UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 16, 2001
------------------------------
NN, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-23485 62-1096725
- ---------------------------- ----------------------- ---------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2000 Waters Edge Drive, Johnson City, Tennessee 37604
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (423) 743-9151
-------------------------
None
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
NN, Inc., a Delaware corporation ("NN"), acquired all of the outstanding
stock of The Delta Rubber Company, a Connecticut corporation ("Delta"), on
February 16, 2001. Delta provides high quality engineered bearing seals and
other precision-molded rubber products to original equipment manufacturers. NN
plans to continue the operation of the Delta business, which consists of one
manufacturing facility located in Danielson, Connecticut.
NN acquired Delta by purchasing the outstanding stock from Delta's
shareholders for $22.5 million in cash, of which $500,000 is to be held in
escrow for one year. The purchase price was based on Delta's existing customer
base, financial performance and the expectation that Delta's products and
customers will compliment NN's existing business. Financing for the transaction
was provided by AmSouth Bank.
The Stock Purchase Agreement and the press release issued by NN in
connection with the stock purchase are filed as exhibits to this report and are
incorporated herein by reference. The description of the stock purchase set
forth herein does not purport to be complete and is qualified by the provisions
of the Stock Purchase Agreement and the press release attached hereto.
Item 7. Financial Statements and Exhibits.
(a,b) FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION.
Financial statements and pro forma financial information will be
filed by amendment within the required reporting period.
(c) EXHIBITS. The following exhibits are filed herewith:
10.20 Stock Purchase Agreement, dated February 16, 2001, by and
among NN, Inc., The Delta Rubber Company, The Delta
Shareholders and David Harrington as Sellers' Representative
99.1 Press Release dated February 16, 2001
\
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NN, Inc.
----------------------------
(Registrant)
DATE: February , 2001
/s/ William C. Kelly, Jr.
William C. Kelly, Jr.
Chief Accounting Officer
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
10.20 Stock Purchase Agreement, dated February 16, 2001, by and among NN, Inc.,
The Delta Rubber Company, The Delta Shareholders and David Harrington as
Sellers' Representative
99.1 Press Release dated February 16, 2001
STOCK PURCHASE AGREEMENT
dated as of
February 16, 2001
by and among
NN, INC.
and
THE DELTA RUBBER COMPANY
and
THE DELTA SHAREHOLDERS
and
DAVID HARRINGTON as Sellers' Representative
TABLE OF CONTENTS
ARTICLE 1 PURCHASE; PURCHASE PRICE; CLOSING.............................................1
1.1 Purchase of Stock.............................................................1
1.2 Purchase Price................................................................1
1.3 Payment of Purchase Price.....................................................1
1.4 Closing.......................................................................2
1.5 Closing Adjustments...........................................................2
1.6 Post Closing Adjustment.......................................................2
1.7 Section 338(h)(10) Election; Allocation of Purchase Price.....................3
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF BUYER.......................................4
2.1 Organization and Qualification................................................4
2.2 Authority Relative to this Agreement..........................................4
2.3 Financing Commitment..........................................................4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF DELTA AND THE SHAREHOLDERS..................5
3.1 Organization, Qualification and Corporate Power...............................5
3.2 Authorization of Transaction..................................................5
3.3 Capitalization................................................................5
3.4 Financial Statements..........................................................6
3.5 Receivables...................................................................7
3.6 Absence of Certain Developments...............................................7
3.7 Undisclosed Liabilities.......................................................8
3.8 Books and Records.............................................................8
3.9 Taxes.........................................................................9
3.10 Real Property Leases.........................................................11
3.11 Real Property Owned..........................................................12
3.12 Compliance, Utilities and Other Matters......................................13
3.13 Assets.......................................................................13
3.14 Inventory....................................................................14
3.15 Contracts....................................................................15
3.16 Litigation...................................................................16
3.17 Compliance with Law..........................................................16
3.18 Intellectual Property........................................................17
3.19 Environmental Matters........................................................18
3.20 Delta Products; Product Liability............................................21
3.21 Brokers or Finders...........................................................22
3.22 Corporate Names..............................................................22
3.23 Insurance....................................................................22
3.24 Compensation, Employment Agreements; Organized Labor Matters.................22
3.25 Employee Plans and ERISA.....................................................23
3.26 Deposit Accounts; Powers of Attorney.........................................23
3.27 Related Party Agreements.....................................................24
3.28 Customer/Supplier Relationships..............................................24
3.29 Indebtedness to and from Officers, Directors and the Shareholders............24
3.30 Disclosure...................................................................24
ARTICLE 4 COVENANTS OF DELTA AND THE SHAREHOLDERS......................................24
4.1 Conduct of Business..........................................................24
4.2 Access.......................................................................26
4.3 Engineering Inspections......................................................26
4.4 Insurance....................................................................26
4.5 Exclusive Dealing............................................................26
4.6 Notice of Certain Events.....................................................26
4.7 Communications with Customers and Suppliers..................................27
4.8 Continued Truth of Representations and Warranties............................27
4.9 Environmental Remediation and Monitoring.....................................27
ARTICLE 5 JOINT COVENANTS..............................................................27
5.1 Filings......................................................................27
5.2 Connecticut Transfer Act.....................................................27
5.3 Fulfillment of Conditions....................................................28
ARTICLE 6 CONDITIONS TO CLOSING........................................................28
6.1 Conditions to Obligations of Each Party to Close.............................28
6.2 Additional Conditions to Buyer's Obligations.................................28
6.3 Additional Conditions to the Shareholders' Obligations.......................30
ARTICLE 7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION..................31
7.1 Survival of Representations and Warranties...................................31
7.2 Indemnifications.............................................................32
7.3 Dispute Resolution...........................................................34
ARTICLE 8 GENERAL PROVISIONS...........................................................37
8.1 Public Statements............................................................37
8.2 Confidentiality..............................................................37
8.3 Notices......................................................................37
8.4 Interpretation...............................................................39
8.5 Amendment....................................................................39
8.6 Severability.................................................................39
8.7 Miscellaneous................................................................39
8.8 Counterparts.................................................................39
8.9 Cumulative Remedies..........................................................39
8.10 Attorneys' Fees..............................................................39
8.11 Construction.................................................................40
8.12 Governing Law................................................................40
8.13 Definitions..................................................................40
8.14 Termination..................................................................41
8.15 Further Assurances...........................................................41
8.16 The Sellers' Representative, Power of Attorney...............................41
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of February 16, 2001 (this "Agreement"),
by and among NN, Inc., a Delaware corporation ("Buyer"), The Delta Rubber
Company, a Connecticut corporation ("Delta"), Lee Burris, David Harrington,
Frank Hegedus, James Meagher III, Milton Oliveira, Stephen Raczka, and David
Sawin, the shareholders of Delta as individuals (collectively, the
"Shareholders"), and David Harrington (the "Sellers' Representative").
RECITALS
WHEREAS, Delta is engaged in the manufacture of high quality engineered
bearing seals and other precision-molded rubber products in the State of
Connecticut (the "Business");
WHEREAS, the Shareholders own 46,993 shares of the Delta Common Stock, as
defined in Section 3.3 (the "Purchased Shares"), with such shares constituting
all of Delta's outstanding capital stock;
WHEREAS, Buyer desires to purchase from the Shareholders, and the
Shareholders desire to sell to Buyer the Purchased Shares.
WHEREAS, the Shareholders wish to appoint the Sellers' Representative as
their agent and attorney-in-fact with the authority to act on their behalf in
connection with the sale of the Purchased Shares to Buyer.
NOW THEREFORE, the parties hereby agree as follows:
ARTICLE 1
PURCHASE; PURCHASE PRICE; CLOSING
1.1 Purchase of Stock. On the Closing Date (as defined in Section 1.4),
each Shareholder shall sell, convey, transfer and assign, upon the terms and
subject to the conditions set forth in this Agreement, to Buyer, free and clear
of all liens, security interests, charges, restrictions, encumbrances and claims
of every kind, and Buyer shall purchase from each Shareholder, all but not less
than all of the Purchased Shares held by such Shareholder. In consideration of
the sale of the Purchased Shares to Buyer, Buyer agrees to pay to each
Shareholder his pro rata share of each component of the Purchase Price in
accordance with his respective ownership of the Purchased Shares at Closing.
1.2 Purchase Price. The aggregate purchase price for the Purchased Shares
shall be Twenty-Two Million Five Hundred Thousand Dollars ($22,500,000) (the
"Purchase Price") as adjusted by the net amount of the adjustments provided in
Sections 1.5 and 1.6 below, and shall be payable as set forth in Section 1.3.
1.3 Payment of Purchase Price. Subject to the adjustments described in
Section 1.5, Buyer shall deliver the Purchase Price as follows:
1
(a) At Closing, Buyer shall deliver to AmSouth Bank (the "Escrow
Agent") the sum of Five Hundred Thousand Dollars ($500,000) (the "Escrow
Amount") to be held pursuant to the Escrow Agreement of even date herewith
and attached hereto as Exhibit A to be applied against any claims of Buyer
or Delta against the Shareholders under this Agreement. The Escrow Amount,
less any amounts to be paid to Buyer pursuant to the terms of the Escrow
Agreement, shall be distributed to the Shareholders by the Escrow Agent, in
accordance with the terms and conditions of the Escrow Agreement.
(b) At Closing, Buyer shall pay to the Shareholders, subject to the
adjustments under Section 1.5, below, the aggregate sum of Twenty-Two
Million Dollars ($22,000,000) in immediately available funds.
(c) Buyer and the Shareholders agree that Two Hundred Thousand Dollars
($200,000) of the amount paid to the Shareholders under Section 1.3(b)
shall be set aside in a separate trust fund (the "Remediation Fund") under
the direction of Robinson & Cole, LLP to pay for the expenses related to
the environmental tasks to be conducted by the Shareholders following the
Closing Date as set forth in Section 4.9, Schedule 4.9, and Exhibit 4.9
hereto (the "Shareholders' Environmental Tasks"). The Remediation Fund
shall be subject to the terms and conditions set forth in Schedule 1.3(c).
1.4 Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall be held, subject to the satisfaction or waiver by the
appropriate parties of the conditions set forth herein, at the offices of
Blackwell Sanders Peper Martin LLP, 2300 Main Street, Suite 1000, Kansas City,
Missouri, at 9 a.m. local time on February 16, 2001, or at such other place and
time as the parties may mutually agree (the "Closing Date").
1.5 Closing Adjustments. The Purchase Price and the funds paid to the
Shareholders under Section 1.3(b) shall be reduced by the amount of any interest
bearing debt of Delta in existence at the time of Closing and by all amounts
paid by Delta or Buyer for the obligations of the Shareholders under Section
3.21.
1.6 Post Closing Adjustment.
(a) Closing Balance Sheet. Seller's Representative shall cause to be
prepared and shall deliver to Buyer within forty-five (45) days after the
Closing a closing balance sheet (the "Closing Balance Sheet") on a basis
consistent with Delta's unaudited October 31, 2000 balance sheet attached
hereto as Exhibit B (the "Opening Balance Sheet").
(b) Increase or Decrease in Net Assets. The Purchase Price, as
adjusted in Section 1.5, shall be decreased or increased, as appropriate,
after the Closing Date by the amount by which, as of the Closing Date,
Delta's total assets less total liabilities (excluding interest bearing
debt) as reflected on the Closing Balance Sheet are less than or greater
than Delta's total assets less total liabilities (excluding interest
bearing debt) as reflected on the Opening Balance Sheet (such difference
being the "Post-Closing Adjustment"). Sellers' Representative shall
calculate the Post-Closing Adjustment and
2
deliver its calculation of the Post-Closing Adjustment to Buyer with the
Closing Balance Sheet. Except as provided in Section 1.6(c), Buyer or the
Shareholders, as the case may be, shall pay the Post-Closing Adjustment to
the other party within ten (10) business days of Buyer's receipt of the
Post-Closing Balance Sheet and the calculation of the Post-Closing
Adjustment.
(c) Review of Post-Closing Adjustment. Following receipt by Buyer of
the Closing Balance Sheet and of the calculation of the Post-Closing
Adjustment, Buyer may accept or reject the calculation. Buyer shall have
fifteen (15) business days to notify Sellers' Representative that Buyer
rejects the calculation of the Post-Closing Adjustment. If Buyer does not
notify Sellers' Representative of Buyer's rejection of the calculation
within such fifteen (15) business day period, Buyer will be deemed to have
accepted the calculation of the Post-Closing Adjustment.
(d) If Buyer timely notifies Sellers' Representative of Buyer's
rejection of the calculation of the Post-Closing Adjustment and Buyer and
the Sellers' Representative do not, after a good faith attempt, reach
agreement with regard to the amounts to be paid under this Article, Buyer
and the Sellers' Representative will submit the dispute for resolution to a
nationally recognized certified public accounting firm which is mutually
acceptable to the parties (the "Arbitrator"). Notwithstanding the
submission of any dispute to an Arbitrator, Buyer on the one hand and the
Shareholders on the other hand agree to pay any amounts required to be paid
under this Article 1 which are not the subject of a bona fide dispute.
Promptly, but not less than twenty (20) days after its acceptance as
Arbitrator, the Arbitrator will determine, those and only those issues in
dispute. The Arbitrator will be instructed to resolve such issues applying
a method consistent with the preparation of the Opening Balance Sheet. The
Arbitrator's determination will be conclusive and binding on the parties.
Each party will bear its own costs and the costs of the Arbitrator will be
shared equally by Buyer on one hand and the Shareholders on the other hand.
1.7 Section 338(h)(10) Election; Allocation of Purchase Price. Within one
hundred and twenty (120) days following the Closing, Buyer and each Shareholder
shall join in making an election under Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended (the "Code") and any similar state or local law
provision with respect to Delta (the "338 Election"). At Buyer's expense, Buyer
and Delta shall jointly prepare and file the forms required by applicable tax
laws for the 338 Election and Delta and each Shareholder shall use his best
efforts to cooperate with Buyer and Delta to prepare, complete, and file such
forms. In connection with the 338 Election, Buyer and each Shareholder have
agreed to the allocation of purchase price among the assets as set forth on
Schedule 1.7, which allocation is acknowledged by Buyer and each Shareholder to
be reasonable, based on fair market values and consistent with Section 338 of
the Code and the Treasury Regulations promulgated thereunder and any comparable
provisions of state or local law. The Shareholders agree to pay on a timely
basis, and to indemnify Buyer against, any state or federal income taxes due, up
to and including the Closing Date, which either Delta or the Shareholders are
required to pay following the Closing Date, including, but not limited to, any
tax, no matter when such tax may actually be due on the deemed asset sale from
the 338 Election.
3
Buyer acknowledges and the Shareholders agree that the
Shareholders shall have the right and obligation to prepare and to file all
federal and state corporate income tax returns for Delta related to Delta's
operations up to the Closing Date, including the short period tax return which
will be required to be prepared and filed for the period commencing January 1,
2001 and ending on the Closing Date. In addition, Buyer acknowledges and the
Shareholders agree that the Shareholders shall be entitled and obligated to
respond to any inquiries by taxing authorities concerning such tax returns,
including, without limitation, any audits of same and any audits of prior tax
periods. Buyer agrees to give prompt written notice to the Sellers'
Representative of any notice received after the Closing Date by Delta or Buyer
from any taxing authority relating to Delta which relates to a period prior to
the Closing Date.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as otherwise set forth in the written disclosure schedules (the
"Schedules") attached hereto, Buyer hereby represents and warrants to the
Shareholders as follows:
2.1 Organization and Qualification. Buyer is duly incorporated and is
validly existing as a corporation and in good standing under the laws of the
State of Delaware and has the requisite corporate power to carry on its business
as now conducted.
2.2 Authority Relative to this Agreement. Buyer has the requisite corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by Buyer,
and the consummation by Buyer of the transactions contemplated hereby, have been
duly authorized by the board of directors of Buyer, and no other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer and constitutes a valid and binding obligation of Buyer,
enforceable in accordance with its terms except as enforceability may be limited
by (i) applicable bankruptcy, reorganization, insolvency, moratorium and similar
laws affecting the enforcement of creditors' rights generally, and (ii) general
equitable principles (regardless of whether enforceability is considered in a
proceeding in equity or at law). Buyer is not subject to or obligated under any
provision of (a) its certificate or articles of incorporation or bylaws, (b) any
contract, (c) any license, franchise or permit or (d) any law, regulation,
order, judgment or decree, which would be breached or violated by the execution,
delivery and performance of this Agreement and the consummation by it of the
transactions contemplated hereby. Except as disclosed in Schedule 2.2, no
authorization, consent or approval of, or filing with, any public body, court or
authority is necessary on the part of Buyer for the consummation by Buyer of the
transactions contemplated by this Agreement.
2.3 Financing Commitment. Buyer has obtained a financing commitment from a
lender pursuant to which Buyer shall have access to sufficient funds to
consummate the transaction contemplated by this Agreement.
4
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DELTA AND THE SHAREHOLDERS
Except as otherwise set forth in the Schedules attached hereto, Delta and
each Shareholder, jointly and severally, hereby represent and warrant to Buyer
as follows:
3.1 Organization, Qualification and Corporate Power. Delta is a corporation
duly incorporated, validly existing under the laws of the State of Connecticut,
has delivered its most recent annual report to the Connecticut Secretary of
State, has paid the requisite fee, and has not filed a Certificate of
Dissolution with the Connecticut Secretary of State. Delta is duly qualified to
do business as a foreign corporation and in good standing in each jurisdiction
in which it is required to qualify to do business as a foreign corporation.
Delta has full corporate power and authority necessary to carry on the Business
and to own and use the properties and assets owned and used by it in connection
with the Business as such Business is now being conducted and as such properties
and assets are now being used. The articles of incorporation and by-laws of
Delta which were previously furnished are true, complete, and correct copies of
such documents as in effect on the date of this Agreement.
3.2 Authorization of Transaction. The execution, delivery and performance
of this Agreement and the transactions contemplated by this Agreement have been
duly authorized by the board of directors of Delta. No other approval on the
part of Delta or any Shareholder is necessary to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. Delta has full corporate power and authority and each Shareholder has
full legal power and authority to enter into this Agreement and to perform their
respective obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of Delta and each Shareholder enforceable in
accordance with its terms and conditions. Except as disclosed in Schedule 3.2,
neither the execution and the delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) conflict in a material manner
with, result in a breach of, constitute a default under, result in the
acceleration of, or require the payment of any amounts under, or create in any
party the right to accelerate, terminate, modify or cancel (A) any written
restriction, lien, encumbrance, indenture, contract, lease, sublease, agreement
or mortgage for borrowed money, instrument of indebtedness or other obligation
or liability to which Delta or any Shareholder is a party or by which any of
them is bound or to which any of their assets are subject (or result in the
creation of any lien or encumbrance upon any of the Purchased Shares or Delta's
assets) or (B) any provision of the certificate of incorporation or bylaws or
other organizational documents of Delta, or (ii) violate any Law to which Delta
is subject, the violation of which would adversely affect Buyer, Delta, the
Purchased Shares, or the transactions contemplated by this Agreement. Except as
disclosed in Schedule 3.2, no notice to, filing with or authorization, consent
or approval of, any public body, court, authority or other third party is
necessary by Delta or any Shareholder for the consummation by Delta and the
Shareholders of the transactions contemplated by this Agreement.
3.3 Capitalization. The authorized capital stock of Delta consists of
190,000 shares of Class A voting common stock and 10,000 shares of Class B
non-voting common stock, with a par value, in each case, of $.20 per share (the
"Delta Common Stock"), of which 46,993
5
shares of Class A voting common stock are outstanding and 15,889 shares are held
in treasury. All of the issued and outstanding shares of the capital stock of
Delta have been duly authorized and validly issued, are fully paid and
nonassessable and were offered, issued, sold and delivered by Delta in
compliance with all laws concerning the issuance of securities. Other than the
Purchased Shares held by the Shareholders there are no other shareholders or any
outstanding or authorized options, rights, warrants, calls, convertible
securities, rights to subscribe, conversion rights or other agreements or
commitments to which Delta or any Shareholder is a party or which are binding
upon Delta or any Shareholder providing for the issuance or transfer by Delta or
any Shareholder of any shares of capital stock, or any instrument convertible
into any such shares, of Delta and Delta has not reserved any shares of its
capital stock for issuance, nor are there any outstanding stock appreciation
rights, phantom equity or similar rights, agreements, arrangements or
commitments based upon the book value, income or other attribute of Delta.
3.4 Financial Statements. The books of account and related records of Delta
fairly reflect in reasonable detail its assets, liabilities and transactions in
accordance with the accrual basis of accounting applied on a consistent basis.
Schedule 3.4 contains the following financial statements:
Statements of income, retained earnings and cash flows of Delta for
the fiscal years ended December 31, 1998 and December 31, 1999,
inclusive, and balance sheets of Delta as at each of such dates
(together, the "Audited Financial Statements"), and an unaudited
statement of income of Delta for the ten months ended October 31, 2000
and an unaudited balance sheet of Delta as at such date (the
"Unaudited Financial Statements" and together with the Audited
Financial Statements constitute the "Financial Statements").
(a) The Audited Financial Statements: (i) are correct and complete and
in accordance with the books and records of Delta, which are regularly
maintained by management, (ii) fairly present the financial condition,
assets and liabilities of Delta as at their respective dates and the
results of operations and cash flows for the periods covered thereby and
(iii) have been prepared in accordance with GAAP consistently applied. The
Audited Financial Statements have been certified by Delta's accountants.
All references in this Agreement to the "Balance Sheet Date" shall mean
December 31, 1999.
(b) The Unaudited Financial Statements: (i) have been prepared on a
basis consistent with the Audited Financial Statements and in accordance
with all of the information contained in the books and records of Delta,
which are regularly maintained by management, (ii) fairly present the
financial condition, assets and liabilities of Delta as at their respective
dates and Schedule 3.4(b) sets forth all of the year end adjustments for
the December 31, 2000 fiscal year known to Delta or the Shareholders as of
the Closing Date, and (iii) have been prepared in accordance with GAAP
consistently applied except that the Unaudited Financial Statements do not
contain explanatory notes or a statement of cash flows and are subject to
year end adjustments of the type and in amounts consistent with historical
practices of Delta.
6
3.5 Receivables. All accounts and notes receivable reflected on the Opening
Balance Sheet, and all of Delta's accounts and notes receivable existing as of
the Closing Date (a) have arisen in the ordinary course of business of Delta,
(b) are subject only to a reserve for bad debts computed substantially in
accordance with GAAP consistently applied and reasonably estimated to reflect
the probable results of collection, and (c) have been billed and are generally
due within 30 days after such billing. Schedule 3.5 sets forth the total amount
of Delta's accounts receivable outstanding as of the last day of the month
immediately preceding the present month, and the aging of such receivables based
on the following schedule: 0-30 days, 31-60 days, 61-90 days, and over 90 days,
from the due date thereof.
3.6 Absence of Certain Developments. Since the Balance Sheet Date, except
as set forth on Schedule 3.6, or as contemplated by this Agreement, there has
not been:
(a) any event having a Material Adverse Effect on the business,
operations, properties, assets, rights, prospects, liabilities,
authorizations or condition (financial or otherwise) of Delta or Delta's
relations with its customers, agents, employees or creditors;
(b) any damage, destruction or loss (whether or not covered by
insurance) having a Material Adverse Effect on Delta's properties or
Business;
(c) any change in the authorized capital of Delta or its outstanding
securities or any change in the ownership of Delta's capital stock
including any change in ownership among the Shareholders or any grant of
any subscriptions, options, warrants, calls, conversion rights of
commitments or other interests in Delta stock;
(d) any declaration or payment of any dividend or distribution in
respect of Delta's capital stock or any direct or indirect purchase, or
redemption or other acquisition or retirement of any of the capital stock
of Delta except $1,478,090 distributed or to be distributed to permit the
Shareholders to pay their tax obligations due to Delta's status as a
subchapter `S' corporation;
(e) any increase in the compensation, bonus, sales commissions or fees
payable or to become payable by Delta to any of its directors, officers,
employees, consultants or agents, except for ordinary and customary bonuses
and salary increases for employees (which are other than officers,
directors, consultants or agents) in accordance with past practice and
reflected in the books and records of Delta and except for a special bonus
paid to employees on or near the Closing Date for a total sum not in excess
of $150,000;
(f) any work interruptions, labor grievances or claims filed;
(g) any sale or transfer, or any agreement to sell or transfer, any
assets, property or rights of Delta to any person or entity (other than the
sales of inventory in the ordinary course of business);
(h) any new or renegotiated indebtedness or any cancellation, or
agreement to cancel, any indebtedness or other obligation owing to Delta,
including any indebtedness
7
of Affiliates of Delta, other than the negotiation and adjustment of bills
made by Delta in the course of good faith disputes with customers in the
ordinary course of business and in a manner consistent with past practice;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of Delta or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets other than
inventories;
(k) any waiver of any rights or claims of Delta, other than the
negotiation and adjustment of invoices made by Delta in the course of good
faith disputes with customers in the ordinary course of business and in a
manner consistent with past practice;
(l) any amendment or termination (other than by expiration at the end
of its term) of any Contract, agreement, lease, license, permit or other
right to which Delta is a party;
(m) any transaction or conduct by Delta outside the ordinary course of
its business;
(n) any cancellation or termination of any contract with a customer or
client prior to the scheduled termination date which individually or in the
aggregate accounted for $50,000 of sales during the prior fiscal year;
(o) [RESERVED].
(p) any changes in accounting methods or practices (including, without
limitation, any change in depreciation or amortization methods or rates);
or
(q) any other distribution of property or assets by Delta.
3.7 Undisclosed Liabilities. Delta has no liabilities or obligations of any
nature, whether due or to become due, absolute, contingent or otherwise,
including liabilities for or in respect of federal, state and local taxes and
any interest or penalties relating thereto, except (a) to the extent reflected
as a liability on the Opening Balance Sheet, (b) liabilities incurred in the
ordinary course of business consistent with historical practice since the
Balance Sheet Date, and fully reflected as liabilities on Delta's books of
account, which alone or together would not have a Material Adverse Effect, (c)
unaccrued liabilities under contracts entered into in the ordinary course and
made available to Buyer where the amount of the liability is ascertainable from
the face of the contract and (d) liabilities disclosed and quantified on
Schedule 3.7.
3.8 Books and Records. The financial records, ledgers, account books,
minute books, stock certificate books, stock registers and other corporate
records of Delta are current, correct and complete in all material respects.
8
3.9 Taxes.
(a) Except as set forth on Schedule 3.9:
(i) Delta has timely filed all required federal, state, local and
foreign tax returns (the "Tax Returns") and estimates for all years
and periods (and portions thereof, if required) and for all
jurisdictions (whether federal, state, local or foreign) in which any
such Tax Returns or estimates were due. All Tax Returns were true,
correct and complete when filed. Delta has not filed a request for
extension of any Tax Return that is currently in effect. Copies of all
federal, state and foreign Tax Returns filed by Delta for the past
three-(3) years have been provided to Buyer. All Taxes, owed by Delta
and each Shareholder or remitted by Delta on behalf of a third party,
whether or not shown on a Tax Return, have been paid.
(ii) Since 1985, Delta has never been a member of any
consolidated, combined or unitary group for federal, state, local or
foreign Tax purposes.
(iii) Delta is not a party to any joint venture, partnership or
other arrangement that could be treated as a partnership for federal
income Tax purposes.
(iv) Delta has (a) withheld all required amounts from its
employees, agents, contractors and nonresidents and remitted such
amounts to the proper agencies; (b) paid all employer contributions
and payments; and (c) filed all federal, state, local and foreign Tax
Returns and reports with respect to employee income tax withholding,
social security, unemployment taxes and payments, all in compliance
with the withholding tax provisions of the Code as in effect for the
applicable year and other applicable federal, state, local or foreign
laws.
(v) Delta has not executed or filed with any taxing authority
(whether federal, state, local or foreign) any agreement or other
document extending or having the effect of extending the period for
assessment, reassessment or collection of any Taxes past the Closing
Date, and no power of attorney granted by Delta with respect to any
Taxes will be in force following the Closing.
(vi) No federal, state, local or foreign Tax audits or other
administrative proceedings, discussions or court proceedings are
presently pending with regard to any Taxes or Tax Returns of Delta.
(vii) Delta has not entered into any agreement with any taxing
authority relating to Taxes which affects any taxable year ending
after the Closing Date.
(viii) Delta has not agreed to and it is not required to make any
adjustment by reason of a change in accounting methods that affects
any taxable year ending after the Closing Date. Neither the IRS nor
any other agency has proposed any such adjustment or change in
accounting methods that affects any taxable year ending after the
Closing Date. Delta has no application pending with
9
any taxing authority requesting permission for any changes in
accounting methods that relate to its business or operations and that
affects any taxable year ending after the Closing Date.
(ix) Delta is not a party to any tax sharing agreement or similar
arrangement for the sharing of tax liabilities or benefits effective
for any year (whether current year, a future year or a past year) that
will have any effect after the Closing.
(x) Delta is not an investment company within the meaning of Code
section 351(e).
(xi) There is no contract, agreement, plan or arrangement
covering any employee or former employee of Delta that, individually
or collectively, could give rise to the payment by Delta after the
Closing Date of any amount that would not be deductible by reason of
Code sections 280G or 162(m).
(xii) No asset of Delta is tax-exempt use property under Code
section 168(h).
(xiii) No portion of the cost of any asset of Delta has been
financed directly or indirectly from the proceeds of any tax-exempt
state or local government obligation described in Code section 103(a).
(xiv) None of the assets of Delta is property that Delta is
required to treat as being owned by any other person pursuant to the
safe harbor lease provision of former Code section 168(f)(8).
(xv) Delta does not have and has not had a permanent
establishment in any foreign country and does not and has not engaged
in a trade or business in any foreign country.
(xvi) In the past seven years, Delta has not been a party to a
transaction that has been reported as a reorganization within the
meaning of Code section 368 or distributed a corporation (or been
distributed by a corporation) in a transaction that has been reported
to qualify under Code section 355.
(xvii) Delta has made a valid election to become a Subchapter S
corporation under Code section 1362(a) and Regulation section
1.1362-6(a) and the election remains effective through the Closing
Date.
(b) For purposes of this Section 3.9, the term "Delta" shall be deemed
to include any predecessor to Delta and any person or entity from which
Delta incurs a liability for Taxes as a transferee, joint and severally, or
by contract.
10
3.10 Real Property Leases.
(a) Set forth in Schedule 3.10 is a complete and accurate list and a
brief description of all real property leased or subleased by Delta (as
lessee or sublessee) (the "Leased Real Property"). With respect to each
lease so set forth, and except as otherwise indicated in Schedule 3.10: (i)
the lease has been validly executed and delivered by Delta and is in full
force and effect; (ii) neither Delta, nor any other party to the lease, is
in material breach or default, and no event has occurred which, with notice
or lapse of time, would constitute such a material breach or default and
permit termination, modification or acceleration under the lease; (iii) the
consummation of the transactions under this Agreement will not cause a
termination of the lease; (iv) no party to the lease has repudiated any
material provision thereof; (v) there are no disputes or oral agreements in
effect as to the lease, and there are no delayed payment programs in effect
as to the lease; (vi) all improvements leased thereunder have been
maintained substantially in accordance with the lease, applicable Law and
normal industry practice, and such improvements are generally suitable for
the purposes for which they are being used and Delta and each Shareholder
has not received any notice from any governmental authority that any of the
buildings and improvements is in material violation of any applicable Law;
and (vii) Delta has not assigned, sublet, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold, except
encumbrances, if any, which are to be released on or before the Closing
Date.
(b) Except as disclosed in Schedule 3.10, each component of the Leased
Real Property is in good condition, working order and repair, except for
maintenance, repairs and replacements conducted or required in the ordinary
course of the operation of the Leased Real Property, maintenance, repairs
and replacements that do not adversely affect the operation of the Leased
Real Property as the same are now operated, and ordinary wear and tear.
(c) Except as disclosed in Schedule 3.10, no Person authorized to act
on behalf of Delta has entered into any contract, arrangement or
understanding with respect to the future ownership, development, use,
occupancy or operation of the Leased Real Property which (i) would be
binding on Delta, and (ii) would have a Material Adverse Effect on Delta,
the leased property or its future ownership, development, use or operation
thereof by Delta or Buyer, other than options, rights of first refusal or
other similar arrangements in favor of Delta under the leases and subleases
relating to the Leased Real Property, copies of which have been previously
delivered to Buyer.
(d) Delta and each Shareholder has not received notice of any pending
condemnation or eminent domain proceedings that affect the Leased Real
Property and there are no threatened or contemplated condemnation or
eminent domain proceedings that affect the Leased Real Property, and Delta
and each Shareholder has not received any notice, oral or written, of the
intention of any governmental entity or other Person to take or use all or
any part thereof under the power of eminent domain.
11
(e) Delta is not obligated to pay any leasing or brokerage commissions
relating to any lease and, except as set forth on Schedule 3.10, will not
have any obligation to pay any leasing or brokerage commission upon the
renewal of any lease.
(f) Except as set forth on Schedule 3.10, no construction, alteration
or other leasehold improvement work with respect to any of the leases
remains to be paid for or to be performed by Delta.
3.11 Real Property Owned. Schedule 3.11 lists and describes in reasonable
detail and contains a legal description of all real property owned by Delta (the
"Owned Real Property"). With respect to each parcel of real property listed in
Schedule 3.11, except as otherwise indicated in Schedule 3.11:
(a) Delta has good and marketable fee simple title to the Owned Real
Property, free and clear of all mortgages, pledges, security interests,
encumbrances, covenants, charges or other liens, easements and other
restrictions, other than installments of real property taxes and special
assessments not yet delinquent;
(b) Delta and each Shareholder has not received any notice of pending
condemnation or eminent domain proceedings that affect the Owned Real
Property and, to the knowledge of Delta and the Shareholders, there are no
threatened or contemplated condemnation or eminent domain proceedings that
affect the Owned Real Property, and Delta and each Shareholder has not
received any notice, oral or written, of the intention of any governmental
entity or other Person to take or use all or any part thereof under the
power of eminent domain;
(c) there are no leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the Owned Real Property, except for
possible incidental and temporary use, none of which, if any, would be
binding on Delta following Closing;
(d) there are no outstanding options or rights of first refusal to
purchase any of the Owned Real Property, or any portion thereof or interest
therein;
(e) there are no Persons (other than Delta) in possession of any of
the Owned Real Property;
(f) each component of the Owned Real Property is in good operating
condition and repair, except for ordinary wear and tear, maintenance,
repairs and replacements conducted or required in the ordinary course of
the operation of the Owned Real Property and maintenance, repairs and
replacements that do not adversely affect the operation of any of the Owned
Real Property as the same are now operated;
(g) the Leased Real Property and the Owned Real Property comprise all
of the real property used by Delta in connection with the Business;
(h) the Owned Real Property is legally subdivided and consists of
separate tax lots so that it is assessed separate and apart from any other
property;
12
(i) except as set forth on Schedule 3.11, the Owned Real Property is
not located in any special flood hazard area designated by any federal,
state, county or local government agencies having jurisdiction over the
Owned Real Property;
(j) except as set forth on Schedule 3.11, no work has been performed
on or materials supplied to the Owned Real Property within any applicable
statutory period which could give rise to mechanic's or materialmen's
liens;
(k) Schedule 3.11 sets forth a true, correct and complete list of all
title insurance commitments, title insurance policies, surveys, site plans,
engineering reports and hazardous waste reports prepared with respect to
the Owned Real Property, copies of which have previously been made
available by Delta to Buyer.
3.12 Compliance, Utilities and Other Matters. Except as disclosed in
Schedule 3.12, with respect to the Owned Real Property and the Leased Real
Property (as indicated below):
(a) to the knowledge of Delta and the Shareholders and except for
matters shown on the survey of the Owned Real Property prepared by KWP
Associates on January 19, 2001, the buildings and improvements on the Owned
Real Property are located within the boundary lines of the parcels of land
as shown on the surveys and/or described in the deeds with respect to each
(excluding boundary line fences and driveways and utility lines extending
into public rights of way), are not in violation of setback requirements
and are not in violation of zoning laws and ordinances, and do not encroach
on any easement which burdens the land to an extent that they prevent the
use of such easements for their beneficial purposes or could warrant a
removal of the encroachment;
(b) Delta currently has vehicular access to the Owned Real Property
and the Leased Real Property adequate for its current uses and such access
will not be terminated upon consummation of the transactions contemplated
by this Agreement;
(c) all buildings and improvements thereon have received all approvals
of Governmental Authorities (including licenses and permits) as are
necessary in connection with Delta's ownership or operation thereof and
such buildings and improvements in general are currently operated and
maintained in material compliance with all applicable laws, rules and
regulations; and
(d) all buildings and improvements thereon are supplied with utilities
and other similar services or have available utilities and other similar
services (e.g., on-site wells) adequate for the present operation of such
buildings and improvements.
3.13 Assets.
(a) Schedule 3.13(a) contains a complete and correct list of all of
the assets of the type identified below, which are owned or used by Delta
in connection with the Business, listed according to the following
categories:
13
(i) all inventory of Delta relating to the Business, including
without limitation finished goods inventory, work in process
inventory, raw materials inventory and supplies as of January 31, 2001
(collectively, the "Inventory");
(ii) all automobiles, trucks, trailers, vans and other vehicles
of Delta used in the Business (collectively, the "Vehicles"); and
(iii) all fixtures, fabricating, demonstration, and other
equipment, machinery, apparatus, tools, appliances, and computer
equipment used in the Business, whether or not reflected as capital
assets in the accounting records of Delta (collectively, the "Fixed
Assets").
(b) Except as set forth in Schedule 3.13(b), Delta has good and
marketable title to or a valid right to use, as the case may be, the
Inventory, Fixed Assets, Vehicles and all books, records, correspondence,
manuals, customer lists, studies, reports and summaries relating to the
Business (collectively, the "Personal Property Assets") and none of the
Personal Property Assets is subject to any lien, security interest,
encumbrance or other adverse claim.
(c) Except as set forth in Schedule 3.13(c), Delta has good and
marketable title to all assets used, held for use in, or necessary for the
operation of the Business as presently conducted.
(d) The Personal Property Assets are suitable and adequate for the
purposes for which such assets are currently used and there are no actual,
current or presently existing conditions affecting the Personal Property
Assets, either individually or in the aggregate, which would interfere in
any adverse respect with the normal use thereof in the operation of the
Business. The Personal Property Assets are in good operating condition and
repair, taking into account normal wear and tear and subject to
maintenance, repairs and replacements conducted or required in the ordinary
course of the Business.
3.14 Inventory.
(a) Except as set forth in Schedule 3.14, Delta has good and
marketable title to all of its Inventory as reflected on the Opening
Balance Sheet and none of such Inventory is subject to any lien, security
interest, encumbrance or other adverse claim.
(b) All of the Inventory, wherever located (including items in
transit), owned by Delta and used or held for use in connection with the
Business (i) is currently usable or saleable in the ordinary course of
business as now conducted by Delta and taking into account market
conditions, useful life of the Inventory and any other matters customarily
affecting the use and sale of Inventory, (ii) is sufficient for the conduct
of the Business, taking into account market conditions, useful life of the
Inventory and any other matters customarily affecting Inventory levels,
(iii) meets applicable quality control standards of Delta and all
published, and applicable quality control standards required of Delta by
its customers, including QS-9000 and IS09001, and (iv) is carried on the
books of Delta at
14
an amount which reflects valuations not in excess of the lower of cost or
market determined substantially in accordance with GAAP applied on a
consistent basis.
3.15 Contracts. (a) Schedule 3.15 (a) contains a complete and correct list
or copy of all agreements, contracts, commitments and other instruments and
arrangements in excess of $25,000 (whether written or oral) of the types and
listed accordingly to the categories described below by which Delta or any of
the Shareholders are bound or affected or to which Delta or any Shareholder is a
party or by which any of them is bound in connection with the Business (the
"Contracts"):
(i) leases, licenses, permits, franchises, insurance policies,
Governmental Approvals and other contracts concerning or relating to
the Owned Real Property or the Leased Real Property;
(ii) employment, consulting, agency, collective bargaining or
other similar contracts, agreements, and other instruments and
arrangements relating to or for the benefit of current, future or
former employees, officers, directors, sales representatives,
distributors, dealers, agents, independent contractors or consultants;
(iii) loan agreements, indentures, letters of credit, mortgages,
security agreements, pledge agreements, deeds of trust, bonds, notes,
guarantees, and other agreements and instruments relating to the
borrowing of money or obtaining of or extension of credit;
(iv) licenses, licensing arrangements and other contracts
providing in whole or in part for the use of, or limiting the use of,
any Intellectual Property;
(v) brokerage or finder's agreements;
(vi) joint venture, partnership and similar contracts involving a
sharing of profits or expenses (including but not limited to joint
research and development and joint marketing contracts);
(vii) stock purchase agreements, asset purchase agreements and
other acquisition or divestiture, agreements, including but not
limited to any agreements relating to the acquisition, sale, lease or
disposal of any assets (other than sales of inventory in the ordinary
course of business) or involving continuing indemnity or other
obligations;
(viii) sales agency, manufacturer's representative, marketing or
distributorship agreements;
(ix) contracts, agreements or arrangements with respect to the
representation of the Business in foreign countries;
15
(x) master lease agreements providing for the leasing of both (A)
personal property primarily used in, or held for use primarily in
connection with, the Business and (B) other personal property;
(xi) contracts, agreements or commitments with any employee,
director, officer, or Affiliate of Delta or Affiliate of a
Shareholder; and
(xii) any other contracts, agreements or commitments that are or
will be material to the Business.
(b) Delta has made available to Buyer complete and correct copies of
all written Contracts, together with all amendments thereto, and accurate
descriptions of all material terms of all oral Contracts, set forth or
required to be set forth in Schedule 3.15(a) are included in such Schedule;
(c) Delta is not a party to any employment agreement, nor has it
executed any letter relating to employment, which provides for any increase
in compensation (including severance pay or benefits) based on a change in
control of Delta or a sale of the Business. There have been no events of
default under any contract by Delta or any third party, and no state of
facts exist which with notice or the passage of time, or both, would
constitute an event of default by Delta or any other party to a Contract.
All Contracts are in full force and effect, and each constitutes the legal,
valid, binding and enforceable obligation of Delta and the other parties
thereto. Except for the consents set forth on Schedule 3.2, the
transactions contemplated by this Agreement will not (and will not give any
person a right to) terminate or modify any rights of, or accelerate or
increase any obligations of Delta under any Contract.
3.16 Litigation. Except as set forth in Schedule 3.16, there is no action,
order, writ, injunction, judgment or decree outstanding or any claim, suit,
litigation, proceeding, labor dispute, arbitral action, governmental audit or
investigation (collectively, "Actions") pending, threatened or anticipated (a)
against, related to or affecting Delta, the Shareholders or the Purchased
Shares, (b) seeking to delay, limit or enjoin the transactions contemplated by
this Agreement, (c) that involve the risk of criminal or civil liability to
Delta or its respective officers or directors, or (d) in which Delta is a
plaintiff. Except as set forth in Schedule 3.16, Delta is not in default with
respect to or subject to any judgment, order, writ, injunction or decree of any
court or governmental agency, and there are no unsatisfied judgments against
Delta.
3.17 Compliance with Law. Except as set forth in Schedule 3.17:
(a) Delta has not violated any material applicable Laws or any final,
non-appealable judgment, decision, decree or order of any court or
governmental agency, department or authority relating to the Business,
including, without limitation, all applicable energy, public utility,
zoning, building and health Laws and all applicable Laws promulgated by the
United States Environmental Protection Agency;
(b) Delta holds all material licenses, franchises, permits,
registrations, orders, resale tax certificates and other governmental
authorizations and approvals (collectively, the "Authorizations") necessary
to operate the Business in the manner in which it is
16
presently conducted. Schedule 3.17(b) lists all such Authorizations. The
Authorizations listed on Schedule 3.17(b) are valid, and neither Delta nor
any Shareholder has received any notice that any Governmental Authority
intends to cancel, terminate or not renew any such Authorization, nor is
there any basis that would permit any Governmental Authority to cancel,
terminate or not renew any such Authorization. Except as set forth in
Schedule 3.17(b), Delta has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set
forth in the Authorizations and is not in material violation of any of the
foregoing;
(c) Delta and each Shareholder has not received any written notice to
the effect and has not been advised that Delta is not in compliance with
any Laws, and has no reason to anticipate that any of its existing
practices or policies are likely to result in violations of any such Laws
as now applied and enforced against Delta; and
(d) Delta has filed in a timely manner all reports, documents and
other materials it was required to file (and the information contained
therein was correct and complete) under all Laws (including rules and
regulations thereunder).
3.18 Intellectual Property.
(a) Attached hereto as Schedule 3.18 is a correct list of all
Proprietary Rights used in or necessary to the Business as now being
conducted (other than for off-the-shelf software programs that have not
been customized for use by Delta). Except as set forth in Schedule 3.18,
Delta owns or has the right to use all Proprietary Rights necessary to the
conduct of the Business as presently conducted and as necessary to develop
Delta's products and services as such products and services are currently
anticipated to be developed. With respect to such Proprietary Rights,
except as otherwise indicated in such schedule, (a) Delta owns all right,
title, and interest in and to or a valid and enforceable license or waiver
to use all of such Proprietary Rights, (b) there are no outstanding notices
or claims (written or oral) received by Delta or any Shareholder asserting
the infringement by, or invalidity, abuse, misuse, or unenforceability of,
any of such Proprietary Rights by Delta, and there are no grounds for the
same, and (c) all such Proprietary Rights will be owned or available for
use by Delta on identical terms and conditions immediately subsequent to
the Closing Date. The conduct of the Business has not and does not infringe
any rights of others. Except as set forth on Schedule 3.18, all of the
patents, trademarks (including service marks and logos) and copyrights
owned by Delta have been duly registered in, filed in or issued by the
United States Patent and Trademark Office or Register of Copyrights or the
corresponding offices of other countries as identified on Schedule 3.18 and
have been properly maintained and renewed, consistent with commercially
reasonable business practices, in accordance with all applicable provisions
of Law in the United States and each such country, except in those
instances set forth in Schedule 3.18 where registration applications are
pending in either such Office or Register.
(b) The term "Proprietary Rights" means any patents, patent
applications, patent disclosures and inventions as well as any reissues,
continuations, continuations-in-part, divisions, extensions or
reexaminations thereof; any trademarks, service marks,
17
trade dress, logos, trade names, service names, brand names and corporate
names, together with all goodwill associated therewith, whether or not
registered; copyrights and copyrightable works; mask works; trade secrets;
know-how and confidential information; computer software, including source
code and object code; all other proprietary rights; and all copies and
tangible embodiments of the foregoing (in whatever form or medium); all
registrations, applications for registration and renewals for each of the
foregoing; and all know-how, in each of the foregoing cases wherever such
rights exist throughout the world, including the right to recover for past
infringement.
(c) To the extent any Proprietary Rights exist, Delta has taken
reasonable security measures to maintain the confidentiality of and to
protect such Proprietary Rights. To the extent any Proprietary Rights
exist, each engineer, programmer, consultant and officer of Delta has
executed a proprietary information and inventions agreement substantially
in the form provided to Buyer. After the Closing Date, all patents, patent
applications or other Proprietary Rights used or useful in the business of
Delta shall be unimpaired as a result of this transaction.
3.19 Environmental Matters. Notwithstanding anything to the contrary
contained in this Agreement or the Schedules and other attachments hereto, the
representations and warranties set forth in this Section 3.19 are the exclusive
representations and warranties of Delta and the Shareholders concerning any and
all environmental matters.
(a) Definitions
(i) As used herein, "Environmental Claims" means any and all
administrative, regulatory or judicial actions or causes of action,
suits, obligations, liabilities, losses, proceedings, executory
decrees, judgments, penalties, fees, demands, demand letters, orders,
directives, claims (including any claims involving toxic torts or
liability in tort, strict, absolute or otherwise), liens, notices of
noncompliance or violation, or legal fees or costs of investigations,
monitoring or proceedings, relating in any way to any Environmental
Laws or any Environmental Permit issued under any such Environmental
Laws, or arising from the presence, Release or threatened Release (or
alleged presence, Release or threatened Release) into the environment
of any Hazardous Materials (hereinafter "Claims") including, without
limitation, and regardless of the merit of such Claims, any and all
Claims by any governmental or regulatory authority or by any third
party for enforcement, cleanup, remediation, removal, response,
remedial or other actions or damages, contribution, indemnification,
cost recovery, compensation, or injunctive relief pursuant to any
Environmental Law or for any Property damage or personal injury
(including death) or threat of injury to health, safety, natural
resources, or the environment.
(ii) As used herein, "Environmental Laws" means all applicable
past and present statutes, regulations, rules, ordinances, codes,
licenses, permits, orders, approvals, authorizations and similar
items, of all governmental agencies, departments, commissions, boards,
bureaus, or instrumentalities of the United States, and the states and
political subdivisions thereof, and all principles of
18
common law pertaining to the regulation and protection of human
health, safety, and damages to natural resources, including, without
limitation, Releases and threatened Releases or otherwise relating to
the operation, manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of Hazardous Materials.
Environmental Laws include, but are not limited to, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended ("CERCLA"); the Federal Insecticide, Fungicide and Rodenticide
Act, as amended ("FIFRA"); the Resource Conservation and Recovery Act,
as amended ("RCRA"); the Toxic Substances Control Act, as amended
("TSCA"); the Food, Drug, and Cosmetic Act as amended ("FDA"); the
Clean Air Act, as amended ("CAA"); the Federal Water Pollution Control
Act, as amended ("FWPCA"); the Oil Pollution Act of 1990, as amended
("OPA"); the Fish and Wildlife Coordination Act, as amended ("FWCA");
the Endangered Species Act, as amended ("ESA"); the National
Environmental Policy Act of 1969 ("NEPA"); the Wild and Scenic Rivers
Act, as amended ("WSRA"); the Rivers and Harbors Act of 1899, as
amended ("1899 Rivers Act"); the Water Resource Research Act of 1984,
as amended ("WRRA"); the Occupational Safety and Health Act, as
amended ("OSHA"); and the Safe Drinking Water Act, as amended
("SDWA"); and their state and local counterparts or equivalents, all
as amended from time to time.
(iii) As used herein, "Environmental Permits" means all
registration; application; filing; certification; notice; final,
non-appealable order; license; permit; approval; consent;
qualification; authorization and/or waiver of any governmental
authority issued under or with respect to any applicable Environmental
Laws.
(iv) As used herein, "Hazardous Materials" means (a) any
chemicals, materials, substances or wastes which are now defined as or
included in the definition of "hazardous substances", "hazardous
materials", "toxic substances", "extremely hazardous substances",
"toxic pollutants", or words of similar import, under any applicable
Environmental Laws; (b) any petroleum, petroleum products (including,
without limitation, crude oil or any fraction thereof), natural gas,
natural gas liquids, liquefied natural gas or synthetic gas useable
for fuel (or mixtures of natural gas and such synthetic gas) or oil
and gas exploration or production waste, polychlorinated biphenyls
("PCBs"), asbestos-containing materials ("ACMs"), mercury and
lead-based paints; and (c) any other chemical, material, substances,
or waste, exposure to which is prohibited, limited or regulated by any
government or regulatory authority.
(v) As used herein, "Properties" means all of Delta's Owned Real
Property and Leased Real Property.
(vi) As used herein, "Release" means any emission, spill,
seepage, leak, escape, leaching, discharge, injection, pumping,
pouring, emptying, dumping, disposing or release of Hazardous
Materials.
19
(b) Except for violations or conditions that have been cured or
remedied in all material respects, or are disclosed in Schedule 3.19(b),
Delta is in material compliance with all applicable Environmental Laws in
connection with the ownership, use, maintenance, and operation of the
Properties. Without limiting the foregoing, Delta and the Business are in
material compliance with all laws, rules, and regulations, relating to: (i)
releases, discharges, emissions or disposals to air, water land, or
groundwater; (ii) the use, manufacture, importing, handling, or disposal of
Hazardous Materials; (iii) the generation, treatment, storage,
transportation, disposal, or other management of solid wastes and of
Hazardous Materials; (iv) the exposure of persons to Hazardous Materials;
and (v) all judicial and administrative orders, injunctions, judgments,
declarations, directives, notices, or demands with respect to the foregoing
matters. Delta has not received any communication (written or oral) that
alleges that Delta or any operations on the Properties are not in
compliance with applicable Environmental Laws, except violations or
conditions that have been cured or remedied in all material respects, or
would not be reasonably expected to have a Material Adverse Effect on the
business, operations, or financial condition of the Business.
(c) Except as set forth in Schedule 3.19(c), Delta is not subject to
any pending or, to the knowledge of Delta or any Shareholder, threatened
investigation or inquiry by any governmental or regulatory body, relating
to any violation under any Environmental Law, or relating to a Release or
threatened Release of any Hazardous Materials, whether on Property owned or
controlled by Delta or elsewhere, except for violations of Environmental
Laws which would not reasonably be expected to have a Material Adverse
Effect on the business, operations, or financial condition of Delta or the
Business.
(d) Schedule 3.19(d) contains a complete and correct list of all
material Environmental Permits, all of which are in full force and effect
and, to the extent any of such Environmental Permits are not personal to
Delta but apply to the Owned or Leased Real Property, all such
Environmental Permits will remain in full force and effect following
consummation of the transactions contemplated hereby. Except as set forth
in Schedule 3.19(d), Delta is not required to file, obtain, or apply for
additional material Environmental Permits to conduct the Business as it is
presently being conducted, including those Environmental Permits relating
to: (i) the Release or threatened Release of Hazardous Materials; or (ii)
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, whether by Delta or
any third party on its behalf. Delta and the Properties are in material
compliance with all Environmental Permits and Environmental Laws, and Delta
has not received any notice from any governmental authority or any other
Person indicating that the Properties are not now in material compliance or
requesting information that may reasonably result in issuance of notice
that the Properties are not now in material compliance. Schedule 3.19(d)
further contains a complete and correct list of all periodic or other
reports concerning Delta, the Properties, or operations at the Properties
submitted to any Governmental Authority by Delta within the past one year,
including but not limited to NPDES, EPCRA, CERCLA, Hazardous Materials, air
emissions reports, reports of environmental investigations of the
Properties, and any corrective action, cleanup, or monitoring plans.
20
(e) Except as set forth in Schedule 3.19(e), no underground storage
tanks ("USTs") or other underground storage receptacles, or related piping,
for Hazardous Materials are located on the Properties and there have been
no uncorrected or non-mitigated material releases of Hazardous Materials
in, on, under or from the Properties. The USTs identified in Schedule
3.19(e) have been properly closed according to all applicable Environmental
Laws. Except as disclosed on Schedule 3.19(e), no conditions exist which:
(i) interfere with, prevent, or, with the passage of time, could interfere
with or prevent continued compliance in all material respects with any of
the Environmental Permits or any Environmental Law; (ii) may give rise to
any substantial liability of Delta (whether based in contract, tort,
implied or express warranty, criminal or civil statute or otherwise) under
any Environmental Law; or (iii) obligate Delta or, with the passage of
time, could cause Delta to be obligated, to incur substantial cost in
connection with the clean up, remediation, abatement or other restoration
to a former condition, by itself or jointly with others, of any
contaminated surface water, groundwater, soil or any natural resources
associated therewith either on the Properties or at any Property owned by a
third party, or any building, structural or insulation materials located on
or in the Properties that contain greater than 1% asbestos.
(f) Delta has not: (i) released any Person from any claim under any
Environmental Law or waived any rights concerning any violation of
Environmental Law; or (ii) contractually indemnified any Person for any
violation of Environmental Law related to the Properties, except as listed
on Schedule 3.19(f).
(g) Except as set forth in Schedule 3.19(g), there are no consent
decrees, consent orders, settlement agreements, judgments, judicial or
administrative orders or agreements (other than Environmental Permits) with
or liens by any governmental authority, quasi-governmental entity or other
Person relating to any Environmental Law which regulate, obligate or bind
Delta with respect to the Business and which are not generally applicable
to all Persons owning and/or operating Properties similar to the Business.
(h) True and correct copies of all Phase I or greater written
environmental reports, audits or assessments conducted for Delta by
independent, unrelated third Persons and related to the Properties have
been made available to Buyer for copying and/or inspection.
(i) There is no Environmental Claim pending or threatened against
Delta or against any Person or entity whose liability for any Environmental
Claim Delta has or may have retained or assumed either contractually or by
law, or in connection with the ownership or operation of the Properties,
and no valid basis for any such Environmental Claim exists.
3.20 Delta Products; Product Liability. Subject to Delta's historical
ordinary course experience, all products manufactured or modified by Delta are
free from any defects in material and workmanship that could (1) allow a
purchaser or user thereof to return any such
21
product for refund or replacement, (2) result in a recall of any such product,
or (3) give rise to a claim by any person for personal injury caused by any such
product when used in the manner for which such product was designed and
intended.
3.21 Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, except Stonebridge Associates,
LLC ("Delta's Financial Advisor"), whose success fee will be paid by the
Shareholders.
3.22 Corporate Names. Set forth on Schedule 3.22 is a listing of all prior
corporate names of Delta, and all names of all predecessor companies of Delta,
including the names of any entities acquired by Delta (by stock purchase, merger
or otherwise) or owned by Delta or from which Delta previously acquired material
assets. Except as disclosed on Schedule 3.22, Delta has not been a subsidiary or
division of another corporation.
3.23 Insurance. Except as provided on Schedule 3.23, Delta has not, during
the past three policy years, handled or received knowledge of any insurance
losses or workers' compensation claims relating to Delta or the Employees
(defined below). Delta maintains, and since December 31, 1999 has maintained,
insurance (a) written by insurance companies reasonably believed by Delta to be
financially sound and reputable, (b) that is sufficient for compliance by Delta
with all of its Contracts, agreements, instruments and other commitments and
with all applicable Law, and (c) that insures against risks of the kind
customarily insured against and in amounts customarily carried by companies
similarly situated and provides adequate insurance coverage for the Business and
the assets of Delta. Schedule 3.23 lists and summarizes the property and
casualty and liability insurance policies and programs maintained for the
benefit of Delta. To the extent that Delta has a policy of maintaining
self-insurance coverage of any kind under which Delta benefits, such policy is
described on Schedule 3.23. Except as set forth on Schedule 3.23, since December
31, 1999, (i) no insurance maintained by Delta or with respect to the business
conducted by Delta has been canceled by the insurer nor has Delta applied for
and been refused coverage by any insurer, (ii) Delta and each Shareholder has
not received any notice of any pending or threatened termination of any policies
of insurance owned or paid by Delta, nor has any insurer suggested any
alteration of any tangible asset, the purchase of additional assets or
modification of any methods of doing business, and (iii) all insurance
maintained by or for the benefit of Delta can be terminated by Delta without the
need for any additional payments of any kind from Delta or any other person or
entity on account of the policies. Delta is not in default with respect to any
provision contained in any such insurance policy, and Delta has not failed to
give any notice or present any claim thereunder in a due and timely fashion.
3.24 Compensation; Employment Agreements; Organized Labor Matters.
(a) Schedule 3.24 sets forth the names and titles of all employees of
Delta (the "Employees") and the names of all officers and directors of
Delta listing all employment, severance or other agreements with the
Employees and the base rate of compensation of each such person as of the
date hereof.
22
(b) During the past three years (i) Delta has not been, nor is it
currently, bound by or subject to (and none of the assets or properties of
Delta is bound by or subject to) any arrangement or agreement with any
labor union with respect to the Employees, (ii) none of the Employees has
been or is currently represented by any labor union or covered by any
collective bargaining agreement, (iii) no campaign to establish such
representation has been commenced or is currently in progress, and (iv)
there has not been nor is there currently any pending or threatened labor
dispute involving any group of the Employees nor has Delta experienced any
labor interruptions.
3.25 Employee Plans and ERISA. Schedule 3.25 attached hereto contains a
true, correct and complete list of all pension, benefit, profit sharing,
retirement, deferred compensation, welfare, insurance, disability, bonus,
vacation pay, severance pay and other similar plans, programs and agreements
whether reduced to writing or not, relating to the employees or former employees
of Delta (collectively the "Employee Plans") under which or to which Delta
contributes or has ever contributed or has been required to contribute for the
benefit of its employees or former employees, and, except as set forth in
Schedule 3.25, there are no Employee Plans with respect to which Delta has any
obligations, contingent or otherwise, past or present, under applicable law or
the terms of any such Employee Plan. Delta has not contributed to, nor does it
have any past or present obligation to contribute to, any multiemployer plan, as
such term is defined in Section 3(37) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). Except as set forth on Schedule 3.25, the
Employee Plans have been operated and maintained in all material respects in
compliance with all applicable Laws and regulations including, but not limited
to ERISA, the Code, and the health care continuation provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, a amended ("COBRA").
Delta has in all respects performed all obligations required to be performed
under, and is not in violation in any respect of, and there has not been any
material default or violation by any other party with respect to, any of the
Employee Plans. Except as set forth in Schedule 3.25, Delta does not have any
obligation to provide life or medical insurance benefits to former or retired
employees or beneficiaries thereof, excluding any obligations under COBRA.
Neither Delta, nor any of its directors, officers, employees or agents, or any
"party of interest" or "disqualified person," as such terms are defined in
Section 3 of ERISA and Section 4975 of the Code, has, with respect to any
Employee Plan, engaged in or been a party to any nonexempt "prohibited
transaction," as such term is defined in Section 406 of ERISA or Section 4975 of
the Code. To the extent applicable, each Employee Plan intended to qualify under
Section 401(a) of the Code have been determined by the Internal Revenue Service
to so qualify, and the trusts created thereunder have been determined to be
exempt from tax under the provisions of Section 501(a) of the Code. Nothing will
occur prior to Closing which might cause the loss of such qualification or
exemption, and no such Employee Plan has been operated in a manner which would
cause it to be disqualified in its operation.
3.26 Deposit Accounts; Power of Attorney. Set forth on Schedule 3.26 with
respect to Delta is (a) the name of each financial institution in which Delta
has accounts or safe deposit boxes, (b) the names in which the accounts or boxes
are held, (c) the type of account and account number, and (d) the name of each
person or entity authorized to draw thereon or have access thereto. Schedule
3.26 also sets forth the name of each person or entity holding a general or
special power of attorney from or otherwise binding upon Delta and a description
of the terms of such power.
23
3.27 Related Party Agreements. Except as set forth on Schedule 3.27, Delta
is not a party to or otherwise bound by any agreement with any of its Affiliates
or with any Shareholder or Shareholder Affiliate.
3.28 Customer/Supplier Relationships. Except as set forth on Schedule 3.28
and since the Balance Sheet Date, there have not been any material and adverse
changes, terminations, cancellations or limitations of the business relationship
of the Seller with any customer or supplier which individually or in the
aggregate provided more than $500,000 of services or purchases during the prior
fiscal year other than such changes that occur in the ordinary course of
business.
3.29 Indebtedness to and from Officers, Directors and the Shareholders.
Except as set forth on Schedule 3.29 attached hereto, Delta is not indebted,
directly or indirectly, to any person who is an officer, director or any of the
Shareholders of Delta or any Affiliate of any such person in any amount
whatsoever other than for salaries for services rendered or reimbursable
business expenses, all of which have been reflected on the Financial Statements,
and no such officer, director, or any of the Shareholders or Affiliate of any
such person is indebted to Delta except for advances made to employees of Delta
in the ordinary course of business to meet reimbursable business expenses
anticipated to be incurred by such obligor.
3.30 Disclosure. No representation or warranty of Delta or any of the
Shareholders in this Agreement or in any certificate or agreement furnished or
to be furnished by Delta or any of the Shareholders or on behalf of Delta or any
of the Shareholders contains, or will contain, an untrue statement of a material
fact with respect to Delta or any of the Shareholders or omits to state a
material fact necessary to make the statements therein with respect to Delta or
any of the Shareholders not misleading. True, correct and complete copies of
each document or agreement listed or described on Delta's Schedules have been
made available or will be made available to Buyer prior to the Closing and there
are no amendments or modifications thereto, except as expressly noted in Delta's
Schedules on which such agreement or document is referenced.
ARTICLE 4
COVENANTS OF DELTA AND THE SHAREHOLDERS
4.1 Conduct of Business. During the period from the date of this Agreement
and continuing until the Closing Date, Delta and each Shareholder, jointly and
severally, agree that (except as Buyer shall otherwise consent in writing):
(a) Ordinary Course.
(i) Delta shall carry on its respective business in the usual,
regular and ordinary course, in substantially the same manner as
heretofore conducted, and shall use all reasonable efforts to preserve
intact its present lines of business, maintain its rights and preserve
its relationships with customers, suppliers and others having business
dealings with Delta and that the Business shall not be impaired at the
Closing Date.
24
(ii) Delta shall not (A) enter into any new material line of
business or (B) incur or commit to any capital expenditures other than
those set forth on Schedule 4.1(a).
(iii) Delta shall not change the pricing on any of its products
or services without the written consent of Buyer except in the
ordinary course.
(b) Product Development. Delta shall continue to use commercially
reasonable efforts to develop, in accordance with existing plans or
contract, any new products or services or modifications to existing
products or services.
(c) Dividends; Changes in Share Capital. Delta shall not (i) declare
or pay any dividends on or make other distributions in respect of any of
its capital stock except $127,000 to permit the Shareholders to pay their
tax obligations due to Delta's status as a subchapter `S' corporation, (ii)
split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of
or in substitution for, shares of its capital stock, or (iii) repurchase,
redeem or otherwise acquire any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital
stock.
(d) Issuance of Securities. Delta shall not issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of its
capital stock of any class or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such
shares or enter into any agreement with respect to any of the foregoing.
(e) Governing Documents. Delta shall not amend or propose to amend its
certificate of incorporation, by-laws or other governing documents.
(f) No Acquisitions. Delta shall not acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets (other than the acquisition of assets used in the
operations of the Business in the ordinary course).
(g) No Dispositions. Delta shall not sell, lease, encumber or
otherwise dispose of, or agree to sell, lease, encumber or otherwise
dispose of, any of its assets other than inventory.
(h) Indebtedness. Delta shall not (i) make any loans, advances or
capital contributions to, or investments in, any other Person or (ii) pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than trade
indebtedness, payments, discharges or satisfactions incurred or committed
to in the ordinary course of business consistent with past practice and
borrowings or paydowns consistent with past practice under Delta's existing
credit facilities.
25
(i) Severance Pay. Except as contemplated by this Agreement, Delta
shall not grant or obligate itself to pay any severance or termination pay
(i) to any director or officer or (ii) to any other employee except (A)
payments made pursuant to written agreements outstanding on the date hereof
and disclosed in Delta's Schedules and (B) the payment of no more than two
(2) weeks severance to employees, in lieu of notice of termination, who
leave prior to the Closing Date.
(j) Employees; Benefit Plans. Delta shall not (i) adopt any employee
benefit plan, (ii) enter into any employment contract, pay or agree to pay
any special bonus or special remuneration to any director or employee, or
increase the salaries or wage rates of its employees, except for bonuses to
existing employees in connection with anniversary and promotions consistent
with past practice and except for a special bonus paid to employees on or
near the Closing Date for a total sum not in excess of $150,000, or (iii)
hire or employ any executive personnel after the date hereof.
(k) Reports, Taxes. Delta will duly and timely file all Tax Returns
and will promptly pay all Taxes levied or assessed upon it or any of its
properties (unless contesting such in good faith and adequate provision has
been made therefor), until the Closing Date.
4.2 Access. Delta will provide Buyer and Buyer's representatives access
upon reasonable notice to Delta's properties, books, records, contracts,
commitments, facilities, premises, and equipment and to Delta's officers and
employees.
4.3 Engineering Inspections. Prior to the Closing Date, Delta will permit
Buyer and Buyer's consulting engineers and other representatives, agents,
employees and independent contractors to conduct engineering and other
inspections of Delta's facilities.
4.4 Insurance. Delta will maintain in full force and effect through the
Closing Date all of Delta's existing casualty, liability, and other insurance
relating to or affecting the Business in amounts not less than those in effect
on the date hereof.
4.5 Exclusive Dealing. None of the Shareholders will, directly or
indirectly, through any officer, director, agent or otherwise, (a) transfer or
dispose of any of the Purchased Shares, (b) solicit, initiate or encourage
submission of proposals or offers from any person relating to an acquisition or
purchase of all or a material portion of the assets of or an equity interest in
Delta or any merger, consolidation or business combination with Delta, or (c)
participate in any discussions or negotiations regarding, in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt by any
other person to do or seek any of the foregoing. The Shareholders agree to
promptly notify Buyer of any such proposal or offer, or any inquiry or contact
with respect thereto received by Delta or any of the Shareholders.
4.6 Notice of Certain Events. After the date of this Agreement until the
Closing Date, should Delta or any Shareholder become aware of: (i) any matter
which, if existing, occurring or known as of the date of this Agreement, would
have been required to be disclosed to Buyer, (ii) any occurrence, omission or
state of events which constitutes a breach of any representation, warranty or
covenant of Delta or the Shareholders in this Agreement, (iii) any
26
Material Adverse Change in the Business, (iv) the institution or threat of
institution of any litigation or governmental investigation relating to the
Business, or the transactions contemplated by this Agreement, or (v) the
occurrence, or the failure to occur, of any other event, if such occurrence or
failure is likely to result in the failure to satisfy any condition set forth in
Article 5, Delta or the Shareholder promptly shall notify Buyer thereof in
writing, in sufficient detail to permit a reasonable analysis thereof. Delta or
the Shareholder also shall furnish to Buyer such additional information related
to the matter in question as Buyer reasonably may request.
4.7 Communications with Customers and Suppliers.
(a) Delta will accept customer requests for products and services in
the ordinary course of business and consistent with past practice.
(b) Delta and Buyer will cooperate in communication with suppliers and
customers concerning the transfer of the Purchased Shares to Buyer on the
Closing Date.
4.8 Continued Truth of Representations and Warranties. The Shareholders and
Delta will not take any actions that would result in any of the representations
or warranties set forth in Article 3 hereof being untrue.
4.9 Environmental Remediation and Monitoring. Delta affirmatively covenants
that Delta will continue up to the Closing Date, and the Shareholders
affirmatively covenant that the Shareholders will continue after the Closing
Date, with all costs being paid by the Sellers' Representative from the
Remediation Fund, to conduct the Shareholders' Environmental Tasks, as set forth
on Schedule 4.9 and Exhibit 4.9 hereto, including the installation and
implementation of post-remediation groundwater monitoring for those known areas,
if required, and also including all interaction with the Connecticut Department
of Environmental Protection ("CTDEP") for purposes of filing under the Act, as
defined in Section 5.2, to the satisfaction of applicable Environmental Laws.
ARTICLE 5
JOINT COVENANTS
5.1 Filings. Promptly after the execution of this Agreement, each of the
parties hereto shall prepare, make or cause to be made or cooperate in the other
party's making of any required filings, submissions and notifications under the
laws of any domestic or foreign jurisdictions to the extent that such filings
are necessary to consummate the transactions contemplated hereby. Each of the
parties shall furnish to the other party or parties such necessary information
and reasonable assistance as such other party or parties reasonably may request
in connection with the foregoing.
5.2 Connecticut Transfer Act. Except as provided in Section 4.9, Delta
shall assume all liabilities, duties and responsibilities imposed by or arising
from the Connecticut Transfer Act, Conn. Gen. Stat. Section 22a-134 et seq., as
amended (the "Act"). Such compliance shall include preparing and signing
the Form III or Form IV, whichever is applicable, as the "certifying party," as
that term is defined in the Act, and filing such Form III or
27
Form IV with the commissioner of environmental protection, along with the
environmental condition assessment form, as required by the Act, and paying all
required fees.
5.3 Fulfillment of Conditions. Each party hereto will take all commercially
reasonable actions necessary or desirable, and proceed diligently and in good
faith, to satisfy each condition to the obligations of each other party hereto
contained in this Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Each Party to Close. The respective
obligations of each party to enter into and complete the Closing shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) The parties shall have received all necessary consents and
approvals from third parties;
(b) There shall have been no law, statute, rule or regulation,
domestic or foreign, enacted or promulgated which would make consummation
of the transactions contemplated by this Agreement illegal; and
(c) No injunction or other order entered by a United States (state or
federal) court of competent jurisdiction shall have been issued and remain
in effect which would prohibit Buyer or Delta from consummating the
transactions contemplated hereby.
6.2 Additional Conditions to Buyer's Obligations. The obligations of Buyer
to enter into and complete the Closing are subject to the satisfaction of the
following conditions on or before the Closing Date:
(a) Representations; Warranties. Each of the representations and
warranties of Delta and each Shareholder set forth in this Agreement shall
have been true and correct in all material respects on the date of this
Agreement;
(b) Performance of Covenants. Delta shall have performed each
obligation and agreement and complied with each covenant to be performed
and complied with by it under this Agreement prior to the Closing Date;
(c) Consents. All consents by third parties including, without
limitation, all required consents of each Shareholder's spouse, if
applicable, and any required consents of the landlords under any leases, or
any consents by governmental or regulatory agencies that are reasonably
required for the consummation of the transactions contemplated hereby, or
that are reasonably required in order for Buyer to own, operate or control
Delta will have been obtained and will be in full force and effect;
(d) Real Estate. At the sole cost of Buyer, Buyer shall have obtained
from one or more nationally recognized title insurance companies reasonably
satisfactory to
28
Buyer a fee owner's title insurance policy, in each case in form and
substance reasonably satisfactory to Buyer, together with endorsements
requested by Buyer, including, without limitation, access, 3.1 zoning with
parking, non-imputation, comprehensive same-as- survey, one-tax-parcel, and
contiguity endorsements, in an amount determined by Buyer, insuring Buyer,
showing that Delta has good and marketable fee simple title to the Owned
Real Property, free and clear of all encumbrances. In connection therewith,
Delta shall facilitate Buyer's dealing directly with the title insurance
company and shall provide to the title insurance company such affidavits
and indemnifications in customary form and substance as shall be required
by the title insurance company;
(e) Employment Agreements. At Closing, designated employees of Delta,
including those individuals set forth on Schedule 6.2(e) will each have
delivered to Buyer an Employment Agreement in the form attached hereto as
Exhibit C providing for continued employment with Delta and an agreement
not to compete with Delta;
(f) No Material Adverse Changes. There shall not have occurred any
event that would have a Material Adverse Effect on the Business or with
respect to Delta in general since December 31, 1999;
(g) Termination of Agreement among Delta and the Shareholders. Delta
shall have terminated any and all agreements between or among Delta and any
of the Shareholders or any other Affiliate of Delta or Affiliate of any of
the Shareholders;
(h) Environmental Reports. Delta shall have made available to Buyer
any and all environmental reports concerning the Business and the
Properties in a form and content acceptable to Buyer;
(i) Purchased Shares. At Closing, Buyer shall receive good and
marketable title to the Purchased Shares, free and clear of all liens,
liabilities, security interests and encumbrances of any nature whatsoever;
(j) Escrow Agreement. The Sellers' Representative and each Shareholder
shall have executed and delivered the Escrow Agreement to the Buyer;
(k) Remediation Funds. Buyer shall have received the written
undertaking set forth on Schedule 1.3(c) from Robinson & Cole, LLP
regarding the Remediation Funds
(l) Document Delivery. Delta or the Shareholders, as the case may be,
will have delivered to Buyer the following:
(i) certificates representing all of the Purchased Shares,
endorsed by each Shareholder in blank, or with stock transfer powers
executed by each Shareholder in blank attached;
(ii) a certificate executed on behalf of Delta by its chief
executive officer or the chief financial officer and by the Sellers'
Representative to the effect that, as of the Closing Date:
29
(1) All representations and warranties made by Delta and the
Shareholders in this Agreement are true and correct in all
material respects on and as of the Closing Date, as though all
such representations and warranties were made on and as of such
time;
(2) All covenants and obligations of this Agreement to be
performed by Delta and the Shareholders on or before such date
have been so performed; and (3) The condition set forth in
Section 6.2(f) has been satisfied.
(iii) certified copies of the resolutions duly adopted by Delta's
board of directors approving the execution, delivery, and performance
of this Agreement;
(iv) a copy of Delta's certificate of incorporation certified by
the Secretary of State of Connecticut;
(v) a certificate of legal existence from the State of
Connecticut and good standing certificates, as applicable, for Delta
from every jurisdiction in which it is required to qualify to do
business as a foreign corporation, dated not earlier than ten (10)
days prior to the Closing Date;
(vi) copies of all third party and governmental consents (or
other evidence satisfactory to Buyer) that Delta is required to obtain
in order to effect the transactions contemplated by this Agreement;
(vii) resignations of the officers and directors of Delta;
(viii) a statement of release from Delta's Financial Advisor that
all fees and expenses other than the success fee described in Section
3.21 have been paid by Delta;
(ix) a Title Affidavit executed by an officer of Delta; and
(x) such other documents as Buyer may reasonably request in
connection with the transactions contemplated hereby.
(m) Absence of Claims. There shall be no bona fide action, suit, claim
or proceeding of any nature pending, or overtly threatened, against Delta,
any Shareholder, the Purchase Shares, Delta's properties or any of Delta's
officers or directors, arising out of, or in any way connected with, the
transactions contemplated by this Agreement.
6.3 Additional Conditions to the Shareholders' Obligations. The obligations
of the Shareholders to enter into and complete the Closing are subject to the
satisfaction of the following conditions on or before the Closing Date:
30
(a) Representations; Warranties; Certificate. Each of the
representations and warranties of Buyer set forth in this Agreement are
true and correct in all material respects on the date of this Agreement,
and the Shareholders shall have received a certificate of the chief
executive officer or the chief financial officer of Buyer to such effect;
(b) Performance of Covenants. Buyer shall have performed each
obligation and agreement and complied with each covenant required to be
performed and complied with by it under this Agreement prior to the Closing
Date;
(c) Document Delivery. At Closing, Buyer will have delivered to each
Shareholder the following:
(i) the Purchase Price to be paid in cash;
(ii) a certificate executed on behalf of Buyer by its president
or any vice president, stating that the conditions set forth in
Sections 6.3(a) and 6.3(b) hereof have been satisfied;
(iii) certified copies of the resolutions duly adopted by Buyer's
board of directors approving the execution, delivery, and performance
of this Agreement;
(iv) copies of all third party and governmental or regulatory
consents (or other evidence satisfactory to the Shareholders) that
Buyer is required to obtain in order to effect the transactions
contemplated by this Agreement;
(v) the Escrow Agreement;
(vi) the Employment Agreements identified on Schedule 6.2(e); and
(vii) such other documents as the Shareholders may reasonably
request in connection with the transactions contemplated hereby.
(d) Guaranty. Buyer shall have caused all personal guaranties of David
Harrington and Milton Oliveira related to the Line of Credit and Term Loan
Agreement between Delta and Citizen's Bank dated March 11, 1994, as
heretofore amended, to be terminated as of the Closing Date.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.1 Survival of Representations and Warranties. Except as otherwise
specified, all of the representations and warranties made in this Agreement or
pursuant hereto shall survive the Closing Date for a period of two (2) years
(except for the representations and warranties in (a) Section 3.9 (Taxes), which
shall survive the Closing Date until the applicable statute of limitations
expires, (b) Section 3.25 (Employee Plans and ERISA), which shall survive
31
the Closing Date until the applicable statute of limitations expires, and (c)
Section 3.19 (Environmental Matters), which shall survive the Closing Date for a
period of three (3) years, and all representations and warranties shall survive
and shall be unaffected by (and shall not be deemed waived by) any
investigation, audit, appraisal, or inspection. Any breach of any representation
or warranty constituting fraud shall survive indefinitely.
7.2 Indemnifications.
(a) By Delta and the Shareholders. Delta, prior to the Closing, and
each Shareholder, prior to and after the Closing, jointly and severally,
agree to defend, indemnify and hold harmless Buyer, its officers,
directors, employees, agents, advisers, representatives and Affiliates
(collectively, the "Buyer Indemnitees") from and against, and pay or
reimburse Buyer Indemnitees for, any and all claims, liabilities,
obligations, losses, fines, costs, royalties, proceedings, deficiencies or
damages (whether absolute, accrued, conditional or otherwise and whether or
not resulting from third party claims), including out-of-pocket expenses
and reasonable attorneys' and accountants' fees incurred in the
investigation or defense of any of the same or in asserting any of their
respective rights hereunder (collectively, the "Losses"), resulting from or
arising out of:
(i) Any inaccuracy of any representation or warranty by Delta or
any of the Shareholders contained in this Agreement; and
(ii) Any failure of Delta or any of the Shareholders to perform
any covenant or agreement contained in this Agreement.
(b) By Buyer. Buyer agrees to defend, indemnify and hold harmless
Delta, the Shareholders and Delta's officers, directors, employees, agents
advisers, representatives and Affiliates from and against any and all
Losses resulting from or arising out of;
(i) Any inaccuracy in any representation or warranty by Buyer
contained in this Agreement; and
(ii) Any failure of Buyer to perform any covenant or agreement
contained in this Agreement.
(c) Indemnification Procedures. In the case of any claim asserted by a
third party against a party entitled to indemnification under this
Agreement (the "Indemnified Party"), notice shall be given by the
Indemnified Party to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and the
Indemnified Party shall permit the Indemnifying Party (at the expense of
such Indemnifying Party) to assume the defense of any claim or any
litigation resulting therefrom, provided that (i) the counsel for the
Indemnifying Party who shall conduct the defense of such claim or
litigation shall be reasonably satisfactory to the Indemnified Party, (ii)
the Indemnified Party may participate in such defense at such Indemnified
Party's expense, and (iii) the omission by any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
indemnification obligation
32
under this Agreement except to the extent that such omission results in a
failure of actual notice to the Indemnifying Party and such Indemnifying
Party is materially damaged as a result of such failure to give notice.
Except with the prior written consent of the Indemnified Party, no
Indemnifying Party, in the defense of any such claim or litigation, shall
consent to entry of any judgment or enter into any settlement that provides
for injunctive or other nonmonetary relief affecting the Indemnified Party
or that does not include as an unconditional term thereof the giving by
each claimant or plaintiff to such Indemnified Party of a release from all
liability with respect to such claim or litigation. In the event that the
Indemnified Party shall in good faith determine that the conduct of the
defense of any claim subject to indemnification hereunder or any proposed
settlement of any such claim by the Indemnifying Party might be expected to
affect adversely the Indemnified Party's tax liability or the ability of
Buyer to conduct its business, or that the Indemnified Party may have
available to it one or more defenses or counterclaims that are inconsistent
with one or more of those that may be available to the Indemnifying Party
in respect of such claim or any litigation relating thereto, the
Indemnified Party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating
to any such claim at the sole cost of the Indemnifying Party, provided that
if the Indemnified Party does so take over and assume control, the
Indemnified Party shall not settle such claim or litigation without the
written consent of the Indemnifying Party, such consent not to be
unreasonably withheld and counsel selected by the Indemnified Party shall
be reasonably satisfactory to the Indemnifying Party. In the event that the
Indemnifying Party does not accept the defense of any matter as above
provided, the Indemnified Party shall have the full right to defend against
any such claim or demand and shall be entitled to settle or agree to pay in
full such claim or demand. In any event, the Indemnifying Party and the
Indemnified Party shall cooperate in the defense of any claim or litigation
subject to this Section 7.2 and the records of each shall be available to
the other with respect to such defense.
(d) Limitations. The liability of each Shareholder under this Section
shall be limited in proportion to their respective percentage ownership of
the Purchased Shares. The indemnity provided by this Article 7 shall be the
exclusive remedy for all Losses, except that all parties to this Agreement
shall retain such rights and remedies as they may have under applicable
anti-fraud provisions of state and federal securities laws, but subject to
the specific dollar thresholds mentioned in the preceding sentence.
Notwithstanding any provision in this Article 7, the Shareholders shall
have no liability to indemnify Buyer unless the total of all
indemnification liabilities of the Shareholders hereunder exceeds One
Hundred Thousand U.S. Dollars ($100,000 US); however, this limitation shall
not apply to the Shareholders' agreement to indemnify Buyer under Section
1.7 or any Losses claimed under this Section 7.2 related to a breach of
Sections 3.3, 3.9, 3.21, 3.27, or 3.29. In any event, the Shareholders'
indemnification liability under all the provisions of this Agreement shall
not exceed Eighteen Million Seven Hundred Thousand U.S. Dollars
($18,700,000).
(e) Time Limit. All claims for indemnification under clause (i) of the
first sentence of Section 7.2(a) or clause (i) of the first sentence of
Section 7.2(b) must be asserted within 30 days after the termination of the
respective survival periods set forth in Section 7.1.
33
7.3 Dispute Resolution.
(a) Mediation. No party shall commence an arbitration proceeding
pursuant to this Agreement unless such party shall first give a written
notice to the other parties hereto setting forth the nature of the dispute
which requires resolution. The parties thereafter shall attempt in good
faith to resolve the dispute by mediation under the Commercial Mediation
Rules of the American Arbitration Association ("AAA") in effect on the date
of this Agreement except as otherwise provided in this Article 7.
Any mediation conducted in connection with this Agreement shall be
held in Providence, Rhode Island on the date(s) and at the time(s)
determined by the mediator and agreed to by the parties.
If the dispute has not been resolved by mediation as provided above
within sixty (60) days after the delivery of the above-referenced notice,
then the dispute shall be resolved by arbitration in accordance with the
provisions of this Agreement.
(b) Arbitration. Any dispute, controversy or claim arising out of or
relating to this Agreement (except for such disputes or controversies
regarding the Closing Balance Sheet, which shall be resolved exclusively
pursuant to Section 1.6.(d)) or the performance by the parties of its or
their obligations, including the determination of the scope of this
agreement to arbitrate, which is not settled through mediation as provided
above, shall be resolved by binding arbitration held in Providence, Rhode
Island administered by the AAA in accordance with its published Commercial
Arbitration Rules (the "AAA Rules") in effect on the Closing Date, except
as specifically otherwise provided in this Article 7. Notwithstanding the
foregoing, any party to this Agreement may, in its discretion, apply to a
court of competent jurisdiction for equitable relief concerning matters for
which such equitable relief is available to any such party in accordance
with applicable statutory and/or case law, including, but not limited to,
injunctive relief.
The institution and maintenance of any judicial action as permitted in
this Agreement and the pursuit of any such rights or remedies shall not
constitute a waiver of the right or obligation of any party hereto to
submit any dispute to negotiation, mediation or arbitration that may arise
from the exercise of such rights or remedies. The institution and
maintenance of an action for judicial relief or pursuit of provisional
rights or remedies, all as provided herein, shall not constitute a waiver
of the right of any party, including the plaintiff(s) seeking relief or
remedies, to submit such dispute to negotiation, mediation or arbitration.
(c) Mediators and Arbitrators. If the matters(s) in controversy
(exclusive of attorney fees and expenses) shall appear, as at the time of
the demand for arbitration, to exceed $500,000, then the panel to be
appointed shall consist of three neutral arbitrators; otherwise, one
neutral arbitrator. If a panel shall arbitrate a dispute, then a majority
of such panel shall decide the award.
34
Every person named on lists of potential mediators or arbitrators
shall be a neutral and impartial lawyer (i) who has practiced law for at
least ten years, in the field of general corporate and commercial matters,
with experience representing companies in merger and acquisition
transactions, and (ii) who has had experience, and is generally available
to serve, as a mediator or an arbitrator, as the case may be. Each party
hereto shall be entitled to strike on a peremptory basis, for any reason or
no reason any or all of the names of potential mediators or arbitrators on
any lists submitted to the parties by the AAA as well as any persons
selected by the AAA to serve as a mediator or an arbitrator by
administrative appointment. In the event the parties cannot agree on the
selection of the mediator or arbitrator(s) from the one or more lists
submitted by the AAA within twenty days after the AAA transmits to the
parties its first list of potential mediators or arbitrators, the Regional
Vice President of the AAA for the Rhode Island Region shall nominate three
persons who, in his or her opinion, meet the criteria set forth herein,
which nominees may not include persons named on any list submitted by the
AAA. Each party shall be entitled to strike one of such three nominees on a
peremptory basis within five days after its receipt of such list of
nominees indicating its order of preference with respect to the remaining
nominees. If two of such nominees have been stricken by the parties, the
unstricken nominee shall be the mediator or arbitrator, as the case may be.
Otherwise, the selection of the mediator or arbitrator shall be made by the
AAA from the remaining nominees in accordance with the parties' mutual
order of preference, or by random selection in the absence of a mutual
order of preference. If any mediator or arbitrator shall become unwilling
or unable to serve, the vacancy created thereby shall be filled by the
parties by following the procedures set forth in this section 7.3(c).
No mediator or arbitrator(s) appointed hereunder, nor the AAA, shall
be liable to any party for any act or omission in connection with any
mediation or arbitration conducted pursuant to this Agreement.
(d) Procedures, Application of Law. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the
circumstances and shall resolve the dispute as expeditiously as
practicable, and if reasonably practicable, within 120 days after the
selection of the arbitrator(s), provided, that the arbitrator(s) shall have
no fewer than thirty (30) days after the close of the arbitration hearings
to render the arbitral award. The AAA shall give the parties written notice
(as provided in Section 8.3 hereof) of the award, which shall include an
explanation thereof. Such explanation may, but need not, include findings
of fact and conclusions of law. After such notice of award, the decision of
the arbitrator(s) shall be final and binding, subject to the provisions of
Section 7.3(f) hereof.
The parties agree that the arbitrator(s) shall give effect to the
substantive law of the State of Delaware, including but not limited to
conflicts of law provisions, statutes of limitation, and matters pertaining
to the validity of this arbitration clause in determining matters submitted
to arbitration hereunder; provided, however, that the Federal Arbitration
Act (Title 9 U.S.C.), to the extent inconsistent, will supersede the laws
of such State and govern. In doing so, the arbitrator(s) shall not be
required to do independent legal research, and shall be entitled to rely
upon briefs and memoranda of law submitted by counsel for the parties.
35
(e) Authority. The arbitrators shall have authority to award relief
under legal and not equitable principles but shall have the authority to
include equitable remedies, including, without limitation, specific
performance, in the arbitral award. The fees, expenses and compensation of
the arbitration provided for under the AAA Rules shall be borne by the
Buyer and the Shareholders (who, as amongst themselves, shall ratably be
responsible for such costs in accordance with number of shares of Delta
which each such Shareholder held on the day prior to the Closing) in
proportion to the respective fault of each party as reflected in the award
of the arbitrators, and each party shall bear its own counsel fees and the
expense of its witnesses except as are statutorily available and as
otherwise provided by applicable law, and interest shall be payable on any
award to the extent provided by applicable law. Provided, however, that if
the arbitrator(s) finds that the claim or defense of any party was
frivolous or lacked a reasonable basis in fact or law, the arbitrator(s)
may assess against such party all or any part of the counsel and witness
fees and expenses of the other party/ies.
(f) Entry of Judgment; Errors of Law. Judgment upon the award rendered
by the arbitrators may be entered in any court having in personam and
subject matter jurisdiction. The Buyer and each Shareholder hereby submit
to the in personam jurisdiction of the Federal and State courts in the
State of Connecticut, for the purpose of confirming any such award and
entering judgment thereon.
Notwithstanding the foregoing, if any party applies to a court of
competent jurisdiction for an order confirming, modifying or vacating the
award of the arbitrator(s) such party shall have the right to request
judicial review of the award if such party reasonably believes such award
was granted based on an error of law. In such event, the court shall have
the power to review whether, as a matter of law based on the explanation of
the award by the arbitrator(s), the award should be confirmed or be
modified or vacated in order to correct any errors of law made by the
arbitrator(s). In order to effectuate such judicial review limited to
issues of law, the parties agree (and shall so stipulate to the court) that
facts identified or found, if any, by the arbitrator(s) in the arbitral
award shall be final and binding on the parties and shall serve as the
facts to be submitted to and relied on by the court in determining the
extent to which the award should be confirmed, modified or vacated.
(g) Confidentiality. All proceedings under this Article 7, and all
evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties; provided, however, that any award or order
rendered by the arbitrator(s) pursuant to the terms of this Agreement may
be entered as a judgment or order in court as provided herein, and that
briefs, discovery, testimony and other evidence may be furnished to a court
of competent jurisdiction in order that the parties may exercise their
respective rights under Section 7.3(f) hereof.
(h) Continued Performance. The fact that the dispute resolution
procedures specified in this Article 7 shall have been or may be invoked
shall not excuse any party from performing its obligations under this
Agreement and during the pendency of any such procedure all parties shall
continue to perform their respective obligations in good
36
faith, provided, that any dispute among the parties related to the ability
to perform referenced above shall be resolved by the arbitrator(s).
(i) Tolling. All applicable statutes of limitation shall be tolled
while the procedures specified in this Article 7 are pending. The parties
will take such action, if any, required to effectuate such tolling.
(j) Escrow Agent Unnecessary. The parties agree that the escrow agent
under and as identified in the Escrow Agreement is not a necessary party to
and shall not be joined in or made party to any arbitration proceeding
commenced under this Article 7.
ARTICLE 8
GENERAL PROVISIONS
8.1 Public Statements. Except as required by applicable Law, neither Buyer,
Delta or any Shareholder shall make any public announcement or statement with
respect to this Agreement without, in the case of Delta or any Shareholder,
Buyer's approval and, in the case of Buyer, Delta's approval.
8.2 Confidentiality. Except as and to the extent required by Law, each
party (the "Receiving Party") shall not disclose or use, and it shall cause its
representatives not to disclose or use, any Confidential Information (as defined
below) with respect to another party (the "Disclosing Party") furnished, or to
be furnished by the Disclosing Party or its Representatives in connection
herewith at any time or in any manner other than in connection with its
evaluation of the transaction. For purposes of this Section, "Confidential
Information" means any information about the Disclosing Party furnished to the
Receiving Party by the Disclosing Party; provided that it does not include
information which the Receiving Party can demonstrate by written documentation
(i) is generally available to or known by the public other than as a result of
improper disclosure by the Receiving Party, (ii) was in the Receiving Party's
possession prior to disclosure by the Disclosing Party or its Representatives,
or (iii) is obtained by the Receiving Party from a source other than the
Disclosing Party (or in the case of Delta, its Shareholders), provided that such
source was not bound by a duty of confidentiality to the Disclosing Party or
another party with respect to such information. In the event of the termination
of this Agreement, as provided for in Section 8.14, the Receiving Party and its
Representative(s) shall promptly return to the Disclosing Party any Confidential
Information in its possession.
8.3 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
sent by telex, telecopy, facsimile or overnight courier, or mailed by registered
or certified mail (postage prepaid and return receipt requested), to the party
to whom the same is so delivered, sent or mailed at the following addresses (or
at such other address for a party as shall be specified by like notice):
37
(a) if to Buyer:
NN, Inc.
2000 Waters Edge Drive
Building C, Suite 12
Johnson City, Tennessee 37604
Attention: David Dyckman, CFO
Telecopy: (423) 743-2670
with a copy to:
James M. Ash
Blackwell Sanders Peper Martin LLP
2300 Main Street
Suite 1000
Kansas City, Missouri 64108
Telecopy: (816) 983-8080
(b) if to Delta:
Delta Rubber Company
P.O. Box 300
39 Wauregan Road
Danielson, Connecticut 06239
Attention: David Harrington
Telecopy:
with a copy to:
Robinson & Cole LLP
280 Trumbull Street
Hartford, CT 06103
Attention: Jack S. Kennedy, Esq.
Telecopy: (860) 275-8299
(c) If to the Shareholders or the Sellers' Representative:
David Harrington
168 Quassett Road
Pomfret, CT 06258
38
with a copy to:
Robinson & Cole LLP
280 Trumbull Street
Hartford, CT 06103
Attention: Jack S. Kennedy, Esq.
Telecopy: (860) 275-8299
Notices delivered personally or by telex, telecopy or facsimile shall be deemed
delivered as of actual receipt, mailed notices shall be deemed delivered three
days after mailing and overnight courier notices shall be deemed delivered one
day after the date of sending.
8.4 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated.
8.5 Amendment. This Agreement may not be amended except by an instrument
signed by each of the parties hereto.
8.6 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
8.7 Miscellaneous. This Agreement (together with all other agreements,
documents and instruments referred to herein): (a) constitute the entire
agreement and supersede all other prior agreements and undertakings, both
written and oral, among the parties with respect to the subject matter hereof;
(b) are not intended to confer upon any other Person any rights or remedies
hereunder; (c) shall not be assigned by operation of law or otherwise and any
attempted assignment shall be null and void, except that Buyer may assign all or
any portion of its rights under this Agreement (i) to any wholly-owned
subsidiary, but no such assignment shall relieve Buyer of its obligations
hereunder and (ii) to any successors of Buyer which acquires substantially all
of its assets.
8.8 Counterparts. This Agreement may be executed via facsimile or otherwise
in one or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
8.9 Cumulative Remedies. Subject to the provisions of Section 7.2(d), all
rights and remedies of either Party hereto are cumulative of each other and of
every other right or remedy such Party may otherwise have at law or in equity,
and the exercise of one or more rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise of other rights or remedies.
8.10 Attorneys' Fees. If any Party to this Agreement brings an action to
enforce its rights under this Agreement, the prevailing Party shall be entitled
to recover its costs
39
and expenses, including without limitation reasonable attorneys' fees, incurred
in connection with such action, including any appeal of such action, which shall
be set by the judge and not a jury.
8.11 Construction. The language used in this Agreement shall be deemed to
be the language chosen by the parties to express their mutual intent and no rule
of strict construction shall be applied against any Party. The use of the word
"including" in this Agreement means "including without limitation" and is
intended by the parties to be by way of example rather than limitation.
8.12 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.
8.13 Definitions.
(a) "Affiliate" shall mean with respect to any Person, any (i)
officer, director, or holder of more than 10% of the outstanding shares or
equity interests of such Person or any spouse, relative by birth, adoption
or marriage of any such Person and (ii) any other Person which directly or
indirectly controls, is controlled by, or is under common control with such
Person. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of the "controlled" Person,
whether through ownership of voting securities, by contract, or otherwise.
(b) "GAAP" means generally accepted United States accounting
principles.
(c) "Governmental Authority" shall mean the United States, any state
or municipality, the government of any foreign county, any subdivision of
any of the foregoing, or any authority, department, commission, board,
bureau, agency, court, arbitration, instrumentality, or other body or any
of the foregoing.
(d) "Law" shall mean any statutes, rules, regulations, permits,
decrees, injunctions, judgments, orders, rulings, determinations, writs,
decrees and awards of any Governmental Authority.
(e) "Made available" shall mean physically presented to or
specifically made available either (i) in Delta's data room at the
Hartford, Connecticut and Stamford, Connecticut offices of Robinson & Cole,
LLP visited by Buyer on November 7-9, 2000 or (ii) at Delta during visits
by Buyer and its representatives during the week of November 13, 2000.
(f) "Material Adverse Effect" shall mean, with respect to Delta, any
adverse change, circumstance or effect that with all other adverse changes,
circumstances and effects, is or is reasonably likely to be materially
adverse to the business, financial condition or results of operations of
Delta.
(g) "Person" shall mean any individual, corporation, partnership,
limited liability company, limited liability partnership, limited or
general partnership, firm, joint
40
venture, association, joint-stock company, trust, unincorporated
association or organization, or other entity or organization, or
Governmental Authority.
(h) "Tax" shall mean any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise
and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts.
8.14 Termination. This Agreement may be terminated prior to the Closing
only as follows: (i) at any time by the mutual consent of Delta and Buyer; (ii)
by Buyer, upon a breach of any representation, warranty, covenant or agreement
on the part of Delta or any Shareholder or upon the failure to fulfill any of
the conditions set forth in this Agreement; (iii) by the Shareholders, upon a
breach of any representation, warranty, covenant or agreement on the part of
Buyer set forth in this Agreement in either case which has a Material Adverse
Effect on Delta; or (iv) by Delta, the Shareholders or Buyer if the Closing
shall not have occurred before March 1, 2001.
In the event of the termination of this Agreement as provided in this
Section, this Agreement shall become null and void and there shall be no
liability on the part of Delta or Buyer, except that the provisions of Articles
7 and 8 shall survive such termination. If this Agreement is terminated other
than pursuant to section (i) or (iv) above, then the parties that are in
compliance with their obligations under this Agreement shall be entitled to
exercise and pursue all rights and remedies available to it or them hereunder,
at law, in equity or otherwise, and shall be entitled to recover from the other
party or parties all of its or their out-of-pocket expenses incurred in
connection with or relating to the negotiation, preparation, execution and
delivery of this Agreement.
8.15 Further Assurances. At any time and from time to time after the
Closing, at Buyer's reasonable request and without further consideration, the
Shareholders promptly shall execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation, and take such other action
necessary to more effectively transfer, convey and assign to Buyer, and to
confirm Buyer's title to, the Purchased Shares, to put Buyer in actual
possession and operating control thereof, to assist Buyer in exercising all
rights with respect thereto and to carry out the purpose and intent of this
Agreement.
8.16 The Sellers' Representative, Power of Attorney.
(a) The Sellers' Representative. The Shareholders hereby appoint and
constitute David A. Harrington as the Sellers' Representative hereunder, to
exercise the powers on behalf of the Shareholders set forth in this
Agreement; and David A. Harrington hereby accepts such appointment. In the
event of the death, resignation or inability to act of David A. Harrington,
and upon receipt by Buyer of evidence of the same which is satisfactory to
Buyer, Milton Oliveira shall be successor to the Sellers' Representative
with all powers of his predecessor. In the event of the death, resignation
or inability to act of Milton Oliveira, and upon receipt by Buyer of
evidence of the same
41
which is satisfactory to Buyer, then within 30 business days of Buyer's
receipt of such evidence, a successor to the Sellers' Representative shall
be appointed by Jack S. Kennedy, Esq. of Robinson & Cole LLP, or, if he is
unable to make such appointment for any reason, then by the Managing
Partner of Robinson & Cole LLP and such appointed successor shall have all
powers of his predecessor.
(b) Power of Attorney. Each Shareholder, by his execution of this
Agreement, hereby constitutes and appoints the Sellers' Representative his
true and lawful attorney in fact, with full power in his name and on his
behalf:
(i) to receive on behalf of such Shareholder the proceeds of sale
of such Shareholder's Shares being sold hereunder, to give the Buyer a
receipt therefor on behalf of such Shareholder and to hold such
proceeds subject to the terms hereof and the instructions of such
Shareholder with respect to the ultimate disbursement thereof;
(ii) to act on such Shareholder's behalf according to the terms
of this Agreement, including, without limitation, the power to contest
or acquiesce in the determination of the Purchase Price in accordance
with Section 1.6; to amend this Agreement or terminate this Agreement;
to waive compliance with conditions precedent to the Shareholders'
obligations set forth in Article 6.3; to consent to the assignment of
rights under this Agreement; to execute the Escrow Agreement on behalf
of the Shareholders and to give instructions to the Escrow Agent under
the Escrow Agreement; to give and receive notices on behalf of all the
Shareholders; and to act on their behalf in connection with any matter
as to which the Shareholders jointly and severally are an "Indemnified
Party" or "Indemnifying Party"; all in the absolute discretion of the
Sellers' Representative;
(iii) in general, to do all things and to perform all acts,
including, without limitation, executing and delivering all
agreements, certificates, receipts instructions and other instruments
contemplated by or deemed advisable in connection with this Agreement.
This power of attorney, and all authority hereby conferred, is granted
subject to the interests of the Shareholders and the Buyer hereunder and in
consideration of the mutual covenants and agreements made herein, and shall
be irrevocable and shall not be terminated by any act of any Shareholder or
by operation of law, whether by the death or incapacity of any Shareholder
or by the occurrence of any other event. Each Shareholder agrees to hold
the Sellers' Representative free and harmless from any and all loss, damage
or liability which they, or any one of them, may sustain as a result of any
action taken in good faith hereunder.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
42
IN WITNESS WHEREOF, Buyer, Delta, the Shareholders and Sellers'
Representative have caused this Agreement to be executed on the date first
written above by their respective signatures duly authorized.
NN, INC.
By:
Name:
Title:
THE DELTA RUBBER COMPANY
By:
Name:
Title:
THE DELTA RUBBER COMPANY
SHAREHOLDERS
/s/ Lee Burris
-------------------------------------------
Lee Burris
/s/ David Harrington
-------------------------------------------
David Harrington
/s/ Frank Hegedus
-------------------------------------------
Frank Hegedus
43
/s/ James Meagher III
-------------------------------------------
James Meagher III
/s/ Milton Oliveira
-------------------------------------------
Milton Oliveira
/s/ Stephen Raczka
-------------------------------------------
Stephen Raczka
/s/ David Sawin
-------------------------------------------
David Sawin
SELLERS' REPRESENTATIVE
/s/ David Harrington
-------------------------------------------
David Harrington
44
NEWS BULLETIN RE: NN, INC.
2000 Waters Edge Drive
FROM: Building C, Suite 12
Johnson City, TN 37604
Nasdaq: NNBR
[THE FINANCIAL RELATIONS BOARD
BSMG WORLDWIDE LOGO]
- --------------------------------------------------------------------------------
FOR FURTHER INFORMATION:
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
Will Kelly Kerry Thalheim John McNamara
Treasurer & Manager of Investor Relations (General info) (Analyst info)
(423) 743-9151 212-661-8030 212-661-8030
FOR IMMEDIATE RELEASE
February 16, 2001
NN, INC. ACQUIRES DELTA RUBBER COMPANY;
BEARING SEAL BUSINESS EXPANDS BEARING PLATFORM
Acquisition Highlights:
o Consistent with NN's long-term strategic growth plan
o Broadens precision bearing component product offering
o Enhances ability to serve global customers
o Positive financial contribution
Johnson City, Tennessee, February 16, 2001 -- NN, Inc. (Nasdaq: NNBR) an
independent manufacturer and supplier of high-quality, precision bearing
components to domestic and international anti-friction bearing manufacturers,
today announced the acquisition of Delta Rubber Company, a privately held
company, headquartered in Danielson, Connecticut for $22.5 million in cash.
Founded in 1957, the Company is a premier designer and manufacturer of rubber
bearing seals.
Delta Rubber Company supplies high-quality, sophisticated bearing seals to
customers serving the automotive, agriculture, manufacturing and oil industries.
ISO 9001 and QS-9000 certified, the Company focuses on value-added products that
take advantage of its proprietary design and compounding capability, lean
manufacturing and flexible production capabilities. The Company has one
manufacturing facility located in northeastern Connecticut. Total revenues
amounted to $19.5 million in 2000.
Roderick R. Baty, President and Chief Executive Officer of NN, Inc., said, "At
the outset of executing our strategic growth plan, we identified two initial
companies that would increase our ability to expand the precision component
portion of our strategy. Those two companies were Industrial Molding Corporation
and Delta Rubber Company. With the acquisition of IMC and Delta Rubber we have
expanded our product offering beyond balls and rollers to include plastic
retainers and bearing seals. As a result, we believe NN is ideally positioned to
provide exceptional value to our worldwide customers.
"It is important to note that Delta meets all of our specific acquisition
criteria. With more than 40 years of experience in the bearing seal industry,
the Company has developed proprietary core competencies in key areas such as
bearing seal design and manufacturing expertise. Delta is positioned as a
quality and
service leader in the bearing seal market, is solidly profitable,
well managed, and has a similar culture which embraces lean values very similar
to NN's," added Mr. Baty.
David Harrington, President of Delta Rubber Company, said, "I am extremely
pleased that we will be joining forces with a company that shares our customer
and employee values. By combining resources with NN, we believe that we
significantly enhance our ability to advance Delta's strategic focus on the
bearing industry which will enable the Company to gain market share and position
the Company for enhanced growth and profitability. We feel this combination
takes our progress in establishing Delta as one of North America's preeminent
suppliers of high-quality precision-molded bearing seals to the next level."
Mr. Baty continued, "Delta has a number of key business strengths that positions
it for increased growth and profitability. Its extensive seal design and testing
capabilities enable it to gain important early involvement in customers' product
development processes. Additionally, we are gaining the advantages of Delta's
proprietary materials, process expertise, highly dedicated employees, and a
strong reputation with customers we know well. This positions NN to expand our
leading presence in the industries we jointly serve. In summary, we are excited
about the fact that this acquisition will be immediately accretive while also
strengthening the strategic positioning of our precision bearing component
business."
NN Inc. will finance the acquisition with borrowings under its revolving credit
facility, which will be expanded temporarily while arrangements for longer-term
financing are established. The acquisition will be accounted for using the
purchase method of accounting.
NN, Inc. is an independent manufacturer and supplier of high quality, precision
bearing components to both domestic and international anti-friction bearing
manufacturers.
For More Information on NN Inc., at no cost via facsimile,
please call 1-800-PRO-INFO, and enter Code #094 , or Stock Ticker Symbol - NNBR
###