EXHIBIT 2.1
ACQUISITION AGREEMENT
dated as of November 30, 1998 among
Phoenix Color Corp.,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and Viking Leasing Partnership
Table of Contents
R E C I T A L S .............................................................1
I. DEFINITIONS............................................................2
1.1 Terms Defined....................................................2
II. PURCHASE AND SALE OF SHARES AND
PARTNERSHIP EQUIPMENT..................................................6
2.1 Sale of the Shares...............................................6
2.2 Sale of Partnership Equipment....................................7
2.3 Purchase Price; Allocation; Escrow Funds.........................7
2.4 Funded Debt of Company and Partnership...........................8
2.5 Credit for Funded Debt; Net Cash Payment.........................9
2.6 Closing Balance Sheet and Adjustments............................9
2.7 Disbursement of Net Cash Payment................................10
2.8 Closing.........................................................11
III. EMPLOYMENT AND OTHER ARRANGEMENTS....................................12
3.1 Employment and Non-Competition Agreements.......................12
3.2 Production Facility; Lease......................................13
IV. REPRESENTATIONS AND WARRANTIES OF THE
SELLING STOCKHOLDERS..................................................13
4.1 Organization and Standing; By-Laws and Minutes..................13
4.2 Capitalization..................................................14
4.3 Ownership and Transfer of Shares; Validity of Agreement.........14
4.4 Financial Statements............................................15
4.5 No Undisclosed Liabilities......................................16
4.6 Books and Records...............................................16
4.7 Accounts Receivable.............................................16
4.8 Inventories.....................................................17
4.9 Backlog.........................................................17
4.10 Real Property Leases............................................17
4.11 Company Equipment...............................................18
4.12 Title to Assets Generally.......................................19
4.13 Contracts Listed; No Default....................................19
4.14 Related Party Transactions......................................20
4.15 Customers and Customer Deposits.................................21
4.16 Employee Benefit Plans..........................................21
4.17 Authorization and Non-Contravention; Consents...................26
4.18 Labor Relations.................................................27
4.19 Insurance.......................................................27
4.20 Intellectual Property...........................................28
4.21 Compliance with Applicable Law..................................29
4.22 Environmental Laws..............................................29
4.23 Litigation......................................................30
4.24 Unlawful Payments...............................................31
4.25 Permits.........................................................31
4.26 Restrictive Covenants...........................................32
4.27 Tax Matters.....................................................32
4.28 Bank Accounts and Powers of Attorney............................35
4.29 Corporate and Fictitious Names..................................36
4.30 Absence of Certain Recent Changes...............................36
4.31 OSHA............................................................39
4.32 Immigration Matters.............................................39
4.33 Brokers.........................................................39
4.34 Year 2000 Issue.................................................40
4.35 Funded Debt; No Default.........................................40
4.36 Subordinated Debentures; No Default.............................40
4.37 Accuracy of Information Furnished...............................40
V. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP.....................41
5.1 Partnership Existence and Authority.............................41
5.2 Capacity of the Partners........................................42
5.3 No Broker.......................................................42
5.4 Title to Partnership Equipment..................................42
5.5 Non-Contravention; Consents.....................................42
5.6 Condition of Partnership Equipment..............................43
5.7 Books and Records...............................................43
5.8 No Undisclosed Liabilities......................................44
5.9 Contracts Listed; No Default....................................44
5.10 Insurance.......................................................45
5.11 Partnership Equipment...........................................46
5.12 Partnership Tax Liabilities.....................................46
5.13 Accuracy of Information Furnished...............................47
VI. REPRESENTATIONS OF PURCHASER..........................................47
6.1 Authorization...................................................47
6.2 Organization....................................................48
6.3 Non-Contravention...............................................48
6.4 No Broker.......................................................49
VII. CONDUCT PENDING CLOSING; COVENANTS....................................49
7.1 Access and Information..........................................49
7.2 Cooperation and Publicity.......................................50
7.3 Other Proposals to Selling Stockholders.........................50
7.4 Notification by Selling Stockholders............................50
7.5 Conduct of Business.............................................51
7.6 Prohibited Activities...........................................52
7.7 Certain Affirmative Covenants...................................56
7.8 Tax Liabilities and Information.................................56
7.9 Termination of Employee Benefit Plans...........................60
7.10 Updated Financial Statements and Disclosure Schedules...........60
7.11 Books and Records to be Kept Current............................61
7.12 Special Payment of EPA Credits..................................61
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER......................62
8.1 Authorization of Board..........................................62
8.2 Intentionally Omitted...........................................62
8.3 Facility........................................................62
8.4 Release of Personal Guarantees..................................62
8.5 Termination of Employee Benefit Plans...........................63
8.6 Delivery of Shares..............................................63
8.7 Officers' Certificates..........................................63
8.8 Opinion of Counsel..............................................64
8.9 No Material Adverse Change......................................65
8.10 Compliance with Covenants.......................................65
8.11 Truth of Representations........................................65
8.12 Consents and Waivers............................................65
8.13 Litigation......................................................65
8.14 Employment and Non-Competition Agreements.......................66
8.15 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filing........................................66
8.16 Miscellaneous Documents.........................................66
8.17 Legal Matters...................................................67
8.18 Due Diligence...................................................67
8.19 Escrow Agreement and Disbursing Agent...........................67
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS........................67
9.1 Truth of Representations........................................68
9.2 Compliance by Purchaser.........................................68
9.3 Litigation......................................................68
9.4 Tender of Payment...............................................68
9.5 Employment and other Agreements.................................68
9.6 Release or Termination of Personal Guarantees...................68
9.7 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filing........................................69
X. INDEMNIFICATION AND CLAIMS............................................69
10.1 Indemnification by Sellers and Partnership......................69
10.2 Indemnity Fund; Escrow..........................................70
10.3 Right of Offset.................................................71
10.4 Indemnification Procedures and Notice...........................72
10.5 Distribution and Termination of Escrow Fund.....................73
10.6 Indemnification Successors and Assigns..........................73
XI. MISCELLANEOUS MATTERS.................................................74
11.1 Parties to Bear Their Own Expenses; Exceptions..................74
11.2 Purchaser May Assign; Possible Merger...........................74
11.3 Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Cause the Company and
Partnership to Act............................................75
XII. TERMINATION PRIOR TO CLOSING..........................................75
12.1 Mutual Termination..............................................75
12.2 Termination by Purchaser........................................75
12.3 Termination by Sellers..........................................75
12.4 Termination by Purchaser or Sellers.............................76
XIII. GENERAL PROVISIONS....................................................76
13.1 Survival of Representations, Warranties, etc....................76
13.2 Confidentiality.................................................77
13.3 Entire Agreement................................................78
13.4 Waiver..........................................................78
13.5 No Assignment; Exceptions.......................................79
13.6 Benefits of Agreement...........................................79
13.7 Remedies Cumulative.............................................80
13.8 Governing Law...................................................80
13.9 Notices.........................................................80
13.10 Counterparts....................................................81
13.11 Severability....................................................81
13.12 Headings........................................................82
EXHIBITS
a. Exhibit 1 - ▇▇▇▇ of Sale
b. Exhibit 2 - Employment Agreement
c. Exhibit 3 - Non-Competition Agreement
d. Exhibit 4 - Lease Termination Agreement
e. Exhibit 5a - Opinion of Counsel - ▇▇▇▇▇▇▇ & Huntington
f. Exhibit 5b - Opinion of Counsel - Jenner & Block
g. Exhibit 5c - Opinion of Counsel - ▇▇▇▇▇ & ▇▇▇▇▇
h. Exhibit 6 - Escrow Agreement
i. Exhibit 7 - Assignment of Emissions Credit
SCHEDULES
a. Schedule A
b. Schedule 2.2 - Partnership Equipment
c. Schedule 2.4 - Funded Debt of Company
d. Schedule 4.3 - Ownership of Shares
e. Schedule 4.5 - Undisclosed Liabilities
f. Schedule 4.7 - Accounts Receivable
g. Schedule 4.8 - Inventories
h. Schedule 4.9 - Backlog
i. Schedule 4.10 - Real Property Leases
j. Schedule 4.11 - Company Equipment
k. Schedule 4.12 - Title to Assets
l. Schedule 4.13 - Contracts
m. Schedule 4.14 - Related Party Transactions
n. Schedule 4.15 - Customers and Customer Deposits
o. Schedule 4.16 - Employee Benefit Plans
p. Schedule 4.17 - Authorization and Non-Contravention
q. Schedule 4.18 - Labor Relations
r. Schedule 4.19 - Insurance
s. Schedule 4.20 - Intellectual Property
t. Schedule 4.22 - Environmental Laws
u. Schedule 4.23 - Litigation
v. Schedule 4.25 - Permits
w. Schedule 4.26 - Restrictive Covenants
x. Schedule 4.27 - Tax Matters
y. Schedule 4.28 - Bank Accounts and Powers of Attorney
z. Schedule 4.29 - Corporate and Fictitious Names
aa. Schedule 4.30 - Absence of Certain Recent Changes
bb. Schedule 4.31 - OSHA
cc. Schedule 4.32 - Immigration Matters
dd. Schedule 4.34 - Year 2000 Issue
ee. Schedule 4.35 - Funded Debt; No Default
ff. Schedule 4.36 - Subordinated Debentures; No Default
gg. Schedule 5.4 - Title to Partnership Equipment
hh. Schedule 5.5 - Non-Contravention
ii Schedule 5.7 - Books and Records
jj. Schedule 5.8 - Undisclosed Liabilities
kk. Schedule 5.9 - Contracts
ll. Schedule 5.10 - Insurance
mm. Schedule 5.11 - Partnership Equipment
nn. Schedule 5.12 - Partnership Tax Liabilities
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT (the "Agreement"), dated as of November 30, 1998
among Phoenix Color Corp., a Delaware corporation ( the "Purchaser"), ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (collectively, the
"Selling Stockholders") and Viking Leasing Partnership, a Illinois general
partnership (the "Partnership," and collectively with the Selling Stockholders,
the "Sellers").
R E C I T A L S
A. The Selling Stockholders beneficially own and hold of record all of the
issued and outstanding shares of capital stock (the "Shares") of Mid-City
Lithographers, Inc. (the "Company"), a Delaware corporation ;
B. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (collectively, the "Principal
Stockholders") are active in the management of the Company, which is
engaged in the business of producing and supplying book components;
C. The Principal Stockholders are also the general partners of the
Partnership, which owns certain printing machinery and equipment (the
"Partnership Equipment") described in Sellers Disclosure Schedule 2.2
annexed hereto, which it currently leases to the Company for use in the
Company's printing operations;
D. The Selling Stockholders desire to sell and the Purchaser desires to
buy all of the Shares, subject to the terms and conditions of this
Agreement;
E. Concurrently with such sale of Shares to the Purchaser, the Purchaser
desires to buy and the Partnership desires to sell the Partnership
Equipment;
F. Certain of the parties have signed a Letter of Intent dated August 19,
1998 (the "Letter of Intent") generally describing such sale and purchase,
which are subject to the specific terms and conditions hereof; and
G. The parties desire to set forth in this Agreement the terms and
conditions of such sale and purchase, and to enter into the other
agreements and arrangements provided for herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises, covenants, representations and warranties made herein, and the sum of
$10.00 and other good and valuable consideration paid and given by each party to
the others, receipt of which is hereby acknowledged, THE PARTIES AGREE AS
FOLLOWS:
I. DEFINITIONS
1.1 Terms Defined. As used in this Agreement, the following terms have the
following respective meanings:
Agreement - As defined in the initial paragraph of this Agreement.
Balance Sheet - As defined in Section 4.4 of this Agreement. Balance
Sheet Date - As defined in Section 4.4 of this Agreement.
Closing - As defined in Section 2.8 of this Agreement.
Closing Balance Sheet - As defined in Section 2.6 of this Agreement.
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Closing Date - As defined in Section 2.8 of this Agreement.
Code - Internal Revenue Code of 1986, and any regulations
thereunder, all as amended from time to time.
Company - As defined in the Recitals to this Agreement.
Company Funded Debt - As defined in Section 2.4 of this Agreement.
Confidential Information - As defined in Section 13.2 of this
Agreement.
Controlled Group - As defined in Section 4.16(d) of this Agreement.
Delivery Date - As defined in Section 2.6 of this Agreement.
Emission Credits - As defined in Section 7.12 of this Agreement.
Employment Agreement - As defined in Section 3.1 of this Agreement.
Environmental Laws - Any and all Federal, foreign, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
and any and all common law requirements, rules and bases of liability
regulating, relating to or imposing liability or standards of conduct concerning
pollution, protection of the environment, or the impact of pollutants,
contaminants or toxic or hazardous substances on human health or the
environment, as now or may any time hereafter be in effect.
Equipment - As defined in Section 4.11 of this Agreement.
ERISA - Defined as the Employee Retirement Income Security Act of
1974, as amended from time to time, together with all rules and regulations
promulgated pursuant thereto, as amended from time to time.
Escrow Agent - As defined in Section 10.2 of this Agreement.
Escrow Agreement - As defined in Section 10.2 of this Agreement.
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Escrow Fund - The fund consisting initially of the sum of $150,000
deducted from the Net Cash Payment; provided, however that such sum shall mean
only $60,000 in the event that Sellers provide reasonable written proof that (i)
the Company irrevocable elected prior to Closing not to carryback the 1995 net
operating loss of the Company to prior years, or (ii) the Selling Stockholders
cause the Company to file, prior to Closing, amended Federal, State and local
income tax returns for the calendar years 1992, 1993 and 1994 eliminating the
effect of any carryback of such net operating loss. If such election or
amendment is filed after Closing, the sum of $90,000 shall be released from the
Escrow Fund and disbursed in accordance with the procedure set forth in Section
2.7 of this Agreement.
Facility - As defined in Section 3.2 of this Agreement.
Financial Statements - As defined in Section 4.4 of this Agreement.
Funded Debt - As defined in Section 2.4 of this Agreement.
GAAP - means generally accepted accounting principles consistently
applied as in effect in the United States from time to time, except as applied
to the amortization of research and development expenses.
Hazardous Material - Any substances defined or designated as
hazardous or toxic waste, hazardous or toxic material, hazardous or toxic
substances or similar term, under any Environmental Law.
LaSalle Bank Agreement - The Revolving Credit and Term Loan
Agreement and Security Agreement, dated May 1, 1998, as amended, between LaSalle
National Bank and the Company.
Letter of Intent - As defined in the Recitals to this Agreement.
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Indemnified Losses - As defined in Section 10.1 of this Agreement.
Material Adverse Change - A material adverse change with respect to
the Sellers shall mean (a) any material adverse change (both before and after
giving effect to the transactions contemplated by this Agreement) with respect
to the business, assets, properties, financial condition, stockholders' equity,
contingent liabilities, prospects, material agreements or results of operations
of the Partnership or the Company, or (b) any fact or circumstance that, singly
or in the aggregate with any other fact or circumstance, has a reasonable
likelihood of resulting in or leading to (i) a material adverse change described
in clause (a), (ii) the inability of the Sellers to perform in any material
respect their obligations hereunder or the inability of the Purchaser to enforce
in any material respect the rights purported to be granted hereunder or under
any other agreement among the parties, or (iii) a material adverse change on the
ability of the Sellers to effect (including hindering or unduly delaying) the
transactions contemplated by this Agreement on the terms contemplated hereby and
thereby.
Net Cash Payment - As defined in Section 2.5 of this Agreement.
Non-Competition Agreement - As defined in Section 3.1 of this
Agreement.
Non-Secured Indemnified Losses - As defined in Section 10.3 of this
Agreement.
Partners - As defined in Section 5.2 of this Agreement.
Partnership - As defined in the initial paragraph to this Agreement.
Partnership Equipment - As defined in the Recitals to this
Agreement.
Partnership Funded Debt - As defined in Section 2.4 of this
Agreement.
Pension Plan - As defined in Section 4.16(b) of this Agreement.
Personal Guarantee(s) - As defined in Section 2.4 of this Agreement.
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Plan(s) - As defined in Section 4.16(a) of this Agreement.
Post-Closing Returns - As defined in Section 7.8(b) of this
Agreement.
Post-Retirement Benefits - As defined in Section 4.16(g) of this
Agreement.
Purchase Price - As defined in Section 2.3 of this Agreement.
Purchaser - As defined in the initial paragraph to this Agreement.
Purchaser Indemnitee(s) - As defined in Section 10.1 of this
Agreement.
Selling Stockholders - As defined in the initial paragraph to this
Agreement.
Sellers - As defined in the initial paragraph to this Agreement.
Shares - As defined in the Recitals to this Agreement.
Subordinated Debentures - Subordinated Debentures shall mean the
debentures issued by the Company to ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ on or about
December 31, 1986, in the aggregate principal amount of $1,000,000.
Welfare Plan - As defined in Section 4.16(b) of this Agreement.
Year 2000 Problem - As defined in Section 4.34 of this Agreement.
II.PURCHASE AND SALE OF SHARES AND
PARTNERSHIP EQUIPMENT
2.1 Sale of the Shares. Subject to all of the terms and conditions of this
Agreement, the Selling Stockholders agree to sell and Purchaser agrees to buy
the Shares. The number of Shares being sold by and purchased from each of the
Selling Stockholders, and the amount of consideration to be paid to each of the
Selling Stockholders, are as set forth in Schedule A annexed hereto.
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(Schedule A and all Sellers Disclosure Schedules referred to in this Agreement
are attached hereto and made part hereof.)
2.2 Sale of Partnership Equipment. Subject to all of the terms and
conditions of this Agreement, the Partnership agrees to sell and the Purchaser
agrees to buy the Partnership Equipment, which is described and listed in
Sellers Disclosure Schedule 2.2. Such Schedule sets forth, for each item of
Partnership Equipment, a description of the Partnership Equipment, its serial
number and age, and the number of printing impressions made by such item from
the time of its initial installation.
2.3 Purchase Price; Allocation; Escrow Funds.
(a) The total purchase price (the "Purchase Price") for the Shares
and the Partnership Equipment is $12,500,000. The Purchase Price will be paid by
the Purchaser at the Closing in accordance with this Article II and the other
provisions of this Agreement.
(b) The portion of the Purchase Price allocated to the Partnership
Equipment shall be equal to the appraised value of the Partnership Equipment and
shall be paid to the Partnership. Such appraised value shall be determined at
least fifteen (15) days prior to the Closing Date by an independent appraiser
selected by the Purchaser and reasonably acceptable to the Sellers, and shall be
based on information contained in Sellers Disclosure Schedule 2.2 The remainder
of the Purchase Price shall be allocated to the purchase of the Shares and shall
be paid to the Selling Stockholders in the same proportion which their
respective ownership interests in the Shares bears to the total number of
Shares, as set forth in Schedule A.
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(c) Amounts disbursed in payment of the Purchase Price shall be
adjusted to reflect the setting aside and delivery in escrow of a portion of the
Purchase Price as set forth in Section 2.8 and Article X hereof.
2.4 Funded Debt of Company and Partnership. The funded debt of each of the
Company and the Partnership is set forth in Sellers Disclosure Schedule 2.4,
which separately lists, as of October 31, 1998, each item of the entire funded
indebtedness of the Company and the Partnership, the name of each funded
indebtedness creditor, the principal amount owed and any accrued interest which
is in arrears or is non-current, and the extent to which any of the Sellers (who
shall be identified herein) has personally guaranteed such funded debt (such
personal guarantees being referred to as the "Personal Guarantees.") Such funded
debt includes, without limitation:
(a) the outstanding principal amount of the Company's term loan
indebtedness under the LaSalle Bank Agreement;
(b) the outstanding principal balance of the Company's revolving credit
line indebtedness under the LaSalle Bank Agreement, which amount
will be adjusted for seasonal or unusual activity as agreed by the
Purchaser and the Company;
(c) the indebtedness incurred by the Partnership for the acquisition of
the Partnership Equipment and the indebtedness incurred by the
Company for its Equipment, including the balance owed on any capital
leases in each instance;
(d) certain Company indebtedness to the Partnership under the terms of
the Company's lease of Partnership Equipment;
(e) the outstanding principal balance of the Subordinated Debentures;
and
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(f) the outstanding principal balance of other funded debt incurred by
the Company, as agreed between the Selling Stockholders and the
Purchaser.
The funded debt of the Partnership is referred to as the "Partnership Funded
Debt," the funded debt of the Company is referred to as the "Company Funded
Debt," and the total of the Partnership Funded Debt and Company Funded Debt is
referred to as the "Funded Debt."
2.5 Credit for Funded Debt; Net Cash Payment. The amounts of the
Partnership Funded Debt and the Company Funded Debt, and the aggregate amount of
the Funded Debt, shall be calculated and fixed as of the Closing Date, and such
amounts shall be subject to the agreement between the Company and the Purchaser
as set forth in Section 2.6. The agreed amount of the Funded Debt shall be
deducted from the Purchase Price, and the balance thereof shall be paid in cash
(the "Net Cash Payment") at the Closing.
2.6 Closing Balance Sheet and Adjustments. In preparation for the Closing:
(a) On a date (the "Delivery Date") at least two business days prior
to the Closing, the Selling Stockholders shall cause the Company and the
Partners shall cause Partnership each to deliver to the Purchaser a separate
balance sheet showing the respective assets and liabilities of the Company and
the Partnership as of December 31, 1998 (each, a "Closing Balance Sheet,")
except that each such Closing Balance Sheet may reflect accounts receivable and
accounts payable as of a date not earlier than December 23, 1998, which date
shall be noted in such Closing Balance Sheet. Each Closing Balance Sheet shall
(i) itemize the Funded Debt by creditor, (ii) include, as supporting schedules,
the respective accounts payable and accounts receivable for the Company and the
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Partnership, together with appropriate aging schedules and amended Sellers
Disclosure Schedules as of December 31, 1998, (iii) indicate comparative
information as of December 31, 1997 and (iv) be prepared in accordance with
GAAP. In addition, each Closing Balance Sheet shall be accompanied by written
confirmations from Funded Debt creditors showing the respective outstanding
principal balances due from the Company and the Partnership as of December 31,
1998 in each case.
(b) The Closing Balance Sheet for the Company and the Closing
Balance Sheet for the Partnership (and the amount of Funded Debt reflected
therein) shall be subject to the approval of the Purchaser in each case, and the
Sellers shall provide all information and schedules requested by the Purchaser
in support of each Closing Balance Sheet. The Purchaser shall promptly review
each such Closing Balance Sheet and the supporting information, and, after all
required adjustments are made, the Closing shall proceed and each Closing
Balance Sheet, as so adjusted, shall be delivered as a Closing document.
(c) The amounts of Funded Debt reflected in each Closing Balance
Sheet shall be deducted from the Purchase Price as set forth in Section 2.5.
2.7 Disbursement of Net Cash Payment. The Net Cash Payment shall be paid
in immediately available funds by cashier or certified check or by wire transfer
to ▇▇▇▇▇▇▇ & Huntington, as special counsel for the Sellers, who will act as
disbursing agent and who will be authorized by the Sellers to receive and
disburse the Net Cash Payment in the respective amounts to which each of the
Sellers is entitled as set forth in Section 2.3 and Schedule A. The Net Cash
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Payment should be distributed into separate accounts for the Selling
Stockholders and the Partnership in accordance with the allocation formula set
forth in Section 2.3(b).
2.8 Closing. The closing for the sale and purchase of the Company's Shares
(the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m. on January 4, 1999,
with the Closing to be effective as of the opening of business on January 1,
1999 or such other time and date as the parties may agree to in writing (the
"Closing Date"). At the Closing:
(a) the Selling Stockholders will deliver to the Purchaser, free and
clear of all liens, claims, charges and encumbrances, certificates representing,
in the aggregate, all of the Shares, which shall be validly issued, duly
endorsed for transfer to the Purchaser or accompanied by valid stock powers or
other instruments of transfer duly executed, and accompanied by all requisite
stock transfer tax stamps;
(b) the Partnership will deliver to the Purchaser a (i) ▇▇▇▇ of sale
for the Partnership Equipment in the form set forth as Exhibit 1 annexed to this
Agreement and made part hereof, and (ii) possession of the Partnership
Equipment, free and clear of any liens, claims, charges or encumbrances, except
as set forth in Sellers Disclosure Schedule 5.11;
(c) the Purchaser will deliver confirmation of either (i) payment in
full of the Partnership Funded Debt and the Company Funded Debt in respect of
which the Principal Stockholders have issued Personal Guarantees, or (ii) the
release and termination of any personal liability under such Personal
Guarantees;
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(d) the parties will deliver the executed Employment Agreement,
Non-Competition Agreement and other agreements referred to in Article III below;
(e) the Purchaser will deliver to ▇▇▇▇▇▇▇ & Huntington the Net Cash
Payment;
(f) the Purchaser and the Sellers will execute and deliver to each
other all other agreements, certificates, consents, opinions of counsel,
documents and other items required to be delivered pursuant to Article VIII and
any other applicable provisions of this Agreement;
(g) the parties will deliver all other documents and take all other
actions required to be delivered or taken at the Closing in accordance with this
Agreement.
(h) The Purchaser, the Sellers and the Escrow Agent (as hereinafter
defined) will execute and deliver an Escrow Agreement, and the Purchaser will
arrange to deposit in escrow the Escrow Fund out of the Net Cash Payment in
accordance with the provisions of Article X hereof, provided that such Escrow
Fund amount shall be increased by $250,000 in the event reports of estimated
income tax are not filed by the Company and such tax is not paid prior to
Closing as set forth in Section 7.8(g).
III. EMPLOYMENT AND OTHER ARRANGEMENTS
3.1 Employment and Non-Competition Agreements. At the Closing, the
Purchaser will enter into a one-year employment agreement with ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(the "Employment Agreement") and a non-competition agreement with ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ (the "Non-Competition Agreement"), on the terms and conditions and in
the forms set forth as Exhibits 2 and 3 respectively, annexed to this Agreement
and made part hereof, and Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, by their
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respective signatures to this Agreement, each confirms that he will execute and
deliver the Employment Agreement and Non-Competition Agreement.
3.2 Production Facility; Lease. At the Closing, the existing lease
agreement between the Company and Laurel Limited Partnership ("Laurel"), a
partnership controlled by the Principal Stockholders, for the Company's
production facility located at ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (the
"Facility") will be terminated pursuant to the lease termination agreement
annexed as Exhibit 4 to this Agreement. At the Closing, the Purchaser will enter
into a new lease with Laurel for the Facility, which new lease will be on
substantially the same terms and conditions as the existing lease and shall be
subject to the approval of the parties as to form and substance, except that (i)
the term of the new lease shall commence as of the Closing Date and shall expire
on June 30, 1999. The termination of the existing lease at the Closing shall be
subject to Purchaser's obtaining a release or termination of any agreement under
which such lease is pledged as collateral.
IV. REPRESENTATIONS AND WARRANTIES OF THE
SELLING STOCKHOLDERS
The Selling Stockholders jointly and severally represent and warrant to
the Purchaser, and the Purchaser is relying materially thereon in entering into
this Agreement, as follows:
4.1 Organization and Standing; By-Laws and Minutes. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power to carry
on its business as it is now
-13-
being conducted, and is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where such qualification is
necessary under applicable law, except where the failure to qualify would not
result in any Material Adverse Change. The Company has no subsidiaries and its
only place of business is within the State of Illinois. The copies of the
Certificate of Incorporation and the by-laws of the Company, delivered to the
Purchaser, are true and complete copies of these documents as amended and now in
effect. The corporate minutes of the Company as presented for inspection by the
Purchaser are current, accurate and complete in all material respects.
4.2 Capitalization. The authorized capital stock of the Company consists
of 12,000 shares of voting common stock, no par value, of which 11,306 shares
are issued and outstanding, and 4,000 shares of nonvoting common stock, no par
value, of which 205 shares are issued and outstanding, as of the date hereof.
The 11,306 voting common shares and the 205 nonvoting common shares comprise the
Shares. Except as set forth in this Section 4.2, there is no other authorized
class, series or unit of securities of any kind evidencing a proprietary
interest in the Company. None of the shares of the Company has been issued in a
manner giving rise to claims for violation of the securities laws of any
jurisdiction.
4.3 Ownership and Transfer of Shares; Validity of Agreement.
(a) All of the Shares are fully paid, duly and validly issued and of
record and beneficially owned by the persons listed, in the respective amounts
indicated, in Schedule A. Except as set forth in Sellers Disclosure Schedule 4.3
annexed to this Agreement, there is no option, warrant, call,
-14-
convertible security, preemptive right or commitment of any kind relating to
unissued shares of the capital stock of the Company. The Company owns no shares
of capital stock or other interest in any corporation, partnership, association
or other entity.
(b) The Shares to be delivered at the Closing are presently, and will be
at the time of such delivery, free and clear of any liens, charges, encumbrances
or claims. The sale and delivery of the Shares to Purchaser, when consummated
pursuant to this Agreement, will transfer to and vest in Purchaser the ownership
of all, and not less than all, the issued and outstanding shares of the Company.
(c) This Agreement constitutes the valid and binding obligation of the
Sellers enforceable against the Sellers in accordance with its terms, except as
may be limited by applicable bankruptcy, reorganization, insolvency, moratorium
or other similar laws or by legal or equitable principles relating to or
limiting creditors' rights generally.
4.4 Financial Statements. The Selling Stockholders have provided unaudited
financial statements of the Company for the years ended December 31, 1995, 1996,
and 1997, for the six months ended June 30, 1998 and for the nine months ended
September 30, 1998 (the "Balance Sheet Date") including a balance sheet as of
the Balance Sheet Date (the "Balance Sheet") (such unaudited financial
statements being referred to collectively as the "Financial Statements"). The
Financial Statements have been prepared in accordance with GAAP applied on a
basis consistent with prior periods, are accurate and complete, and present
fairly the financial condition of the Company as of the respective dates
indicated and the results of its operations and cash flows for the respective
periods indicated.
-15-
4.5 No Undisclosed Liabilities. Sellers Disclosure Schedule 4.5 lists each
and every liability of the Company (whether accrued, absolute, contingent or
otherwise) as of the Balance Sheet Date. Except as set forth in Sellers
Disclosure Schedule 4.5, to the best knowledge of the Selling Stockholders, the
Company is not subject to any material liability (defined, for purposes of this
Section 4.5, as any single item in excess of $5,000), whether absolute,
contingent, accrued or otherwise, other than (i) liabilities of the same nature
as those set forth in Disclosure Schedule 4.5 which were incurred by the Company
in the ordinary course of business after the Balance Sheet Date, (ii)
liabilities arising under existing agreements to which the Company is a party
(excluding liabilities arising on account of breaches by the Company of such
existing agreements which breaches are not disclosed in the Sellers Disclosure
Schedule), and (iii) other liabilities disclosed in the Sellers Disclosure
Schedule. Except as disclosed herein, the Company has no material unrealized or
anticipated losses, in excess of $5,000 for a single item, from unfavorable
commitments.
4.6 Books and Records. The books and records of the Company are true,
accurate and complete in all material respects and have been consistently
maintained from period to period in accordance with GAAP applied on a consistent
basis. With respect to the audit of the December 31, 1997 and June 30, 1998
financial statements conducted by PricewaterhouseCoopers LLP, Sellers
acknowledge that they have provided, or caused to be provided, the information
contained in such financial statements.
4.7 Accounts Receivable. The accounts receivable of the Company (i) are
reflected in the Balance Sheet (except those accounts receivable collected since
the Balance Sheet Date), (ii)
-16-
are listed in Sellers Disclosure Schedule 4.7 (which sets forth the accounts
receivable on the books of the Company, together with an aging schedule as of
the Balance Sheet date), (iii) have been generated in the ordinary course of
business and (iv) reflect bona fide obligations for the payment of goods or
services provided by the Company. The amounts reflected in such accounts
receivable are expected to be fully collected in the ordinary course of
business, on a schedule consistent with the past collection practices of the
Company, except to the extent reserved against explicitly in the Balance Sheet.
4.8 Inventories. The inventories of the Company reflected in the Balance
Sheet and listed in Sellers Disclosure Schedule 4.8 are in good, merchantable
and usable condition, have been reflected in the Balance Sheet at cost, and
include no obsolete or discontinued items, or items which have failed any
quality testing, in each case except as set forth in Sellers Disclosure Schedule
4.8 and except to the extent reserved against in the Balance Sheet. Except as
set forth in Sellers Disclosure Schedule 4.8 , such inventories are located and
maintained at the Facility, and are owned free and clear of any liens,
encumbrances, charges or claims of others.
4.9 Backlog. Sellers Disclosure Schedule 4.9 accurately sets forth as of
the Balance Sheet Date the name, aggregate contract price, revenues received to
date and balance remaining on all projects of the Company then in progress or
under contract to be performed.
4.10 Real Property Leases. The Company is a tenant in the Facility under
the lease agreement listed in Sellers Disclosure Schedule 4.10, and such lease
agreement is in full force and
-17-
effect, and is terminable and will be terminated at the Closing in accordance
with the provisions of Exhibit 4a. The Company is not in default in the
performance of any provision of such lease. Except as set forth in Sellers
Disclosure Schedule 4.10, the Company has not collaterally assigned or
encumbered its interest under such lease and is current in its payment of rent
and other charges due under such lease. The use by the Company of the real
property leased by it has not violated and does not violate any environmental or
local zoning or similar land use laws.
4.11 Company Equipment. Sellers Disclosure Schedule 4.11 lists each item
of the Company's machinery and equipment (the "Equipment") with an original cost
on the books of the Company in excess of $1,000 per item. All of such Equipment
is owned by the Company, free and clear of any liens, charges, encumbrances or
security interests, except as set forth in Sellers Disclosure Schedule 4.11 and
4.12. With respect to any Equipment held by the Company under an equipment lease
with unaffiliated third parties, such equipment lease is in full force and
effect and the Company is not in default thereunder. With respect to Partnership
Equipment held by the Company under lease with the Partnership, such lease is in
full force and effect and the Company has made all payments due thereunder
except as set forth in Sellers Disclosure Schedule 2.4 with respect to certain
lease payment obligations included in Funded Debt. The Company has not
undertaken any action which, with the giving of notice or the passage of time or
both, would result in a default under any lease of Equipment or Partnership
Equipment. The Equipment and the Partnership Equipment are in good operating
condition and repair and are suitable for use in the ordinary course of business
of the Company, and include all machinery and equipment necessary
-18-
to manufacture the products sold by the Company to operate the business of the
Company as currently conducted.
4.12 Title to Assets Generally. Except as stated in Sellers Disclosure
Schedule 4.12, the Company holds good and marketable title to its assets as
reflected on the Balance Sheet and to all assets and properties whose ownership
has been acquired by the Company after the Balance Sheet Date (except assets
sold or consumed in the ordinary course of business subsequent to the Balance
Sheet Date), free and clear of all adverse claims, liens, mortgages, charges,
security interests, encumbrances or restrictions.
4.13 Contracts Listed; No Default. Sellers Disclosure Schedule 4.13
contains a complete and correct list as of the date hereof of all agreements,
contracts and commitments of the following types, written or oral, to which the
Company is a party or by which the Company or any of its properties is bound as
of the date hereof: (i) mortgages, indentures, security agreements, letters of
credit, loan agreements and other agreements, guarantees and instruments
relating to the borrowing of money or extension of credit; (ii) employment,
consulting, severance and agency agreements; (iii) collective bargaining
agreements; (iv) bonus, profit-sharing, compensation, stock option, stock
purchase, pension, severance, retirement, deferred compensation or other plans,
trusts or funds for the benefit of employees, officers, agents or, directors
(whether or not legally binding); (v) sales agency, manufacturer's
representative or distributorship agreements; (vi) agreements, orders or
commitments for the purchase of raw materials, supplies or finished products
exceeding $2,500 in amount; (vii) agreements, orders or commitments, if any, for
the sale of products exceeding
-19-
$2,500 in amount; (viii) licenses of intellectual property, transfer of
technology or know how and other intellectual property rights; (ix)
confidentiality agreements, including agreements binding any of the Company's
employees; (x) agreements or commitments for capital expenditures in excess of
$2,500 for any single project (it being warranted that all undisclosed
agreements or commitments for capital projects do not exceed $10,000 in the
aggregate for all projects); (xi) brokerage or finder's agreements; (xii)
stockholders' agreements and any agreements restricting the transfer of any of
the shares of the Company; (xiii) joint venture and partnership agreements;
(xiv) leases for real and personal property; and (xv) other agreements,
contracts and commitments which in any case involve payments or receipts of more
than $2,500. The Selling Stockholders have made available to the Purchaser
complete and correct copies of all such written agreements, contracts and
commitments, together with all amendments thereto, and provided accurate
descriptions of all oral agreements listed in Sellers Disclosure Schedule 4.13.
All agreements, contracts and commitments referred to in this Section 4.13 are
in full force and effect in accordance with their respective terms and there
does not exist thereunder as of the date hereof any default by the Company, any
other party thereto, or any event or condition which, after notice or lapse of
time or both, would constitute a default thereunder on the part of the Company,
or any other party thereto. Company has not granted any powers of attorney,
except routine powers of attorney relating to representation before governmental
agencies or given in connection with qualification to conduct business in
another jurisdiction, except as set forth in Section 4.28.
4.14 Related Party Transactions. Except as set forth in Sellers Disclosure
Schedule 4.14, the Company has not made any loans to any officer, director,
shareholder or employee of the
-20-
Company, outstanding on the date of this Agreement, nor entered into any
agreement or arrangement with any such person, or with a parent, child, spouse
or sibling of such person, in which such person or any of such relatives has a
material direct or indirect economic interest in such arrangement or agreement,
other than compensation arrangements in keeping with the usual and customary
practices of the Company.
4.15 Customers and Customer Deposits. Set forth in Sellers Disclosure
Schedule 4.15 is a true and complete list of customers and customer deposits
shown on the Balance Sheet, indicating for each customer the date on which the
deposit was received, the amount of each deposit, the product(s) ordered, the
total purchase price for each such product, the current stage of production and
the estimated delivery date for the product(s) ordered. Except as therein set
forth, each of the customer deposits represents a bona fide customer order for a
product or products that the Company reasonably believe can be delivered in
accordance with the specifications and upon the terms agreed to with the
customer. The Company is not engaged in any material dispute with any customer,
and the entering into and performance of this Agreement is not expected to
result in any Material Adverse Change in the business relationship between the
Company and its customers.
4.16 Employee Benefit Plans. With respect to each employee benefit plan of
the Company:
(a) Sellers Disclosure Schedule 4.16 sets forth all pension,
savings, retirement, health, insurance, severance and other employee benefit or
fringe benefit plans, within the meaning of Section 3(3) of ERISA, maintained
currently with respect to the business of the Company
-21-
(referred to herein as the "Plan" or "Plans"). With respect to each of the
Plans, the Selling Stockholders have delivered to the Purchaser copies of: (i)
Plan documents, and, where applicable, related trust agreements, and any related
agreements which are in writing; (ii) summary Plan descriptions; (iii) the most
recent Internal Revenue Service ("IRS") determination letter relating to each
Plan for which a letter of determination was obtained; (iv) to the extent
required to be filed, the most recent Annual Report (Form 5500 Series and
accompanying schedules of each Plan and applicable financial statements) as
filed with the IRS; (v) audited financial statements, if any.
(b) Except as set forth in Sellers Disclosure Schedule 4.16, (i) in
all material respects, each Plan conforms to, and its administration is in
compliance with, all applicable requirements of law, including, without
limitation ERISA and the Internal Revenue Code of 1986 (the "Code") and all
rules and regulations promulgated pursuant thereto, and (ii) all of the Plans
are in full force and effect as written, and all premiums, contributions and
other payments required to be made by the Company under the terms of any pension
plan as defined in Section 3(2) of ERISA (a "Pension Plan") or welfare plan as
defined in Section 3(1) of ERISA (a "Welfare Plan") have been made. There are no
Plan defects whether by plan, instrument or operation thereof, which would make
any of the Plans eligible for any IRS voluntary compliance programs, including
the IRS Voluntary Compliance Resolution Program (VCR), Standardized VCR Program,
Closing Agreement Program (CAP), and/or Walk-In CAP.
(c) Except as set forth in Sellers Disclosure Schedule 4.16, each
Plan maintained by the Company with respect to its business that is a Pension
Plan is qualified under Section 401(a) of the Code, and a favorable
determination letter has been issued by the IRS with respect to each
-22-
such qualified Pension Plan. No Plan maintained by the Company that is a Welfare
Plan is funded through a voluntary employee beneficiary association as defined
in Section 501(c)(9) of the Code.
(d) Except as set forth in Sellers Disclosure Schedule 4.16, all
required installments as defined in Section 412(m) of the Code required to be
made by the Company or any trade or business (whether or not incorporated) under
common control with the Company within the meaning of Sections 414(b), (c), (m)
or (o) of the Code (the "Controlled Group") before the Closing Date with respect
to each Pension Plan will have been paid prior to the Closing Date. No Pension
Plan maintained by the Company or the Controlled Group has incurred any
"accumulated funding deficiency" (whether or not waived) as that term is defined
in Section 412 of the Code or Section 302 of ERISA.
(e) Except as set forth in Sellers Disclosure Schedule 4.16, there
are no multiemployer plans (as defined in Subsection 3(37) of ERISA) in which
the Company or any other trade or business under common control (within the
meaning of Section 414(b) or (c) of the Code) has ever participated or to which
a contribution or other payment is required.
(f) Except as set forth in Sellers Disclosure Schedule 4.16 or as
required by COBRA, no Pension Plan has been terminated since January 1, 1996 in
a termination which will result in any liability to be incurred by the Company
under Title IV of ERISA. Except as indicated in Sellers Disclosure Schedule
3.16, none of the Pension Plans that are subject to Title IV of ERISA have been
partially terminated or have been the subject of a "reportable event" as defined
in Section 4043 of ERISA. No proceedings by the Pension Benefit Guaranty
Corporation ("PBGC") to terminate any of the Pension Plans pursuant to Subtitle
C of Title IV of ERISA have been instituted or threatened. All required premiums
have been paid to the PBGC with respect to all Pension Plans.
-23-
(g) Except as set forth in Sellers Disclosure Schedule 4.16 or as
required by COBRA, the Company does not maintain any plan providing
post-retirement benefits other than pension benefits provided under a Pension
Plan qualified under Section 401(a) of the Code ("PostRetirement Benefits"). The
Company is not liable for Post-Retirement Benefits under any plan not maintained
by them. The Company has complied in all material respects with the requirements
of Section 4980B of the Code and Sections 601 to 608 of ERISA relating to
continuation coverage for group health plans.
(h) Except as disclosed in Sellers Disclosure Schedule 4.16, with
respect to each Pension Plan that is a "defined benefit plan" within the meaning
of Section 414(j) of the Code, the present value of all accrued benefits under
such Plan does not exceed the present value of the assets of such Plan, with
both such amounts calculated as of the same date based on the actuarial
assumptions established by the Company for funding. The Selling Stockholders
have delivered to the Purchaser a true and complete copy of the most recent
actuarial report for each such Pension Plan.
(i) Except as disclosed in Sellers Disclosure Schedule 4.16, each
Plan has filed all required reports, documents and notices with the IRS, the
United States Department of Labor and the PBGC.
(j) There are no investigations, proceedings, or lawsuits pending
or, to the best knowledge of the Selling Stockholders or, threatened against any
Plan by any administrative agency, whether local, state or federal.
(k) Other than routine employee claims for benefits, there are no
lawsuits or other claims pending or, to the best knowledge of the Selling
Stockholders threatened against any Plan,
-24-
the Company or any fiduciary (within the meaning of Section 3(21)(A) of ERISA)
of a Plan brought on behalf of any participant, beneficiary or any such
fiduciary thereunder, nor is there any reasonable basis for any such claim.
(l) All amendments required to have been made prior to the date
hereof to comply with applicable law (whether required by reason of the
enactment of legislation or otherwise) have been adopted with respect to each
Plan.
(m) With respect to each Plan, (A) no nonexempt "prohibited
transaction" within the meaning of Section 4975 of the Code or Section 406 of
ERISA has occurred, and (B) no income has been received that constitutes
"unrelated business taxable income" within the meaning of Section 512 of the
Code or "unrelated debt-financed income" within the meaning of Section 514 of
the Code.
(n) All applicable local, state and federal income tax withholding
obligations have been satisfied with respect to all benefits paid under each
Plan.
(o) Except as set forth in Sellers Disclosure Schedule 4.16:
(i) on or before January 1, 1999, the Company shall cause
the Plans to be terminated, and, as to any Plan which
requires prior notice of such termination to be given,
the Company will issue such termination notice not later
than November 20, 1998;
(ii) prior to the Closing Date, the Company shall make any
and all filings and submissions then required under the
Code or ERISA to the appropriate governmental agencies
necessary in connection with such termination; and
-25-
(iii) prior to the Closing Date, the Company shall direct the
trustees of the Plans to distribute any vested account
balances to each Plan participant, as provided under
each Plan, as soon as administratively practicable.
4.17 Authorization and Non-Contravention; Consents. Each of the Selling
Stockholders has full right, power and authority to enter into and to perform
this Agreement. Except as set forth in Sellers Disclosure Schedule 4.17, each
consent, authorization, order or approval of or filing or registration with, any
governmental authority required in connection with the execution, delivery and
performance of this Agreement by the Selling Stockholders has been or by the
Closing Date will be obtained, and the execution and delivery of this Agreement
and the performance thereof by the Selling Stockholders do not and will not:
(a) violate any provision of the charter or bylaws of the Company or
any law, order, arbitration award, judgment or decree to which either of them is
a party or by which they or any of their properties are bound;
(b) violate or breach, or result with the passage of time in the
violation or breach of, or result in the acceleration or termination of or
entitle any party to accelerate or terminate (whether after the giving of notice
or lapse of time or both) any obligation under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other encumbrance
upon any of the properties of the Company pursuant to, any provision of any
mortgage, lien, lease, agreement, permit, indenture, license or instrument to
which any of the Selling Stockholders or the Company
-26-
is a party or by which any of them or the Company's properties are bound and
which is material to the business of the Company as now or as proposed to be
conducted; or,
(c) violate or conflict with any other material restriction of any
kind or character to which the Company is subject or by which any of its
properties may be bound.
4.18 Labor Relations. Except as described in Sellers Disclosure Schedule
4.18, there are no agreements with, or pending petitions for recognition of, a
labor union or association as the exclusive bargaining agent for any or all of
the Company's employees; no such petitions have been pending at any time within
five years of the date of this Agreement, and, there has not been any organizing
effort by any union or any other group seeking to represent any employees of the
Company as their exclusive bargaining agent at any time within five years of the
date of this Agreement; and there are no labor strikes, work stoppages or other
labor troubles now pending or, threatened against the Company, nor have there
been any such labor strikes, work stoppages or other labor troubles at any time
within five years of the date of this Agreement.
4.19 Insurance. Set forth in Sellers Disclosure Schedule 4.19 is a true,
correct and complete listing of all insurance policies or binders of insurance
which relate to the Company's business. Except as set forth in Sellers
Disclosure Schedule 4.19:
(a) the coverage under each such policy and binder is in full force
and effect, and no notice of cancellation or nonrenewal with respect to, or
disallowance of any claim under, any such policy or binder has been received by
the Company;
(b) there are no programs of self-insurance relating to the
Company's business;
-27-
(c) there are no pending or unpaid claims under any such insurance
policy; and
(d) no event has occurred which reasonably might form the basis of
any claim against the Company relating to its business or operations or any of
their assets or properties covered by any of the policies or binders set forth
in such Schedule or which would reasonably be expected to increase materially
the insurance premiums payable under any such policy or binder.
4.20 Intellectual Property. Sellers Disclosure Schedule 4.20 sets forth a
true and complete list, including, where applicable, the date of application,
date of registration, date of issuance, date of termination, serial or
registration number of each patent, trademark or copyright and the book value
thereof, as of the Balance Sheet Date, of all intellectual property which is
related to the business of the Company, and describes the extent of the interest
of the Company and any third party therein. Except as stated in such Schedule,
the right, title or interest of the Company in any intellectual property is free
and clear of adverse claims, liens, mortgages, charges, security interests and
encumbrances or other restrictions or limitations of any kind. The Company owns
or has the legal right to use all intellectual property necessary for the
non-infringing design, manufacture, use or sale, as the case may be, of all of
the products, components of products and services which it, in its business as
currently conducted, manufactures, uses or sells. Except as set forth in such
Schedule, the Company has not, within the time period as to which liability is
not barred by statute, infringed or misappropriated any intellectual property of
another, received from another any notice or claim in respect thereto, committed
any acts of unfair competition, or received from another any notice or claim in
respect thereto.
-28-
4.21 Compliance with Applicable Law. The Company, is in the conduct of its
business and with respect to the properties owned or used by it, currently in
compliance with all foreign, federal, state or local laws, statutes, ordinances,
regulations and permits.
4.22 Environmental Laws. Except as set forth in Sellers Disclosure
Schedule 4.22:
(a) the Facility complies and has at all times complied with, and
the Company is not in violation of and has not violated, in connection with the
ownership, use, maintenance or operation of the Facility and the conduct of the
business related thereto, any Environmental Laws;
(b) the Company (i) has operated the Facility and has at all times
received, handled, used, stored, treated, shipped and disposed of all Hazardous
Material in compliance with all Environmental Laws and all other applicable
health or safety statutes, ordinances, orders, rules, regulations or
requirements, and (ii) has removed (or will remove prior to the Closing) from
the Facility all Hazardous Material, other than those permitted to be retained
by the Company at the Facility pursuant to applicable law or valid permits or
other approvals issued by relevant governmental authorities and such removal has
or will be effected through a waste disposal hauler properly qualified under
Environmental Laws, with no residual or subsequent liability to the Company;
(c) no work, repairs, construction or capital expenditures with
respect to the Facility are necessary in order to bring it into compliance with
or avoid violation of any Environmental Laws;
(d) to the best knowledge of the Selling Stockholders and after
reasonable inquiry, no Hazardous Material has been released into the environment
or deposited, discharged,
-29-
placed or disposed of at, on or near the Facility, nor has the Facility been
used at any time by any person as a landfill or a waste disposal site;
(e) no notices of any violation of any of the matters referred to in
subsections (a) through (d) above relating to the Facility or its use have been
received by the Company, and there are no outstanding writs, injunctions,
decrees, orders or judgments or pending or threatened lawsuits, claims,
proceedings or investigations relating to the ownership, use, maintenance or
operation of the Facility, nor is there any basis for the institution or filing
of such lawsuits, claims, proceedings or investigations;
(f) there are no monitoring ▇▇▇▇▇ at the Facility for monitoring
hazardous leachate or other Hazardous Materials or releases;
(g) there are no subsurface tanks situated at the Facility;
(h) there is no evidence of PCB contamination from any power
transformer, capacitor or any other source at the Facility;
(i) there is no asbestos-containing material at the Facility; and
(j) the Company knows of no fact or circumstance that would
reasonably be expected to give rise to any future civil, criminal or
administrative proceedings against them under any Environmental Laws.
4.23 Litigation. Except as set forth in Sellers Disclosure Schedule 4.23,
there is no action, suit, proceeding or investigation pending or, threatened
against the Company, and there are no facts known to the Selling Stockholders
which would reasonably be expected to serve as the basis for any such action,
suit, proceeding or investigation; and the Company is not in default in
-30-
respect of any judgment, order, writ, injunction or decree of any court or any
federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality.
4.24 Unlawful Payments. The Company has not, directly or indirectly, made
any of the following payments: (i) illegal political contributions, (ii)
payments from corporate funds not recorded or falsely recorded on its books and
records, (iii) payments from corporate funds to governmental officials in their
individual capacities for the purpose of obtaining favorable treatment in
securing business or licenses or to obtain special concessions, or (iv) illegal
payments from corporate funds to obtain or retain business.
4.25 Permits. Sellers Disclosure Schedule 4.25 lists all permits,
licenses, orders and approvals held by the Company and designates those whose
issuance or renewal is currently pending, and:
(a) the Company holds all permits, licenses, orders and approvals of
all foreign, federal, state or local governmental or regulatory bodies required
to conduct their business as currently conducted; all such permits, licenses,
orders and approvals are in full force and effect, no suspension or cancellation
of any of them is threatened; and none of such permits, licenses, orders or
approvals will be adversely affected by the consummation of the transactions
contemplated in this Agreement;
(b) the Company is currently in compliance with the rules and
regulations of all governmental agencies having authority over it, including,
without limitation, agencies concerned with export and import licenses,
occupational safety, environmental protection and employment
-31-
practices, the failure to comply with could adversely affect its business,
operations, earnings or financial condition;
(c) the Company has not received notice of violation of any such
rules or regulations within the last five years, which could result in any
liability to the Company for penalties or damages or any injunction or
governmental order or decree; and
(d) with respect to a pending operations permit from the State of
Illinois, the Selling Stockholders know of no reason why such permit should not
be issued in the ordinary course, and the absence of such permit will not result
in any Material Adverse Change.
4.26 Restrictive Covenants. Sellers Disclosure Schedule 4.26 lists all
agreements containing restrictive covenants to which the Company is a party,
except as so set forth, the Company is not a party to any agreement, contract or
covenant limiting its freedom in competing in any line of business or with any
person or other entity in any geographic area.
4.27 Tax Matters.
(a) Except as set forth in Sellers Disclosure Schedule 4.27:
(i) All federal, state and local income, payroll, sales, use,
transfer, franchise, recordation and other tax returns, and all
reports of estimated federal, state and local taxes, required to be
filed to date by or on behalf of the Company, have been duly filed
on a timely basis, and such tax returns and reports of estimated
taxes are true, complete and correct to the best knowledge of the
Selling Stockholders after reasonable inquiry. All taxes shown on
such returns or otherwise payable with
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respect thereto (the term "tax" or "taxes" for purposes of this
Agreement being deemed to include interest, penalties and related
charges) have been paid in full on a timely basis (unless otherwise
indicated in such Schedule), and no other taxes are payable by the
Company with respect to items or periods covered by such returns
(whether or not shown on or reportable on such returns). The Company
has withheld and paid over all taxes required to have been withheld
and paid over, and complied with all information reporting and
backup withholding requirements, including maintenance of required
records with respect thereto, in connection with amounts paid or
owing to any employee, creditor, independent contractor or other
third party. There are no liens on any of the assets of the Company
with respect to taxes, other than liens for taxes not yet due and
payable or for a tax liability that the Company is contesting in
good faith through appropriate proceedings and for which appropriate
reserves have been established, as set forth in Sellers Disclosure
Schedule 4.27. The Company is not currently the beneficiary of any
extension of time to file any return. No claim has ever been made by
an authority in a jurisdiction where the Company does not file
returns that they may be subject to tax by that jurisdiction.
(ii) Purchaser has been furnished by the Selling Stockholders or the
Company with true and complete copies of (A) all tax audit reports,
statements of deficiencies, and closing or other agreements received
by the Company relating to taxes, and (B) all federal, state and
local income, franchise or other tax returns for the Company, in
each case for all periods ending on and after December 31, 1995. The
Company has not done and is not doing business and has not derived
and is not deriving income
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from activities conducted (except to the extent protected by P.L.
86-272), in any state, local, territorial or foreign taxing
jurisdiction other than those for which all tax returns have been
furnished to Purchaser.
(iii) Except as set forth in Schedule 4.27, the returns of the
Company have not been audited by a government or taxing authority,
nor is any such audit in process, pending or, to the best knowledge
of the Selling Stockholders threatened (either in writing or orally,
formally or informally). Except as set forth in Schedule 4.27, no
deficiencies exist, and no deficiencies have been asserted (either
in writing or orally, formally or informally) or are expected to be
asserted with respect to taxes of the Company, and the Company has
not received notice (either in writing or orally, formally or
informally) or expects to receive notice that it has not filed a
return or paid taxes required to be filed or paid by it. The Company
is not a party to any action or proceeding for assessment or
collection of taxes, and no such action or proceeding has been
asserted or threatened (either in writing or orally, formally or
informally) against the Company or any of its assets. No waiver or
extension of any statute of limitations is in effect with respect to
taxes or returns of the Company. The Company has disclosed on
federal income tax returns all positions taken therein that could
give rise to a substantial understatement penalty, and such
disclosures are reflected in the copies of tax returns delivered to
Purchaser.
(iv) The Company is not , nor has it been, a party to any
tax-sharing agreement or arrangement.
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(v) The Company has not made an election under Section 338 of the
Code or has taken any action that would result in any income tax
liability as a result of a deemed election within the meaning of
Section 338 of the Code. The Company is not a "consenting
corporation" under Section 341(f) of the Code. The Company has not
entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a
nondeductible expense pursuant to Section 28OG of the Code or an
excise tax to the recipient of such payment pursuant to Section 4999
of the Code. The Company has not made or will make (A) a deemed
dividend election under Treasury Regulations Section 1.1502-32(f)(2)
or (B) a consent dividend filing under Section 565 of the Code. The
Company has not agreed to, nor is it required to make, any
adjustment under Code Section 481(a) by reason of a change in
accounting method or otherwise.
(b) Sellers Disclosure Schedules and the Financial Statements contain an
accurate and complete description of the adjusted tax basis of the Company in
its assets as of December 31, 1997, its current earnings and profits, tax
carryovers, excess loss accounts, tax elections affecting the Company, and
deferred intercompany transactions. Except as disclosed in the Sellers
Disclosure Schedules, the Company has no net operating losses or other tax
attributes presently subject to limitation under Code Sections 382, 383, or 384,
or the federal consolidated return regulations.
4.28 Bank Accounts and Powers of Attorney. Sellers Disclosure Schedule
4.28 lists the name of each bank, savings and loan, or other financial
institution, in which the Company has an account, including cash contribution
accounts or safe deposit boxes, the names of all persons
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authorized to draw thereon or to have access thereto, and the names of any
persons holding powers of attorney with respect to the business of the Company
and a summary of the terms thereof.
4.29 Corporate and Fictitious Names. Except as disclosed in Sellers
Disclosure Schedule 4.29, the Company has not been known by or used any other
corporate or fictitious name.
4.30 Absence of Certain Recent Changes. Except as disclosed in Sellers
Disclosure Schedule 4.30, since the date of the Letter of Intent, the Company
has conducted its operations only in the ordinary and usual course of business,
in a manner consistent with past and present practices (including without
limiting the foregoing practices concerning the maintenance of the Equipment and
Partnership Equipment) and has not:
(a) suffered either any Material Adverse Change in its financial
condition, results of operations or business or any other event or condition of
any character that might reasonably be expected to have a material adverse
effect on its business or prospects, including any liability, loss, damage or
expense outside the ordinary course of business, except for any such Material
Adverse Change or other event or condition disclosed in an updated Sellers
Disclosure Schedule to be provided to Purchaser in accordance with the
provisions of Section 7.10 of this Agreement;
(b) suffered any loss or prospective loss of one or more dealers,
suppliers or customers, or altered any contractual arrangement with any one or
more of its dealers, suppliers or customers, the loss or alteration of which,
either individually or in the aggregate, would have a material adverse effect on
the business or prospects of the Company, except for any such loss or
-36-
alteration disclosed in an updated Sellers Disclosure Schedule to be provided to
Purchaser in accordance with the provisions of Section 7.10 of this Agreement;
(c) made any capital expenditure or commitments for the acquisition
or construction of any single item of property, plant or equipment in excess of
$5,000;
(d) amended or terminated any lease, contract or material commitment
to which the Company is a party;
(e) entered into any transaction not in the ordinary course of
business or otherwise inconsistent in any respect with the past practices or
conduct of the business of the Company;
(f) declared, set aside or paid any dividend or other distribution
in respect of the shares of the Company;
(g) sold any accounts receivable, disposed of any inventories other
than in the ordinary course of business or accrued any liabilities not in the
ordinary course of business;
(h) changed any material accounting principle, material procedure or
material practice followed by the Company or the method of applying such
principle, procedure or practice;
(i) incurred any indebtedness for borrowed money, except for
indebtedness incurred in the ordinary course of business under the revolving
credit facility included in the LaSalle Bank Agreement;
(j) created, assumed or permitted to exist any lien, pledge,
security interest, encumbrance or mortgage of any kind on any of its properties
or assets;
(k) permitted the occurrence or continuance of any default under any
agreement;
(l) acquired the securities or substantially all of the assets of
any other entity;
(m) merged or consolidated with any entity;
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(n) established or agreed to establish any pension, retirement,
profit-sharing, deferred compensation or other employee benefit or welfare plan
for the employees of the Company;
(o) increased the rate of compensation payable or to become payable
to the Company's officers or employees or increased the amounts paid or payable
to such officers or employees under any Plan, or made or increased any
arrangements made for or with any of such officers or employees for the payment
of any bonus or profit-sharing amounts; provided, however, that amounts payable
to the Principal Stockholders as year-end bonuses under the Company's 401K plan
and any related drawing account, in accordance with prior Company practice,
shall not constitute a prohibited payment under this clause (o);
(p) entered into any employment or similar contract with any officer
or employee;
(q) amended in any material respect or terminated any Plan or
agreement concerning employee benefits or compensation or made awards or
distributions under any such Plan or agreement not consistent with past practice
or custom except as contemplated herein; and
(r) entered into any contract (including but not limited to
assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders, sales
orders, mortgages and security agreements) which (A) contain a grant or other
transfer, whether present, retroactive, prospective, or contingent, by it of any
rights in any Intellectual Property, or (B) contain a promise made by or to it
to pay any lump sum or royalty or other payment or consideration with respect to
the acquisition, practice or use of any intellectual property.
-38-
4.31 OSHA. Except as otherwise provided in Sellers Disclosure Schedule
4.31, during the five years immediately prior to the date of this Agreement, the
Company has not been cited for any violations of the Occupational Safety and
Health Act of 1970, as amended, nor are there any citations pending as a result
of inspections of the Company for noncompliance with such Act. Except as
otherwise provided in such Schedule, each of the conditions which resulted in
the issuance of a citation has been abated or otherwise corrected to the
satisfaction of the Occupational Safety and Health Administration as of the date
of this Agreement.
4.32 Immigration Matters. Except as set forth in Sellers Disclosure
Schedule 4.32, the Company has properly completed and maintained Forms I-9 on
all persons who became employed by the Company for the past three years, and any
alien employee of the Company is employed pursuant to a valid temporary work
authorization. Such Schedule lists the names of any alien employees who are
required to have temporary work authorizations, the date of their employment and
their job titles and responsibilities, and attached to such Schedule is the Form
I-9 for each such person.
4.33 Brokers. No finder, broker, or agent (i) has acted for or on behalf
of Selling Stockholders or the Company in connection with negotiation or
consummation of this Agreement or the transactions contemplated hereby or (ii)
is entitled to any commission or finders fee in connection therewith. Any claim
by such finder, broker or agent shall be the obligation of the Selling
Stockholders.
-39-
4.34 Year 2000 Issue. The Company has reviewed the areas within its
business and operations which could be adversely affected by the risk that
certain material computer applications used by the Company (or any of its
material suppliers, customers or vendors) may be unable to recognize and perform
properly date-sensitive functions involving dates prior to and after December
31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem will not result in any
Material Adverse Change to the Company or its operations.
4.35 Funded Debt; No Default. Except as set forth in Sellers Disclosure
Schedule 4.35, the Company is not in default under the terms and conditions of
the Funded Debt, and the Company is not aware of, and has not received notice of
any event or condition that, would create a Company default under the terms and
conditions of the Funded Debt. The aggregate principal amount of Funded Debt is
listed in Sellers Disclosure Schedule 2.4.
4.36 Subordinated Debentures; No Default. Except as set forth in Sellers
Disclosure Schedule 4.36, the Company is not in default of any terms and
conditions governing the Subordinated Debentures. The aggregate outstanding
principal amount of the Subordinated Debentures is $1,000,000.
4.37 Accuracy of Information Furnished. No statement or information given
by the Selling Stockholders or the Company contained in this Agreement or in any
Sellers Disclosure Schedule or other Schedule annexed hereto or in the Financial
Statements, and no statement contained in any certificate, confirmation, exhibit
or other instrument or document furnished or to
-40-
be furnished by or on behalf of the Selling Stockholders or the Company to the
Purchaser or Purchaser's representatives pursuant to this Agreement, or in
connection with the transactions contemplated by this Agreement, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact which is necessary to make the statements contained
herein or therein not misleading.
V. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as general
partners, jointly and severally, make the following representations and
warranties to the Purchaser, each of which shall be deemed material, and the
Purchaser, in executing, delivering and consummating the transactions
contemplated by this Agreement, has relied and will rely upon the correctness
and completeness of each of such representations and warranties:
5.1 Partnership Existence and Authority. The Partnership is a general
partnership, duly organized and validly existing under the laws of the State of
Illinois. The Partnership exists and remains in existence under the laws of the
State of Illinois. The copy of the Partnership's articles of organization or
Partnership Agreement, as amended to date, delivered to Purchaser, are true and
complete.
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5.2 Capacity of the Partners. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the
"Partners") are the general partners of the Partnership and have full authority
and capacity to make, execute and deliver this Agreement and to carry out the
transactions contemplated hereby on behalf of the Partnership. The Partners
constitute the only partners of the Partnership.
5.3 No Broker. No finder, broker, or agent (i) has acted for or on behalf
of Partnership in connection with the negotiation or consummation of this
Agreement or the transactions contemplated hereby or (ii) is entitled to any
commission or finders fee in connection therewith. Any claim by such finder,
broker or agent shall be the obligation of the Partners.
5.4 Title to Partnership Equipment. Except as set forth in Sellers
Disclosure Schedule 5.4, the Partnership has good and marketable title to the
Partnership Equipment, free and clear of all liens, claims, encumbrances,
security interests or restrictions on transfer. Subject to any liens or
encumbrances set forth in Schedule 5.4, the Partnership will convey good and
marketable title to the Partnership Equipment to the Purchaser at the Closing.
5.5 Non-Contravention; Consents. Except as set forth in Sellers Disclosure
Schedule 5.5, each consent, authorization, order or approval of or filing or
registration required in connection with the execution, delivery and performance
of this Agreement by the Partners has been or by the Closing Date will be
obtained, and the execution and delivery of this Agreement and the performance
thereof by the Partnership does not and will not:
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(a) violate any provision of the of the Partnership or any law,
order, arbitration award, judgment or decree to which either of them is a party
or by which they or any of their assets are bound;
(b) violate or breach, or result with the passage of time in the
violation or breach of, or result in the acceleration or termination of or
entitle any party to accelerate or terminate (whether after the giving of notice
or lapse of time or both) any obligation under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other encumbrance
upon any of the assets of the Partnership Equipment pursuant to, any provision
of any mortgage, lien, lease, agreement, permit, indenture, license or
instrument to which the Partnership properties are bound and which is material
to the business of the Partnership as now or as proposed to be conducted; or,
(c) violate or conflict with any other material restriction of any
kind or character to which the Partnership Equipment is subject.
5.6 Condition of Partnership Equipment. The Partnership Equipment is free
from material defect, patent or latent, has been maintained in accordance with
good industry practice, is in good operating condition and repair, subject to
normal wear and tear in the ordinary course, and is suitable for the purposes
for which it is being acquired by the Purchaser.
5.7 Books and Records. Except as set forth in Sellers Disclosure Schedule
5.7, the books and records of the Partnership are true, accurate and complete in
all material respects and have been maintained in accordance with GAAP applied
on a consistent basis.
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5.8 No Undisclosed Liabilities. Sellers Disclosure Schedule 5.8 lists each
and every liability of the Partnership (whether accrued, absolute, contingent or
otherwise). Except as set forth in Sellers Disclosure Schedule 5.8, to the best
knowledge of the Partners, the Partnership is not subject to any material
liability (defined, for purposes of this Section 5.8, as any single item in
excess of $2,500), whether absolute, contingent, accrued or otherwise, other
than (i) liabilities of the same nature as those set forth in Disclosure
Schedule 5.8 which were incurred by the Partnership in the ordinary course of
business, (ii) liabilities arising under existing agreements to which the
Partnership is a party (excluding liabilities arising on account of breaches by
the Partnership of such existing agreements which breaches are not disclosed in
the Sellers Disclosure Schedule), and (iii) other liabilities disclosed in the
Sellers Disclosure Schedule. Except as disclosed herein, the Partnership has no
material unrealized or anticipated losses, in excess of $2,500 for a single
item, from unfavorable commitments.
5.9 Contracts Listed; No Default. Sellers Disclosure Schedule 5.9 contains
a complete and correct list as of the date hereof of all agreements, contracts
and commitments of the following types, written or oral concerning the
Partnership Equipment, by which the Partnership is bound as of the date hereof,
including: (i) mortgages, indentures, security agreements, letters of credit,
loan agreements and other agreements, guarantees and instruments relating to the
borrowing of money or extension of credit by the Purchaser; (ii) licenses of
intellectual property, transfer of technology or know how and other intellectual
property rights; (iii) leases for real and personal property; and (iv) other
agreements, contracts and commitments which in any case involve payments or
receipts of more than $2,500. The Partnership has made available to the
Purchaser complete and correct
-44-
copies of all such written agreements, contracts and commitments, together with
all amendments thereto, and provided accurate descriptions of all oral
agreements listed in Sellers Disclosure Schedule 5.8. All agreements, contracts
and commitments referred to in this Section 5.9 are in full force and effect in
accordance with their respective terms and there does not exist thereunder as of
the date hereof any default by the Partnership, any other party thereto, or any
event or condition which, after notice or lapse of time or both, would
constitute a default thereunder on the part of the Partnership, or any other
party thereto. The Partnership has not granted any powers of attorney, except
routine powers of attorney relating to representation before governmental
agencies or given in connection with qualification to conduct business in
another jurisdiction.
5.10 Insurance. Set forth in Sellers Disclosure Schedule 5.10 is a true,
correct and complete listing of all insurance policies or binders of insurance
which relate to the Partnership Equipment. Except as set forth in such Schedule:
(a) the coverage under each such policy and binder is in full force
and effect, and no notice of cancellation or nonrenewal with respect to, or
disallowance of any claim under, any such policy or binder has been received by
the Partnership;
(b) there are no pending or unpaid claims under any such insurance
policy; and
(c) no event has occurred which reasonably might form the basis of
any claim against the Partnership relating to the Partnership Equipment by any
of the policies or binders set forth in the Schedule or which would reasonably
be expected to increase materially the insurance premiums payable under any such
policy or binder.
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5.11 Partnership Equipment. Sellers Disclosure Schedule 5.11 lists each
item of Partnership Equipment with an original cost on the books of the
Partnership in excess of $1,000 per item. All of such Partnership Equipment is
owned by the Partnership, free and clear of any liens, charges, encumbrances or
security interests, except as set forth in Sellers Disclosure Schedules 5.4 and
5.11. With respect to any Partnership Equipment subject to a capital lease
between the Partnership and third parties, such capital lease is in full force
and effect and the Partnership is not in default thereunder. The Partnership
Equipment is in possession of the Company pursuant to an equipment lease between
the Partnership and the Company described in Sellers Disclosure Schedule 4.11
and 4.13, which lease is in full force and effect. The Company is not in default
under such lease, or any default thereunder has been waived subject to the
Company's obligation to repay the Partnership the amount owed by the Company to
the Partnership as set forth in Sellers Disclosure Schedule 2.4. The Partnership
has not undertaken any action which, with the giving of notice or the passage of
time or both, would result in any such default.
5.12 Partnership Tax Liabilities.
(a) Except as set forth in Sellers Disclosure Schedule 5.12, the
Partnership and the Partners have filed or caused to be filed all federal, state
and local income, payroll, sales, use, transfer, franchise, recordation and
other tax returns, and all reports of estimated federal, state and local taxes,
required to be filed in connection with the business and property of the
Partnership. Such tax returns and reports of estimated taxes are true, complete
and correct to the best knowledge of the Partnership and the Partners, and all
taxes shown on such returns or otherwise payable with respect thereto (the term
"tax" or "taxes" for purposes of this Agreement, being deemed to include
-46-
interest, penalties and related charges) have been paid in full on a timely
basis (unless otherwise indicated in such Schedule), and no other taxes are
payable by the Partnership or the Partners with respect to items or periods
covered by such returns (whether or not shown on or reportable on such returns).
(b) The sale of the Partnership Equipment to the Purchaser will be
exempt from any sales or use taxes imposed by the State of Illinois.
(c) The Partnership and the Partners will be responsible for filing,
and will file in a timely manner, any required federal, state and local income,
payroll, sales, use, transfer, franchise and recordation tax return in respect
of the sale of the Partnership Equipment, and all tax obligations in connection
therewith shall be the responsibility of the Partnership and the Partners.
5.13 Accuracy of Information Furnished. No statement or information given
by the Partnership contained in this Agreement or in any Sellers Disclosure
Schedule or other Schedule annexed hereto, and no statement contained in any
certificate, confirmation, exhibit or other instrument or document furnished or
to be furnished by or on behalf of the Partnership or to the Purchaser or
Purchaser's representative pursuant to this Agreement, or in connection with the
transactions contemplated by this Agreement, contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
which is necessary to make the statements contained herein or therein not
misleading.
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VI. REPRESENTATIONS OF PURCHASER
The Purchaser represents and warrants to the Sellers acknowledging
that they are relying thereon, as follows:
6.1 Authorization. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated by this
Agreement, have been duly approved by the Purchaser's Board of Directors. The
Purchaser has all necessary corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate such
transactions in accordance with the terms and conditions of this Agreement. This
Agreement constitutes the valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws or by legal or equitable principles relating to or limiting
creditors' rights generally.
6.2 Organization. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
6.3 Non-Contravention. The execution, delivery and performance of this
Agreement by Purchaser do not and will not (i) conflict with the charter or the
by-laws of Purchaser, (ii) violate any order, writ, injunction, or decree
applicable to Purchaser or (iii) result in any breach or termination of, or
constitute a default under, or constitute an event which, with notice or lapse
of time, or both, would become a default under, or create any rights of
termination, cancellation, or acceleration in any person under, any contract,
agreement, arrangement, commitment, license, lease,
-48-
easement, permit, right of way or understanding or violate any provisions of any
laws, ordinances, rules or regulations to which Purchaser is a party or by which
Purchaser or any of its assets, business or operations is bound; provided,
however, that Purchaser may be required to obtain the consent of First Union
National Bank and First Union Investors to its execution of this Agreement.
6.4 No Broker. No finder, broker, or agent (i) has acted for or on behalf
of Purchaser in connection with negotiation or consummation of this Agreement or
the transactions contemplated hereby or (ii) is entitled to any commission or
finders fee in connection therewith. Any claim by such finder, broker or agent
shall be the obligation of the Sellers.
VII. CONDUCT PENDING CLOSING; COVENANTS
7.1 Access and Information. From the date of this Agreement until the
Closing:
(a) The Selling Stockholders shall cause the Company to permit
Purchaser and Purchaser's counsel, accountants, investment bank, commercial bank
and other representatives full access during normal business hours and upon
reasonable notice to (i) all of the properties, assets, books, records, files,
agreements, and other documents of the Company, and (ii) to all Partnership
Equipment for purposes of inspecting and appraising same;
(b) The Sellers shall furnish to Purchaser and its representatives
all information with respect to the Company and the Partnership as Purchaser may
reasonably request; and
(c) As agreed between the Company and the Purchaser, the Sellers
shall permit and facilitate communications between Purchaser and all providers,
suppliers and other persons
-49-
having dealings with the Company, and all persons or entities maintaining,
servicing, repairing or financing the Partnership Equipment.
7.2 Cooperation and Publicity. From the date of this Agreement until the
Closing, the Selling Stockholders will cause the Company and its officers and
employees to cooperate with Purchaser and its representatives in planning for
the post-Closing operations of the Company and Purchaser on a combined basis,
including the possible merger or consolidation of the Company with the
Purchaser. In addition, the Selling Stockholders and Purchaser will consult with
each other before making any public announcements with respect to the
transactions contemplated hereby, and any public announcements shall be made
only at such time and in such manner as the Selling Stockholders, and Purchaser
shall mutually agree.
7.3 Other Proposals to Selling Stockholders. From the date of this
Agreement until the Closing (provided that this Agreement has not been
terminated pursuant to Article X hereof), the Selling Stockholders will not,
directly or indirectly, whether through representatives or otherwise, solicit or
encourage any written inquiries or proposals for the acquisition of the Shares
or all or substantially all of the assets or the business of the Company, and
the Selling Stockholders and will promptly inform Purchaser of any unsolicited
offers from third parties for the purchase of the shares of the Company or the
purchase of its assets.
7.4 Notification by Selling Stockholders. Each of the Selling Stockholders
shall give prompt notice to Purchaser of:
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(a) any notice or other communication received by him or the
Company, or any occurrence or state of facts of which he or it shall become
aware, subsequent to the date of this Agreement and prior to the Closing Date,
which would cause any representation or warranty of the Selling Stockholders to
be or become untrue or misleading under this Agreement, or which relate to a
default (or event which with notice or lapse of time or both would become a
default) under any contract, agreement or instrument to which the Company is a
party or by or to which either the Company or the Selling Stockholders any of
their respective property is bound or subject; and
(b) Any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
this Agreement and the performance thereof.
7.5 Conduct of Business. From the date of this Agreement until the Closing
Date, the Selling Stockholders will cause, and from the date of the Letter of
Intent until the date of this Agreement have caused, the business conducted by
the Company to be operated in the ordinary and usual course of business, in a
manner consistent with past and current practices, and in compliance with the
terms of this Agreement. Without limiting the generality of the foregoing, the
Selling Stockholders shall cause the Company to:
(a) preserve intact its business, organization and relationships
with employees, agents, customers and others having business dealings with it;
(b) complete or maintain in full force and effect all existing
contracts;
(c) preserve its goodwill;
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(d) pay all of its respective accounts payable and other obligations
as they become due;
(e) maintain in force its respective existing insurance policies;
(f) observe all commitments and perform all obligations imposed on
the Company under any contract, arrangement or understanding or required under
any applicable statute, regulation, ruling, decree, judgment or directive; and
(g) properly maintain, service and repair all of the Company's
Equipment and the Partnership Equipment in accordance with good industry
practice.
7.6 Prohibited Activities. From the date of this Agreement until the
Closing Date, the Sellers shall take all measures necessary to ensure that the
Company and the Partnership will not, without Purchaser's express written
consent:
(a) issue, sell or contract to sell any stock, notes, bonds,
Partnership interests or other securities, or any option to purchase the same,
or enter into any agreement with respect thereto:
(b) amend the charter or bylaws of the Company and the Partnership
agreement;
(c) redeem, repurchase, or otherwise acquire any interest in the
Partnership or any Shares or securities convertible into or exchangeable for
such Shares or enter into any agreement to do so;
(d) initiate any legal proceedings, including suits and
administrative proceedings in either the United States or foreign countries;
provided, however, that if any such proceeding is commenced without such
consent, the Sellers will be responsible for the costs and expenses
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(including attorneys fees) of such proceeding and any adverse judgment or award
rendered as a result thereof;
(e) suffer either any Material Adverse Change in the financial
condition, results of operations or business of the Company and the Partnership
or any other event or condition of any character that might reasonably be
expected to have a Material Adverse Change on the Company and the Partnership,
including any liability, loss, damage or expense outside the ordinary course of
business;
(f) suffer any loss or prospective loss of one or more dealers,
suppliers or customers, or alter any contractual arrangement with any one or
more of such dealers, suppliers or customers, the loss or alteration of which,
either individually or in the aggregate, would have an adverse effect on the
business of the Company;
(g) make any capital expenditures or commitments for the acquisition
or construction or lease of any single item of property, plant, machinery or
equipment in excess of $5,000; and, for more than a single item, in excess of
$10,000 in the aggregate;
(h) amend or terminate any lease, contract or material commitment to
which the Company or the Partnership is a party;
(i) declare, set aside or pay any dividend or other distribution in
respect of the capital stock of the Company and the capital of the Partnership;
(j) sell any accounts receivable, dispose of any inventories other
than in the ordinary course of business or accrue any liabilities not in the
ordinary course of business;
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(k) change any material accounting principle, material procedure or
material practice followed by the Company and the Partnership or the method of
applying such principle, procedure or practice;
(l) incur any indebtedness for borrowed money, other than for
working capital under the revolving credit line pursuant to the LaSalle Bank
Agreement;
(m) create, assume or permit to exist any lien, pledge, security
interest, encumbrance or mortgage of any kind on any of the properties or assets
of the Company and the Partnership, other than pursuant to the LaSalle Bank
Agreement, and then only in the ordinary course of business ;
(n) permit the occurrence or continuance of any default under any
agreement for Funded Debt, except with respect to the Subordinated Debentures as
set forth in Section 4.36 of the Sellers Disclosure Schedule;
(o) acquire the securities or substantially all of the assets of any
other entity;
(p) merge or consolidate with any entity other than Purchaser;
(q) sell any assets other than in the ordinary course of business of
the Company, except for the Emission Credits referred to in Section 7.12.
(r) increase the rate of compensation payable or to become payable
to the Company's and the Partnership's officers or employees or increase the
amounts paid or payable to such officers or employees under any Plan, or make or
increase any arrangements for the payment of any bonus or profit-sharing amounts
provided, however, that amounts payable to the Principal Stockholders as
year-end bonuses under the Company's 401K plan and any related drawing account,
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in accordance with prior Company practice, shall not constitute a prohibited
payment under this clause (r);
(s) enter into any employment or similar contract with any officer
or employee;
(t) adopt, amend in any material respect or terminate any Plans,
severance plan or agreement or collective bargaining agreement or make awards or
distributions under any such plan or agreement, except as otherwise contemplated
by Section 7.9 hereof;
(u) enter into any material contract (including but not limited to
assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders, sales
orders, mortgages and loans or security agreements) concerning any rights in any
Intellectual Property;
(v) make any change in the business conducted by the Company or the
Partnership;
(w) agree, whether in writing or otherwise, to take any action
described in this Section 7.6;
(x) permit the relocation of the Partnership Equipment, the
incurring or imposition of any lien or encumbrance on the Partnership Equipment
(except as set forth in Sellers Disclosure Schedules 5.4 and 5.11) which would
grant, convey or create an interest or claim of any third party in or to the
Partnership Equipment; and
(y) except with Purchaser's consent, not to be unreasonably withheld
or delayed, file any amended tax returns, original tax returns after the due
date thereof, or enter into any tax settlement or closing agreements with any
federal, state or local tax authority.
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7.7 Certain Affirmative Covenants. Prior to the Closing Date, the Selling
Stockholders will cause the Company and the Partners will cause the Partnership,
with the cooperation of Purchaser where appropriate, to:
(a) comply promptly with all filing requirements, if any, which
foreign, federal or state law may impose on the execution, delivery and
performance of this Agreement; and
(b) use their best efforts to obtain any consent, authorization or
approval of, or exemption by, any governmental authority or other third party,
including without limitation, the Company's and the Partnership's Funded Debt
and other lenders and landlords and those persons or entities who are parties to
the agreements or instruments described in the Sellers Disclosure Schedules,
whose consent is or may be required to be obtained by the Company or the
Partnership in connection with the consummation of the transactions contemplated
in this Agreement, including without limitation, any consent, authorization or
approval necessary to waive any default under any of such agreements or
instruments.
7.8 Tax Liabilities and Information.
(a) The Selling Stockholders shall cause the Company and the
Partners shall cause the Partnership to prepare and timely file all tax returns
and amendments thereto and reports of estimated taxes required to be filed by
them on or before the Closing Date. The time for filing such returns and reports
will not be extended without Purchaser's consent, and, if such late filing
occurs or such an extension is obtained (as to which Purchaser shall be informed
in each case) without Purchaser's consent, the Sellers shall be responsible for
any interest, penalties or assessments or other costs resulting from such late
filing or extension. Purchaser shall have a reasonable
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opportunity to review such returns, reports and amendments thereto prior to
filing, and , if Purchaser shall make specific objection thereto, such return,
report or amendment shall be corrected to incorporate such objection. From the
date of this Agreement until the Closing Date, the Selling Stockholders will
cause the Company and the Partners will cause the Partnership to pay and
discharge all taxes, assessments and governmental charges upon or against them
or any of their properties or assets, including liabilities for estimated tax
payments, and all interest and penalties, except to the extent and as long as:
(i) the same are being contested in good faith and by appropriate
proceedings pursued diligently and in such a manner as not to cause
any adverse effect upon the condition (financial or otherwise) or
operations of the Company and the Partnership; and
(ii) the Company and the Partnership shall have set aside on its
respective books reserves (segregated to the extent required by
sound accounting practice) in the amount of demanded from the
Company or the Partnership, together with interest and penalties
relating thereto, if any.
Between the date of this Agreement and the Closing Date, the Sellers shall give
Purchaser and its authorized representatives full access to all tax returns and
estimated tax reports of the Company and the Partnership, whether in their
possession or in the possession of third parties. The Sellers and the Company
shall, as of the Closing Date, terminate all tax allocation agreements and shall
ensure that such agreements are of no further force or effect.
(b) With respect to the Company and the Partnership tax returns and
reports required to be prepared and filed after the Closing Date for any prior
period through the Closing Date
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("Post-Closing Returns"): (i) the Sellers will prepare, sign and timely file all
Post-Closing Returns, and, for this purpose, shall have access after the Closing
Date to the appropriate tax and financial records of the Company and the
Partnership as set forth in subsection (f) of this Section 7.8; (ii) the
Purchaser shall have a reasonable opportunity to review such returns prior to
the filing thereof; and (iii) any taxes shown by the Post-Closing Returns to be
payable in the ordinary course shall be the responsibility of the Company and
the Partnership, subject to the provisions of the following subsection.
(c) Notwithstanding any other provision of this Agreement to the
contrary, if, as the result of any tax audit, examination, or proceeding by any
tax authority, any deficiency, assessment, interest or penalty is asserted
(whether before or after the Closing) against the Company and the Partnership
with respect to any period prior to and through the Closing Date, any liability
in respect thereof (including, in addition to tax, penalty and interest, any
legal and accounting fees related thereto) shall be the responsibility of the
Sellers (and not the obligation of the Company or the Purchaser) to the extent,
that any such deficiency, assessment, interest or penalty exceeds the tax
benefit received by Purchaser or the Company and the Partnership with respect to
the item which is the subject of such tax audit, examination or proceeding;
provided, however, that if the subject deficiency, assessment, interest or
penalty results in a tax benefit to be received by refund claims, then such
deficiency, assessment, interest or penalty shall be paid in full from the
Escrow Fund described in Section 10.2, and Purchaser will cause to be filed any
and all applicable refund claims and will reimburse the Escrow Fund if, as and
when any such refund (and any interest thereon) is received.
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(d) The Purchaser shall be responsible for preparing and filing any
of the Company tax returns required for any period commencing on or after the
Closing Date, and for any tax liabilities in connection therewith.
(e) The Purchaser and the Sellers agree to furnish or cause to be
furnished to each other, as promptly as practicable, such information and
assistance relating to the Company and the Partnership as is reasonably
necessary for the preparation and filing of any return, claim for refund or
other required or optional filings relating to tax matters, for the preparation
for and proof of facts during any tax audit, for the preparation for any tax
protest, for the prosecution or defense of any suit or other proceeding relating
to tax matters and for the answer to any governmental or regulatory inquiry
relating to tax matters.
(f) The Purchaser agrees to retain possession of all accounting,
business, financial and tax records and information (i) relating to the Company
and the Partnership and which are in existence on the Closing Date and are
transferred to the Purchaser hereunder and (ii) coming into existence after the
Closing Date which relate to the Company and the Partnership before the Closing
Date, for a period not to exceed six years from the Closing Date. In addition,
from and after the Closing Date, the Purchaser agrees that it will not
unreasonably withhold access by the Sellers and their attorneys, accountants and
other representatives (after reasonable notice and during normal business hours
and with reasonable charge), to such books, records, documents and any or all
other information relating to the Company and the Partnership as the Sellers and
may reasonably deem necessary to prepare for, file, prove, answer, prosecute
and/or defend any such return, filing, audit, protest, claim, suit, inquiry or
other proceeding.
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(g) If prior to the Closing, the Company and the Partnership shall
(i) fail to file reports of estimated federal, state, and local income, payroll,
franchise and other taxes due for the year ended December 31, 1998 and (ii) fail
to pay all such estimated taxes and interest and penalties reflected therein,
the Purchaser shall deduct from the Net Cash Payment the sum of $250,000 (in
addition to the Escrow Fund to be so deducted as set forth in Section 2.8), and
such sum of $250,000 shall be added to and shall constitute a portion of the
Escrow Fund to be applied in accordance with Section 10.2
7.9 Termination of Employee Benefit Plans. On or before the Closing Date,
the Selling Stockholders will cause the Company to take all actions necessary to
terminate, effective on or prior to the Closing Date, the Plans to be terminated
on or prior to the Closing Date, listed in Section 4.16 of Sellers Disclosure
Schedule, and such termination shall be accomplished without requiring any
contributions or payments after the Closing Date by the Company or Purchaser;
provided, however, that if notice prior to termination is required to be given
by any Plan, and such notice is duly in accordance with this Agreement, the
effective date of termination shall be as set forth in such notice. Such actions
shall include, but shall not be necessarily limited to the actions described in
the Sellers Disclosure Schedule 4.16.
7.10 Updated Financial Statements and Disclosure Schedules. From the date
of this Agreement until the Closing Date, the Selling Stockholders will cause
the Company and the Partners will cause the Partnership to prepare and deliver
to Purchaser (i) monthly unaudited financial statements for each calendar month
subsequent to the Balance Sheet Date, and (ii) an amended
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Sellers Disclosure Schedule updated to reflect current information as of the end
of each such calendar month, in each case no later than 30 days after the end of
such calendar month, except that updated schedules of accounts receivable and
accounts payable included in such amended Sellers Disclosure Schedule will be
delivered no later than 15 days after the end of such calendar month.
7.11 Books and Records to be Kept Current. From the date of this Agreement
until the Closing Date, the Selling Stockholders shall cause the Company and the
Partners shall cause the Partnership to keep its books and records current and
to safeguard and maintain such books and records and other corporate documents,
so that such books, records and documents will be available to the Purchaser
from and after the Closing.
7.12 Special Payment of EPA Credits. Purchaser agrees that Selling
Stockholders shall receive the proceeds from the pending disposition of EPA
Credit Sale Exclusions for approximately one hundred (100) tons of VOM emission
reduction credits (the "Emission Credits"), expected to be completed prior to
the Closing. If the sale of the Emission Credits is completed after the Closing,
the proceeds thereof will be placed in a special escrow account for the benefit
of the Selling Stockholders. All expenses incurred by the Company in connection
with the sale of Emission Credits will be deducted from the proceeds of the sale
of the Emission Credits and repaid to the Company. The Selling Stockholders will
be responsible for any taxes related to the sale of the Emission Credits and
which result from the Company distributing the proceeds of such sale to the
Selling Stockholders. If no contract for the sale of the Emission Credits is
entered into by the Company prior to Closing, the Purchaser agrees that the
Company shall assign, set over, and transfer, effective
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at Closing, its rights to any Emission Credits that have been generated at the
Company's Facility, located at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
since 1990 or that are gained from future reductions in emissions of volatile
organic material generated by changes in the operation or permanent closure of
the facility pursuant to the Assignment annexed as Exhibit 7 to this Agreement.
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to consummate the transactions contemplated in
this Agreement is subject to the fulfillment of each of the following
conditions:
8.1 Authorization of Board. The form and substance of this Agreement and
all appended Exhibits and Schedules, and the consummation of the transactions
contemplated thereby shall have been duly approved by the Board of Directors of
the Purchaser.
8.2 Intentionally Omitted.
8.3 Facility. With respect to the Facility, the Selling Stockholders shall
have delivered an agreement terminating the Facility lease in the form set forth
as Exhibit 4, and the Purchaser shall have entered into a new lease agreement
for the Facility as set forth in Section 3.2.
8.4 Release of Personal Guarantees. The Purchaser shall have obtained a
commitment for the release of Personal Guarantees, from the beneficiaries of
such Personal
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Guarantees, with respect to any portion of the Funded Debt which is subject to
such Personal Guarantees and which is not being fully paid at the Closing.
8.5 Termination of Employee Benefit Plans. The Selling Stockholders shall
have delivered agreements, instruments, certificates and other documents, and a
legal opinion of counsel to the Company, all of which shall be satisfactory in
form and substance to Purchaser and its attorneys, confirming the termination of
each of the Plans without obligation to Purchaser, to be terminated on or prior
to the Closing Date (except for any Plan whose termination is pending pursuant
to notice of termination given prior to the Closing Date), as listed in Sellers
Disclosure Schedule 4.16, and as set forth in Section 7.9 above.
8.6 Delivery of Shares. The Selling Stockholders shall have delivered
certificates for the Shares, free and clear of all liens, encumbrances, charges
and claims, which Shares, as of the Closing Date, shall be duly and validly
issued and fully paid and non-assessable, and which shall constitute all, and
not less than all, of the issued and outstanding shares of the Company.
8.7 Officers' Certificates. The Sellers shall have delivered the following
certificates, dated as of the Closing Date:
(a) a certificate duly executed by the Secretary of the Company,
certifying as to the incumbency and signatures of the officers of the Company,
as to copies of the charter and by-laws and good standing certificates of the
Company, as to any director or shareholder resolutions
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required in connection with the consummation of the transactions contemplated by
this Agreement, as to the form of certificates for Shares, and as to the
Company's authorized and outstanding shares;
(b) a certificate duly executed by the Partners, certifying as to
the incumbency and signatures of the Partners, the organization and good
standing of the Partnership and the authority of the Partners; and
(c) a certificate executed by the respective Sellers to the effect
that the representations and warranties of the Sellers made under this Agreement
are true and correct in all material respects at and as of the Closing Date, and
that the Sellers have complied with or performed all conditions, and have caused
the Company to comply with and perform all conditions, required to be performed
by each of them on or prior to the Closing Date in accordance with this
Agreement.
8.8 Opinions of Counsel. The Purchaser shall have received:
(a) a favorable opinion, dated as of the Closing Date, from ▇▇▇▇▇▇▇
& Huntington, special counsel to the Sellers and counsel to the Company, in the
form annexed hereto as Exhibit 5(a);
(b) a favorable opinion from Jenner & Block, in the form annexed as
Exhibit 5(b); and
(c) a favorable opinion from ▇▇▇▇▇ & ▇▇▇▇▇, in the form annexed as
Exhibit 5(c).
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8.9 No Material Adverse Change. No Material Adverse Change in the
business, operations, earnings, assets or financial condition of the Company,
shall have occurred prior to the Closing.
8.10 Compliance with Covenants. The Sellers and the Company shall have
duly performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by them prior to or
at the Closing.
8.11 Truth of Representations. The representations and warranties of the
Sellers contained in this Agreement shall have been true and correct in all
material respects when made, and shall also be true and correct in all material
respects at and as of the Closing Date, with the same force and effect as if
made at and as of the Closing.
8.12 Consents and Waivers. At the Closing, all consents, authorizations,
orders or approvals required for the closing of the transactions contemplated in
this Agreement hereof shall have been obtained, including without limitation the
consent of First Union National Bank in accordance with a Credit Agreement
between such bank and Purchaser dated as of September 15, 1998 and the consent,
if required, of First Union Investors in accordance with a Bridge Note Purchase
Agreement dated September 15, 1998.
8.13 Litigation. At the Closing, (i) there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental agency
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of competent jurisdiction restraining or prohibiting the consummation of the
transactions provided for herein or limiting in any manner Purchaser's right to
control the Company or any aspect of their business or requiring the sale or
other disposition of any of their operations or making such consummation unduly
burdensome to the Purchaser, and (ii) no proceeding or lawsuit shall have been
commenced and be pending or be threatened by any governmental or regulatory
agency or any other person with respect to such consummation which Purchaser, in
good faith and with the advice of counsel, believes is likely to result in any
of the foregoing or which seeks the payment of substantial damages by the
Company or Purchaser.
8.14 Employment and Non-Competition Agreements. The Employment Agreement
and Non-Competition Agreement described in Section 3.1 shall have been executed
and delivered.
8.15 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filing. The Purchaser shall have completed a
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ filing with the appropriate federal agency, and the time for a
determination in respect thereof, and any extension thereof as required by law,
shall have finally elapsed and the Purchaser shall not have received any adverse
determination as a result thereof.
8.16 Miscellaneous Documents. The Selling Stockholders shall have caused
the Company to deliver certificates of good standing for the jurisdictions in
which the Company is incorporated and qualified to do business as a foreign
corporation and the Partners shall have caused the Partnership to deliver a
certificate from the appropriate County Clerk that the Partnership exists
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and remains in existence, as well as such resolutions, consents and other
confirmatory documents and instruments reasonably requested by Purchaser's
counsel.
8.17 Legal Matters. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of the Sellers
with respect to the Company and the Partnership, under the provisions of this
Agreement, and all other actions and proceedings required to be taken by or on
behalf of the Sellers in furtherance of the transactions contemplated hereby,
shall be reasonably satisfactory in form and substance to counsel for the
Purchaser.
8.18 Due Diligence. The Purchaser shall be satisfied in its sole
discretion as to its due diligence activities concerning the Company and the
Partnership, which due diligence activities shall commence at the signing of
this Agreement.
8.19 Escrow Agreement and Disbursing Agent. The parties shall have
executed and delivered the Escrow Agreement provided for in Article X.
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligation of the Sellers to consummate the transactions contemplated
in this Agreement is subject to the fulfillment of each of the following
conditions:
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9.1 Truth of Representations. The representations and warranties made by
Purchaser shall be true and correct in all material respects and shall be deemed
to have been made again on and as of the Closing Date.
9.2 Compliance by Purchaser. All the terms, covenants, agreements and
conditions of this Agreement to be complied with and performed by the Purchaser
on or before the Closing Date shall have been complied with and performed in all
respects.
9.3 Litigation. No action or proceeding shall have been instituted or
shall have been threatened to restrain or prohibit any of the transactions
contemplated hereby.
9.4 Tender of Payment. The Purchaser shall have tendered payment of the
Purchase Price in accordance with the terms of this Agreement.
9.5 Employment and other Agreements. The Purchaser shall have executed the
Employment Agreement, Non-Competition Agreement, and lease termination agreement
provided for in Article III above.
9.6 Release or Termination of Personal Guarantees. The Purchaser shall
have delivered instruments releasing the Personal Guarantees or shall have paid
in full the Funded Debt secured by such Personal Guarantees.
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9.7 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filing. If the Purchaser's counsel determines that a
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ filing is required, the Purchaser shall have made such filing
with the appropriate federal agency and the time for a determination in respect
thereof, and any extensions thereof as required by law, shall have finally
elapsed without any adverse determination. All of the Company's costs of such
filing, including attorney and accounting fees related thereto, shall be paid by
Purchaser.
X. INDEMNIFICATION AND CLAIMS
10.1 Indemnification by Sellers and Partnership. Subject to the provisions
of Section 13.1 of this Agreement as to the survival of representations,
warranties, covenants and agreements, the Sellers hereby jointly and severally
agree to indemnify Purchaser and its directors, officers, employees, agents and
affiliates (any of the foregoing being referred to as a "Purchaser Indemnitee"
or collectively, as "Purchaser Indemnitees") from and against any loss,
liability, damage, obligation or expense whether absolute or accrued, including
interest, penalties and reasonable attorneys fees and expenses (collectively,
"Indemnified Losses") incurred in the investigation or defense of, or in
asserting the rights of, the Purchaser Indemnitees hereunder, incurred and
arising directly or indirectly by reason of or in connection with:
(i) the inaccuracy or breach of any representation or warranty by
the Sellers set forth in this Agreement or in any certificate or
other document furnished by Sellers or the Company pursuant to this
Agreement;
(ii) the nonperformance or breach of any covenant, agreement or
obligation of any of the Sellers or the Company, which is contained
in this Agreement, including, but
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not limited to the nonperformance of the obligations of the Sellers
set forth in Section 7.8 above;
(iii) any tax liability (of any kind whatsoever) of the Company or
any of the Selling Stockholders (including any interest and penalty)
resulting from or in connection with any breach of the
representations contained in Section 4.27 and 5.12 or nonperformance
of the obligations of the Sellers and the Company set forth in
Section 7.8;
(iv) any past, present or future obligation or liability, whether or
not disclosed pursuant to this Agreement, arising from a condition
prior to Closing at the Facility, which, as a result of enforcement
of any Environmental Laws, results in Indemnified Losses; and
(v) any obligation or liability arising or resulting from the
termination of any or all of the Plans listed in Sellers Disclosure
Schedule 4.16, and any liability or obligation resulting from any
failure by the Company or the Partnership to have made any
contributions, pay any premiums or take any steps required by
applicable laws or regulations in connection with such Plans prior
to the Closing.
10.2 Indemnity Fund; Escrow. In order to secure the indemnification
obligations set forth in Section 10.1(iii), the parties agree that the Escrow
Fund will be set aside out of the Net Cash Payment and placed in escrow at the
Closing, to be held, administered, applied, disbursed and distributed as set
forth in a separate escrow agreement ("Escrow Agreement") among the parties and
counsel to Purchaser (the "Escrow Agent"), in the form annexed to this Agreement
as Exhibit 6,
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which Escrow Agreement shall be executed and delivered at the Closing; provided,
however, that the Escrow Fund shall be increased by $250,000 in the event the
conditions set forth in Section 7.8(g) are not satisfied prior to the Closing.
Subject to the provisions of the Escrow Agreement, the Escrow Fund will be
available to pay any Indemnified Losses required to be paid and not otherwise
resolved or settled, will be maintained for a period of equal to greater of
three years after the Closing, or the end of the statutory period of limitation
on the tax liability of the Company and the Partnership for all periods prior to
the Closing, will be held in an interest-bearing form at a reputable financial
institution selected by Purchaser's counsel, and will be released and returned
to the Sellers at the end of the escrow period as set forth in the Escrow
Agreement. The amount or availability of the Escrow Fund to pay Indemnified
Losses at any given time shall not be deemed to limit or fix the liability of
the Sellers under Section 10.1.
10.3 Right of Offset. In the event that any Indemnified Losses shall occur
which shall not be payable or paid from the Escrow Fund, such Indemnified Losses
being referred to as the Non-Secured Indemnified Losses, Purchaser shall have
the right to offset and deduct the amount of any Non-Secured Indemnified Losses
from (i) amounts due to the Selling Stockholders under the Employment Agreement
and Non-Competition Agreement referred to in Section 3.1 and (ii) amounts due to
the Laurel Limited Partnership as landlord under the lease agreement for the
Facility to be executed at the Closing. In the event the Purchaser shall elect
to exercise its right of offset, it shall so notify the Selling Stockholders
immediately prior to effecting such offset. The Right of offset hereby granted
may be exercised by the Purchaser on its own behalf or on behalf of any
Purchaser Indemnitee.
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10.4 Indemnification Procedures and Notice.
(a) If any event which may give rise to any Indemnified Losses
occurs or is alleged, and any Purchaser Indemnitee asserts that the Sellers have
become obligated to such Purchaser Indemnitee pursuant to Section 10.1, or if
any suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which the Sellers may become obligated to any
Purchaser Indemnitee under any provision, term or condition of this Agreement,
such Purchaser Indemnitee shall give written notice thereof to the Sellers, and,
if the Purchaser Indemnitee is a person other than the Purchaser, to the
Purchaser as well. The Sellers shall thereafter defend, contest or otherwise
protect the Purchaser Indemnitee against any such suit, action, investigation,
claim or proceeding at their sole cost and expense. The Purchaser Indemnitee
shall have the right, but not the obligation, to participate at its own expense
in the defense thereof by counsel of the Purchaser Indemnitee's choice and shall
in any event cooperate with and assist the Sellers in the defense of any such
suit, action, investigation, claim or proceeding to the extent reasonably
possible. If the Sellers fail timely to defend, contest or otherwise protect any
Purchaser Indemnitee against such suit, action, investigation, claim or
proceeding, the Purchaser Indemnitee shall have the right to do so, including,
without limitation, the right to make any compromise or settlement thereof, and
the Purchaser Indemnitee shall be entitled to recover the entire cost thereof
from the Sellers including, without limitation, reasonable attorneys' fees,
disbursements and amounts paid as the result of such suit, action,
investigation, claim or proceeding.
(b) If, at any time after the notice and other procedures provided
for in the preceding subparagraph are undertaken, a Purchaser Indemnitee will be
required to pay any Indemnified Losses, and if the Sellers have been unable or
have failed to pay, settle or eliminate such
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Indemnified Losses, the affected Purchaser Indemnitee shall be entitled to
payment of the full amount of such Indemnified Losses from the Escrow Fund. In
such case, the Purchaser Indemnitee shall send notice to the Escrow Agent of the
Escrow Fund, stating the amount and nature of the Indemnified, and indicating
the inability, failure or refusal of the Sellers to indemnify such Purchaser
Indemnitee. Within 15 days after such notice, the Escrow Agent of the Escrow
Fund shall issue a check drawn on the Escrow Fund and payable to the Purchaser
Indemnitee in the full amount of such Indemnified Losses or shall take such
other action as shall be provided for in the Escrow Agreement, and shall so
notify the Sellers.
10.5 Distribution and Termination of Escrow Fund. Amounts held in the
Escrow Fund, less amounts paid or reserved for Indemnified Losses or for claims
in connection therewith, shall be subject to distribution to the Sellers from
time to time, and the Escrow Fund shall be terminated, as set forth in the
Escrow Agreement.
10.6 Indemnification Successors and Assigns. All of the rights and
obligations of the Sellers, the Purchaser and any Purchaser Indemnitee pursuant
to this Article X shall survive any sale, assignment or other transfer by the
Purchaser of title to or interest in the Shares or any assets of the Company or
the Partnership Equipment, and shall apply to and bind each and every successor
and assign of the Purchaser.
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XI. MISCELLANEOUS MATTERS
11.1 Parties to Bear Their Own Expenses; Exceptions. The parties will be
responsible for their own legal fees, advisory fees and other expenses incurred
by them, respectively, in connection with the preparation of this Agreement and
the consummation of the transactions contemplated therein, as well as all
personal federal, state and local tax liabilities incurred in connection with
such transactions. It is understood that the Company will pay the fees and
disbursements of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in connection with the preparation of
financial and accounting information for the Company, but, if the Purchaser
shall terminate this Agreement for any reason other than the failures or
breaches referred to in the first sentence of Section 12.2, the Purchaser will
reimburse the Company for amounts so paid to ▇▇. ▇▇▇▇▇▇▇, up to a maximum
reimbursement by the Purchaser of $25,000. However, if this Agreement is
terminated by the Purchaser because the Purchaser is unable to obtain any
consent required from First Union National Bank and/or First Union Investors,
such maximum amount shall be increased from $25,000 to $50,000.
11.2 Purchaser May Assign; Possible Merger. Purchaser has informed Selling
Stockholders that it is considering merging the Company into Purchaser. In
connection therewith, Purchaser may assign its interest in this Agreement to a
wholly-owned subsidiary corporation, without obtaining the consent of the
Selling Stockholders; provided, however, that the Purchaser shall remain
primarily liable under this Agreement. Subsequent to the completion of the
Closing, the Selling Stockholders will cooperate with and assist the Company to
the extent possible (and without additional cost to the Selling Stockholders )
to effectuate such merger.
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11.3 Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Cause the Company and Partnership to
Act. Whenever a provision of this Agreement requires any action to be taken by
the Company or the Partnership, Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, by their execution
of this Agreement, undertake to cause such action to be taken by the Company or
the Partnership.
XII. TERMINATION PRIOR TO CLOSING
12.1 Mutual Termination. This Agreement may be terminated at any time
prior to Closing by the mutual written consent of the Sellers, and the
Purchaser.
12.2 Termination by Purchaser. This Agreement may be terminated at any
time prior to Closing by Purchaser, if any of the Sellers or the Company shall
(i) fail to perform the obligations required in this Agreement to be performed
by such party on or prior to the Closing Date, or (ii) breach any of the
representations, warranties or covenants of the Sellers contained in this
Agreement, which failure or breach is not cured within ten (10) days after the
Purchaser has notified the breaching party of Purchaser's intent to terminate
this Agreement pursuant to this Section 12.2. This Agreement may also be
terminated by Purchaser if it shall not be able to obtain the consents as set
forth in Section 8.12 on or before December 31, 1998.
12.3 Termination by Sellers. This Agreement may be terminated by the
Sellers if (i) Purchaser has not obtained the consents set forth in Section 8.12
on or before December 31, 1998, (ii) Purchaser shall fail to perform in any
material respect the obligations contained herein required
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to be performed by Purchaser on or prior to the Closing Date, or (iii) Purchaser
shall breach any of its representations, warranties or covenants contained
herein, which failure or breach is not cured within ten (10) days after the
Sellers have notified the breaching party of the intent of the Sellers to
terminate this Agreement pursuant to this Section 12.3.
12.4 Termination by Purchaser or Sellers. Either the Purchaser or Sellers
may terminate this Agreement if there shall be any order, writ, injunction or
decree of any court or governmental or regulatory agency binding on any party
which prohibits or restrains such party from consummating the transactions
contemplated hereby, or in the event that the transactions contemplated hereby
have not been consummated (other than on account of any default by any party
hereto) on or prior to January 4,1999, or to such later date as the parties may
agree.
XIII. GENERAL PROVISIONS
13.1 Survival of Representations, Warranties, etc. Each of the
representations and warranties, covenants and agreements contained in this
Agreement shall survive for a period of seven (7) years from the Closing Date
(except that the representations and warranties contained in Section 4.27 shall
survive until the applicable tax statutes of limitations relating thereto shall
have run) and any liability relating thereto shall be extinguished with regard
to any indemnification or other claim not made against the Sellers prior to the
seventh anniversary of the Closing Date; provided, however, that claims against
the Sellers based on fraudulent conduct shall not be subject to any such
limitation period.
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13.2 Confidentiality.
(a) Except as required by law, neither the Purchaser nor the
Principal Stockholders will, without the prior written consent of the other
party, divulge, furnish to or make accessible to anyone any knowledge or
information to confidential or secret information (including, without
limitation, customer lists, supplier lists and pricing arrangements with
customers or suppliers) ("Confidential Information").
(b) The Parties agree that if any of them or their representatives
is requested or required (by court order or process) to disclose any of the
Confidential Information, each party will notify the other so that it may seek
any appropriate protective order and/or take any other action. Notwithstanding
the foregoing (i) either party may disclose to any tribunal or other person only
that portion of the Confidential Information with respect to which it is advised
by legal counsel that it is legally required to make such disclosure and shall
use its reasonable efforts to obtain assurance that confidential treatment will
be accorded such Confidential Information; and (ii) the Purchaser may make such
disclosures as it is required under federal securities law in connection with
the preparation and consummation of a private placement offering to investors
and/or the registration of the Purchaser's securities with the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
(c) Any information, which (i) at or prior to the time of disclosure
by any party was generally available to the public through no breach of this
covenant, (ii) was available to the public on a non-confidential basis prior to
its disclosure by any of the parties or (iii) was made available to the public
from a third party provided that such third party did not obtain or disseminate
such information in breach of any legal obligations of the parties, shall not be
deemed Confidential
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Information for purposes hereof, and the undertakings in this covenant with
respect to Confidential Information shall not apply thereto.
13.3 Entire Agreement. This Agreement and the Schedules, Exhibits, lists
and other documents referred to herein constitute the entire agreement among the
parties hereto with respect to the transactions contemplated hereby and
supersede all prior agreements, discussions and proposals with respect thereto,
whether written or oral. This Agreement may be modified only by a written
instrument executed by the parties.
13.4 Waiver. The terms and conditions of this Agreement are intended for
the benefit of the respective parties hereto and are not subject to waiver
unless such waiver is expressly set forth in writing. In addition:
(a) No omission or delay in exercising any right or power under this
Agreement or any related agreement or document will be deemed to impair such
right or power or shall be construed as a waiver of same or a waiver of or
acquiescence in any default under this Agreement or any related agreement or
document. Any single or partial exercise of any such right or power shall not
preclude other or further exercise thereof, and no waiver shall be valid unless
in writing and signed by the party making such waiver, and then only to the
extent specified in such writing.
(b) Neither the performance of a due diligence investigation by any
party hereto (including, specifically, and without limiting the scope of the
foregoing, (i) an audit of certain financial statements of the Company performed
on behalf of the Purchaser, and (ii) assistance by representatives of the
Purchaser in the preparation of certain schedules) nor completion of the
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Closing provided for herein shall waive a breach of, or otherwise release or
discharge, any representation or warranty made by any of the Sellers in this
Agreement or in any agreement, schedule, certificate or other document delivered
to the Purchaser pursuant to this Agreement. It is expressly understood that the
representations and warranties of the Sellers set forth in this Agreement are
made by the Sellers and not by any other party, that the Purchaser has a right
to rely on such warranties and representations, and any claims and rights of the
Purchaser resulting from any breach of a representation or warranty are
specifically reserved.
13.5 No Assignment; Exceptions. Except as provided in Sections 10.6 and
11.2, neither the Sellers, nor the Purchaser shall have the authority to assign
any of their respective interests in this Agreement without the prior written
consent of the other; provided, however, that Purchaser may assign or pledge all
or any portion of its rights hereunder as security, without the prior written
consent of Sellers, to any bank or other financial institution providing
financing to Purchaser as set forth in Section 8.2 above. The Sellers shall
execute, and shall cause the Company and Partnership to execute, any documents
reasonably required in order to effect such assignments.
13.6 Benefits of Agreement. This Agreement shall be binding upon and, to
the extent permitted in this Agreement, shall inure to the benefit of the
parties and their respective successors and assigns. However, it is the intent
of the parties hereto that no third-party beneficiary rights be created or
deemed to exist, and none shall so exist, in favor of any person not a party to
this Agreement, unless otherwise expressly agreed in writing by the parties.
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13.7 Remedies Cumulative. Subject only to the express limitations set
forth in this Agreement, the rights and remedies provided herein shall be
cumulative and shall not preclude any party from asserting any other rights or
seeking any other remedies against the other to which it may otherwise be
entitled by law.
13.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without regard to conflict of
law provisions. The parties agree that any actions or claims arising under this
Agreement shall be brought in a court of general jurisdiction located in Lake
County or a United States District Court in Chicago, ▇▇▇▇ County.
13.9 Notices. Any notice, request, instruction or other document required
or permitted to be given hereunder by a party shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, return
receipt requested, or by prepaid overnight delivery service, addressed as
follows:
If to Sellers:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ & Huntington
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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If to Purchaser:
Phoenix Color Corp.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, President
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Executive Vice President
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other persons or addresses as may be designated in writing by the
party desiring to receive such notice. If mailed as aforesaid, the day of
mailing shall be deemed to be the date of delivery.
13.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
13.11 Severability. In case any one or more of the covenants, agreements,
provisions or terms contained in this Agreement shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, provisions or terms contained herein shall be in no way affected,
prejudiced or disturbed thereby.
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13.12 Headings. The headings of the various Articles and Sections of this
Agreement, were employed, are for convenience of reference only and shall not be
deemed in any way to modify, interpret or construe the text of this Agreement or
the intent of the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered on the date and year first above written.
PHOENIX COLOR CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
President
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
VIKING LEASING PARTNERSHIP,
A General Partnership
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
General Partner
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
General Partner
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