.
The Balance Sheet fairly presents, in accordance with GAAP, the
consolidated financial position of the Company at June 30, 1999 (the "Balance
Sheet Date") and, except as indicated therein, reflects all material claims
against and all debts and liabilities of the Company, fixed or contingent, as at
the Balance Sheet Date, and the related statement of income, shareholders'
equity and cash flows fairly present, in accordance with GAAP, the consolidated
results of operations and cash flows of the Company for the year then ended. The
audited balance sheets of the Company dated at June 30, 1997 and 1998 fairly
present, in accordance with GAAP, the consolidated financial position of the
Company at the respective dates thereof and, except as indicated therein,
reflect all material claims, individually and in the aggregate, against and all
debts and liabilities of the Company, fixed or contingent, as at the respective
dates thereof, and the related consolidated statements of income or operations
and retained earnings and cash flows fairly present, in accordance with GAAP,
the results of operations and cash flows of the Company for the years then
ended.
2.9 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth in
Section 2.5 above and Section 2.9 of the Disclosure Schedule and except for
properties and assets reflected
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in the Balance Sheet or acquired since the Balance Sheet Date or that have been
sold or otherwise disposed of in the ordinary course of business, each of the
Company and its subsidiaries has good, valid and marketable title to (a) all of
its properties and assets (real and personal, tangible and intangible),
including, without limitation, all of the properties and assets reflected in the
Balance Sheet, except as indicated in the notes thereto, and (b) all of the
properties and assets purchased by the Company or any subsidiary since the
Balance Sheet Date; in each case subject to no encumbrance, lien charge or other
restriction of any kind or character except (i) statutory liens not yet
delinquent; (ii) liens for taxes not yet delinquent or the validity of which are
being contested in good faith by appropriate actions, (iii) liens granted to a
seller to secure all or a portion of the purchase price for an asset or (iv)
liens that do not individually or in the aggregate materially impair the use or
proposed use of the asset or property or materially detract from the value of
the asset or property to which they relate.
2.10 REAL PROPERTY. Except as set forth in Section 2.10(a) of the
Disclosure Schedule, neither the Company nor any subsidiary owns any real
property or any interest therein. Except as set forth in Section 2.10(b) of the
Disclosure Schedule, there are no leases, subleases, licenses, concessions or
other agreements, written or oral, granting to any party or parties other than
the Company or any subsidiary the right of use or occupancy of any portion of
any parcel of real property owned or leased by the Company or any of its
subsidiaries ("Real Property"). Except as set forth in Section 2.10(c) of the
Disclosure Schedule, each parcel of Real Property is zoned for use in the manner
in which the facility is currently being used, and as such the Company's or such
subsidiary's operation of its business thereon is permitted within such use.
Except as set forth in Section 2.10(d) of the Disclosure Schedule, there are no
pending or, to the Company's or the Shareholders' knowledge, threatened
proceedings relating to the zoning for the Real Property. Except as set forth in
Section 2.10(e) of the Disclosure Schedule, there are no outstanding options or
rights of first refusal to purchase the Real Property or any portion thereof or
interest therein. Except as set forth in Section 2.10(f) of the Disclosure
Schedule, there are no parties other than the Company or a subsidiary in
possession of the Real Property. The Real Property is supplied with utilities
and other services necessary and adequate for the operation of the Real Property
as currently operated by the Company or its subsidiary. Except as set forth in
Section 2.10(g) of the Disclosure Schedule, the Real Property, including,
without limitation, the foundations, roofs, floors, plumbing, heating, air
conditioning and electrical systems thereof, are in good operating condition and
repair, ordinary wear and tear excepted.
2.11 ABSENCE OF CERTAIN CHANGES. Except as and to the extent set
forth in Section 2.11 of the Disclosure Schedule, since the Balance Sheet Date,
the Company (including its subsidiaries) has not:
(a) conducted its business other than in the usual and ordinary
manner and in the ordinary course of business, including making all regularly
scheduled payments and commitments (e.g., payroll, taxes, rent and lease
payments) coming due through the Closing Date;
(b) suffered any material adverse change in its working capital,
financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, business or operations;
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(c) written down the value of any inventory in an aggregate
amount of $100,000 or more;
(d) waived any claims or rights of the Company of substantial
value;
(e) sold, transferred or otherwise disposed of any of the
Company's properties or assets (real, personal or mixed, tangible or intangible)
with a value of $25,000 or more except in the ordinary course of business and
consistent with past practice;
(f) disposed of or disclosed to any person other than
representatives of Buyer any trade secret, formula, process or know-how of the
Company not theretofore a matter of public knowledge, the disclosure of which
would have a material adverse affect on the business, operations, assets or
financial condition of the Company;
(g) granted any general increase in the compensation of the
Company's employees (including any such increase pursuant to any bonus, pension,
profit sharing or other plan or commitment) or any increase in the compensation
payable or to become payable to any employee of the Company other than increases
reasonable in amount and in the ordinary course of business;
(h) made any change in any method of accounting or accounting
practice that would have a material adverse effect on the assets or operations
of the Company;
(i) to the Company's and the Shareholders' knowledge, replaced
any customer-owned molds or Company/subsidiary-owned molds with new molds at the
expense of the Company or any subsidiary, or given any incentives to customers
by sharing or agreeing to share in the cost of constructing a mold; or
(j) agreed, whether in writing or otherwise, to take any action
described in this Section 2.11.
2.12 TRADE ACCOUNTS AND OTHER RECEIVABLES. All accounts
receivable and other receivables due or recorded in the records and books of
account of the Company as being due to the Company as at the Balance Sheet Date
(less the amount of any allowances or reserves therefor made in the records and
books of account of the Company) were actually made in the ordinary course of
business and shall (subject to the amount of any allowances or reserves therefor
made in the records and books of account of the Company) be good and collectible
in full in the ordinary course of business. The Company has delivered to the
Buyer a complete and accurate aging list of all receivables of the Company and
its subsidiaries as of June 30, 1999.
2.13 LEASES. Section 2.13 of the Disclosure Schedule contains a
true, correct and complete list of each equipment and Real Property lease to
which the Company or any subsidiary is a party (the "Leases"). The Company has
delivered to Buyer a true, correct and complete copy of each Lease, including
all modifications and amendments and all material notices relating thereto. The
Leases are valid, binding and enforceable in accordance with their terms (except
to the extent that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the enforcement
of creditors' rights in general and except that the availability of equitable
remedies, including specific
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performance, is subject to the discretion of the court before which any
proceeding therefor may be brought), and are in full force and effect; there are
no existing material defaults by the Company or any subsidiary or, to the
Company's and Shareholder's knowledge, any material defaults by the lessors
thereunder; no event of default has occurred that (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute a material default thereunder; neither the Company or any subsidiary
is in violation of, nor, to the knowledge of the Company and the Shareholders,
the lessor is not in violation of, any of the terms or conditions of any such
Lease in any material respect; no notice has been given, or received by the
Company or any subsidiary under any Lease alleging a material default by the
lessor or the Company or any subsidiary, as the case may be, of any such Lease.
2.14 PROPERTY, PLANT AND EQUIPMENT. The tangible assets and
equipment of the Company and its subsidiaries are in good operating condition
and repair and are adequate for the uses to which they are being put; and none
of such assets or equipment is in need of maintenance, repairs or replacements
that are material in nature except for (a) ordinary, routine maintenance,
repairs and replacements and (b) other repairs as of the Closing Date that do
not exceed $50,000 in the aggregate. The Company has delivered to Buyer a
complete and accurate copy of the Company's depreciation schedule for the
Company, which includes a list of all of the Company's property, plant and
equipment as of the Balance Sheet Date and as reflected on the Balance Sheet.
2.15 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Section 2.15 of the
Disclosure Schedule lists:
(a) all patents held by the Company and its subsidiaries and all
pending patent applications by the Company or any subsidiary, including for each
such patent the serial or patent number, country, filing and expiration date and
title;
(b) all registered trademarks of the Company or any of its
subsidiaries, and all pending applications for registration by the Company or
any of its subsidiaries of trademarks, including for each such trademark, the
registration or application number, country, filing and expiration date;
(c) all registered copyrights of the Company or any of its
subsidiaries and all applications by the Company or any of its subsidiaries for
registration of copyrights, including the registration number, country and
filing and expiration date of each such copyright;
(d) all licenses by the Company or any of its subsidiaries to any
person or entity of any of the rights identified in subparagraphs (a) through
(c) above; and
(e) all licenses by any other person or entity to the Company or
any of its subsidiaries of any patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights or
processes of any other person or entity.
Each license identified in Section 2.15 of the Disclosure
Schedule pursuant to subparagraphs (d) and (e) above (each a "License") is a
valid and binding obligation of the Company or the subsidiary thereto,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency,
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moratorium or other laws affecting the enforcement of creditors' rights in
general and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding therefor may be brought. With respect to each License, there is no
material default (or event that with the giving of notice or passage of time
would constitute a material default) by the Company or subsidiary thereto or, to
the knowledge of the Company and the Shareholders, the other party thereto. The
Company has not received any notice (and the Company and the Shareholders do not
have knowledge) of claims asserted by any person to use any patents, trademarks,
service marks, trade names, copyrights, technology, know-how or processes
licensed by or to the Company or challenging or questioning the validity or
effectiveness of any License.
The Company and its subsidiaries have good and valid title to, or
otherwise possess adequate rights to use, all patents, trademarks, trade names,
copyrights, inventions, trade secrets, software licenses and other proprietary
information necessary to permit the Company and its subsidiaries to conduct the
business and operations of the Company and its subsidiaries in substantially the
same manner as it had been conducted prior to the date hereof.
Neither the Company nor any of its subsidiaries has, nor, to the
Company's and the Shareholders' knowledge, have any of them been alleged to
have, infringed upon any patent, trademark, trade name or copyright or
misappropriated or misused any invention, trade secret or other proprietary
information entitled to legal protection.
2.16 CONTRACTS, COMMITMENTS AND BID PROPOSALS.
(a) Except as listed in Section 2.16 of the Disclosure Schedule,
the Company and its subsidiaries do not have and are not bound by:
(i) any agreement, contract or commitment that involves
or could involve in excess of $50,000 (or $25,000
if not entered into in the ordinary course of
business) or that has an unexpired term in excess
of four years, excluding specifically in both
instances (A) purchase orders from the Company's
customers and (B) contracts for the purchase by the
Company of raw materials;
(ii) any contracts, except for those contracts that can
be terminated upon 90 days' or less notice, for the
purchase by the Company of raw materials that
involve annual purchases of more than $200,000 or
which extend beyond December 31, 2003;
(iii) any agreement, contract or instrument that grants a
power of attorney, agency or similar authority to
another person or entity;
(iv) any loan or advance to, investment in, guaranty or
other contingent liability in respect of any
indebtedness or obligation of, any individual,
partnership, joint venture, corporation, limited
liability company, trust, unincorporated
organization, government or other entity or any
agreement, contract or commitment relating to the
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making of any such loan, advance, investment,
guaranty or other contingent liability;
(v) any agreement, contract or commitment relating to
the employment of any person by the Company or any
subsidiary, or any bonus, deferred compensation,
pension, severance, profit sharing, stock option,
employee stock purchase, retirement or other
employee benefit plan;
(vi) any management service, consulting, sales
representative, distributor or similar type of
contract;
(vii) any confidentiality, nondisclosure or similar
agreement entered into outside the ordinary course
of business, except for agreements which by their
terms prohibit the disclosure of the existence of
such agreement;
(viii) any agreement, contract or commitment limiting the
freedom of the Company or any subsidiary to engage
in any line of business or compete with any person
or entity; or
(ix) any contract, agreement or employee benefit plan
that contains a provision providing for increased
benefits or payments, or accelerated payments or
benefits, upon a change of control of the Company,
including, without, limitation any change of
control based on the transactions contemplated by
this Agreement.
(b) Each contract, agreement and commitment listed in Section
2.16 of the Disclosure Schedule (each a "Contract") is valid and binding on the
Company or subsidiary in accordance with its terms and in full force and effect,
and, except as set forth in Section 2.16 of the Disclosure Schedule, there
exists no material default, event, occurrence, condition or act (including the
purchase of the Shares hereunder) that, with the giving of notice, the lapse of
time or the happening of any other event or condition, would become a material
default thereunder. The Company or its subsidiary has performed all of the terms
or conditions of the Contracts (or any contract, agreement or commitment
required to be set forth in Section 2.18 of the Disclosure Schedule) in all
material respects, and all of the covenants to be performed by any other party
thereto have been materially performed. The Company has heretofore delivered to
Buyer a true, correct, accurate and complete copy of the Contracts.
2.17 CUSTOMERS AND SUPPLIERS. Section 2.17 of the Disclosure
Schedule contains a complete and accurate list of (i) the 10 largest customers
of the Company and its subsidiaries in terms of revenues during each of the
Company's last two fiscal years, showing the approximate total sales to each
such customer during each period; and (ii) the 10 largest suppliers of the
Company and its subsidiaries in terms of purchases during each of the Company's
last two fiscal years, showing the approximate total purchases from each such
supplier during such periods. Except as set forth in Section 2.17 of the
Disclosure Schedule, since the Balance Sheet Date, to the Company's and the
Shareholders' knowledge, there has
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been no material adverse change in the business relationship of the Company or
any of its subsidiaries with any customer or supplier listed on Schedule 2.17.
2.18 LABOR DIFFICULTIES. Except as set forth in Section 2.18 of
the Disclosure Schedule, (a) the Company and its subsidiaries are in material
compliance with all federal, state or other applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and are not engaged in any unfair labor practice as defined in
the National Labor Relations Act; (b) there is no labor strike, dispute,
slowdown or stoppage actually pending or, to the Company's and the Shareholders'
knowledge, threatened against the Company or any of its subsidiaries; (c) none
of the Company's or any subsidiaries' employees is covered by a collective
bargaining agreement or is a member of a union, and no representation question
exists respecting the employees of the Company or any subsidiary; (d) there
exists no basis for the assessment of unpaid wages with respect to employees of
the Company or any subsidiary; (e) there has not been any material adverse
change in relations with employees of the Company or any of its subsidiaries as
a result of the announcement, if any, of the transactions contemplated by this
Agreement; and (f) since the Balance Sheet Date, no officer or key employee of
the Company or any of its subsidiaries has resigned, and to the knowledge of the
Company and the Shareholders, no officer or key employee of the Company or any
of its subsidiaries has indicated that he or she intends to resign.
2.19 PERSONNEL. Section 2.19 of the Disclosure Schedule sets
forth a true and complete list of:
(a) the name and current salary of all exempt employees of the
Company and its subsidiaries as of June 30, 1999, who receive salaries in excess
of $50,000 per year; and
(b) the name and compensation arrangements of any other employees
of the Company and its subsidiaries not listed in Section 2.19 of the Disclosure
Schedule pursuant to subparagraph (a) above, who receive salaries or base
compensation in excess of $50,000 per year.
2.20 EMPLOYEE BENEFIT PLANS.
(a) Employee Benefit Plans, Collective Bargaining and Employee
Agreements, and Similar Arrangements.
(i) Section 2.20(a)(i) of the Disclosure Schedule lists
all employee benefit plans and employment or severance agreements or
other similar arrangements to which the Company or any of its
subsidiaries is or during the last five years has been a party or by
which it is or during the last five years has been bound, legally or
otherwise, including, without limitation, (A) any profit-sharing,
deferred compensation, bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, severance, welfare or incentive plan,
agreement or arrangement, (B) any plan, agreement or arrangement
providing for "fringe benefits" or perquisites to employees, officers,
directors or agents, including, but not limited to, benefits relating to
Company automobiles, clubs, vacation, child care, parenting, sabbatical,
sick leave, medical, dental, hospitalization, life insurance and other
types of insurance, (C) any employment agreement, or (D) any other
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"employee benefit plan" (within the meaning of Section 3(3) of ERISA)
(collectively, the "Plans").
(ii) The Company has delivered to Buyer true and complete
copies of all documents and summary plan descriptions with respect to
the Plans, or summary descriptions of any Plans not otherwise in
writing.
(iii) Except as set forth in section 2.20(a)(iii) of the
Disclosure Schedule, there are no negotiations, demands or proposals
that are pending or, to the Company's and the Shareholders' knowledge,
have been made which concern matters now covered, or that would be
covered, by plans, agreements or arrangements of the type described in
this Section 2.20(a).
(iv) Except as set forth in Section 2.20(a)(iv) of the
Disclosure Schedule, the Company is in material compliance with the
applicable provisions of ERISA (as amended through the date of this
Agreement), the regulations and published authorities thereunder, and
all other laws applicable with respect to all the Plans. The Company has
performed all of its material obligations under all the Plans. There is
no action, suit, inquiry, proceeding or investigation by or before any
court or governmental or other regulatory or administrative agency or
commission ("Actions") (other than routine claims for benefits) pending
or, to the Company's and Shareholders' knowledge, threatened against the
Plans or their assets, or arising out of the Plans, and all of the Plans
have been operated in material compliance with their terms. No facts, to
the Company's or Shareholders' knowledge, exist that could give rise to
any such Actions.
(v) Subject to the collective bargaining agreements listed
in Section 2.18 of the Disclosure Schedule and except as otherwise
specified in such Plan, and except as specified in Section 2.20(a)(v) of
the Disclosure Schedule, each of the Plans can be terminated by the
Company within a period of 30 days following the Closing Date, without
payment of any additional compensation or amount or the additional
vesting or acceleration of any such benefits.
(vi) All obligations of the Company under each of the
Plans (x) that are due prior to the Closing Date have been paid or shall
be paid prior to the Closing Date, and (y) that have accrued prior to
the Closing Date have been or shall be paid prior to the Closing Date or
properly accrued on the Company's balance sheet.
(vii) Except as set forth in Section 2.20(a)(vii) of the
Disclosure Schedule, no employee, consultant or agent of the Company is
entitled to any severance, parachute or other form of payment or benefit
from the Company or its successors or assigns arising or becoming due as
a result of the consummation of the transactions contemplated by this
Agreement.
(b) Qualified Plans. Except as set forth in Section 2.20(b) of
the Disclosure Schedule, no Plan is a stock bonus, pension or profit-sharing
plan within the meaning of Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code). Each Plan which is intended to qualify under Section
401(a) of the Code is so qualified.
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(c) Title IV Plans. Except as set forth in Section 2.20(c) of the
Disclosure Schedule, no Plan is a plan subject to Title IV of ERISA.
(d) Multiemployer Plans. Except as set forth in Section 2.20(d)
of the Disclosure Schedule, no Plan is a "multiemployer plan" (within the
meaning of Section 3(37) of ERISA) (a "Multiemployer Plan").
(e) Health Plans. All group health plans of the Company have been
operated in material compliance with the group health plan continuation coverage
requirements of the Code to the extent such requirements are applicable. Except
as set forth in Section 2.20(e) of the Disclosure Schedule and except to the
extent required under Section 4980B of the Code, no Plan provides health or
welfare benefits (through the purchase of insurance or otherwise) for any
retired or former employee of the Company or any of its ERISA Affiliates (as
such term is defined below).
(f) Fines and Penalties. Except as set forth in Section 2.20(f)
of the Disclosure Schedule, there has been no act or omission by the Company, or
any of its ERISA Affiliates, that has given rise to or may give rise to fines,
penalties, taxes or related charges under Section 502(c), (i) or (l) or Section
4071 of ERISA or Chapter 43 of the Code.
(g) Pension Plans. As of the most recent valuation date for any
Pension Plan (as such term is defined below), there was no unfunded benefit
liability (as defined in Section 4001(a)(18) of ERISA), individually or in the
aggregate for all Pension Plans (excluding for purposes of such computation any
Pension Plans with respect to which assets exceed benefit liabilities). "Pension
Plan" means any Plan, other than a Multiemployer Plan, which is subject to
Section 412 of the Code or Section 302 of ERISA.
(h) Multiemployer Plans. As of the most recent valuation date for
each Multiemployer Plan for which the actuarial report is available, there was,
based on information available pursuant to Section 4221(e) of ERISA, no
potential liability of the Company or any of its ERISA Affiliates for a complete
withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of
