ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") dated this 2nd day of
December, 1997 by and among FLEXFAB Horizons International, Inc., a Michigan
corporation (hereinafter referred to as "Seller"); AFC Cable Systems, Inc., a
Delaware corporation (hereinafter referred to as "AFC"); and AFC Madison
Acquisition Corp. , a Delaware corporation and a wholly-owned subsidiary of AFC
(hereinafter referred to as "Buyer").
W I T N E S S E T H:
WHEREAS, Seller, through its so-called "Federal Hose Division", is engaged
in the business of manufacturing and selling flexible hose and ducting products
in metal, PVC, plastic and fabric for various industrial applications and, more
particularly, to the electrical and utility industries (the business and assets
of Seller's Federal Hose Division are hereinafter referred to as the
"Business");
WHEREAS, Seller wishes (a) to sell to Buyer all or substantially all of
the business and assets of Seller used in the Business and (b) to have the Buyer
assume certain scheduled liabilities of the Seller; and
WHEREAS, the Buyer is desirous of purchasing such assets and assuming such
liabilities on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the
representations and warranties, covenants and agreements hereinafter made, the
parties hereto do hereby agree as hereinafter set forth:
1. AGREEMENT TO BUY AND SELL ASSETS.
1.1 PURCHASE OF ASSETS. The Buyer agrees to buy from the Seller and
the Seller agrees to sell to the Buyer, all but not less than all, of the
business and assets of every kind and description owned by the Seller now and on
the Closing Date (as hereinafter defined) that are used in the Business of the
Seller, whether constituting real or personal, tangible or intangible property
and whether or not in the possession or control of the Seller, including,
without limitation:
(a) the cash balances (and cash equivalents) of the Business as
of the Closing Date as reflected on the Closing Date Balance Sheet (as defined
in Section 3.1 below);
(b) all machinery, equipment, plant and office furniture and
fixtures, vehicles and trailers and tools and dies of the Business ("Machinery
and Equipment") all of which is specifically identified on SCHEDULE 1.1(b);
(c) all inventory of the Business, including, finished goods,
work-in-process and raw materials and supplies on hand, and all inventory
returned by customers subsequent to the Closing Date in the ordinary course of
business of the Business and consistent with past experience;
(d) all receivables of the Business as reflected on the Closing
Date Balance Sheet, including accounts receivable, contracts receivable, loans,
notes receivable and advances (collectively, the "Accounts") not collected prior
to the Closing Date (as hereinafter defined);
(e) customer lists, lists of suppliers, salesman's lists, sales
reports, cost sheets, bills of material, technical information, engineering
data, production data, blueprints and specifications, drawings, licenses,
license agreements, formulae, processes, trade secrets, software (including
documentation and source code), know-how and the Confidential Information (as
hereinafter defined in Section 15.2 hereof), and all files, financial and
business information and records (including computer software and records) of
the Seller used in the Business;
(f) all of the Seller's right, title and interest in and to the
name "Federal Hose", and any variation or derivation thereof, and all patents,
trademarks, trade names, service marks, brand names, logos, copyrights and
applications for any of the foregoing, used in the conduct of the Business, all
of which are listed on SCHEDULE 4.10 attached hereto;
(g) subject to Section 11.5 hereof, all right, title and
interest of the Seller in and to (A) the leases for real and personal property
and other contracts listed on SCHEDULE 1.1(g) attached hereto; (B) all purchase
orders given by the Seller in the ordinary course of business of the Business
consistent with past practices for the purchase of products, materials,
supplies, parts and other items used in the ordinary course of business with
respect to which the Seller has not received all of the goods or services
ordered on or prior to the Closing Date; and (C) all purchase orders submitted
to the Seller (and accepted by the Seller) by customers of the Seller in the
ordinary course of business of the Business and consistent with past practices
with respect to which the Seller has not received full payment thereon on or
prior to the Closing Date (all of such leases, contracts, purchase orders and
sales commitments specified in clauses (A), (B) and (C) of this Section 1.1(g)
are hereinafter referred to as the "Assumed Contracts");
(h) all transferable interests in all government licenses and
permits necessary to the conduct of the Business which are transferable to Buyer
with or without the consent of the issuing authority;
(i) such prepaid expenses and other assets of the Business as
are set forth on SCHEDULE 1.1(i) attached hereto;
(j) leasehold improvements on any real property which Seller,
as tenant, leases from others (whether affiliates or non-affiliates of Seller)
in the conduct of the Business;
(k) the goodwill of the Business;
(l) all manufacturers', vendors' and suppliers' warranties, to
the extent assignable, with or without the consent of the manufacturer, vendor
or supplier, as the case may be, in respect of any asset used in the Business;
and
(m) general intangibles, contract claims and other rights and
all other property owned by the Seller and used in the Business except as
excluded in the proviso below;
PROVIDED, HOWEVER, that there shall be excluded from such purchase and sale the
following:
(a) the Seller's corporate franchise, stock record books,
corporate record books containing minutes of meetings of
directors and stockholders, Seller's corporate seal, and such
other records as have to do exclusively with the Seller's
organization or stock capitalization;
(b) income tax deposits, income tax refunds, and any prepaid
expenses not set forth on SCHEDULE 1.1(i) attached hereto;
(c) the Seller's tax returns;
(d) any real property in which Seller has fee simple title;
(e) Seller's employee benefit plan and the assets thereof;
(f) any assets of Seller used exclusively in Seller's
so-called "Flexfab Division" or Seller's so-called "FHI
Division" (together "Seller's Other Businesses"); and
(g) the assets of Seller specifically identified on SCHEDULE
1.1 proviso (g) attached hereto.
All of the Business assets of the Seller to be acquired by the Buyer are
hereinafter collectively referred to as the "Acquired Assets". All of the assets
of Seller mentioned in clauses (a) through (h) of the foregoing proviso of this
Section 1.1 as being excluded from the purchase and sale are hereinafter
collectively referred to as the "Excluded Assets".
1.2 ASSUMPTION OF CERTAIN COMMERCIAL OBLIGATIONS. On the Closing
Date, the Buyer shall assume and thereafter pay, perform or discharge when due
only the following commercial liabilities and obligations (collectively, the
"Assumed Liabilities") of the Seller:
(a) the trade accounts payable, accrued payroll, and other
accrued liabilities of the Seller arising from the operation of the Business in
the ordinary course of business, consistent (in type and amounts) with past
practices BUT ONLY OF THE TYPE reflected on
the Interim Date Balance Sheet (as defined in Section 4.8 hereof) of the
Business AND ONLY TO THE EXTENT reflected dollar for dollar on the Closing Date
Balance Sheet referred to in Section 3.1 hereof, provided that Buyer shall not
assume any of the Excluded Liabilities as defined in Section 1.3 hereof and,
provided, further, that Buyer shall not assume any liability of Seller or its
stockholders for legal, accounting and other fees and expenses incurred in
connection with the transactions contemplated by this Agreement;
(b) the liabilities as of the Closing Date under the Assumed
Contracts except for any liability under any of the Assumed Contracts arising
out of the Seller's failure to perform its obligations thereunder to the extent
such performance is due on or prior to the Closing Date;
(c) the liability to customers of the Business to repair or
replace defective products manufactured or sold by Seller on or prior to the
Closing Date but only to the extent that the cost of making such repairs of
replacements does not exceed the warranty reserve to be set forth on the Closing
Date Balance Sheet; and
(d) any liabilities and obligations to be assumed and
performed by the Buyer under Section 11.9 hereof with respect to the Transferred
Employees.
Seller agrees that notwithstanding anything to the contrary herein or
elsewhere contained, all of the Assumed Liabilities which represent intercompany
indebtedness or liabilities of the Business to Seller or its affiliates shall be
paid within 30 days of the date hereof, without interest, except that a portion
thereof equal to US $120,000 may be paid within 5 business days following the
determination of the Final Net Book Value, together with interest thereon at the
Prime Rate per annum, as reported by The Wall Street Journal on the Closing
Date, from the Closing Date until the date such payment is made.
1.3 EXCLUDED LIABILITIES. With the exception of the Assumed
Liabilities, the Buyer assumes no liabilities or other obligations, commercial
or otherwise, of the Seller, known or unknown, fixed or contingent, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured or otherwise (such
liabilities and obligations of Seller, other than the Assumed Liabilities, are
hereinafter referred to collectively as the "Excluded Liabilities" and
individually as an "Excluded Liability") including, without limitation, any
liability or obligation of Seller to any person with respect to the following:
(i) any transaction occurring after the Closing Date;
(ii) the transfer of the Acquired Assets pursuant hereto
including transfer taxes and stamp taxes;
(iii) income taxes or, except to the extent accrued dollar for
dollar on the Closing Date Balance Sheet, any state or local taxes, fees,
assessments or other similar charges (including, without limitation, franchise
taxes, real estate taxes, payroll taxes, personal property taxes and sales and
use taxes);
(iv) except to the extent provided in Section 1.2(c), defects,
returns or allowances, losses, personal injury, property damage or other damages
of any kind whatsoever, whether suffered or incurred by the Seller's customer or
Buyer's customer or any other person, arising out of products manufactured or
sold by the Seller or services performed by the Seller on or prior to the
Closing Date, whether the occurrence giving rise to such liability occurs before
or after the Closing, whether the claim is asserted before or after the Closing;
(v) except for accrued payroll, vacation pay and sick pay
described in Section 1.2(a) hereof and reflected dollar for dollar on the
Closing Date Balance Sheet, any responsibility, liability or obligation with
respect to salary, wages, sick pay, vacation pay, severance pay, savings plans,
gainsharing plans, deferred compensation, the Seller's pension, profit-sharing,
retirement, and other fringe benefit plans, including but not limited to any
employee pension benefit plan as defined in Section 3(1) of ERISA (as
hereinafter defined in Section 4.15 hereof), or any other obligations for the
benefit of any personnel of the Seller, including but not limited to accrued
pension benefits (vested or unvested), arising out of their employment through
the Closing Date or the termination of their employment by the Seller upon the
consummation of the transactions contemplated hereby;
(vi) the environmental condition of the Real Property (as
hereinafter defined in Section 4.5 hereof) as it exists on the Closing Date or
the clean-up thereof, including, without limitation, the clean-up of any
Hazardous Materials (as hereinafter defined in Section 4.5 hereof) either on the
Real Property or originating on the Real Property;
(vii) the failure to comply with the requirements of all
applicable building, fire, zoning and Environmental Laws (as hereinafter defined
in Section 4.5 hereof), laws relating to occupational health and safety,
antitrust laws, and other laws applicable to the Seller or the conduct of the
Business prior to the Closing Date;
(viii) any Assumed Contract to the extent such liability arises
out of the Seller's failure to perform its obligations thereunder prior to the
Closing Date;
(ix) except for any intercompany indebtedness or liabilities of
the Business to Seller described in Section 1.2(a) hereof and recorded dollar
for dollar on the Closing Date Balance Sheet, any indebtedness for borrowed
money or intercompany transactions or indebtedness to Seller's shareholders and
affiliates;
(x) occurrences on the Real Property occurring prior to the
Closing Date;
(xi) Seller's employee health and dental plans, or any other
employee welfare benefit plan as defined in Section 3(1) of ERISA maintained by
Seller, arising out of or relating to, medical or dental services provided or
rendered to the Seller's employees with respect to claims incurred on or before
the Closing Date;
(xii) any liability to pay a bonus to ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, the
payment of which is contingent upon the consummation of the transactions
contemplated hereby; and
(xiii) the conduct of Seller's Other Businesses.
The Seller shall have any and all responsibility to all
creditors and all third parties and to the Buyer with respect to, and shall pay,
discharge and perform when due, all liabilities and obligations of the Seller
not expressly assumed by the Buyer and, without limiting the generality of
Section 12.1 hereof, shall indemnify and hold the Buyer harmless from and
against any and all damages, liabilities, losses and expenses arising from such
liabilities and obligations.
1.4 CONSIDERATION FOR SALE AND TRANSFER OF THE ACQUIRED ASSETS.
Subject to the terms and conditions of this Agreement and in reliance upon the
representations, warranties, agreements and covenants of Seller herein
contained, and in full consideration of such sale, conveyance, transfer,
assignment and delivery of the Acquired Assets to Buyer, Buyer agrees to pay and
deliver to Seller, in a combination of cash and stock of AFC as hereinafter
provided in Section 2.2 hereof, a purchase price in United States Dollars (the
"Purchase Price") equal to SEVEN MILLION FIVE HUNDRED THOUSAND UNITED STATES
DOLLARS (US $7,500,000) (which amount shall be subject to adjustment as provided
in Article 3).
1.5 ALLOCATION OF PURCHASE PRICE. The allocation of the Purchase
Price among the Acquired Assets shall be as set forth on SCHEDULE 1.5 attached
hereto and the parties agree to report the subject transaction for federal and
state income tax reporting purposes in a manner consistent therewith.
2. CLOSING AND PAYMENT OF THE PURCHASE PRICE.
2.1 CLOSING. The closing of the transactions contemplated hereby (the
"Closing") is being held at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Incorporated,
2300 Hospital Trust Tower, Providence, Rhode Island at the opening of business
on the date hereof, effective as of the close of business on Friday, November
21, ▇▇▇▇ (▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇ Friday, November 21, 1997 is hereinabove and
hereinafter referred to as the "Closing Date").
2.2 PAYMENTS OF PURCHASE PRICE AT CLOSING. At the Closing, against
transfer of title to the Acquired Assets, the Buyer shall:
(a) assume the Assumed Liabilities;
(b) pay by wire transfer of immediately available United States
funds to Seller a portion of the Purchase Price equal to SIX MILLION FOUR
HUNDRED THOUSAND UNITED STATES DOLLARS (US $6,400,000);
(c) deliver to Seller stock certificate(s), issued in Seller's
name, representing Eleven Thousand Three Hundred Sixty Four (11,364) shares (or
the equivalent
number of shares necessary to account for any stock split, stock dividend or
other recapitalization occurring after the signing of this Agreement and before
the Closing) of AFC's Common Stock, $0.01 par value per share ("Common Stock"),
which the parties agree shall have, for purposes of this Agreement, a value of
US $26.40 per share (the 11,364 shares of Common Stock to be delivered to Seller
are hereinafter referred to as the "Seller's AFC Shares"); and
(d) pay by wire transfer of immediately available United States
funds to State Street Bank and Trust Company (the "Escrow Agent") the sum of
EIGHT HUNDRED THOUSAND UNITED STATES DOLLARS (US $800,000) (representing the
balance of the Purchase Price), which shall be held by the Escrow Agent and
administered and disposed of by the Escrow Agent in accordance with the terms
and provisions of an escrow agreement by and among Seller, Buyer and Escrow
Agent in the form of EXHIBIT A attached hereto (the "Escrow Agreement"). To the
extent that distributions from the funds under the Escrow Agreement are
insufficient to pay Buyer any amounts payable to Buyer under any of Sections
3.2, 4.4(e) or 12.1 hereof, Seller shall immediately pay any deficiencies to
Buyer.
Following the Closing, the payments made pursuant to this Section 2.2 shall be
adjusted as provided in Article 3 hereof.
2.3 TRANSFER OF ACQUIRED ASSETS. At the Closing, the Seller shall
transfer to the Buyer all right, title and interest in and to the Acquired
Assets free and clear of all claims, liens, pledges, encumbrances, mortgages,
charges, security interests, options, rights, restrictions or any other
interests or imperfections of title whatsoever. Said transfer shall be effected
by the delivery to the Buyer of fully executed bills of sale, endorsements,
assignments and other good and sufficient instruments of conveyance and
transfer, in form and substance satisfactory to the Buyer and its counsel.
3. POST CLOSING DETERMINATION OF FINAL NET BOOK VALUE AND ADJUSTMENT OF
PAYMENT MADE AT CLOSING; AND CONTINGENT EARNOUT PAYMENT.
3.1 DETERMINATION OF FINAL NET BOOK VALUE. The payment made by Buyer
pursuant to Section 2.2 hereof is subject to possible adjustment following the
Closing (as provided in Section 3.2 hereof) based upon the Final Net Book Value
as determined pursuant to this Section 3.1. For purposes hereof, the term "Final
Net Book Value" shall mean the net book value of the Acquired Assets less the
net book value of the Assumed Liabilities of the Seller as of the Closing Date,
determined in accordance with United States generally accepted accounting
principles ("US GAAP"), consistently applied with prior periods. For purposes of
determining the Final Net Book Value, inventory will be physically taken by
Seller, and Buyer and Buyer's accountants shall be entitled to participate in
the physical inventory. Seller, at Seller's sole expense, shall prepare a
balance sheet of the Business of Seller (the "Closing Date Balance Sheet") as of
the Closing Date, together with statements of the results of operations and
changes in financial position of the Business of Seller for the period ended on
the Closing Date, including the related notes. The Closing Date Balance Sheet
and the related statements of the results of operations and changes in financial
position, and related notes, shall be prepared in accordance
with US GAAP, consistently applied with prior periods and shall, consistent
therewith, include a reserve for doubtful accounts (the "Reserve for Doubtful
Accounts") and a warranty reserve to cover only the cost of repair and
replacement of defective or non-conforming products. Not later than sixty (60)
days after the Closing, Seller will furnish to Buyer (1) the Closing Date
Balance Sheet, together with an unqualified auditor's report of Seller's current
auditors (the "Auditor") (whose fees shall be paid by Seller) opining that the
Closing Date Balance Sheet has been prepared in accordance with the requirements
of this Section 3.1 and (2) a statement showing the Final Net Book Value,
together with a certificate of the Auditor and Seller's Chief Financial Officer
that the Final Net Book Value has been prepared in accordance with this Section
3.1 hereof. Buyer will give representatives of Seller access to Buyer's premises
and to all of its books and records for purposes of preparing the Closing Date
Balance Sheet and will cause appropriate Buyer personnel to assist Seller and
its representatives, at no cost to Seller, in the preparation of the Closing
Date Balance Sheet. Seller agrees to cause the Auditor to afford to Buyer and
Buyer's accountants access to the Auditor's workpapers at reasonable times
during the ten (10) day period referred to in the immediately next succeeding
sentence. Unless Buyer notifies Seller in writing that Buyer or Buyer's
accountants disagrees with the Closing Date Balance Sheet and the statement of
the Final Net Book Value within ten (10) days after receipt thereof, the Closing
Date Balance Sheet and the statement of the Final Net Book Value shall be
conclusive and binding on Buyer and Seller. If Buyer notifies Seller in writing
of its disagreement with the Closing Date Balance Sheet and the statement of the
Final Net Book Value within such 10-day period, then Buyer and Seller shall
attempt to resolve their differences with respect thereto within thirty (30)
days after Seller's receipt of Buyer's written notice of disagreement. For
purposes of consideration of such disapproval by Buyer or Buyer's accountants,
materiality of items shall not be deemed a consideration for rejection of
modifications requested by Buyer (whether or not materiality might otherwise be
a consideration under US GAAP). Any disputes not resolved by Buyer and Seller
within such 30-day period regarding the Closing Date Balance Sheet or the Final
Net Book Value will be resolved by an accounting firm mutually acceptable to
both parties or, in the absence of agreement, by a "big-six" accounting firm
selected by lot after eliminating Seller's and Buyer's principal outside
accountants and one additional firm designated as objectionable by each of
Seller and Buyer. The determination of any accounting firm so selected, and the
Closing Date Balance Sheet and the Final Net Book Value (with such modifications
therein, if any, as reflect such determination), shall be conclusive and binding
upon the parties. The fees and expenses of such accounting firm in acting under
this Section shall be borne equally by Seller and Buyer.
3.2 ADJUSTMENT OF PAYMENTS MADE AT CLOSING. If the Final Net Book
Value is less than ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
DOLLARS (US $1,920,000), Seller shall pay to Buyer the amount of the shortfall.
The amount, if any, payable from Seller to Buyer pursuant to this Section 3.2,
together with interest thereon at the Prime Rate per annum, as reported by THE
WALL STREET JOURNAL on the Closing Date, from the Closing Date until the date
such payment is made, shall be paid by Seller to Buyer as soon as possible but
in any event not more than five business days following the final determination
of the Final Net Book Value; PROVIDED, HOWEVER, at Buyer's election, all or any
portion of any amount payable by Seller to Buyer under this Section 3.2 shall be
paid by the Escrow Agent to
Buyer out of the Price Adjustment/Receivables Fund (as defined in the Escrow
Agreement) as provided in the Escrow Agreement.
3.3 CONTINGENT EARNOUT PAYMENTS.
(a) EARNOUT PAYMENTS FORMULA. Following the Closing, as
contingent additional purchase price, Buyer will pay to Seller earnout payments
(the "Earnout Payments") as follows:
(i) after the end of calendar year 1998, Buyer will
pay to Seller three (3) times the amount, if any, by which "EBIT" (as defined
below) of the Business for calendar year 1998 exceeds US $1,200,000;
(ii) after the end of calendar year 1999, Buyer will
pay to Seller three times the amount, if any, by which EBIT of the Business for
calendar year 1999 exceeds THE GREATER OF US $1,200,000 or EBIT of the Business
for calendar year 1998; and
(iii) after the end of calendar year 2000, Buyer will
pay to Seller three times the amount, if any, by which EBIT of the Business for
calendar year 2000 exceeds THE GREATEST OF (aa) US $1,200,000, (bb) EBIT of the
Business for calendar year 1998 or (cc) EBIT of the Business for calendar year
1999.
(b) DEFINITIONS. As used in this Section 3.3, "EBIT" of the
Business shall mean earnings BEFORE (i) interest (except to the extent
hereinafter expressly provided) and taxes, (ii) amortization of intangibles
arising solely from the sale of the Business from Seller to Buyer and (iii) any
costs and expenses incurred by AFC or its affiliates for and on behalf of the
Business including, without limitation, management time, travel expenses and the
fees and expenses of attorneys, accountants and other third persons, BUT AFTER
(aa) a fixed corporate charge or allocation equal to one half of one percent
(0.5%) of net sales (of the Business for the calendar year for which EBIT is
being calculated), (bb) any interest expense incurred by AFC or the Buyer in
connection with any loan or investment made by AFC to or in the Buyer, or any
loan made by a financial institution to Buyer, in either case, only to the
extent the proceeds of such loan or investment are used for the purpose of
financing the growth or working capital requirements of the Business and (cc)
rental or interest expense in connection with the leasing or mortgage financing
of the Real Property (as defined in Section 4.5(a) hereof) owned or leased by
Buyer or any of its affiliates after the Closing. Except as otherwise provided
by this definition, EBIT shall be calculated in accordance with US GAAP,
consistently applied with prior periods.
As used in this Section 3.3 only, the term "BUSINESS" shall mean only the
"Business" as defined in the preamble to this Agreement, as the same shall be
carried on and conducted by Buyer (or any affiliate of Buyer) using the Acquired
Assets after the Closing, whether as an unincorporated division or as a stand
alone entity, AND AS THE SAME MAY GROW OR BE EXPANDED BY CAPITAL IMPROVEMENTS,
THE DEVELOPMENT AND SALE OF NEW PRODUCTS, THE ENTRY INTO NEW GEOGRAPHIC MARKETS
OR OTHERWISE, BUT SPECIFICALLY EXCLUDING HOWEVER the business of any going
concern acquired by Buyer or any of its affiliates after the Closing (whether
such acquisition is by purchase of stock,
purchase of assets, merger or otherwise) as long as the costs of acquiring such
going concern are excluded from the calculation of EBIT.
(c) DETERMINATION OF EBIT. After the end of each of calendar
years 1998, 1999, and 2000, Buyer shall prepare and will furnish to Seller, not
later than seventy five (75) days following the end of such calendar year, a
statement showing Buyer's determination of the EBIT of the Business for such
calendar year ("Buyer's Determination"), together with a certificate of Buyer's
chief financial officer that the EBIT of the Business for such calendar year has
been prepared and calculated in accordance with this Section 3.3 hereof. Unless
Seller notifies Buyer in writing that Seller disagrees with Buyer's
Determination within ten (10) days after receipt thereof, Buyer's Determination
shall be conclusive and binding on Buyer and Seller. Buyer agrees to cause its
auditor and other related personnel and employees to afford to Seller and
Seller's accountants access to all work papers related to the determination of
the applicable EBIT at reasonable times during the ten day period referred to in
the next preceding sentence. If Seller notifies Buyer in writing of its
disagreement with Buyer's Determination within such ten (10) day period, then
Buyer and Seller shall attempt to resolve their differences with respect thereto
within thirty (30) days after Buyer's receipt of Seller's written notice of
disagreement. Any disputes not resolved by Buyer and Seller within such thirty
(30) day period regarding the EBIT of the Business will be resolved by an
accounting firm mutually acceptable to both parties or, in the absence of
agreement, by a "big-six" accounting firm selected by lot after eliminating
Seller's and Buyer's principal outside accountants and one additional firm
designated as objectionable by each of Seller and Buyer. The determination of
EBIT of the Business made by any accounting firm so selected shall be conclusive
and binding upon the parties. The fees and expenses of such accounting firm in
acting under this Section shall be borne equally by Seller and Buyer.
(d) TIME AND METHOD OF PAYMENT OF EARNOUT PAYMENTS. Following
the end of each of calendar years 1998, 1999 and 2000, within ten (10) days
following the final determination of EBIT of the Business for such calendar
year, Buyer shall pay Seller the amount of any Earnout Payment earned by Seller
in such calendar year, in immediately available United States funds by cashier's
check or by wire transfer to an account designed by Seller, provided that, with
respect to any Earnout Payment earned by Seller in calendar year 1998 only,
Buyer may elect to pay such Earnout Payment either: (i) entirely in cash or (ii)
in a combination of cash and AFC Common Stock (provided that the AFC Common
Stock may not comprise more than fifty (50%) percent of the value of the Earnout
Payment). Any portion of such Earnout Payment payable in cash shall be paid in
immediately available United States funds by cashier's check or by wire transfer
to an account designated by Seller. Any portion of the Earnout Payment payable
in AFC Common Stock shall be paid by delivery from Buyer to Seller of stock
certificate(s), issued in Seller's name, representing a number of shares of AFC
Common Stock having a value (as hereinafter determined) equal to such portion of
the Earnout Payment. The number of shares of AFC Common Stock to be delivered to
Seller shall be determined by dividing the portion of the Earnout Payment which
is to be paid in AFC Common Stock by the arithmetic average of the mean of the
closing bid and asked prices for AFC Common Stock on the NASDAQ National Market,
or such other nationally recognized market in which such Common Stock trades if
such Common Stock is no longer listed on the NASDAQ National
Market, for the twenty (20) trading days falling within the calendar year in
respect of which the Earnout Payment is to be made comprised of the last ten
(10) trading days in the month of July and the last ten (10) trading days in the
month of October.
(e) In the event that all or substantially all of the business
and assets of the Business shall be sold after the Closing Date, but prior to
December 31, 2000 (the period between the Closing Date and December 31, 2000 is
hereinafter referred to as the "Earnout Period"), to a person not affiliated
with Buyer, then, unless Seller shall timely make the election referred to in
the immediately following sentence, Buyer shall cause the purchaser of the
Business to assume Buyer's obligation to pay the Earnout Payments to Seller as
provided above, and no such sale of the Business or assumption of Buyer's
obligation to pay the Earnout Payments shall have the effect of changing the
formula for the calculation of the Earnout Payments or the dates for payment
thereof or of relieving Buyer of its obligation to Seller in respect thereof.
Notwithstanding anything to the contrary contained in this Section 3.3, if all
or substantially all of the business and assets of the Business shall be sold
during the Earnout Period to a person not affiliated with Buyer, Buyer shall
give Seller notice of such sale within ten (10) days of the closing thereof; and
if Seller shall, within fifteen (15) days of being notified of such sale, give
Buyer notice of Seller's desire to receive payment of the Liquidated Amount (as
hereinafter defined) in lieu of any further Earnout Payments, then, within
thirty (30) days of Buyer's receipt of Seller's notice, Buyer shall pay to
Seller, in lieu of any further payments of Earnout Payments which might
otherwise be earned in the calendar year in which the sale occurs or in any
subsequent calendar year during the Earnout Period, an amount (the "Liquidated
Amount") equal to the sum of (A) the PRODUCT of (i) US $400,000 MULTIPLIED BY
(ii) a fraction, the numerator of which is the number of days between the date
of the closing of the sale of the Business and the end of the calendar year in
which the sale occurs, and the denominator of which is 365 plus (B) US $400,000
for each full calendar year during the Earnout Period which begins after the
date of the closing of the sale.
(f) Until the earlier of December 31, 2000 or (if applicable)
the date upon which Buyer pays the entire Liquidated Amount to Seller, Buyer
covenants and agrees with Seller that Buyer will run the Business in a
businesslike manner, in accordance with sound business practices and in
accordance with the best business judgment of Buyer's officers and directors.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER
As of the date hereof and as of the Closing Date, Seller represents
and warrants to Buyer as follows:
4.1 ORGANIZATION AND QUALIFICATION OF THE SELLER. The Seller is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Seller has the requisite corporate power
and authority to own or lease all of the Acquired Assets and to conduct the
Business in the manner and in the places where the Acquired Assets are owned or
leased or the Business is now conducted. The Seller is duly qualified, licensed
and authorized to do business as a foreign corporation and is in good standing
as a foreign
corporation in the jurisdictions, if any, shown on SCHEDULE 4.1, and such
jurisdictions are the only jurisdictions wherein Seller is required to be so
qualified, licensed and authorized to do business, other than where the failure
to be so qualified, licensed and authorized, as the case may be, would not have
a Material Adverse Effect. "Material Adverse Effect" as used in this Agreement
means any change or effect that would be materially adverse to the financial
condition or operations of the Business.
4.2 AUTHORITY OF SELLER. This Agreement and each of the other
agreements, documents and instruments required to be executed by Seller pursuant
to this Agreement will constitute, when delivered, the valid and binding
obligations of Seller and shall be enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors' rights and to the
application of equitable principles. The execution, delivery and performance of
this Agreement and each such other agreement, document and instrument have been
duly authorized by all necessary corporate action of Seller.
The execution, delivery and performance by Seller of this Agreement
and each such other agreement, document and instrument, except as specifically
identified on SCHEDULE 4.2, does not and will not with the passage of time or
the giving of notice or both:
(a) result in a breach of or constitute a default by the Seller
or result in any right of termination or other effect adverse to the Seller
under any indenture or loan or credit agreement of the Seller, or any other
agreement, lease or instrument to which the Seller is a party or by which the
Acquired Assets are bound or affected;
(b) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance or claim of any nature whatsoever on the Acquired Assets;
(c) result in a violation of or default under any law, rule, or
regulation, or any order, writ, judgment, injunction, decree, determination or
award, now in effect to which Seller is a party or by which Seller or the
Acquired Assets are bound;
(d) violate any provisions of the Articles of Organization, or
equivalent, or Bylaws of the Seller, as amended;
(e) require any approval, consent or waiver of, or filing with,
any person; or
(f) contravene any applicable law or regulation, except that
Seller makes no representation or warranty with respect to antitrust laws.
4.3 INTENTIONALLY LEFT BLANK
4.4 ASSETS.
(a) Except for the Excluded Assets, the Acquired Assets
constitute all of the assets and rights associated with, and necessary to
operate and conduct, the Business as now operated and conducted by Seller.
(b) The machinery and equipment included within the Acquired
Assets: (i) is in a good state of operating condition and repair; (ii) has been
maintained in accordance with a regular preventative maintenance program; (iii)
is adequate for the Business's current production levels; and (iv) conforms with
all applicable laws, ordinances and regulations.
(c) Except as listed on SCHEDULE 4.4(c) attached hereto, the
Seller has good and marketable title to all of the Acquired Assets, free and
clear of all claims, liens, pledges, charges, mortgages, security interests,
encumbrances, equities or other imperfections of title of any nature whatsoever,
except for liens for current taxes and assessments not yet due and payable.
(d) The inventories of the Business reflected on the Closing
Date Balance Sheet, after giving effect to any inventory reserve set forth
therein, are of a quality and quantity saleable or useable in the ordinary
course of business of the Business, are valued at the lower of cost or market
and, except as may be modified as a result of the determination of the Final Net
Book Value in accordance with Article 3 hereof, reflect write-downs to
realizable values in the case of items which have become obsolete, unusable or
unsaleable (except at prices less than cost) through regular distribution
channels in the Seller's business. Subject to write-downs complying with the
preceding sentence and any inventory reserve set forth on the Closing Date
Balance Sheet, the values of the inventories of the Business stated in the
Closing Date Balance Sheet reflect the Seller's normal inventory valuation
policies and were determined in accordance with US GAAP, practices and methods
consistently applied. Purchase commitments for raw materials and inventory are
not, individually or in the aggregate, in excess of normal requirements and, to
the best of Seller's knowledge, none are at prices in excess of the lowest
prices reasonably available in the current market. Sales commitments for
finished goods are all at prices in excess of prices used in valuing inventory
items or of estimated costs of manufacture of items not in inventory after
allowing for selling expenses and a normal profit margin except in instances of
sale promotions or product introductions consistent with past practices. Since
the Interim Date, no inventory items have been sold or disposed of except
through sales in the ordinary course of business.
Of the goods and products of the Business sold before the Closing (other
than those that are non-conforming), none were sold upon terms and conditions
which permit the customer to return the same for exchange or credit. None of the
products of the Business are sold on consignment.
(e) All of the Accounts arose from bona fide transactions in
the ordinary course of business of the Business, consistent with past practices,
represent accounts validly due for goods sold or services rendered or validly
incurred indebtedness on the part of those obligated thereon, and are fully
collectible dollar for dollar within one hundred eighty (180) days after the
Closing Date in the aggregate face amounts thereof without offset, counterclaim
or resort to litigation net of the Reserve for Doubtful Accounts (as defined in
Section 3.1 hereof). There has not been asserted any counterclaim or claim for
offset against any of the Accounts.
Following the Closing, within ten (10) business days after
Buyer delivers to Seller a schedule of all of the Accounts which remain unpaid
after the expiration of a collection period commencing on the Closing Date and
expiring one hundred eighty (180) days thereafter, at Buyer's election, if the
aggregate face amount of such unpaid Accounts exceeds the Reserve for Doubtful
Accounts (as defined in Section 3.1 hereof), Seller will immediately pay to
Buyer, without regard to the Deductible, an amount equal to the difference
between (A) the aggregate face amount of such unpaid Accounts and (B) the amount
of the Reserve for Doubtful Accounts set forth on the Closing Date Balance
Sheet, against simultaneous delivery by Buyer to Seller of an appropriate ▇▇▇▇
of sale conveying the unpaid Accounts to Seller and entitling Seller to collect
such Accounts in its own name. Notwithstanding the foregoing, at Buyer's
election, all or any portion of any amount payable by Seller to Buyer under this
subsection 4.4(e) shall be paid by the Escrow Agent to Buyer out of the Price
Adjustment/Receivables Fund (as defined in the Escrow Agreement) in the manner
provided in the Escrow Agreement. Any and all payments received by Buyer after
the collection period for which Buyer has heretofore been reimbursed by Seller
shall promptly be paid over to Seller. Buyer shall exercise reasonable efforts
to collect all such unpaid Accounts consistent with past practices before the
end of the aforesaid period; however, Buyer will not be required to initiate
legal proceedings for this purpose. For purposes of determining payment of a
receivable under this guaranty of payment, all amounts paid by a customer after
the Closing shall first be applied to the specific receivable account, if any,
identified by the customer with the payment or, failing such identification, as
otherwise determined by company personnel.
(f) All of the personal property leased by the Seller in the
conduct of the Business is listed on SCHEDULE 4.4(f) attached hereto, and copies
of all of the lease documents have been delivered to the Buyer. All such lease
documents are unmodified and in full force and effect, and there are no other
agreements, written or oral, between the Seller and any third parties claiming
an interest in the Seller's interest in any leased property or otherwise
relating to the Seller's use thereof, and all covenants, conditions,
restrictions and similar matters affecting the leased property have been
complied with by the Seller.
(g) Except as described on SCHEDULE 4.4(g) attached hereto, all
of the Acquired Assets of the Seller are located on the premises owned or leased
by the Seller as set forth on SCHEDULE 4.5 and all the assets located on such
premises are owned or leased by the Seller.
4.5 REAL PROPERTY AND ENVIRONMENTAL CONDITION THEREOF.
(a) With the exception of the real property owned and leased by
the Seller described on SCHEDULE 4.5 attached hereto, the Seller does not own,
lease or otherwise use any real property in the conduct of the Business. (Such
real property owned and leased by the Seller, together with the buildings and
improvements thereon, is herein referred to as the "Real Property"; and, solely
for purposes of SECTION 4.5(b) hereof and Articles 11 and 12 hereof, the term
"Real Property" shall also include any other real property previously owned,
operated or leased by the Seller in the conduct of the Business.) The legal
description of the Real Property is set forth on SCHEDULE 4.5.
(b) To the best of Seller's knowledge, except as otherwise
specifically disclosed on SCHEDULE 4.5, PRIOR TO OR ON THE CLOSING DATE: (i) the
Real Property, and the operations thereon and the uses made thereof, are in
compliance with all, and are not in violation of any, Environmental Laws (as
hereinafter defined); (ii) there has been no generation, use, treatment,
handling, storage or disposal, or arrangement for the use, treatment, handling,
storage or disposal, of Hazardous Materials on, or release or transportation of
Hazardous Materials to or from, the Real Property by any person (including,
without limitation, the Seller and the past and present officers, employees and
agents of the Seller and all past and present owners, operators and lessees of
the Real Property) at any time except in full compliance with all Environmental
Laws; (iii) the Real Property has not been used at any time by any person in
such a manner as to cause a violation of any Environmental Law or to potentially
give rise to any liability or obligation for the remediation or restoration of
the Real Property or for the treatment, storage, removal, disposal, release,
arrangement for removal or disposal or transportation of any Hazardous
Materials; (iv) no such violation, liability or obligation has been created by
the removal, disposal or transportation by any person at any time of any
Hazardous Materials to or from the Real Property; (v) Seller has received no
notice of, and no circumstances exist that could form the basis of, an
Environmental Action (as hereinafter defined) arising out of or relating to the
Real Property or the generation, use, treatment, handling, storage or disposal,
or arrangement for the use, treatment, handling, storage or disposal, of
Hazardous Materials thereon, or the release or transportation of Hazardous
Materials thereto or therefrom; (vi) the Real Property is not listed or proposed
for listing on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
on the Comprehensive Environmental Response, Compensation and Liability
Information System maintained by the Environmental Protection Agency or any
analogous state list of sites requiring investigation or clean-up; (vii) none of
the buildings and improvements included within the Real Property contain
asbestos other than non-friable asbestos that may be used at the time of the
Closing in compliance with Environmental Laws and other than asbestos that may
be naturally occurring, and there are no underground storage tanks or
polychlorinated biphenyl (PCBs) located on or at the Real Property other than
totally enclosed PCBs that may be used at the time of the Closing in compliance
with Environmental Laws; (viii) the Seller has obtained all permits, approvals,
identification numbers, licenses and other authorizations, and renewals thereof,
required under Environmental Laws; all of the same are currently effective; and
Seller is complying in all respects therewith; (ix) no employees of the Seller
have been exposed to Hazardous Materials other than in compliance with
Environmental Laws in effect at the time of
such exposure; and (x) the Seller has delivered to Buyer true, complete and
correct copies or results of any and all reports, studies or tests in the
possession of or initiated by the Seller pertaining to the existence of
Hazardous Materials and other environmental concerns on any part of the Real
Property or concerning compliance with or liability under Environmental Laws in
the operation of the business of the Seller or as conducted by any prior owner,
operator or lessee of the Real Property.
Seller and the Business have fully complied with all of their obligations under
that certain Stipulation and Order entered in the Matter of Federal Hose
Manufacturing, California EPA Docket DO94/95-5-287, entered into in full
settlement of the Enforcement Order issued by the Department of Toxic Substances
Control on November 14, 1994, and no violations specified in such Enforcement
Order remain outstanding and uncured.
As used in this Section 4.5 and elsewhere in this Agreement: (1) "ENVIRONMENTAL
ACTION" means any action, suit, demand, demand letter, claim, notice of
non-compliance or violation, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, including, without
limitation (a) any claim by any governmental or regulatory authority for
enforcement, clean-up, removal, response, remedial or other actions or damages
pursuant to any Environmental Law and (b) any claim by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to the environment; (2) "ENVIRONMENTAL LAWS" and
"ENVIRONMENTAL LAW" means any federal, state or local law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award relating to
the environment or Hazardous Materials, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Hazardous Materials Transportation
Act, the Clean Water Act, the Toxic Substances Control Act, the Clean Air Act,
the Safe Drinking Water Act, the Atomic Energy Act and the Federal Insecticide,
Fungicide and Rodenticide Act, in each case, as amended from time to time; and
(3) "HAZARDOUS MATERIALS" means (a) petroleum or petroleum products, natural or
synthetic gas, asbestos in any form that is or could become friable, urea
formaldehyde foam insulation and radon gas, (b) any substances defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials" "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants" "contaminants" or "pollutants"
or words of any similar import, under any Environmental Law and (c) any other
substance exposure to which is regulated under any Environmental Law.
(c) The Real Property, and the operations thereon and the uses
made thereof, are in compliance with all fire, building and zoning laws,
statutes, ordinances, codes, rules, regulations and decrees.
(d) No notice of violation of any applicable federal, state, or
local statute, ordinance, order, requirement, law, rule, regulation (including,
without limitation, any Environmental Law), or of any covenant, condition,
restriction or easement affecting the Real Property with respect to the use or
occupancy of the Real Property has been given to the Seller by any person having
jurisdiction over the Real Property or by any other person entitled to
enforce the same, or by any private citizen or citizen action group and, to the
best of Seller's knowledge, no such notice has been given to any other person.
(e) To Seller's knowledge, there is no plan, study or effort by
any governmental authority or any other person which may prevent or hinder
Buyer's continued use of the Real Property as heretofore used in the conduct of
the Business by the Seller.
(f) There is not (i) to Seller's knowledge, any intended or
proposed federal, state, or local statute, ordinance, order, requirement, law,
rule or regulation (including, but not limited to, zoning changes) which may
prevent or hinder Buyer's continued use of the Real Property as heretofore used
in the conduct of the Business by the Seller or (ii) any suit, action, claim or
legal, administrative, arbitration or other proceeding or governmental
investigation (other than Environmental Actions) pending or threatened or
contemplated against or affecting either the Real Property or the use thereof.
(g) There is no existing or, to Seller's knowledge, proposed or
contemplated eminent domain proceeding that would result in the taking of all or
any part of the Real Property that would prevent or hinder Buyer's continued use
of the Real Property as heretofore used in the conduct of the Business by the
Seller.
(h) To the best of Seller's knowledge, there are no
encroachments onto the Real Property by any improvements on any adjoining
property.
(i) To the best of Seller's knowledge, there are no
encroachments onto any adjoining property by any improvements on the Real
Property.
(j) There are no unpaid taxes, local improvement levies,
assessments (special, general or otherwise) or bonds of any nature related to
Real Property or any portion thereof.
(k) Neither the Seller nor, to Seller's knowledge, any owner of
the Real Property has subjected the Real Property to any lease, sublease,
tenancy, concession, license, occupancy agreement or similar right other than
the Seller's leasehold interest in that portion of the Real Property leased by
Seller.
(l) With respect to any part of the Real Property owned by
Seller, Seller owns good and marketable fee simple absolute title thereto, free
and clear of any and all mortgages, deeds of trust, liens, encumbrances, claims,
charges, security interests, equities, covenants, conditions, restrictions,
easements, rights of way or other matters, whether or not of records, except as
set forth on Schedule 4.5.
(m) Except as set forth on SCHEDULE 4.2, neither this Agreement
nor anything provided to be done under this Agreement violates or shall violate
any contract, document, understanding, agreement, arrangement or instrument
affecting the Real Property.
4.6 CONDUCT OF THE BUSINESS. Except as provided in SCHEDULE 4.6, the
Seller is not a party to, or subject to or bound by, nor are any of its assets
subject to or bound by, any agreement, oral or written, or any order, writ,
injunction or decree of any court or governmental or administrative body which
prohibits or adversely affects or upon the consummation of the transactions
contemplated hereby would prohibit or adversely affect: (i) the use of any or
all of the Acquired Assets in the conduct of the Business in the ordinary course
of business; or (ii) the conduct of the Business in the same manner as such
business has been conducted by Seller. No supplier, distributor or customer of
the Business of Seller has notified the Seller that it intends to discontinue
its relationship with the Seller.
4.7 PERMITS AND LICENSES. SCHEDULE 4.7 attached hereto contains a
list of all consents, authorizations, licenses, permits, orders, certificates,
registrations, security and other clearances, and qualifications which are
necessary to the conduct of the Business as heretofore conducted or required by
applicable laws (including, without limitation, Environmental Laws); and, except
as set forth on SCHEDULE 4.7, the Seller has obtained all of such consents,
authorizations, licenses, permits, orders, certificates, registrations, security
and other clearances and qualifications, and the same are valid and subsisting.
Seller has no reason to believe that Buyer will not be able to obtain or retain
all such required consents, authorizations, licenses, permits, orders,
certificates, registrations, security and other clearances and qualifications.
The Seller is not required to have any form of security clearance from any
governmental agency in order to conduct the Business in the manner it is
presently conducted.
4.8 FINANCIAL STATEMENTS AND UNDISCLOSED LIABILITIES.
(a) The Seller has delivered to Buyer (1) the unaudited balance
sheets of Seller as of August 29, 1997, and unaudited statements of income and
retained earnings of Seller for the interim period then ended, (2) the audited
balance sheets of Seller as of September 27, 1996, September 29, 1995, and
September 30, 1994, and audited statements of income and retained earnings of
Seller for each of the fiscal years then ended, including, in each case, the
related notes, (3) the unaudited balance sheets of the Business as of September
26, 1997, and unaudited statements of income and retained earnings of the
Business for the interim period then ended and (4) the unaudited balance sheets
of the Business as of September 27, 1996, September 29, 1995 and September 30,
1994, and unaudited statements of income and retained earnings of the Business
for each of the fiscal years then ended. All of the foregoing financial
statements and notes of Seller are collectively referred to herein as the
"Financial Statements". As used herein, (1) the term "Interim Date Balance
Sheet" shall mean the balance sheet of the Business as of September 26, 1997 and
(2) the term "Interim Date" shall mean September 26, 1997.
(b) All of the Financial Statements: (i) are true, complete and
correct and present fairly the financial position of the Seller and the
Business, as applicable, as of the dates thereof and the results of operations
for the respective periods covered by such statements; (ii) are consistent with
the books and records of the Seller; and (iii) have been prepared in accordance
with US GAAP applied on a consistent basis with prior years, except, with
respect to interim unaudited statements, normal year-end adjustments and without
footnotes.
(c) The Seller, as of the Interim Date and the Closing Date,
has no material indebtedness, liability, claim or obligation of any nature,
fixed or contingent, ▇▇▇▇▇▇ or inchoate, liquidated or unliquidated, secured or
unsecured or otherwise of any kind or nature which in accordance with US GAAP
should be recorded on a balance sheet or disclosed in a footnote to financial
statements, except: (i) liabilities specifically described and reflected dollar
for dollar on the Financial Statements; (ii) liabilities incurred in the
ordinary course of business since the Interim Date, in kind and amounts
consistent with past practices; (iii) commercial obligations to perform pursuant
to executory obligations entered into in the ordinary course of business
consistent with past practices, and not in default, or (iv) liabilities, if any,
specifically disclosed and reflected dollar for dollar on SCHEDULE 4.8(c)
attached hereto.
4.9 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.9
attached hereto, the Seller has been and is, and the Business has been and is
being conducted and operated, in compliance with all requirements of all
applicable statutes, laws, ordinances, regulations, rules, codes or decrees,
whether foreign or domestic, federal, state or local, which affect the Seller,
the Business or the Acquired Assets, or to which the Seller is subject,
including, without limitation, those relating to fair labor practices and
standards; equal employment practices; occupational safety and health;
export/import licenses or controls; foreign exchange controls; restraint of
trade and unfair competition; immigration; federal procurement; and
Environmental Laws. Except as set forth on SCHEDULE 4.9, the Seller has not
received any notice or other communication from any person with respect to an
alleged, actual or potential violation and/or failure to comply with any of the
foregoing.
4.10 PATENTS, TRADE NAMES, TRADEMARKS AND COPYRIGHTS. All patents,
patent applications, trade names, registered or common law trademarks, trademark
applications and registered copyrights owned by or licensed to or used by the
Seller in the Business are listed on SCHEDULE 4.10 and have been duly registered
in, filed in or issued by the United States Patent and Trademark Office, the
United States Register of Copyrights or the corresponding offices of other
countries, states or other jurisdictions to the extent set forth on said
SCHEDULE 4.10, and have been properly maintained and renewed in accordance with
all applicable provisions of law and administrative regulations in the United
States and each such country, state or other jurisdiction. Except as set forth
in said SCHEDULE 4.10, the Seller's use of said patents, trade names, trademarks
or copyrights does not require the consent of any third party and the same are
freely transferable and are owned exclusively by the Seller free and clear of
any attachments, liens, royalties, encumbrances, adverse claims, licenses or any
other ownership or other interest of any other person whatsoever. Except as
described in SCHEDULE 4.10, no person has a license to use any of such patents,
trade names, trademarks or copyrights or applications therefor. No order,
decree, judgment or stipulation has ordered, decreed, adjudged, stipulated,
found or determined that Seller or any of its affiliates, in connection with the
conduct of the Business, has infringed any adversely held patent, trade name,
trademark or copyright; and no claim or proceeding charging the Seller or any of
its affiliates, in connection with the conduct of the Business, with
infringement of any adversely held patent, trade name, trademark or copyright,
has been asserted or served upon the Seller or its affiliates at any time during
the six (6) year period prior to and ending upon the Closing Date or, to
Seller's knowledge, is threatened to be asserted or filed; and the conduct of
the Business, as heretofore conducted by the Seller, does not infringe any
patents,
patent applications, trade names, trademarks, copyrights or other rights owned
by or owed to any third person. Except as set forth on SCHEDULE 4.10, to
Seller's knowledge after a review of the current files of the Seller and its
affiliates, no person is infringing upon the patents, trade names, trademarks or
copyrights or applications therefor set forth on SCHEDULE 4.10. Except as
specifically disclosed on SCHEDULE 4.10, the Seller has not used any patent,
trade name, trademark or copyright in order to conduct the Business as presently
being conducted.
Except as set forth on SCHEDULE 4.10, the Seller owns and has the
right to use, free and clear of any claims or rights of any other person,
including without limitation, any affiliate of the Seller, all trade secrets,
customer lists, secret processes, technology, know-how and any other
confidential information required for or used in the manufacture, sale,
distribution or marketing of all products either being, or proposed to be,
manufactured, sold, distributed or marketed by the Seller in the conduct of the
Business, including, without limitation, any products licensed by the Seller
from others. The Seller is not in any way making any unlawful or wrongful use of
any trade secrets, customer lists, manufacturing processes, secret processes,
technology, know-how or any other confidential information of any other person,
including, without limitation, any former employer of any present or past
employee of the Seller. All manufacturing processes, secret processes, know-how,
and any other intellectual property and confidential information resulting from
the development activities engaged in by any employees of the Seller is the
property of the Seller. No Business Employee (as defined below) is a party to
any non-competition agreement, non-disclosure agreement, or similar agreement
with any other person.
4.11 LIST OF CONTRACTS. Except for the contracts, commitments, plans,
agreements and licenses described in SCHEDULE 4.11 attached hereto and those
which relate exclusively to Seller's Other Businesses, with respect to the
Business, the Seller is not a party to nor is it or any of the Acquired Assets
subject to or otherwise bound by any oral or written:
(a) Contract for the employment of any officer or employee;
(b) Collective bargaining agreement (or any side agreement,
local understanding or settlement agreement relating to such collective
bargaining agreement) or any agreement or contract with any labor union or other
employees' association;
(c) Lease or agreement to it or by it of real property or
personal property;
(d) Any individual contract, agreement, order, commitment or
letter of intent involving more than $10,000 for the future purchase of
commodities, materials, ingredients, supplies, merchandise, services or
equipment;
(e) Bonus, pension, profit-sharing, stock option, retirement,
deferred compensation, hospitalization, insurance or similar plan or practice,
or sick pay, vacation pay, severance pay or other policy or practice, formal or
informal, in effect with respect to employees or any other person or entity;
(f) Franchise, dealer, distribution, sales or agency contract
or commitment;
(g) Any individual contract of sale, letter of intent, order or
commitment involving more than $10,000 creating any obligation of the Seller to
manufacture, sell or distribute products or services;
(h) Guarantees or indemnities, direct or indirect, current or
contingent, of the obligations of customers or any other person or entity;
(i) Advertising contract or commitment;
(j) License agreement (as licensor or licensee);
(k) Real estate mortgage, loan or credit agreement with any
lender, indenture, pledge, conditional sale or title retention agreement,
equipment obligation or lease, or lease purchase agreement;
(l) Any agreement which restricts in any way the ability of
Seller to engage in business or to use information in the possession of Seller;
or
(m) Other material contract affecting the Business.
Except as set forth on SCHEDULE 4.11, all the Assumed Contracts are
valid and binding obligations of, and enforceable against, the Seller and, to
Seller's knowledge, the other parties thereto in accordance with their
respective terms and conditions.
There has been no uncured breach or default of any provision of any
Assumed Contract by the Seller or, to the knowledge of Seller, any other party
thereto, and nothing has occurred which with lapse of time or the giving of
notice or both would constitute a breach or default by the Seller or, to the
knowledge of Seller, by any other party thereto with respect to any such
contract or which would cause acceleration of any obligation of any party
thereto or the creation of any lien, encumbrance, security interest in or upon
the Acquired Assets. Buyer has been furnished with true and complete copies of
all scheduled contracts and commitments in writing except for customer orders
which have been made available for review by Buyer.
4.12 LITIGATION. Except as set forth on SCHEDULE 4.12 attached
hereto, there is no action, suit, investigation (whether formal or informal),
subpoena or proceeding pending or, to the best of Seller's knowledge, threatened
against the Seller which either (i) relates to the Business or (ii) might
reasonably be expected to have a material adverse effect on the Seller.. Except
as set forth on SCHEDULE 4.12, no order, writ, injunction, subpoena or decree
has been issued by or requested of any court or governmental agency which might
either (i) adversely affect the Business or the transactions contemplated by
this Agreement or (ii) materially adversely affect the Seller. The Seller has
never been subject to nor is it a party as a debtor to any bankruptcy or other
insolvency or similar proceeding.
4.13 ABSENCE OF CHANGES. Since the Interim Date, the Seller has
conducted the Business only in the ordinary course, and, except as set forth on
SCHEDULE 4.13 and SCHEDULE 4.8(d) attached hereto, the Seller has not, in
connection with the Business, as of the date hereof and as of the date of the
Closing, either directly or indirectly since the Interim Date:
(a) except for changes in the ordinary course of business
consistent with past practice which have not had, and will not have, a Material
Adverse Effect, suffered any change in the condition (financial or otherwise),
properties, assets, liabilities, business, operations, affairs or prospects of
the Business, which change by itself or in conjunction with any or all other
such changes has been or may be adverse with respect to the condition (financial
or otherwise), properties, assets, liabilities, business, operations, affairs or
prospects of the Business;
(b) INTENTIONALLY LEFT BLANK;
(c) mortgaged, pledged or subjected to lien, charge or any
encumbrance or other imperfection of title any of the Acquired Assets;
(d) written up or down the value of any inventory or other
assets or written off as uncollectible any notes or accounts receivable or any
portion thereof, except in amounts which, in the aggregate, are not in excess of
pre-existing reserves therefor or taken or set aside any reserves or charges in
its books against earnings or assets or reversed any reserves;
(e) (i) purchased, sold, assigned, transferred, abandoned or
otherwise disposed of any assets other than in the ordinary course of its
business consistent with past practices, or (ii) canceled any debts or claims,
other than in the ordinary course of business consistent with past practices;
(f) entered into any transaction or agreement other than in the
ordinary course of business consistent with past practices;
(g) entered into any compromise or settlement of any
litigation, proceeding or governmental investigation relating to the Business or
the Acquired Assets;
(h) failed to pay, satisfy, perform or otherwise discharge any
debt, lien, obligation or liability as the same may have become due and payable
unless such debt, lien, obligation or liability was or is being contested in
good faith and is disclosed on SCHEDULE 4.13 attached hereto;
(i) suffered any damage, destruction or loss to the Acquired
Assets, whether or not covered by insurance, which adversely affects the
condition (financial or otherwise), properties, assets, liabilities, business,
operations, affairs or prospects the Business;
(j) except for those made or suffered in the ordinary course of
business consistent with past practice which have not had, and will not have, a
Material Adverse Effect, made or suffered any amendment, modification or
termination of any of the Assumed Contracts which adversely affects the
condition (financial or otherwise), properties, assets, liabilities, business,
operations, affairs or prospects of the Business;
(k) received notice or acquired knowledge of any labor trouble,
difficulty, dispute or organizing effort involving employees of the Seller;
(l) formed any subsidiaries or merged or consolidated, or
obligated itself to do so, with or into any other person;
(m) waived any rights, contractual or otherwise, except in the
ordinary course of business consistent with past practice;
(n) changed the compensation payable or to become payable by
the Seller to any Business Employees other than, normal merit increases and
bonuses made in accordance with (and consistent in amount with) its usual
practices;
(o) INTENTIONALLY LEFT BLANK;
(p) incurred any obligation or liability on behalf of the
Seller to any of its officers, directors, employees, shareholders or affiliates,
or any loans or advances made by the Seller to any of its officers, directors,
employees, shareholders or affiliates, except in the ordinary course of business
consistent with past practices and amounts;
(q) entered into any lease or sublease, pledge or hypothecation
of the Acquired Assets; or
(r) suffered any loss of employees, customers or suppliers that
adversely affects the Business, or been advised by any customer or supplier that
such customer or supplier intends to discontinue its relationship with the
Seller.
4.14 INSURANCE. The Business and the Acquired Assets are and have
been, during the last three (3) years, insured by such insurers, under such
policies, against such risks, in such amounts, and upon such other terms and
conditions as are set forth on SCHEDULE 4.14 attached hereto.
4.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 4.15 attached hereto sets forth
a description of all employee benefit plans, agreements, policies, arrangements
and understandings (whether or not written) and all collective bargaining
agreements relating to employee benefits with respect to which the Seller has or
may incur any future or contingent obligations with respect to Business
Employees, including, without limitation, all plans, agreements, arrangements,
policies or understandings relating to sick pay, vacation pay or severance pay,
deferred compensation, pensions, profit sharing, retirement income or other
benefits, stock
purchase and stock option plans, bonuses, severance arrangements, health
benefits, disability benefits, insurance benefits and all other employee
benefits or fringe benefits, including any employee welfare benefit plans and
employee pension benefit plans within the meaning of Sections 3(1) and 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(individually referred to as a "Plan" and collectively referred to as the
"Plans"). Except as set forth in SCHEDULE 4.15:
(a) True, correct and complete copies of each such Plan (or in
the case of any unwritten Plan, a description thereof), the most recent
actuarial reports and trustee's reports relating thereto (if applicable), the
most recent annual report on Form 5500 filed with the Internal Revenue Service
for any Plan (if applicable), the most recent summary plan description for each
Plan for which a summary plan description is required by law, and each trust
agreement, insurance contract or other funding vehicle relating to any Plan,
have been furnished to Buyer;
(b) Each Plan has been administered and operated in accordance
with its terms and applicable law, and each Plan that is an employee pension
benefit plan under ERISA is "qualified" within the meaning of Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code") and each related
trust is exempt from tax under Section 501(a) of the Code, and each qualified
plan has been amended in a timely manner to conform to the requirements of
applicable legislation. No Plan that is an employee pension benefit plan under
ERISA which is so qualified has been amended since the date of its most recent
determination letter in any respect that would adversely affect its
qualification or materially increase its costs. No liability under ERISA or
otherwise has been incurred or, based upon existing facts, may be expected to be
incurred with respect to any Plan;
(c) All reports and disclosures relating to such Plans required
to be filed or distributed as of the Closing Date have been filed or distributed
in compliance with applicable law;
(d) None of such Plans, any trusts related thereto, any trustee
or administrator thereof, any "party in interest" or any "disqualified person"
with respect thereto has engaged in any nonexempted "prohibited transaction"
under section 4975 of the Code or section 406 of ERISA with respect to such
Plans or has acted or failed to act in a manner that could subject the Seller or
any Plan to any liability for breach of fiduciary duty under ERISA or any other
applicable law;
(e) No liability to the Pension Benefit Guaranty Corporation
("PBGC") has been or is expected to be incurred with respect to any Plan by the
Seller and PBGC has not instituted proceedings to terminate any Plan. No
reportable event within the meaning of Section 4043(b) of ERISA has occurred
with respect to any Plan. There exists no condition or set of circumstances
which presents a risk of the termination or partial termination of any Plan;
(f) The Seller has received determination letters from the
Internal Revenue Service that each Plan which is an employee pension benefit
plan is qualified under
section 401(a) of the Code (if applicable) and such determination letters are in
effect, and Seller does not know of any fact which would adversely affect the
qualified status of any such Plan;
(g) Full payment has been made of all amounts which the Seller
was required under the terms of any of the Plans to have paid as contributions
to such Plans on or prior to the date hereof, and no accumulated funding
deficiencies (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exist with respect to any such Plan;
(h) Other than for claims in the ordinary course for benefits
under the Plans, there are no actions, suits, claims or proceedings, pending or,
to the best of Sellers' knowledge, threatened, nor, to the best of Sellers'
knowledge does there exist any basis therefor, which would result in any
liability with respect to any Plan of the Seller;
(i) The current value of vested accrued benefits under each
Plan which is subject to Title IV of ERISA does not exceed the current value of
all of the assets of such Plan allocable to such vested accrued benefits. For
purposes of the representations in the preceding sentences, the terms "current
value" and "accrued benefit" have the meanings specified in Section 3 of ERISA;
(j) The Seller is not a participant in any Multiemployer Plan
within the meaning of Section 3(37) of ERISA. The Seller has not, with respect
to any Multiemployer Plan, suffered or otherwise caused a "complete withdrawal"
or "partial withdrawal," as such terms are respectively defined in Sections 4203
and 4205 of ERISA. In the event that the Seller were to withdraw from any of
such Multiemployer Plans set forth on Schedule 4.15 as of the Closing Date,
there would be no withdrawal liability, so-called, or any corresponding
obligation to post a bond, letter of credit or other collateral to secure future
payment obligations. To the knowledge of Seller after making reasonable inquiry
of the Plan Administrator and the Plan Investment Manager(s), if any, each such
Multiemployer Plan was determined to be a "qualified plan" under Code Section
401(a), a determination letter having been issued by the Internal Revenue
Service to such effect and no fact or circumstance which should have been known
by Seller, including those discoverable by reasonable inquiry, exists which
would affect the status of the Plan as a "qualified plan" or which would subject
the Plans to "excise taxes";
(k) There are no accrued liabilities under any Plans, programs
or practices maintained on behalf of the employees of the Seller which are not
provided for on their books or financial statements or which have not been fully
provided for by contributions to such Plans, programs, or practices;
(l) The Seller does not maintain any employee welfare benefit
plans, as defined in Section 3(1) of ERISA, which provide post-retirement
benefits to employees;
(m) The Seller has complied with the health care coverage
continuation requirements of the Consolidated Omnibus Budget Reconciliation Act
of 1985 to the extent applicable to Seller;
(n) All accrued liabilities of the Seller with respect to sick
pay, vacation pay, severance pay, deferred compensation, or other obligations
for the benefit of any personnel of the Seller including pension benefits
(vested or unvested) have been reflected dollar for dollar in accordance with US
GAAP on the Financial Statements of the Seller and will be so reflected on the
Closing Date Balance Sheet; and
(o) Each Plan (including any Plan covering retirees or former
employees) may be amended or terminated at any time after the Closing Date
without liability to the Seller.
4.16 GOVERNMENTAL AND OTHER APPROVALS. Under existing law, the Seller
is not required to obtain or make any approval, license, permit or other action
by or filing with, any foreign or domestic, federal, state, municipal or other
governmental body, commission, board, department or agency in order to execute
this Agreement and consummate the transactions contemplated hereby in accordance
with applicable laws and regulations.
4.17 BROKERAGE. Seller has not dealt with any broker or finder in
connection with the transactions contemplated herein, and Seller agrees to
indemnify and hold Buyer harmless in connection with any claims for commissions
or other compensation made by any broker or finder claiming to have been
employed by or on behalf of Seller in connection with the transactions
contemplated herein.
4.18 LABOR RELATIONS. There is no unfair labor practice complaint
against the Seller pending or, to the best of Seller's knowledge, threatened
relating to Business Employees. There are no proceedings pending or, to the best
of Seller's knowledge, threatened before the National Labor Relations Board
relating to Business Employees. There is no labor strike or similar dispute
pending or, to the best of Seller's knowledge, threatened. There is no pending
or past representation question involving an attempt to organize a bargaining
unit including any employees of the Seller and no labor grievance has been filed
within the past 12 months relating to Business Employees. The Seller is not a
party to or bound by any collective bargaining agreement with any employees of
the Business, and no collective bargaining agreement is currently being
negotiated by the Seller with respect to employees of the Business.
4.19 DISCRIMINATION CHARGES. There are no discrimination charges
(relating to sex, age, race, national origin, handicap or veteran status)
pending or, to the best of Seller's knowledge, threatened against the Seller, or
involving the Seller, before any federal, state, county or local agency, board,
commission, authority or other subdivision thereof relating to Business
Employees.
4.20 STOCKHOLDERS. Except as set forth on SCHEDULE 4.20 attached
hereto, the Seller has no stockholders.
4.21 TAXES. The Seller has filed all federal, state, county, local
and foreign income, franchise, excise, sales, use, property, withholding,
unemployment and other tax returns or information which are required to be filed
by it in all countries, states, cities and towns and
other jurisdictions in which it is incorporated or is qualified to do business
as a foreign corporation or otherwise transacts business up to and including the
Closing Date, and has paid all taxes which are required to be paid, whether or
not shown on such returns, or which have become due pursuant to such returns or
any assessment which has been received by it and will continue to do so up to
the Closing Date.
4.22 INVESTMENT REPRESENTATION. Seller: (A) is acquiring the Seller's
AFC Shares (and any further shares of Common Stock which may hereafter be issued
to Seller pursuant to Section 3.3 hereof, the "Earnout Shares") for Seller's own
account, for investment only, and not with a view to, or for sale in connection
with, any distribution in violation of the Securities Act of 1933, as amended
(the "Securities Act") or any rule or regulation under the Securities Act, (B)
is a sophisticated investor and has sufficient knowledge and experience in
financial and business matters to be able to evaluate the merits and risks of
its investment in the Seller's AFC Shares (and any Earnout Shares), (C)
acknowledges that Seller has been furnished with copies of: (i) AFC's annual
report on Form 10-K for the year ended December 31, 1996; AFC's first and second
quarter 1997 reports on Form 10-Q; and AFC's Proxy Statement for the Annual
Meeting of Stockholders held on May 6, 1997, all as filed with the Securities
and Exchange Commission (the "Commission") and [(ii) copies of AFC's press
releases issued in 1997,] (D) acknowledges that AFC has made available to Seller
the opportunity to ask questions of AFC's officers and directors and to acquire
such additional information about AFC as Seller has requested and as is
necessary for Seller to evaluate the merits and risks of its investment in AFC,
(E) understands that the Seller's AFC Shares (and any Earnout Shares) have not
been registered under the Securities Act or under any state securities laws; are
being offered and sold to Seller in reliance on exemptions from the registration
requirements of the Securities Act and such state securities laws; are
"restricted securities" within the meaning of Rule 144 under the Securities Act;
and may not be sold, transferred or otherwise disposed of unless they are
subsequently registered under the Securities Act and applicable state securities
laws or an exemption from registration is then available, (F) is able to bear
the economic risk and lack of liquidity inherent in holding the Seller's AFC
Shares (and any Earnout Shares), (G) understands that any sale of the Seller's
AFC Shares (or any Earnout Shares) which might be made by it in reliance upon
Rule 144 under the Securities Act may be made only in compliance with the terms
and conditions of that Rule and (H) is an "accredited investor" within the
meaning of Regulation D under the Securities Act.
Seller agrees that (A) Seller will not make any offer, sale, transfer, pledge,
hypothecation or other disposition of the Seller's AFC Shares (or any Earnout
Shares) unless they have been registered under the Securities Act and applicable
state securities laws or unless AFC is furnished with an opinion of counsel
satisfactory to AFC that the proposed offer, sale, transfer, pledge,
hypothecation or other disposition is exempt from registration and (B) AFC may
effect a "stop transfer" as to the Seller's AFC Shares (or any Earnout Shares)
in order to reflect the undertakings herein set forth, and may impress a legend
on any certificates for such shares as follows:
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, or under state
securities laws. The holder hereof has represented to the
issuer that he or she has acquired these securities for
investment and not with a view to the distribution thereof,
and they have been issued in reliance on that representation.
These shares may, therefore, not be sold, transferred,
pledged, hypothecated or otherwise disposed of unless they
have been registered under said Act and state securities laws
or unless counsel satisfactory to the Company has given an
opinion that registration is not required."
4.23 DEFINITION OF KNOWLEDGE. With respect to any representation and
warranty herein which is made "to the best of Seller's knowledge" or "to
Seller's knowledge", Seller shall be deemed to have knowledge of any matter or
fact if any of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇ has actual
personal knowledge of such matter or fact.
5. REPRESENTATIONS AND WARRANTIES OF AFC AND BUYER.
As of the date hereof and as of the Closing Date, AFC and Buyer,
jointly and severally, represent and warrant to Seller as follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of AFC and Buyer is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full corporate power and authority to
own or lease all of its properties and to conduct its business in the manner and
in the places where such properties are owned and leased or such business is now
conducted by it and to enter into and perform the transactions contemplated by
this Agreement.
5.2 AUTHORITY. This Agreement and each of the other agreements,
documents and instruments required to be executed by AFC and/or Buyer pursuant
to this Agreement will constitute, when delivered, the valid and binding
obligations of AFC and Buyer (either or both, as applicable) and shall be
enforceable in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights and to the application of equitable principles.
The execution, delivery and performance of this Agreement and each such other
agreement, document and instrument has been, or prior to the Closing will have
been, duly authorized by all necessary corporate action of AFC and Buyer. The
execution, delivery and performance by AFC and/or Buyer (either or both, as
applicable) of this Agreement and each such other agreement, document and
instrument does not and will not with the passage of time or the giving of
notice or both:
(a) result in a breach of or constitute a default by AFC or
Buyer or result in any right of termination or other effect adverse to AFC or
Buyer under any indenture or loan or credit agreement of AFC or Buyer, or any
other agreement, lease or instrument to which AFC or Buyer is a party or by
which the property of AFC or Buyer is bound or affected;
(b) result in a violation of or default under any order, writ,
judgment, injunction, decree, determination or award, now in effect to which AFC
or Buyer is a party or by which it is bound;
(c) violate any provisions of the Certificate of Incorporation,
or equivalent, or By-Laws of AFC or Buyer, as amended; or
(d) require any approval, consent or waiver of, or filing with,
any person.
5.3 GOVERNMENTAL AND OTHER APPROVALS. Under existing law, neither AFC
nor Buyer is required to obtain or make any approval, license, permit or other
action by or filing with, any foreign or domestic, federal, state, municipal or
other governmental body, commission, board, department or agency in order to
execute this Agreement and consummate the transactions contemplated hereby in
accordance with applicable laws and regulations.
5.4 BROKERAGE. Neither AFC nor Buyer has dealt with any broker or
finder in connection with the transaction contemplated herein and each agrees to
indemnify and hold Seller harmless in connection with any claims or commissions
or other compensation made by any broker or finder claiming to have been
employed by or on behalf of AFC or Buyer in connection with the transactions
contemplated herein.
5.5 LITIGATION. There is no action, suit, investigation (whether
formal or informal), subpoena or proceeding pending, or to the best of AFC's or
Buyer's knowledge, threatened against AFC or Buyer, nor has any order, writ,
injunction, subpoena or decree been issued by or requested of any court or
governmental agency, which, in either case, seeks to enjoin or might adversely
affect the transactions contemplated by this Agreement.
5.6 CAPITALIZATION. On the date hereof, the authorized capital stock
of AFC consists of (1) 15,000,000 shares of common stock, $0.01 par value per
share, of which 11,385,359 shares were issued and outstanding as of September
27, 1997 and (2) 1,000,000 shares of preferred stock, $0.01 par value per share,
none of which are issued and outstanding. The authorized capital stock of Buyer
consists of 1000 shares of common stock, $1.00 par value per share, all of which
are owned by AFC. All of Seller's AFC Shares (and any Earnout Shares) which are
to be issued to Seller pursuant to this Agreement will be, when issued in
accordance with this Agreement, duly authorized, validly issued, fully paid and
nonassessable and free of all preemptive rights.
6. INTENTIONALLY LEFT BLANK
7. INTENTIONALLY LEFT BLANK
8. INTENTIONALLY LEFT BLANK
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER TO CLOSE.
The obligation of Buyer to acquire the Acquired Assets and assume the
Assumed Liabilities as contemplated hereby, and to perform its other obligations
hereunder to be performed on or after the Closing, shall be subject to the
fulfillment, on or prior to the Closing Date, unless otherwise waived in writing
by Buyer, of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller set forth in Article 4 hereof shall be true and correct in
all material respects when made and shall be true and correct in all material
respects on the Closing Date as if made on and as of such date.
9.2 PERFORMANCE OF COVENANTS. Seller shall have performed in all
material respects all of its obligations contained in this Agreement to be
performed on or prior to the Closing Date, and Buyer shall have received a
certificate to such effect, executed by Seller and dated as of the Closing Date,
in form satisfactory to Buyer. Notwithstanding the provisions of Section 9.1 and
9.2 hereof, Buyer shall be entitled to enforce, without regard to materiality,
the representations, warranties, agreements, covenants and obligations which are
made by Seller herein and which are not, by their terms, qualified as to
materiality.
9.3 THREATENED OR PENDING PROCEEDINGS. No proceedings shall have been
initiated or threatened by any person seeking to enjoin or otherwise restrain or
to obtain an award for damages in connection with the consummation of the
transactions contemplated hereby.
9.4 CORPORATE AUTHORIZATION. All corporate action, necessary to
authorize (i) the execution, delivery and performance by Seller of this
Agreement and any other agreements or instruments contemplated hereby to which
Seller is a party; and (ii) the consummation of the transactions contemplated
hereby and thereby, shall have been duly and validly taken by Seller, and Buyer
shall have been furnished with copies of all applicable resolutions certified by
the Secretary or Assistant Secretary of Seller.
9.5 DELIVERY OF CERTIFICATES AND DOCUMENTS TO BUYER. Seller shall
have delivered, or cause to be delivered, to Buyer the certificates as to the
legal existence and corporate and tax good standing of the Seller and copies of
its Articles of Organization, or equivalent, as amended, issued or certified by
the appropriate governmental official of the state of its incorporation and the
states where the Seller is qualified to transact business as a foreign
corporation.
9.6 INTENTIONALLY LEFT BLANK
9.7 INTENTIONALLY LEFT BLANK
9.8 CERTIFIED FINANCIAL STATEMENTS. The Chief Financial Officer of
the Seller shall execute and deliver to Buyer a certificate in a form
satisfactory to Buyer certifying to the matters addressed in Section 4.8(b).
9.9 INTENTIONALLY LEFT BLANK
9.10 CONSENTS. Buyer and Seller shall have obtained the approvals,
consents and authorizations of all third persons and governmental agencies
necessary for the consummation of the transactions contemplated hereby in
accordance with the requirements of applicable laws and agreements, including,
without limitation, the consents identified on SCHEDULE 4.2.
9.11 DAMAGE OR DESTRUCTION. The Seller shall not have suffered prior
to the Closing Date any loss on account of fire, flood, accident or any other
calamity or casualty to an extent that would materially interfere with the
conduct of the Business or materially impair the value of the Business as a
going concern, regardless of whether any such loss or losses have been insured
against.
9.12 INTENTIONALLY LEFT BLANK
9.13 LEASE. Buyer's affiliate, AFC Realty Holding Corp. ("AFC
Realty"), and Federal Realty, Inc. ("Federal Realty") shall have entered into a
Lease (the "Lease"), providing that AFC Realty shall lease from Federal Realty
the Real Property at Painesville, Ohio, that is used in the Business, for a
rental and upon such other terms and conditions as are set forth in the form of
Lease attached hereto as EXHIBIT B and made a part hereof.
9.14 EMPLOYMENT AGREEMENT. Buyer and ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have entered
into an Employment Agreement (the "Employment Agreement") pursuant to which
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ serve as President of the Business upon such terms and
conditions as are mutually satisfactory to Buyer and ▇▇. ▇▇▇▇▇▇.
9.15 HSR ACT. If applicable, Buyer and Seller shall each have timely
filed all information, reports, applications or notices and satisfied all
requests for additional information pursuant to the HSR Act, and the applicable
waiting period shall have expired.
9.16 SUPPLY AGREEMENT. Buyer and Seller shall have entered into a
supply agreement (the "Supply Agreement") upon such terms and conditions as are
set forth in the form of Supply Agreement attached hereto as EXHIBIT C and made
a part hereof.
9.17 SEPTEMBER 30, 1997 YEAR END AUDIT. Seller shall have delivered
to Buyer the Financial Statements referred to in the second sentence of section
4.8(a) hereof.
9.18 ESCROW AGREEMENT. Seller, Buyer and the Escrow Agent shall have
executed and delivered the Escrow Agreement.
9.19 REGISTRATION RIGHTS AGREEMENT. AFC and Seller shall have entered
into a registration rights agreement (the "Registration Rights Agreement")
granting piggyback registration rights to Seller with respect to the Seller's
AFC Shares upon the terms and conditions set forth in the Registration Rights
Agreement attached hereto as EXHIBIT D and made a part hereof.
9.20 TRANSITION SERVICES AGREEMENT. Seller and Buyer shall have
entered into a Transition Services Agreement (the "Transition Services
Agreement") upon such terms and conditions as are set forth in the form of
Transition Services Agreement attached hereto as EXHIBIT E and made a part
hereof.
9.21 PERSONAL GUARANTEE. Each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ shall have executed and delivered to Buyer his personal guarantee upon
such terms and conditions as are contained in the form of Guarantee attached
hereto as EXHIBIT F and made a part hereof.
9.22 CLARIFICATION. The condition set forth in Section 9.1 hereof
shall not be fulfilled if there has been a material breach of a single
representation and warranty made by Seller in Article 4 hereof or if there has
been a breach of two or more of the representations and warranties made by
Seller in Article 4 hereof which, taken together, are material. The condition
set forth in Section 9.2 hereof shall not be fulfilled if there has been a
material breach of any single obligation of Seller hereunder to be performed on
or prior to the Closing Date or if there has been a breach of two or more of the
obligations of Seller hereunder to be performed on or prior to the Closing Date
which, taken together, are material.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER TO CLOSE.
The obligation of Seller to sell the Acquired Assets as contemplated
hereby shall be subject to the fulfillment, on or prior to the Closing Date,
unless otherwise waived in writing by Seller, of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer set forth in Article 5 hereof shall be true and correct in
all material respects when made and shall be true and correct in all material
respects on the Closing Date as if made on and as of such date.
10.2 PERFORMANCE OF COVENANTS. Buyer shall have performed in all
material respects all of its obligations contained in this Agreement to be
performed on or prior to the Closing Date and Seller shall have received a
certificate to such effect, executed by Buyer and dated as of the Closing Date,
in form satisfactory to Seller. Notwithstanding the provisions of Section 10.1
and Section 10.2 hereof, Seller shall be entitled to enforce, without regard to
materiality, the representations, warranties, agreements, covenants and
obligations which are made by Buyer herein and which are not, by their terms,
qualified as to materiality.
10.3 THREATENED OR PENDING PROCEEDINGS. No proceedings shall have
been initiated or threatened by any person seeking to enjoin or otherwise
restrain or to obtain an award for damages in connection with the consummation
of the transactions contemplated hereby.
10.4 CORPORATE AUTHORIZATION. All corporate action, necessary to
authorize (i) the execution, delivery and performance by Buyer and AFC of this
Agreement and any other agreements or instruments contemplated hereby to which
Buyer or AFC is a party; and (ii) the consummation of the transactions
contemplated hereby and thereby, shall have been duly and validly taken by Buyer
and AFC, and Seller shall have been furnished with copies of all applicable
resolutions adopted by the Board of Directors of Buyer and AFC, certified by the
Secretary or Assistant Secretary.
10.5 DELIVERY OF CERTIFICATES AND DOCUMENTS TO SELLER. Buyer shall
have delivered, or cause to be delivered, to Seller certificates as to the legal
existence and corporate good standing of each of Buyer and AFC and copies of its
Articles of Incorporation, or the equivalent, as amended, issued or certified by
the appropriate governmental official of the state of its incorporation.
10.6 LEASE. AFC Realty and Federal Realty shall have entered into the
Lease.
10.7 TRANSITION SERVICES AGREEMENT. Seller and Buyer shall have
entered into the Transition Services Agreement.
10.8 CONSENTS. Buyer and Seller shall have obtained the approvals,
consents and authorizations of all third persons and governmental agencies
necessary for the consummation of the transactions contemplated hereby in
accordance with the requirements of applicable laws and agreements, including,
without limitation, the consents identified on SCHEDULE 4.2.
10.9 HSR ACT. If applicable, Buyer and Seller shall each have timely
filed all information, reports, applications or notices and satisfied all
requests for additional information pursuant to the HSR Act, and the applicable
waiting period shall have expired.
10.10 ESCROW AGREEMENT. Seller, Buyer and the Escrow Agent shall have
entered into the Escrow Agreement.
10.11 REGISTRATION RIGHTS AGREEMENT. AFC and Seller shall have
entered into the Registration Rights Agreement.
10.12 CLARIFICATION. The condition set forth in Section 10.1 hereof
shall not be fulfilled if there has been a material breach of a single
representation and warranty made by Buyer in Article 5 hereof or if there has
been a breach of two or more of the representations and warranties made by Buyer
in Article 5 hereof which, taken together, are material. The condition set forth
in Section 10.2 hereof shall not be fulfilled if there has been a material
breach of any single obligation of Buyer hereunder to be performed on or prior
to the Closing Date or if there
has been a breach of two or more of the obligations of Buyer hereunder to be
performed on or prior to the Closing Date which, taken together, are material.
11. CERTAIN RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS, COVENANTS
AND OBLIGATIONS. All representations and warranties contained in Sections 4.1
through 4.23 hereof, inclusive, and in Sections 5.1 through 5.6 hereof,
inclusive, and all agreements and covenants contained anywhere else in this
Agreement or in any other agreement delivered by either party to the other party
incident to the transactions contemplated hereby, shall be deemed to have been
relied upon by the other party, shall survive the execution and delivery of this
Agreement, any investigation made by any party hereto, and the sale and purchase
of the Acquired Assets and payment therefor; PROVIDED, HOWEVER, that (a) the
representations and warranties of Seller contained in Section 4.5(b) (with
respect to, among other things, the Real Property and compliance with
Environmental Laws) shall expire and terminate on the fifth (5th) anniversary of
the Closing Date, (b) all of the other representations and warranties made by
Seller in Sections 4.1 through 4.23 hereof, inclusive, (with the exception of
the representations and warranties of Seller contained in Sections 4.1, 4.2
(first paragraph only), 4.4(c) and 4.5(a) which shall survive indefinitely)
shall expire and terminate on the second (2nd) anniversary of the Closing Date
and (c) all of the representations and warranties made by Buyer in Sections 5.1
through 5.6 hereof, inclusive, (with the exception of the representations and
warranties of Buyer contained in Sections 5.1 and 5.2 which shall survive
indefinitely) shall expire and terminate on the second (2nd) anniversary of the
Closing Date. Any matter disclosed in any numbered Schedule attached hereto
which qualifies a correspondingly numbered Section of Article 4 hereof shall be
deemed disclosed on and with respect to all other relevant numbered Schedules
corresponding to other Sections of Article 4 hereof PROVIDED THAT the relevance
of such matter to such other Schedules and such other Sections of Article 4
hereof is plainly apparent.
11.2 FURTHER ASSURANCES. From time to time after the Closing and
without further consideration, the parties will execute and deliver, or arrange
for the execution and delivery of, such other instruments of conveyance and
transfer and take such other action or arrange for such other actions as may
reasonably be requested to more effectively complete any of the transactions
provided for in this Agreement or any document annexed hereto.
11.3 PUBLICITY AND DISCLOSURES. No press release or any public
disclosure or further disclosure to Seller's or Buyer's employees and
representatives, either written or oral, of the transactions contemplated by
this Agreement shall be made without the prior knowledge and written consent of
Seller and Buyer, provided that any of Seller, Buyer and AFC may make (a) such
disclosures as are required by law or stock exchange rule after notice to, and
consultation with, the other and (b) disclosures to its own employees and
representatives on a need-to-know basis.
11.4 FURTHER COOPERATION OF SELLER. Following the Closing, the Seller
and Buyer agree to use reasonable efforts to secure the transfer to the Buyer or
the reissuance or issuance in the name of the Buyer of all consents, licenses
and permits required under applicable law or
regulation, federal, state and local, or necessary to the ownership of the
Acquired Assets or the operation of the Business.
11.5 CONSENTS OF THIRD PARTIES. To the extent that any transfer or
assignment of any contract, license, lease, commitment, or right to be
transferred and assigned to the Buyer as provided herein, shall require the
consent of the other party thereto, or of any other person, this Agreement shall
not constitute an agreement to assign the same unless and until such consent
shall have been obtained. Seller agrees that it will use its reasonable efforts,
before and after the Closing, to obtain and deliver the consent of the other
parties and the approvals of other persons or authorities, to the extent
necessary, to the assignment of all such contracts, leases, licenses,
commitments or rights to the Buyer. Until such consent or approval is obtained,
the Seller shall act as the Buyer's agent in order to obtain for it the benefits
thereunder and the Seller will cooperate with the Buyer in any reasonable
arrangement designed to provide for the Buyer all benefits under any such
contracts, leases, licenses, commitments or rights. Seller will bear any
reasonable incidental costs associated with performing its obligations
hereunder. The obligations of Seller hereunder with respect to any such
contract, license, lease, commitment or right shall survive until the expiration
or termination of the same in accordance with the terms thereof.
11.6 TRANSFER TAXES. In no event will the Buyer be liable for any
sales, use, transfer or stamp taxes which may be imposed either on the sale from
Seller to Buyer of the Acquired Assets or as a result of the transfer from
Seller to Buyer of the Acquired Assets.
11.7 TAX RETURNS. The Seller will file all tax and information
returns due with respect to the Seller for all periods ended on or prior to the
Closing Date and pay all taxes, if any, shown to be due on such returns.
11.8 MAIL RECEIVED AFTER CLOSING.
(a) In the event that Buyer receives after the Closing any mail
or other communications addressed to Seller, Buyer may open such mail or other
communications and deal with the contents thereof in its discretion to the
extent that such mail or other communications and the contents thereof relate to
any of the Acquired Assets or to any of the Assumed Liabilities, including the
right to endorse without recourse the name of Seller on any check received by
Buyer with respect to the Acquired Assets, and to deal with the proceeds in
accordance with the terms of this Agreement. Buyer agrees to deliver or cause to
be delivered to Seller all other mail and the contents thereof which does not
relate to the Acquired Assets or the Assumed Liabilities.
(b) In the event that Seller receives after the Closing Date
mail or other communications addressed to Seller which relate to any of the
Acquired Assets or the Assumed Liabilities, Seller shall promptly deliver or
cause to be delivered all such mail and the contents thereof to Buyer. Seller
agrees to cooperate with Buyer and to make arrangements (including "lock box"
and other banking arrangements) reasonably necessary in order to properly deal
with checks addressed to Seller but which belong to Buyer pursuant to this
Agreement, and to properly direct the proceeds thereof to Buyer.
11.9 EMPLOYMENT OF BUSINESS EMPLOYEES BY BUYER.
(a) Buyer shall, as of and subject to the Closing, offer
employment to all of Seller's currently active employees of the Business listed
on SCHEDULE 11.9 (collectively, the "Business Employees"). The Buyer's offer of
employment shall consist of salary and bonus or incentive equivalent to that
currently being paid by Seller, together with benefits substantially comparable
to those benefits currently provided by Seller to the Business Employees,
provided that in no event will Buyer have any obligation to provide retiree
health benefits. Such former Business Employees who accept Buyer's offers of
employment are referred to herein as "Transferred Employees". Buyer shall
promptly inform Seller of any of the Business Employees who do not accept
Buyer's offer of employment. Seller shall assign to Buyer all confidentiality
and non-compete covenants of all Business Employees.
(b) Buyer shall recognize all Transferred Employees' service
with Seller for (i) purposes of eligibility and vesting, but not for purposes of
benefit calculation, under the AFC Cable Systems, Inc. Non-Union Salaried and
Hourly Employees 401(k) Savings Plan, and Transferred Employees meeting the
eligibility requirements of such plan shall participate in such plan effective
January 1, 1998 or upon the first subsequent entry date after meeting the
applicable eligibility requirements, and (ii) all purposes (including
eligibility, benefit entitlement, and benefit calculation purposes) under AFC's
other employee benefit plans which are set forth on SCHEDULE 11.9. Seller shall
fully vest all Business Employees under Seller's tax qualified employee pension
benefit plans effective as of the Closing.
(c) For injuries arising out of employment by Seller on or
prior to the Closing Date, Seller shall be liable for any damages, costs,
losses, expenses or liabilities including, without limitation, any workers'
compensation (including weekly benefits, medical and rehabilitation expenses and
any other expenses or obligations) payable under tort, occupational health and
safety laws or otherwise in respect of Seller's Business Employees. Buyer shall
be liable for any such damages, costs, losses, expenses or liabilities payable
for injuries arising out of employment of Transferred Employees by Buyer after
the Closing Date. In the event a Transferred Employee presents a claim after the
Closing Date for an occupational disease, as opposed to a specific injury, the
liability with respect thereto shall be apportioned between Buyer and Seller in
the proportion that the respective length of exposure with Seller (and its
predecessors in interest) prior to the Closing Date, and with the Buyer
following the Closing Date, bears to the combined length of exposure of the
Transferred Employee with both Seller (and its predecessors in interest) and
Buyer.
(d) Buyer shall have no liabilities or obligations under or
with respect to any of Seller's Plans (as defined in Section 4.15 of this
Agreement). With respect to Seller's employee welfare benefit plans, except for
the accruals on the Closing Date Balance Sheet specified in Section 11.10(b)
hereof, Seller shall be solely responsible for all costs and liabilities
relating to claims incurred on or before the Closing Date.
(e) Buyer shall have no liabilities or obligations with respect
to Seller's employees other than Transferred Employees, and Seller shall be
solely responsible for such other employees for all purposes, including, without
limitation, any health benefit continuation rights under federal or state law.
(f) Except as otherwise set forth in this Section 11.9, Seller
shall have no obligation with respect to any of the Transferred Employees with
respect to any claim arising from acts or omissions of Buyer occurring after the
Closing Date, and Buyer shall have no obligation with respect to any of the
Transferred Employees with respect to any claims arising from acts or omissions
of Seller occurring on or before the Closing Date.
11.10 ADMINISTRATION OF SELLER'S PLANS BEFORE AND AFTER THE CLOSING.
(a) After the Closing, Seller will administer all of its Plans (as defined in
Section 4.15 hereof) and distribute benefits therefrom to the Business Employees
in accordance with the terms and provisions of such Plans and applicable laws
and regulations.
(b) During the week commencing November 24, 1997, Seller made
matching contributions to the FHI Retirement Savings Plan for Business Employees
in respect of employee contributions made through the Closing Date in accordance
with plan provisions. Accruals will be made in the Closing Date Balance Sheet
with respect to Business Employees for (i) discretionary profit sharing
contributions under the FHI Retirement Savings Plan in the amount of two percent
(2%) of participant compensation through the Closing Date, and (ii) incentive
bonuses under Seller's ▇▇▇▇▇▇▇ Gainsharing Plan for all periods ending on or
before the Closing Date; and Buyer agrees to make payment of such accrued
amounts to the FHI Retirement Savings Plan and Business Employees, respectively,
in the ordinary course following the Closing Date.
11.11 INVENTORY REPURCHASE. One hundred eighty (180) days after the
Closing, at Buyer's election, Seller will repurchase any unsold or unused
inventory of heavy duty silicone truck products which are sold to the
aftermarket through Seller's HD representatives and which is reflected on the
Closing Date Balance Sheet for a purchase price payable in cash equal to the
value thereof as shown on the Closing Date Balance Sheet, against delivery of a
▇▇▇▇ of sale therefor from Buyer to Seller.
12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY SELLER. Seller agrees to defend, indemnify
and hold Buyer, its officers, directors, affiliates, employees and agents,
harmless from and against any claims by third persons (including, without
limitation, the Environmental Protection Agency or any other federal, state or
local government agency, board, department or body having jurisdiction over
environmental matters or Environmental Laws), damages, liabilities, losses and
expenses (including, without limitation, reasonable attorney's fees incurred in
seeking indemnification hereunder or defending any claim by a third person,
amounts paid in settlement of any claim or suit and costs of clean-up,
restoration, remediation and removal), taxes, fines, penalties and interest, of
any kind or nature whatsoever which may be sustained or suffered by
Buyer or its officers, directors, affiliates, employees or agents, arising out
of, based upon, or by reason of:
(a) a breach of any representation or warranty made by Seller
in Sections 4.1 through 4.23 hereof, inclusive, or a failure to perform any
agreement or covenant made by Seller anywhere else in this Agreement,
(b) any claim, action or proceeding asserted or instituted
growing out of any matter or thing covered by such breached representation,
warranty, agreement or covenant,
(c) any liability that is an Excluded Liability,
(d) The ▇▇▇▇▇ ▇▇▇▇▇▇ product liability claim described in the
FHI Memorandum attached to Schedule 4.12 attached hereto and the violations of
Environmental Laws specified in the Enforcement Order issued by the Department
of Toxic Substances Control of the California Environmental Protection Agency on
November 14, 1994 in the matter of Federal Hose Manufacturing,
(e) the generation, use, treatment, handling, storage or
disposal, or arrangement for the use, treatment, handling, storage or disposal,
of Hazardous Materials on, or release of Hazardous Materials to or from, the
Real Property permitted, taken or made by any person whomsoever, at any time
prior to the Closing, whether or not in compliance with Environmental Laws then
in force,
(f) the removal of Hazardous Materials from the Real Property
and/or the ultimate disposition of such Hazardous Materials, by any person
whomsoever, at any time prior to the Closing, whether or not in compliance with
Environmental Laws then in force,
(g) the use of the Real Property by any person whomsoever, at
any time prior to the Closing, in such a manner as to cause a violation of any
Environmental Law or to potentially give rise to any liability or obligation for
the remediation or restoration of the Real Property or any other affected
property, or for the treatment, storage, removal, disposal, release, arrangement
for removal or disposal or transportation of any Hazardous Materials,
(h) any violations of Environmental Laws in relation to the
Real Property occurring at any time prior to the Closing,
(i) a failure by any person, at any time prior to the Closing,
to obtain, maintain current, and comply with the terms and conditions of, all
permits, approvals, identification numbers, licenses and other authorizations,
and renewals thereof, required under Environmental Laws for the use and
operation of the Real Property, and
(j) the exposure of employees of any owner, operator or lessee
of the Real Property to Hazardous Materials on or in relation to the Real
Property occurring at any time prior to the Closing;
PROVIDED, HOWEVER, that (i) no indemnification shall be payable by Seller with
respect to any claim for breach of any representation or warranty made by Seller
in Sections 4.1 through 4.23 hereof, inclusive, asserted by Buyer after the
expiration or termination date, if any, prescribed for such representation or
warranty in the proviso of the first sentence of Section 11.1 hereof, provided
that once notice of any claim has been timely given, additional related claims
arising out of substantially the same circumstances may be made at any time
prior to the final resolution of such claim (by means of a final, non-appealable
judgment of a court of competent jurisdiction, a binding arbitration decision or
a settlement approved by the parties involved) even if such resolution occurs
after the expiration or termination date, if any, prescribed for such
representation or warranty in the proviso of the first sentence of Section 11.1
hereof, (ii) no indemnification shall be payable by Seller with respect to any
claim under any of clauses (e) through (j) of this Section 12.1 asserted by
Buyer after the fifth (5th) anniversary of the Closing Date, provided that once
notice of any such claim has been timely given, additional related claims
arising out of substantially the same circumstances may be made at any time
prior to the final resolution of such claim (by means of a final, non-appealable
judgment of a court of competent jurisdiction, a binding arbitration decision or
a settlement approved by the parties involved) even if such resolution occurs
after the fifth (5th) anniversary of the Closing Date, (iii) no indemnification
shall be payable by Seller with respect to any claim for breach of any
representation or warranty made by Seller in Sections 4.1 through 4.23 hereof,
inclusive, or with respect to any claim under any of clauses (e) through (j) of
this Section 12.1 hereof, until the total of such claims for indemnification
shall exceed US $75,000 (the "Deductible"), in which event Buyer shall be
entitled to recover the amount of such claims in excess of the Deductible and
(iv) the aggregate liability of Seller for indemnification payable hereunder
with respect to any and all claims by Buyer for breach of the representations
and warranties made by Seller in sections 4.1 through 4.23 hereof, inclusive,
and with respect to any claims under any of clauses (e) through (j) of this
Section 12.1 hereof, shall not exceed US $2,000,000 (the "Indemnity Cap
Amount"). For clarification and the avoidance of doubt, the limitations on
liability for indemnification set forth in clauses (i), (ii), (iii) and (iv) of
the proviso of the immediately preceding sentence shall not apply to claims
under clause (c) of this Section 12.1 hereof in respect of Excluded Liabilities
or claims under clause (d) of this Section 12.1. Any indemnification due from
Seller to Buyer shall be paid in United States dollars. Buyer may recover
indemnification claims: (i) from the Indemnity Fund (as defined in the Escrow
Agreement) as provided in the Escrow Agreement, (ii) by proceeding directly
against Seller, (iii) in any other manner or (iv) by any combination of the
foregoing. The indemnification provided by this Article 12 shall be the sole and
exclusive remedy of the Buyer and its related parties set forth above in this
Section 12.1 with respect to the matters covered by this Section 12.1.
12.2 INDEMNIFICATION BY AFC AND BUYER. AFC and Buyer, jointly and
severally, agree to defend, indemnify and hold Seller, its officers, directors,
affiliates, employees and agents, harmless from and against any claims by third
persons, damages, liabilities, losses and expenses (including, without
limitation, reasonable attorneys' fees incurred in seeking indemnification
hereunder or defending any claim by a third person, and amounts paid in
settlement of any claim or suit) of any kind or nature whatsoever which may be
sustained or
suffered by Seller or its officers, directors, affiliates, employees or agents,
arising out of, based upon, or by reason of:
(a) a breach of any representation or warranty made by AFC or
Buyer in Sections 5.1 through 5.7 hereof, inclusive, or a failure to perform any
agreement or covenant made by AFC or Buyer anywhere else in this Agreement,
(b) any claim, action or proceeding asserted or instituted
growing out of any matter or thing covered by such breached representation,
warranty, agreement or covenant or
(c) any liability that is an Assumed Liability;
PROVIDED, HOWEVER, that (i) no indemnification shall be payable by AFC or Buyer
with respect to any claim for breach of any representation or warranty made by
AFC or Buyer in Sections 5.1 through 5.6 hereof, inclusive, asserted by Seller
after the expiration or termination date, if any, prescribed for such
representation or warranty in the proviso of the first sentence of Section 11.1
hereof, provided that once notice of any claim has been timely given, additional
related claims arising out of substantially the same circumstances may be made
at any time prior to the final resolution of such claim (by means of a final,
non-appealable judgment of a court of competent jurisdiction, a binding
arbitration decision or a settlement approved by the parties involved) even if
such resolution occurs after the expiration or termination date, if any,
prescribed for such representation or warranty in the proviso of the first
sentence of Section 11.1 hereof and (ii) no indemnification shall be payable by
AFC or Buyer with respect to any claim for breach of any representation or
warranty made by AFC or Buyer in Sections 5.1 through 5.6 hereof, inclusive,
until the total of such claims for indemnification shall exceed the Deductible,
in which event Seller shall be entitled to recover the amount of such claims in
excess of Deductible and (iii) the aggregate liability of Buyer for
indemnification payable hereunder with respect to any and all claims by Seller
for breach of the representations and warranties made by Buyer in Sections 5.1
through 5.6 hereof, inclusive, shall not exceed the Indemnity Cap Amount.. For
clarification and the avoidance of doubt, the limitations on liability for
indemnification set forth in clauses (i), (ii) and (iii) of the proviso of the
immediately preceding sentence shall not apply to claims under clause (c) of
this Section 12.2 hereof in respect of Assumed Liabilities. Any indemnification
payments due from AFC or Buyer to Seller shall be paid in United States dollars.
The indemnification provided by this Article 12 shall be the sole and exclusive
remedy of the Seller and its related parties set forth above in this Section
12.2 with respect to the matters covered by this Section 12.2.
12.3 NOTICE, DEFENSE OF CLAIMS. (a) Each party to this Agreement
shall give prompt written notice to the other party to this Agreement of each
claim for indemnification hereunder specifying the amount and nature of the
claim, and of any matter which is likely to give rise to an indemnification
claim. Failure to give timely notice of a matter which may give rise to an
indemnification claim shall not affect the rights of the indemnified party to
collect such claim from the indemnifying party except to the extent that failure
to so notify materially adversely affects the indemnifying party's ability to
defend such claim against a third party. In any case in which a claim for
indemnification involves a claim brought by a third party ("Third
Party Claim") and the indemnifying party has not exercised its rights to assume
and control the defense of such matter as provided under subparagraph (b) of
this Section 12.3, the indemnified party shall have the right (but not the
obligation) to assume and control the defense of any such matter or its
settlement, provided that the indemnifying party may participate in the defense
at its own expense and provided, further, that the indemnified party shall keep
the indemnifying party informed as to the status of the defense and shall not
take any significant action in the defense thereof or consent to entry of
judgment or enter into any settlement thereof without the consent of the
indemnifying party which shall not be unreasonably withheld or delayed. Where
the indemnified party does not exercise its right to assume and control the
defense of such matter or its settlement or the indemnifying party has exercised
its rights to assume and control the defense of such matter as provided under
subparagraph (b) of this Section 12.3, the indemnifying party shall assume and
control the defense of such matter or its settlement at its own expense,
provided that the indemnified party may participate in the defense at its own
expense and, provided, further, that the indemnifying party will keep the
indemnified party informed as to the status of the defense and will not, except
with the consent of the indemnified party (which shall not be unreasonably
withheld or delayed), consent to entry of any judgment or enter into any
settlement which involves more than the payment of money or which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of such
claim or litigation.
(b) The indemnifying party will thirty (30) days (or ten (10)
days in the case of a Third Party Claim with respect to which a complaint has
been filed) after receipt by the indemnifying party of the written notification
from the indemnified party of the Third Party Claim advise the indemnified party
whether the indemnifying party elects to assume and control the defense and
settlement of the Third Party Claim. If the indemnifying party elects to assume
and control the defense and settlement of the Third Party Claim, the
indemnifying party shall provide to the indemnified party at the time of such
election the following documents: (i) written notice that the indemnifying party
undertakes such obligations and (ii) an agreement to indemnify the indemnified
party for all damages, liabilities, losses and expenses with respect to such
Third Party Claim in accordance with the terms of this Article 12. Upon the
delivery of the above items, the indemnifying party will have the right to
diligently, through counsel of its own choice, control the good faith defense or
settlement of such Third Party Claim provided the indemnified party will have
the right to participate in such defense and settlement discussions, through
counsel of its own choice and at its own expense, and the indemnified party will
have the right to approve any proposed settlement to the extent provided for in
Section 12.3(a). Any failure on the part of the indemnifying party of notifying
the indemnified party within the time period provided above regarding the
election shall be deemed an election by the indemnifying party not to assume and
control the defense and settlement of the Third Party Claim.
12.4 TAX EFFECT; INSURANCE EFFECT. (a) The indemnifying party shall
make any indemnification payments determined to be payable to the indemnified
party hereunder promptly after such determination is made, without delay, and
without regard to any expectation that the indemnified party will receive a tax
benefit of any kind as a direct result of the matter giving rise to the claim
for which indemnification payments are to be made. The indemnified party shall
nevertheless exercise commercially reasonable efforts to claim any tax benefit
as a result of any
matter giving rise to an indemnification claim of the indemnified party against
the indemnifying party. If the indemnified party files a federal income tax
return claiming a tax benefit as a direct result of the matter giving rise to
any indemnification claim of the indemnified party against the indemnifying
party prior to the date upon which the indemnifying party is given notice of the
claim, the indemnifying party's indemnification obligation with respect to such
claim shall be reduced by the amount of any such tax benefit so claimed by the
indemnified party. If the indemnified party files a federal income tax return
claiming any such tax benefit as a direct result of the matter giving rise to
any indemnification claim of the indemnified party against the indemnifying
party after the indemnifying party has paid such indemnification claim to the
indemnified party, then the indemnified party shall promptly pay to the
indemnifying party the amount of any such tax benefit claimed by the indemnified
party to the extent of the payments made by the indemnifying party to the
indemnified party on the claim.
(b) The indemnifying party shall make any indemnification
payments determined to be payable to the indemnified party hereunder promptly
after such determination is made, without delay, and without regard to any
expectation that the indemnified party will recover insurance proceeds as a
direct result of the matter giving rise to the claim for which indemnification
payments are to be made. The indemnified party shall nevertheless exercise
commercially reasonable efforts to seek to recover or make a claim for insurance
proceeds as a result of any matter giving rise to an indemnification claim of
the indemnified party against the indemnifying party, and if the indemnified
party receives any insurance proceeds as a direct result of the matter giving
rise to any indemnification claim of the indemnified party against the
indemnifying party prior to the date upon which the indemnifying party is given
notice of the claim, the indemnifying party's indemnification obligation with
respect to such claim shall be reduced by the amount of any such insurance
proceeds actually received by the indemnified party. If the indemnified party
receives any insurance proceeds as a direct result of the matter giving rise to
any indemnification claim of the indemnified party against the indemnifying
party after the indemnifying party has paid such indemnification claim to the
indemnified party, then the indemnified party shall promptly turn over any such
insurance proceeds received to the indemnifying party to the extent of the
payments made by the indemnifying party to the indemnified party on the claim.
Notwithstanding the foregoing, (i) the indemnified party shall have no
obligation whatsoever to seek to recover or make a claim for insurance proceeds
insofar as and to the extent the indemnified party is "self insured" and, (ii)
as used in this section 12.4 hereof, the term "insurance proceeds" shall mean
and refer to payments made by an insurer in the nature of "true insurance"
(excluding any payments, proceeds or recoveries under a so-called "self
insurance" system).
13. INTENTIONALLY LEFT BLANK
14. NON-COMPETITION COVENANT.
14.1 NON-COMPETITION. Seller covenants and agrees with Buyer and AFC
that Seller and its affiliates will not, without the prior written consent of
Buyer or AFC, directly or indirectly, during the period commencing on the date
hereof and expiring on the fifth (5th) anniversary of the date hereof (the
"Restrictive Period"):
(1) form, acquire, invest in, finance, own, operate, manage, or
provide premises to, directly or indirectly, an enterprise (a "Competing
Business") which is engaged either (a) anywhere in North America in the business
of manufacturing or selling in the industrial aftermarket: (i) any products or
services now manufactured by the Business (individually and collectively the
"Existing Products"), (ii) any enhancements or derivatives of the Existing
Products, (iii) any products or services which advance the state of the art of
the Existing Products or (iv) any products or services which are competitive
with the Existing Products or the products and services referred to in clauses
(ii) or (iii) above or (b) anywhere in the world in the business of
manufacturing or selling in the industrial aftermarket: (i) any flexible metal
hose products or services now manufactured by the Business (the "Existing
Flexible Metal Hose Products"), (ii) any enhancements or derivatives of the
Existing Flexible Metal Hose Products, (iii) any products or services which
advance the state of the art of the Existing Flexible Metal Hose Products or
(iv) any products or services which are competitive with the Existing Flexible
Metal Hose Products or the products and services referred to in clauses (ii) or
(iii) above;
(2) sell Products (as defined in the Supply Agreement) to the
industrial distributor market (except (i) as and to the extent not inconsistent
with the Supply Agreement and (ii) to those specific distributors to whom Seller
is now selling the Products);
(3) interfere with or attempt to interfere with any officers,
employees, representatives or agents of Buyer, or any of its affiliates, or
induce or attempt to induce any of them to leave the employ of Buyer or any of
its affiliates, or violate the terms of their contract with any of them; or
(4) for the purpose of conducting or engaging in a Competing
Business, call upon, solicit, advise or otherwise do, or attempt to do, business
with any clients, suppliers, customers or accounts of the Business or the Buyer
or any of its affiliates or take away or interfere or attempt to interfere with
any custom, trade, business or patronage of the Business or the Buyer or any of
its affiliates;
PROVIDED, HOWEVER, that (A) nothing herein shall prevent Seller from
manufacturing and selling Heavy Duty Silicone Truck Products (as defined in
Section 1.1 hereof) to the aftermarket through Seller's HD representatives and
(B) the prohibition contained in clause (2) above shall continue only for so
long as the Supply Agreement is in effect.
14.2 INJUNCTIVE RELIEF. The parties hereto acknowledge and agree
that any breach of the restrictive covenant contained in this Article 14 would
cause irreparable injury to Buyer and AFC and that the remedy at law for any
such breach would be inadequate, and Seller agrees and consents that, in
addition to any other available remedy, temporary and permanent injunctive
relief may be granted in any proceeding which may be brought by AFC or Buyer to
enforce such restrictive covenant without necessity of proof that any other
remedy at law is inadequate.
14.3 ENFORCEMENT. The parties intend that the covenants of Section
14.1 shall be deemed to be a series of separate covenants, one for each county
or province of each and every state, territory or jurisdiction of each country
included within the Territory and one for each month of the Restrictive Period.
If, in any judicial proceeding, a court shall refuse to enforce any of such
covenants, then such unenforceable covenants shall be deemed eliminated from the
provisions hereof for the purpose of such proceeding to the extent necessary to
permit the remaining separate covenants to be enforced in such proceeding. If,
in any judicial proceeding, a court shall refuse to enforce any one or more of
such separate covenants because the total time thereof is deemed to be excessive
or unreasonable, then it is the intent of the parties hereto that such
covenants, which would otherwise be unenforceable due to such excessive or
unreasonable period of time, be in force for such lesser period of time as shall
be deemed reasonable and not excessive by such court.
15. NON-DISCLOSURE COVENANT.
15.1 NON-DISCLOSURE OF INFORMATION. It is understood that the
Business to be acquired by Buyer hereunder is of a confidential nature. Prior to
the date hereof there may have been revealed and on or after the date hereof
there may be revealed to Seller and its affiliates Confidential Information (as
hereinafter defined) concerning the Business of the Seller. Seller for itself
and its affiliates and employees agrees with AFC and Buyer that, following the
Closing, Seller and its affiliates and employees will never divulge or
appropriate to their own use, or to the use of any third party, any Confidential
Information.
15.2 DEFINITION OF CONFIDENTIAL INFORMATION. As used herein, the
term "Confidential Information" means the following oral or written information
used exclusively in the Business: know-how, technology, inventions, designs,
methodologies, trade secrets, patents, secret processes and formulae,
information and data relating to the development, research, testing,
manufacturing, marketing, sale, distribution and uses of products and services,
sources of supplies, budgets and strategic plans, the identity and special needs
of customers, plants and other properties, and any other information which may
give the Seller an opportunity to obtain an advantage over its competitors who
do not know or use such information, PROVIDED THAT the term "Confidential
Information" shall not include (i) any such information that, prior to its use
or disclosure by Seller or its affiliates or employees, can be shown to have
been in the public domain or generally known or available to customers,
suppliers or competitors of the Business through no breach of the provisions of
this Article 15 or other non-disclosure covenants or duties; (ii) any such
information that, prior to its use or disclosure by Seller or its affiliates or
employees, was rightfully in the receiving party's possession, without violation
of the provisions of this Article 15 or other non-disclosure covenants or
duties; and (iii) any such information that, prior to its use or disclosure by
Seller or its affiliates or employees, was independently developed by the
receiving party without violation of the provisions of this Article 15 or other
non-disclosure covenants or duties.
15.3 INJUNCTIVE RELIEF. The parties hereto acknowledge and agree
that the breach of the restrictive covenant contained in this Article 15 would
cause irreparable injury to AFC and Buyer and that the remedy at law for any
such breach would be inadequate, and Seller
agrees and consents that, in addition to any other available remedy, temporary
and permanent injunctive relief may be granted in any proceeding which may be
brought by AFC or Buyer to enforce such restrictive covenant without necessity
of proof that any other remedy at law is inadequate.
16. MISCELLANEOUS.
16.1 EXPENSES. Buyer and Seller shall pay the fees and expenses of
their respective accountants and legal counsel incurred in connection with the
transactions contemplated by this Agreement.
16.2 NOTICES. Any notice or other communication required or permitted
to be given to any party hereunder shall be in writing and shall be given to
such party at such party's address set forth below or such other address as such
party may hereafter specify by notice in writing to the other party. Any such
notice or other communication shall be addressed as aforesaid and given by (1)
certified mail, return receipt requested, with first class postage prepaid, (2)
hand delivery, (3) reputable overnight courier or (4) facsimile transmission.
Any notice or other communication will be deemed to have been duly given (1) on
the fifth day after mailing, provided receipt of delivery is confirmed, if
mailed by certified mail, return receipt requested, with first class postage
prepaid, (2) on the date of service if served personally, (3) on the business
day after delivery to an overnight courier service, provided receipt of delivery
has been confirmed or (4) on the date of transmission if sent via facsimile
transmission, provided confirmation of receipt is obtained promptly after
completion of transmission.
To Seller: c/o Flexfab Horizons International, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Varnum, Riddering, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esquire
Fax: (▇▇▇)▇▇▇-▇▇▇▇
To AFC or Buyer: c/o AFC Cable Systems, Inc.
50 ▇▇▇▇▇▇▇ Plaza
Suite 1250
Providence, Rhode Island 02903
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Chairman and Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
16.3 WAIVER. The failure of any party hereto at any time or times
hereafter to exercise any right, power, privilege or remedy hereunder or to
require strict performance by the other or another party of any of the
provisions, terms or conditions contained in this Agreement or in any other
document, instrument or agreement contemplated hereby or delivered in connection
herewith shall not waive, affect, or diminish any right, power, privilege or
remedy of such party at any time or times thereafter to demand strict
performance thereof; and no rights of any party hereto shall be deemed to have
been waived by any act or knowledge of such party, or any of its agents,
officers or employees, unless such waiver is contained in an instrument in
writing, signed by such party. No waiver by any party hereto of any of its
rights on any one occasion shall operate as a waiver of any of its other rights
or any of its rights on a future occasion.
16.4 SECTION HEADINGS. The section headings in this Agreement are for
convenience of reference only and shall not be deemed to be a part of this
Agreement or to alter or affect any provisions, terms or conditions contained
herein.
16.5 EXHIBITS AND SCHEDULES. Any exhibits, schedules, financial
statements and other documents referenced herein shall be deemed to be attached
hereto and made a part hereof.
16.6 SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law. If any provision of this Agreement is declared illegal,
invalid or unenforceable for any reason in any jurisdiction, then such
declaration shall have no effect upon the remaining provisions of this Agreement
which shall continue in full force and effect as if this Agreement had been
executed with the invalid provision hereof deleted. Furthermore, the entirety of
this Agreement shall continue in full force and effect in all other
jurisdictions.
16.7 ENTIRE UNDERSTANDING. This Agreement sets forth the entire
agreement and understanding between the parties with respect to the subject
matter hereof and merges any and all discussions, negotiations, letters of
intent or agreements in principle between them. Neither of the parties shall be
bound by any conditions, warranties, understandings or representations with
respect to such subject matter other than as expressly provided herein, or as
duly set forth on or subsequent to the date hereof in writing and signed by a
duly authorized officer of the party to be bound thereby.
16.8 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the exclusive benefit of the parties hereto and their respective heirs,
executors, administrators,
legal representatives, successors and permitted assigns. Except as otherwise
expressly provided in this Agreement, this Agreement is not intended to, nor
shall it, create any rights in any other person.
16.9 GOVERNING LAW. This Agreement is and shall be deemed to be a
contract entered into and made pursuant to the laws of the State of Rhode
Island, U.S.A. and shall in all respects be governed, construed, applied and
enforced in accordance with the laws of said State, without reference to its
conflict of laws principles.
16.10 CHOICE OF FORUM AND CONSENT TO JURISDICTION. Any action arising
out of or under this Agreement, any other document, instrument or agreement
contemplated herein or delivered pursuant hereto, or the transactions
contemplated by this Agreement or any of such other documents, instruments or
agreements, shall be brought only in a federal or state court having
jurisdiction and venue in Ohio, U.S.A., and each of the parties hereto hereby
irrevocably submits to the jurisdiction of such courts and agrees that venue in
Ohio is proper. Seller hereby irrevocably designates, appoints and empowers
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ and its successors as its authorized special agent to receive, for and on
behalf of Seller and its affiliates, service of process in any such legal action
or proceeding, a copy of such process to be sent in the manner required above
for notices to such party. Buyer hereby irrevocably designates, appoints and
empowers ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Incorporated, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ and its successors, as its authorized special
agent to receive, for and on behalf of Buyer and its affiliates, service of
process in any such legal action or proceeding, a copy of such process to be
sent in the manner require above for notices to such party. To the extent
permitted by applicable law, final judgment against such party (a certified copy
of which shall be conclusive evidence of the fact and of the amount of any
indebtedness of such party hereunder) in any such legal action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on an
unsatisfied judgment or similar proceeding. Each of the parties hereto hereby
irrevocably waives and agrees not to assert, by way of motion, as a defense, or
otherwise, in any legal action or proceeding, any defense or any claim that it
is not personally subject to the jurisdiction of the above-named Ohio courts for
any reason, including claims that such party may be immune from the
above-described legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, or otherwise), or that such
proceeding is brought in an inconvenient or otherwise improper forum or that
this Agreement or any of the other aforementioned documents, instruments or
agreements, or the subject matter hereof or thereof, may not be enforced in or
by such courts, or that the same are governed by the laws of a jurisdiction
other than Rhode Island. Each of the parties hereby specifically agrees that it
shall not bring any actions, suits or proceedings arising out of or under this
Agreement, any other document, instrument or agreement contemplated herein or
delivered pursuant hereto, or the transactions contemplated by this Agreement or
any of such other documents, instruments or agreements, in the courts of any
jurisdiction other than the above-named courts of Ohio, that any such action
brought by either party shall be dismissed upon the basis of the agreements,
terms and provisions set forth in this Section 16.10, and that any order or
judgment obtained in any such action from a court other than the courts of Ohio
shall be void ab initio provided that, notwithstanding the foregoing provisions
of this Section 16.10, either party may bring and
enforce an action seeking injunctive or other equitable relief in any court of
competent jurisdiction.
16.11 ASSIGNABILITY. Neither party may assign all or any of its
rights and/or obligations hereunder without the prior written consent of the
other party, except that (a) Buyer may at any time, without the consent of
Seller, assign all or any part of its rights and/or obligations under this
Agreement to any affiliate of Buyer, and any such assignee of Buyer shall
succeed to and be possessed of the rights of Buyer hereunder to the extent of
the assignment made, provided that any such assignment shall not relieve Buyer
of its obligations hereunder and (b) after the Closing Buyer may, without
Seller's consent, assign all or any part of its rights and/or obligations
hereunder to any person who acquires all or a major part of the assets of the
Business from Buyer, provided that any such assignment shall not relieve Buyer
of its obligations hereunder.
16.12 COUNTERPARTS; DELIVERY BY FACSIMILE. This Agreement may be
executed in counterparts and by each party hereto on a separate counterpart, all
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier or
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Agreement.
16.13 BULK SALES LAWS. The Buyer hereby waives compliance by the
Seller prior to Closing with the applicable bulk sales law of the State of Ohio
and any other State where the Uniform Commercial Code has been adopted in which
the Seller was doing business, or has property located. The Seller hereby agrees
to indemnify and hold harmless the Buyer in respect of all losses, damages,
costs, liabilities and expenses, including, without limitation, reasonable
attorneys' fees and costs of investigation, relating to or arising out of any
cause of action or other claim for relief arising out of or based upon the laws
of any jurisdiction relating to sales of property in bulk, whether asserted
prior to or subsequent to the Closing Date.
16.14 CERTAIN DEFINITIONS. For the purposes of this Agreement: (a) an
"AFFILIATE" of any specified person shall mean and include any person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such person, (b) an "AFFILIATE"
of any specified natural person shall also include the members of such person's
immediate family and (c) a "PERSON" shall mean and include any natural person,
firm, partnership, association, corporation, limited liability company, company,
unincorporated organization, trust, public body or government or any department,
board, commission or agency thereof.
16.15 PRONOUNS AND PLURALS. All pronouns used herein shall be deemed
to refer to the masculine, feminine, neuter, singular or plural as the identity
of the person or persons may require in the context, and the singular form of
nouns, pronouns and verbs will include the plural, and vice versa, whichever the
context may require.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers or signatories as of the date first written
above.
FLEXFAB HORIZONS INTERNATIONAL, INC.
By: /s/ ▇.▇.▇▇▇▇▇▇
-----------------------------------
Name: ▇.▇. ▇▇▇▇▇▇
---------------------------------
Title: President and CEO
--------------------------------
AFC MADISON ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title: Vice President and Treasurer
---------------------------------
AFC CABLE SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title: Vice President and CFO
---------------------------------
SCHEDULES
Schedule 1.1(b) - Schedule of Machinery and Equipment
Schedule 1.1(g) - Schedule of Assumed Contracts
Schedule 1.1(i) - Schedule of Prepaid Expenses and Other Assets
Schedule 1.1 proviso(g) - Schedule of Certain Excluded Assets
Schedule 1.5 - Schedule of Allocation of Purchase Price
Schedule 4.1 - Schedule of Jurisdictions
Schedule 4.2 - Schedule of Breaches, Defaults and Required Consents
Schedule 4.4(c) - Schedule of Liens and Encumbrances
Schedule 4.4(f) - Schedule of Personal Property Leases
Schedule 4.4(g) - Schedule of Assets at Other Locations
Schedule 4.5 - Schedule and Condition of Real Property
Schedule 4.6 - Schedule of Agreements and Other Matters Restricting
Conduct of Business
Schedule 4.7 - Schedule of Regulatory Licenses,
Consents, Permits and Authorizations
Schedule 4.8(c) - Schedule of Liabilities
Schedule 4.9 - Schedule of Noncompliance with Laws
Schedule 4.10 - Schedule of Patents, Trademarks and
Copyrights
Schedule 4.11 - Schedule of Contracts, Commitments and Intercompany
Transactions
Schedule 4.12 - Schedule of Litigation
Schedule 4.13 - Schedule of Changes
Schedule 4.14 - Schedule of Insurance
Schedule 4.15 - Schedule of Employee Benefit Plans
Schedule 4.20 - Schedule of Stockholders
Schedule 11.9 - Seller's Business Employees
EXHIBITS
Exhibit A - Escrow Agreement
Exhibit B - Lease
Exhibit C - Supply Agreement
Exhibit D - Registration Rights Agreement
Exhibit E - Transition Services Agreement
Exhibit F - Guaranty