CONFIDENTIAL/SUBJECT TO CONFIDENTIALITY AGREEMENT
STOCK PURCHASE AGREEMENT
BETWEEN
▇▇▇▇▇-▇▇▇▇▇▇ CORPORATION
SELLER
AND
DEPARTMENT 56, INC.
BUYER
DATED AS OF JULY 21, 2005
TABLE OF CONTENTS
ARTICLE 1 CERTAIN DEFINITIONS....................................1
1.1 Defined Terms..........................................1
1.2 General Rules of Construction and Interpretation......10
ARTICLE 2 PURCHASE AND SALE OF STOCK............................11
2.1 Sale..................................................11
2.2 Purchase Price; Initial Payment.......................11
2.3 Closing Working Capital Statement.....................12
2.4 Settlement............................................13
2.5 Expenses..............................................13
ARTICLE 3 CLOSING...............................................13
3.1 Time and Place........................................13
3.2 Simultaneous Actions..................................13
3.3 Deliveries by Seller..................................13
3.4 Deliveries by Buyer...................................14
ARTICLE 4 REPRESENTATIONS AND WARRANTIES REGARDING SELLER.......14
4.1 Organization..........................................14
4.2 Power.................................................15
4.3 Authorization.........................................15
4.4 Noncontravention......................................15
4.5 Consents..............................................15
4.6 Stock Ownership.......................................15
4.7 Litigation............................................15
4.8 Brokers...............................................16
ARTICLE 5 REPRESENTATIONS AND WARRANTIES REGARDING COMPANY......16
5.1 Organization..........................................16
5.2 Capitalization........................................16
5.3 Company Subsidiaries..................................17
5.4 Noncontravention......................................17
5.5 Consents..............................................17
5.6 Financial Statements..................................17
5.7 Absence of Undisclosed Liabilities....................18
5.8 Absence of Changes....................................18
5.9 Real Property.........................................18
5.10 Company Contracts.....................................19
5.11 Litigation............................................20
5.12 Compliance............................................20
5.13 Environmental.........................................21
5.14 Employment Matters....................................21
5.15 Employee Benefit Plans................................22
5.16 Intercompany Transactions.............................24
5.17 Intellectual Property.................................24
i
5.18 Ownership of Necessary Assets and Rights..............25
5.19 Tax Matters...........................................25
5.20 Products..............................................26
5.21 No Other Representations or Warranties................26
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER...............27
6.1 Organization..........................................27
6.2 Power.................................................27
6.3 Authorization.........................................27
6.4 Noncontravention......................................27
6.5 Consents..............................................27
6.6 Investment Intent.....................................28
6.7 Litigation............................................28
6.8 Brokers...............................................28
6.9 Financial Capability..................................28
6.10 Environmental Audits..................................28
6.11 Non-Reliance..........................................29
ARTICLE 7 COVENANTS OF THE PARTIES UNTIL CLOSING................29
7.1 Conduct of Business Pending Closing...................29
7.2 Negative Covenants....................................29
7.3 Access................................................31
7.4 Consents..............................................31
7.5 HSR Act...............................................32
7.6 Public Statements.....................................32
7.7 Satisfaction of Company Debt..........................32
7.8 Satisfaction of Conditions............................33
7.9 No Sale...............................................33
7.10 No Negotiations.......................................33
ARTICLE 8 CONDITIONS TO OBLIGATION OF BUYER.....................34
8.1 Representations and Warranties........................34
8.2 Performance of Agreements.............................34
8.3 Approvals.............................................34
8.4 Legal Matters.........................................35
8.5 Material Adverse Effect...............................35
8.6 Financing.............................................35
ARTICLE 9 CONDITIONS TO OBLIGATION OF SELLER....................35
9.1 Representations and Warranties........................35
9.2 Performance of Agreements.............................35
9.3 Approvals.............................................35
9.4 Legal Matters.........................................35
9.5 Release of Guarantees.................................36
ARTICLE 10 TERMINATION...........................................36
10.1 Termination...........................................36
ii
10.2 Effect of Termination.................................36
ARTICLE 11 POST-CLOSING COVENANTS; TAX MATTERS...................37
11.1 Access to Records.....................................37
11.2 Further Assurances....................................37
11.3 Tax Matters...........................................37
11.4 Environmental Obligations.............................43
11.5 Cash Sweep............................................44
11.6 Confidentiality.......................................44
11.7 Noncompete; Nonsolicit................................46
11.8 Litigation Support....................................48
11.9 Insurance.............................................48
ARTICLE 12 EMPLOYEE MATTERS COVENANTS............................48
12.1 General...............................................48
12.2 Welfare Plans.........................................49
12.3 Severance Benefit.....................................51
12.4 Omnibus Compensation Plans............................51
ARTICLE 13 INDEMNIFICATION.......................................51
13.1 Survival..............................................51
13.2 Indemnification.......................................52
13.3 Third Party Claims....................................55
13.4 Remedies Exclusive....................................56
13.5 Recoveries............................................56
13.6 Characterization......................................57
ARTICLE 14 MISCELLANEOUS.........................................57
14.1 Expenses..............................................57
14.2 Binding Effect........................................57
14.3 Entire Agreement; Amendments..........................57
14.4 Notices...............................................57
14.5 Counterparts..........................................58
14.6 Governing Law.........................................59
14.7 Jurisdiction..........................................59
14.8 Waivers...............................................59
iii
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of
July 21, 2005 by and between ▇▇▇▇▇-▇▇▇▇▇▇ Corporation, a Delaware corporation
("SELLER"); and Department 56, Inc., a Delaware corporation ("BUYER").
WHEREAS, Seller owns all of the issued and outstanding capital stock of
Lenox, Incorporated, a New Jersey corporation ("COMPANY"), which Buyer desires
to purchase;
WHEREAS, Company and Company Subsidiaries are engaged primarily in the
business of designing, marketing and manufacturing dinnerware and silver
flatware, collectibles and other tabletop and giftware products (the "BUSINESS,"
but excluding the UK Subsidiary and its business); and
WHEREAS, this Agreement sets forth the terms and conditions upon which
Seller will sell to Buyer, and Buyer will acquire from Seller, all of the
outstanding shares of capital stock of Company (the "SHARE PURCHASE");
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms shall
have the respective meanings set forth below:
"338(H)(10) ELECTIONS" is defined in Section 11.3.
"ADJUSTMENT AMOUNT" is defined in Section 2.2.
"AFFILIATE" means, with respect to any Person, each Person that controls,
is controlled by or is under common control with such Person. For the purpose of
this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"AGREEMENT" is defined in the preamble.
"ARBITRATOR" is defined in Section 2.3.
"BALANCE SHEET" and "BALANCE SHEET DATE" are defined in Section 5.6.
"BASE CONSIDERATION" is defined in Section 2.2.
"BASKET" is defined in Section 13.2.
"BUSINESS" is defined in the preamble.
1
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or other day
on which banks in Louisville, Kentucky are authorized or obligated by Law to
close.
"BUYER" is defined in the preamble.
"BUYER DAMAGES" is defined in Section 13.2.
"BUYER MATERIAL ADVERSE EFFECT" means any change, effect, event or
occurrence that is materially adverse to the business, results of operations or
financial condition of Buyer and Buyer's subsidiaries, viewed as a whole, or on
Buyer's ability to consummate the transactions contemplated hereby; provided
however, that none of the following (nor the effects thereof) shall be deemed,
individually or in the aggregate, to constitute, and none of the following (nor
the effects thereof) shall be taken into account in determining whether there
has been or will be, a Buyer Material Adverse Effect:
(a) this Agreement, the transactions contemplated by this Agreement
or the announcement thereof;
(b) changes or conditions affecting the United States economy or
financial markets or foreign economies or financial markets;
(c) changes in or developments in any industry in which Buyer or any
Buyer subsidiary operates or changes in customer demand,
including seasonal changes (provided that Buyer is not
disproportionately affected thereby as compared to its peer
companies); or
(d) changes or conditions resulting from political or regulatory
conditions, acts of war, terrorism, escalation of hostilities or
earthquakes or other natural occurrences.
"BUYER PARTIES" means, collectively, Buyer and its officers, directors,
employees, subsidiaries, Affiliates (including Company and Company Subsidiaries
from and after the Closing) and their respective successors and permitted
assigns.
"BUYER TAX INDEMNITEE" is defined in Section 11.3.
"BUYER'S ACCOUNTANTS" is defined in Section 2.3.
"BUYER'S NOTICE" is defined in Section 2.3.
"CAP AMOUNT" is defined in Section 13.2.
"CAUSE" means (a) conviction of the applicable employee for committing a
felony under federal law or the law of the state in which such action occurred,
(b) dishonesty or gross negligence in the course of fulfilling the applicable
employee's employment duties, or (c) willful and deliberate failure on the part
of the applicable employee to perform his or her employment duties in any
material respect.
2
"CLAIM" is defined in Section 13.3.
"CLOSING" means the closing of the transactions contemplated by this
Agreement as described in Article 3.
"CLOSING DATE" means the date on which the Closing actually occurs.
"CLOSING WORKING CAPITAL STATEMENT" is defined in Section 2.3.
"COBRA COVERAGE" means the continuation coverage requirements under
Section 4980B of the Code and Part 6 of Title I of ERISA.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITMENT LETTER" is defined in Section 6.9.
"COMPANY" is defined in the preamble.
"COMPANY CONTRACTS" means the Contracts set forth on Section 5.10 of the
Disclosure Schedule (and additional Contracts entered into after the date hereof
which would be required to be identified in Section 5.10 of the Disclosure
Schedule if they were in effect on the date hereof).
"COMPANY MATERIAL ADVERSE EFFECT" means any change, effect, event or
occurrence that is materially adverse to the business, results of operations or
financial condition of Company and Company Subsidiaries, viewed as a whole;
provided however, that none of the following (nor the effects thereof) shall be
deemed, individually or in the aggregate, to constitute, and none of the
following (nor the effects thereof) shall be taken into account in determining
whether there has been or will be, a Company Material Adverse Effect:
(a) this Agreement, the transactions contemplated by this Agreement
or the announcement thereof, including disclosure of the fact
that Buyer is the prospective buyer of Company;
(b) Buyer's announcement or other disclosure of its plans or
intentions with respect to the conduct of the Business;
(c) changes, conditions, events, effects or occurrences affecting
the United States economy or financial markets or foreign
economies or financial markets;
(d) changes, conditions, events, effects or occurrences in or
developments in any industry in which Company or any Company
Subsidiary operates or changes in customer demand, including
seasonal changes (provided that the Business is not
disproportionately affected thereby as compared to its peer
companies);
3
(e) changes, conditions, events, effects or occurrences resulting
from political or regulatory conditions, acts of war, terrorism,
escalation of hostilities or earthquakes or other natural
occurrences;
(f) changes, conditions, events, effects or occurrences to the
extent predominantly arising from any action taken by Buyer or
any of its Affiliates;
(g) any change, condition, occurrence, effect or event resulting
from Buyer's refusal to consent to Company or a Company
Subsidiary taking any action otherwise prohibited by Section
7.2; or
(h) any change in Laws or GAAP accounting rules.
"COMPANY PLAN" is defined in Section 5.15.
"COMPANY SUBSIDIARY" means each entity listed on Section 5.3 of the
Disclosure Schedule, provided, however, that such term does not include the UK
Subsidiary.
"CONFIDENTIAL INFORMATION" is defined in Section 11.6.
"CONFIDENTIALITY AGREEMENT" means the letter agreement dated as of March
2, 2005, entered into between Seller and Buyer.
"CONTRACT" means any written contract, lease, undertaking, agreement or
other arrangement to or under which Company or any Company Subsidiary is legally
bound, including any and all amendments and modifications thereto.
"DISCLOSURE SCHEDULE" is defined at the beginning of Article 4.
"EMPLOYEE BENEFICIARIES" is defined in Section 12.1.
"ENCUMBRANCE" means any mortgage, pledge, claim, security interest,
encumbrance, lien, assessment, conditional sale or other title retention
agreement, whether consensual, statutory or otherwise.
"ENVIRONMENTAL CLAIM" means any Proceeding seeking Environmental Damages
or an order, injunction or similar relief against Company or any Company
Subsidiary by any Person, arising out of, based on, or resulting from any actual
or threatened (a) release or disposal, or the presence in the environment, of
any Hazardous Substances by Company or any Company Subsidiary at any location,
(b) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Laws by Company or any Company Subsidiary or (c) exposure to
any Hazardous Substances caused by Company or any Company Subsidiary.
"ENVIRONMENTAL DAMAGES" means any and all liabilities, costs and
expenditures (including any fees and expenses of attorneys and of environmental
consultants or engineers, and any fees, fines, penalties or charges imposed by a
Governmental Body) incurred in connection
4
with (i) any violation or alleged violation of Environmental Laws, or (ii) the
defense, Remediation or other required response to any Release of Hazardous
Materials.
"ENVIRONMENTAL LAWS" means all applicable Laws as in effect as of the date
hereof (a) related to Releases or threatened Releases of any Hazardous
Substances in soil, surface water, groundwater or air, (b) governing the use,
treatment, storage, disposal, transport, or handling of Hazardous Substances, or
(c) related to the protection of the environment, human health or natural
resources. Such Environmental Laws include the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Toxic Substances Control Act, the Clean Water Act, the Clean
Air Act, the Safe Drinking Water Act, the Emergency Planning and Community
Right-to-Know Act, and their respective state and local counterparts.
"ENVIRONMENTAL SITES" means such Properties of Company or Company
Subsidiaries and other locations as are set forth at Section 5.13 of the
Disclosure Schedule.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means, with respect to any entity, trade or business,
any other entity, trade or business that is, or was at the relevant time, a
member of a group described in Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes or included the first entity, trade or
business, or that is, or was at the relevant time, a member of the same
"controlled group" as the first entity, trade or business pursuant to Section
4001(a)(14) of ERISA.
"FINANCIAL STATEMENTS" is defined in Section 5.6.
"FORM 8023" is defined in Section 11.3.
"FORM 8883" is defined in Section 11.3.
"GAAP" means, as of any date, generally accepted accounting principles in
the United States as in effect on such date.
"GOVERNMENTAL AUTHORIZATIONS" is defined in Section 5.12.
"GOVERNMENTAL BODY" means any United States or foreign, national,
multinational, federal, state, provincial or local governmental, regulatory or
administrative authority, agency or commission or any court or self-regulatory
organization, tribunal or judicial or arbitral body and any instrumentality of
any of the foregoing.
"HAZARDOUS SUBSTANCE" means all hazardous or toxic substances, wastes or
materials, any pollutants or contaminants (including all oil and petroleum of
any kind and in any form, asbestos and raw materials which include hazardous
constituents), or any other similar substances, or materials which are included
under or regulated by any applicable Environmental Law.
5
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
"INCOME TAXES" means U.S. federal, state or local net income or capital
gain Taxes, together with any interest or penalties imposed with respect
thereto.
"INDEMNIFIED PARTY" is defined in Section 13.3.
"INDEMNIFYING PARTY" is defined in Section 13.3.
"INITIAL PAYMENT" is defined in Section 2.2.
"INTELLECTUAL PROPERTY" means all of the following owned or used by
Company or any Company Subsidiary in the operation of their business:
(a) United States and foreign trademarks, service marks and
trademark and service ▇▇▇▇ registrations and applications, trade
names, logos, trade dress and slogans, and all goodwill related
to the foregoing;
(b) patent applications, patents, inventions, improvements,
know-how, formula methodology, research and development,
business methods, processes, technology and software in any
jurisdiction, including re-issues, continuations, divisions,
continuations-in-part, renewals or extensions;
(c) trade secrets;
(d) copyrights in writings, designs, software, mask works or other
works, applications or registrations in any jurisdiction for the
foregoing, other original works of authorship and all moral
rights related thereto; and
(e) Internet web sites, web pages, domain names and applications and
registrations pertaining thereto (excluding any third-party
websites linked to or from the websites of Company).
"KNOWLEDGE OF SELLER" means such facts and other information that, as of
the date of this Agreement, are known to any of the individuals set forth in
Section 1.1A of the Disclosure Schedule after review of this Agreement,
including the Disclosure Schedule.
"LAW" means any law, statute, ordinance, regulation, judgment, order,
award or other decision or requirement of any Governmental Body.
"LEASED PROPERTIES" means any real property that is leased by Company or
any Company Subsidiary.
"LIST" means the United States Environmental Protection Agency's National
Priorities List of Hazardous Waste Sites or any other list, official record or
determination made by any Governmental Entity schedule log, inventory or record
maintained by any Governmental Entity identifying any sites at which there has
been a Release of Hazardous Materials.
6
"LOSSES" is defined in Section 13.2.
"MULTIEMPLOYER PLAN" means any "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA.
"MULTIPLE EMPLOYER PLAN" means any Plan that has two or more contributing
sponsors at least two of whom are not under common control, within the meaning
of Section 4063 of ERISA.
"OTHER ANTITRUST REGULATIONS" is defined in Section 7.4.
"OTHER PARTY" is defined in Section 11.7.
"OTHER TAXES" means any Taxes other than Income Taxes.
"OWNED PROPERTIES" means any real property that is owned in fee simple by
Company or any Company Subsidiary.
"PERMITS" is defined in Section 5.13.
"PERMITTED ENCUMBRANCES" means
(a) Encumbrances for Taxes (and assessments and other governmental
charges or levies) not yet due and payable or due but not
delinquent or being contested in good faith by appropriate
proceedings;
(b) mechanics', builders', workmen's, repairmen's, warehousemen's,
landlord's, carriers' or other like Encumbrances (including
Encumbrances created by operation of law) with respect to which
Company or any Company Subsidiary is not in default in payment
or which are being contested by Company or a Company Subsidiary
in good faith;
(c) Encumbrances in respect of easements, permits, licenses,
right-of-way, restrictive covenants or encroachments or
irregularities in, and other similar exceptions to title;
(d) zoning, entitlement, building, planning, land use and
environmental restrictions or regulations and other Laws;
(e) Encumbrances with respect to debt or other liabilities that are
reflected on the Balance Sheet;
(f) such other imperfections in title, easements, charges,
restrictions and Encumbrances which do not materially detract
from, materially diminish the value of or materially interfere
with the present use of the affected property; and
(g) Encumbrances consented to by Buyer.
7
"PERSON" means an individual, a partnership (general or limited), a
corporation, a limited liability company, an association, a joint stock company,
Governmental Body, a business or other trust, a joint venture, any other
business entity or an unincorporated organization.
"PLAN" is defined in Section 5.15.
"PROCEEDING" means any suit, proceeding, action, arbitration, complaint,
decree or lawsuit before or involving any third party or Governmental Body.
"PROPERTIES" means the Leased Properties and the Owned Properties,
collectively.
"PROPOSED ADJUSTMENT" is defined in Section 2.3.
"PURCHASE PRICE" is defined in Section 2.2.
"QUALIFIED PLAN" is defined in Section 5.15.
"QUALIFYING TERMINATION" shall mean a termination of the employment of a
Company employee
(a) if terminated by Buyer or its Affiliates, other than a
termination for Cause; or,
(b) if terminated by the Company employee following a reduction in
base salary or a required relocation that would move such
Company employee's principal place of employment by more than 50
miles.
"RELEASE" means the spilling, leaking, disposing, discharging, emitting,
depositing, ejecting, leaching, escaping or any other release, whether
intentional or unintentional, of any Hazardous Material.
"REMEDIATION" means any investigative, response, removal, remedial,
treatment, cleanup, disposal, monitoring and other corrective actions with
respect to environmental matters, including the Release of any Hazardous
Material.
"REPORTS" is defined in Section 5.13.
"SELLER" is defined in the preamble.
"SELLER DAMAGES" is defined in Section 13.2.
"SELLER GROUP" means Seller and any subsidiary of Seller, other than
Company or any Company Subsidiary.
"SELLER PARTIES" means, collectively, Seller, its Affiliates (including,
prior to Closing, Company and the Company Subsidiaries), their respective
officers, directors and employees, and their respective successors and permitted
assigns.
"SELLER RESTRICTED BUSINESS" is defined in Section 11.7.
8
"SELLER TAX INDEMNITEE" is defined in Section 11.3.
"SELLER'S ACCOUNTANTS" is defined in Section 2.3(b).
"SHARE PURCHASE" is defined in the preamble.
"SHARES" is defined in Section 2.1.
"SUBSIDIARY" means, with respect to any Person, any other Person of which
such Person (either alone or through or together with any other subsidiary)
owns, directly or indirectly, a majority of the outstanding equity securities or
securities or interests carrying a majority of the voting power in the election
of the board of directors or other governing body of such Person.
"SURVIVAL DATE" is defined in Section 13.1.
"SURVIVING ENTITY" is defined in Section 11.7.
"TAX" OR "TAXES" means
(a) all taxes, levies or other assessments of any kind or nature,
including U.S., state, local and foreign income taxes,
withholding taxes, branch profit taxes, gross receipts taxes,
franchise taxes, transfer taxes, sales and use taxes, business
and occupation taxes, license taxes, property taxes, VAT, custom
duties or imposts, stamp taxes, excise taxes, payroll taxes,
employment taxes, estimated taxes, severance taxes, occupancy
taxes, intangible taxes and capital taxes;
(b) any interest or penalties, additions to tax or additional
amounts imposed in connection with any item described in the
foregoing clause (a) or the failure to comply with any
requirement imposed with respect to any Tax Return; and
(c) any obligation with respect to Taxes described in the foregoing
clause (a) or (b) payable by reason of being a successor or
indemnitor or by reason of contract, assumption, transferee
liability, operation of Law, Treasury Regulation ss.1.1502-6 (or
any predecessor or successor thereof or any analogous or similar
provision under Law) or otherwise.
"TAX AFFILIATES" is defined in Section 5.19.
"TAX BENEFIT" means the Tax effect of any item of loss, deduction or
credit or any other item which decreases Taxes paid or payable or increases tax
basis, including any interest with respect thereto or interest that would have
been payable but for such item, net of any tax detriment associated therewith.
"TAX ITEM" means any item of income, gain, loss, deduction, credit,
recapture of credit or any other item which increases or decreases Taxes paid or
payable, including an adjustment under Section 481 of the Code resulting from a
change in accounting method.
9
"TAX PROCEEDING" means any Tax audit, contest, litigation, defense or
other proceeding with or against any Taxing Authority.
"TAX RETURN" OR "RETURN" means any return, report, declaration, statement,
extension, form or other documents or information filed with or submitted to, or
required to be filed with or submitted to, any Governmental Body in connection
with the determination, assessment, collection or payment of any Tax.
"TAXING AUTHORITY" means any Governmental Body exercising any authority to
impose, regulate, or administer the imposition of Taxes.
"THRESHOLD AMOUNT" is defined in Section 13.2.
"TRANSITION SERVICES AGREEMENT" means the agreement referred to in Section
3.3(c).
"TREASURY REGULATION" means the regulations promulgated under the Code by
the United States Department of Treasury.
"UK SUBSIDIARY" means ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Limited, an English private company
limited by shares.
"WELFARE BENEFITS" shall mean the types of benefits described in Section
3(1) of ERISA (whether or not covered by ERISA).
"WELFARE PLAN" shall mean any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as those terms
are defined in Part I of Subtitle E of Title IV of ERISA.
1.2 GENERAL RULES OF CONSTRUCTION AND INTERPRETATION.
(a) The words "hereof," "herein," and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement.
(b) Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa.
(c) Any reference to a particular gender shall be deemed to include
all other genders unless the context otherwise requires.
(d) Headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(e) Unless an express reference is made to a different document, all
references to a Section or Article will be understood to refer to the indicated
Section or Article of this
10
Agreement, and all references to a Schedule or Exhibit will be understood to
refer to the indicated Schedule or Exhibit to this Agreement.
(f) Whenever the word "include," "includes" or "including" is used in
this Agreement, it shall be deemed to be followed by the words "without
limitation."
(g) In the event of an alleged ambiguity or a question of intent or
interpretation, this Agreement shall be construed as if drafted jointly by the
parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
(h) The word "will" shall be construed to have the same meaning and
effect as the word "shall."
(i) The Disclosure Schedule, and all other Schedules and Exhibits
attached hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Any capitalized terms used in
the Disclosure Schedule or any other Schedule or any Exhibit but not otherwise
defined therein shall have the meaning defined in this Agreement.
ARTICLE 2
PURCHASE AND SALE OF STOCK
2.1 SALE. Upon the terms and subject to the conditions of this Agreement,
on the Closing Date, Seller shall sell, assign, transfer and deliver to Buyer,
and Buyer shall purchase and accept from Seller, all of the issued and
outstanding capital stock of Company, consisting of 1000 shares of Common Stock,
par value $1 per share (the "SHARES"), free and clear of all Encumbrances.
2.2 PURCHASE PRICE; INITIAL PAYMENT.
(a) The purchase price (the "PURCHASE PRICE") to be paid by Buyer to
Seller for the Shares shall be One Hundred Ninety Million Dollars
($190,000,000.00) (the "BASE CONSIDERATION") plus the Adjustment Amount.
(b) The "ADJUSTMENT AMOUNT" (which may be a positive or negative
number) will be equal to the working capital of Company and the Company
Subsidiaries as determined from the Closing Working Capital Statement prepared
in accordance with Section 2.3, minus Ninety Six Million Nine Hundred Thousand
Dollars ($96,900,000.00).
(c) At Closing, Buyer will deliver to Seller, as an initial payment
(the "INITIAL PAYMENT") of the Purchase Price, an amount equal to (i) Seller's
estimate of the Adjustment Amount, estimated on the basis of the interim
unaudited balance sheet of Company and Company Subsidiaries as at the end of the
most recently ended month for which such balance sheet is available at Closing,
estimated as though the end of such month were the Closing Date, plus (ii) the
Base Consideration.
11
2.3 CLOSING WORKING CAPITAL STATEMENT.
(a) As promptly as practicable following the Closing, but not later
than 60 days thereafter, Seller shall
(1) prepare and deliver to Buyer a statement of the consolidated
current assets and current liabilities of Company and the
Company Subsidiaries as of the close of business on the last
business day immediately preceding the Closing Date,
including a calculation of the Adjustment Amount (the
"CLOSING WORKING CAPITAL STATEMENT"), which shall be
prepared in accordance with SCHEDULE 2.3 attached hereto;
and
(2) deliver to Buyer a report of PricewaterhouseCoopers LLP or
another nationally-recognized independent public accounting
firm selected by Seller ("SELLER'S ACCOUNTANTS") stating
that the Closing Working Capital Statement has been prepared
in accordance with SCHEDULE 2.3.
(b) Buyer may cause another independent public accounting firm
selected by Buyer ("BUYER'S ACCOUNTANTS"), to conduct a review of the Closing
Working Capital Statement. Representatives of Buyer and Buyer's Accountants
shall have reasonable access to all journal entries and other records used by
Seller in its preparation of the Closing Working Capital Statement. Within 45
days after Buyer's receipt of the Closing Working Capital Statement and report
of Seller's Accountants, Buyer shall deliver written notice (the "BUYER'S
NOTICE") to Seller either (i) stating that Buyer accepts the Closing Working
Capital Statement or (ii) describing in reasonable detail, including the nature
and amount thereof, each adjustment (a "PROPOSED ADJUSTMENT") that Buyer
proposes be made to the Closing Working Capital Statement; PROVIDED, HOWEVER,
that Buyer's Notice of any Proposed Adjustment shall not be effective unless
accompanied by a special report of Buyer's Accountants stating that each such
Proposed Adjustment is required to be made in order for the Closing Working
Capital Statement to have been prepared in accordance with SCHEDULE 2.3.
Furthermore, the Closing Working Capital Statement shall not be subject to any
adjustment unless the aggregate amount of all such adjustments as finally
determined exceeds $300,000; PROVIDED, that, if such adjustments exceed
$300,000, then the final amount of such adjustments (and not merely the excess
over $300,000) shall be included in the Closing Working Capital Statement and
the final determination of the Adjustment Amount. If Seller has not received
Buyer's Notice within such 45-day period, Buyer shall be deemed to have accepted
the amount of the working capital and the calculation of the Adjustment Amount
set forth in the Closing Working Capital Statement.
(c) If Buyer's Notice contains any Proposed Adjustment, then Buyer and
Seller shall negotiate in good faith to resolve such Proposed Adjustment in
accordance with this Agreement, PROVIDED that if the parties have not resolved
all Proposed Adjustments within 30 days following Seller's receipt of Buyer's
Notice, then Buyer and Seller shall engage Ernst & Young LLP (provided it is not
serving as Buyer's Accountants) or another mutually acceptable firm of
independent public accountants of nationally recognized reputation (the
"ARBITRATOR"). The Arbitrator shall act as an arbitrator to determine only those
Proposed Adjustments still in
12
dispute and the resulting computation of the Adjustment Amount, which
determination shall be made in accordance with the terms of this Agreement,
rendered within 60 days of the Arbitrator's engagement, and shall be final and
binding on all parties.
2.4 SETTLEMENT. Within five business days following the final determination
of the Adjustment Amount in accordance with Section 2.3 above, whether by
agreement or deemed agreement of the parties or by the Arbitrator:
(a) if the Purchase Price is more than the Initial Payment, Buyer
shall deliver to Seller immediately available funds in an amount equal to the
difference between the Purchase Price and the Initial Payment plus interest on
such amount at the rate of 4.5% per annum from the Closing Date to, but not
including, the date of payment; or
(b) if the Initial Payment is more than the Purchase Price, Seller
shall deliver to Buyer immediately available funds in an amount equal to the
difference between the Initial Payment and the Purchase Price plus interest on
such amount at the rate of 4.5% per annum from the Closing Date to, but not
including, the date of payment.
2.5 EXPENSES. All expenses relating to the work to be performed by Buyer's
Accountants as contemplated by Section 2.3 shall be borne by Buyer, all expenses
relating to the work to be performed by Seller's Accountants as contemplated by
Section 2.3 shall be borne by Seller, and all expenses relating to the work, if
any, to be performed by the Arbitrator in accordance with Section 2.3 to resolve
disputes shall be borne equally by Buyer and Seller.
ARTICLE 3
CLOSING
3.1 TIME AND PLACE. The Closing shall take place at the offices of Seller,
Louisville, Kentucky at 10:00 a.m., Louisville, Kentucky time, on the second
business day after the date on which all of the conditions to the Closing (other
than those that by their terms are to be satisfied at Closing) set forth in
Article 8 and Article 9 have been satisfied or waived, or on such other date and
at such other time and place as Seller and Buyer may mutually agree.
3.2 SIMULTANEOUS ACTIONS. All proceedings to be taken and all documents to
be executed and delivered by the parties at the Closing shall be deemed to have
been taken and executed simultaneously and no proceedings shall be deemed taken
nor any documents executed or delivered until all have been taken, executed and
delivered.
3.3 DELIVERIES BY SELLER. On or before the Closing Date, Seller will
deliver to Buyer the following:
(a) a certificate, dated the Closing Date, executed by Seller,
certifying that the conditions to Buyer's obligation to consummate the Closing
under Sections 8.1 and 8.2 have been satisfied;
(b) the original certificate(s) evidencing the Shares accompanied by
duly executed stock transfer power(s) and any other documents necessary to
transfer to Buyer good title to the Shares;
13
(c) the Transition Services Agreement, duly executed by Seller and
Company, in the form of EXHIBIT 3.3(C);
(d) an assignment to Buyer of Seller's rights with respect to
confidentiality agreements signed by other prospective purchasers of Company;
(e) a certificate of good standing for Company and a certified copy of
the Certificate of Incorporation of Company issued by the Secretary of State of
New Jersey, as of a recent date; and
(f) resignations of all members of the board of directors of Company,
to the extent received by Seller at or prior to Closing.
3.4 DELIVERIES BY BUYER. On or before the Closing Date, Buyer will deliver
to Seller the following:
(a) a certificate, dated the Closing Date, executed by Buyer,
certifying that the conditions to Seller's obligation to consummate the Closing
under Sections 9.1 and 9.2 have been satisfied;
(b) the Initial Payment, by wire transfer of immediately available
funds in United States currency to an account or accounts designated in writing
by Seller; and
(c) the Transition Services Agreement, duly executed by Buyer, in the
form of EXHIBIT 3.3(C).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES REGARDING SELLER
Simultaneously with the execution of this Agreement by Seller, Seller is
delivering to Buyer a disclosure schedule (the "DISCLOSURE SCHEDULE") with
numbered sections corresponding to sections in this Agreement. Any matter
disclosed in any section of the Disclosure Schedule shall be deemed disclosed in
all other sections of the Disclosure Schedule to the extent that such disclosure
is reasonably apparent to be applicable to such other sections, notwithstanding
the reference to a particular section or subsection. The inclusion of any
information in the Disclosure Schedule shall not be deemed an admission or
acknowledgement that such information is required to be set forth therein or
that such information is material or that such information constitutes or would
reasonably be expected to constitute a Company Material Adverse Effect.
EXCEPT AS SET FORTH IN THE DISCLOSURE SCHEDULE, SELLER REPRESENTS AND
WARRANTS TO BUYER AS FOLLOWS:
4.1 ORGANIZATION. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
14
4.2 POWER. Seller has all requisite corporate power and authority to own
the Shares and to enter into this Agreement, to perform its obligations
hereunder, and to consummate the sale of the Shares and other transactions
contemplated by this Agreement.
4.3 AUTHORIZATION. The execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions contemplated hereby
by Seller have been duly and validly authorized by all necessary corporate
action on the part of Seller. This Agreement has been duly and validly executed
and delivered by Seller, and is a valid and binding obligation of Seller,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
4.4 NONCONTRAVENTION. Neither the execution, delivery and performance of
this Agreement by Seller, nor the consummation by Seller of the transactions
contemplated hereby nor compliance by Seller with any of the provisions hereof
will:
(a) conflict with or result in a breach of any provision of the
Certificate of Incorporation or Bylaws of Seller;
(b) cause a default, or result in a material breach or give rise to
any right of termination, cancellation, or acceleration under any material
agreement or other material obligation to which Seller is a party, except for
such matters as would not reasonably be expected to result in a material adverse
effect upon the ability of Seller to perform its obligations under this
Agreement;
(c) assuming compliance with the HSR Act, violate any Law, order of
any Governmental Body or Governmental Authorization applicable to Seller, except
as would not reasonably be expected to result in a material adverse effect upon
the ability of Seller to perform its obligations under this Agreement; or
(d) result in the creation of any Encumbrance upon the Shares held by
Seller.
4.5 CONSENTS. No consent or approval by, or notification of or filing with,
any Governmental Body is required to be obtained or made by Seller in connection
with the execution, delivery and performance by Seller of this Agreement, or the
consummation by Seller of the transactions contemplated hereby, except for
compliance with the HSR Act and except for any such consent, approval,
notification or filing the failure of which to obtain or make would not
reasonably be expected to result in a material adverse effect upon Seller's
ability to perform its obligations under this Agreement.
4.6 STOCK OWNERSHIP. Seller has, and agrees to transfer to Buyer at
Closing, good and valid title to the Shares, free and clear of all Encumbrances,
options, restrictions on transfer or rights of refusal. No Person owns or has
any beneficial interest in any of the Shares except Seller. Seller has not
transferred or assigned, or entered into any agreement to transfer or assign,
any of the Shares or any of the voting rights or dividend rights pertaining
thereto.
4.7 LITIGATION. No Proceeding has, as of the date of this Agreement, been
commenced or, to the Knowledge of Seller, threatened against Seller that
challenges the validity
15
of this Agreement or the transactions contemplated hereby or that would
reasonably be expected to have the effect of preventing, materially delaying,
materially impairing or making illegal the transactions contemplated, or have a
material adverse effect on Seller's ability to perform its obligations under
this Agreement.
4.8 BROKERS. Neither Seller nor Company has employed any broker, finder or
investment banker in connection with the transactions contemplated by this
Agreement which would be entitled to a fee or commission in connection with such
transactions, except for any broker, finder or investment banker whose fees or
commissions shall be the sole responsibility of Seller.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES REGARDING COMPANY
EXCEPT AS SET FORTH IN THE DISCLOSURE SCHEDULE, SELLER REPRESENTS AND
WARRANTS TO BUYER AS FOLLOWS:
5.1 ORGANIZATION. Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of New Jersey and has all
requisite corporate power and authority to own, lease and operate its material
properties and to carry on its business as now being conducted. Company is duly
qualified and in good standing to do business in every jurisdiction in which
such qualification is necessary because of the nature of the property owned,
leased or operated by it or the nature of the business conducted by it, except
where the failure to be so qualified or be in good standing would not result in
a Company Material Adverse Effect.
5.2 CAPITALIZATION. The entire authorized capital stock of Company consists
of 2000 shares of Common Stock, par value $1 per share, and 1000 shares of
Preferred Stock, par value $5 per share. There are currently issued and
outstanding only the Shares, which are all duly authorized, validly issued,
fully paid and nonassessable. There is no:
(a) outstanding security convertible into or exchangeable for capital
stock of Company;
(b) option, warrant, put, call or other right to purchase or subscribe
to capital stock of Company;
(c) stock restriction agreement, or contract, commitment or agreement
of any kind relating to the issuance or disposition of Company capital stock or
the issuance or disposition of any security convertible into or exchangeable for
Company capital stock; or
(d) registration rights agreement, voting trust, proxy or other
agreement or restriction on transfer with respect to the Shares.
The Shares are all duly authorized, validly issued, fully paid and
non-assessable, and in certificated form, and have been offered, sold and issued
by Company in compliance with all applicable securities and corporate Laws,
agreements or contracts applicable to Company and Company's Certificate of
Incorporation and Bylaws, and in compliance with any preemptive rights, rights
of first refusal or other rights. The consummation of the Share Purchase will
16
convey to Buyer good and valid title to the Shares, of record and beneficially,
free and clear of all Encumbrances, except for those created by Buyer or arising
out of ownership of the Shares by Buyer.
5.3 COMPANY SUBSIDIARIES. All entities of which Company owns, directly or
indirectly, any capital stock, together with the jurisdiction of incorporation,
are set forth at Section 5.3 of the Disclosure Schedule. Such entities are duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of organization, have all requisite corporate power and
authority to own, lease and operate their respective material properties and to
carry on their respective businesses as now being conducted, and are duly
qualified and in good standing to do business in every jurisdiction in which
such qualification is necessary because of the nature of the property owned,
leased or operated by such entities or the nature of the business conducted by
such entities, except where the failure to be so qualified or be in good
standing would not result in a Company Material Adverse Effect. Company owns all
of the issued and outstanding capital stock of each such entity free and clear
of all Encumbrances, options, restrictions on transfer and rights of refusal
other than Permitted Encumbrances.
5.4 NONCONTRAVENTION. Neither the execution, delivery and performance of
this Agreement by Seller, nor the consummation by Seller of the transactions
contemplated hereby nor compliance by Seller or Company with any of the
provisions hereof will:
(a) conflict with or result in a breach of any provision of the
Certificate of Incorporation or Bylaws of Company or any Company Subsidiary;
(b) except as would not reasonably be expected to result in a Company
Material Adverse Effect, cause a default, or result in a breach or give rise to
any right of termination, cancellation, or acceleration under any Company
Contract or other material obligation to which Company or any Company Subsidiary
is a party, or by which Company or any Company Subsidiary or any of their
respective material properties or assets is or may be bound or benefited; or
(c) except as would not reasonably be expected to result in a Company
Material Adverse Effect and except for compliance with the HSR Act, violate any
Law applicable to Company or any Company Subsidiary.
5.5 CONSENTS. Except for compliance with the HSR Act or as would not
reasonably be expected to result in a Company Material Adverse Effect, no
consent or approval by, or notification of or filing with, any Governmental Body
is required to be obtained or made by Company or any Company Subsidiary in
connection with the execution, delivery and performance by Seller of this
Agreement, or the consummation of the transactions contemplated hereby.
5.6 FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer true and complete copies of the
audited consolidated balance sheets of Company and Company Subsidiaries as of
April 30, 2005 (the "BALANCE SHEET DATE", with the consolidated balance sheet as
of such date being referred to as the "BALANCE SHEET"), and April 30, 2004, with
the Company's investment in the UK Subsidiary
17
accounted for under the equity method, and the related statements of operations,
stockholder's equity and cash flow for the fiscal years then ended
(collectively, the "FINANCIAL STATEMENTS").
(b) The Financial Statements
(1) have been prepared based on the books and records of Company
and Company Subsidiaries;
(2) have been prepared in accordance with GAAP (in effect as of
the respective dates thereof), consistently applied, in all
material respects, except that the UK Subsidiary has been
accounted for under the equity method, and except that the
stock option expense for the Company employees participating
in the ▇▇▇▇▇-▇▇▇▇▇▇ Corporation Omnibus Compensation Plan
for the periods ended April 30, 2005 and 2004, and the
associated disclosures required by Statement of Financial
Accounting Standard Number 123, Accounting for Stock-Based
Compensation, as amended, have been omitted from the
Financial Statements; and
(3) present fairly in all material respects the financial
position of Company and Company Subsidiaries on a
consolidated basis as of the respective dates thereof and
the results of operations, changes in stockholder's equity
and cash flows for the periods covered thereby.
5.7 ABSENCE OF UNDISCLOSED LIABILITIES. There are no liabilities or
obligations of Company or any Company Subsidiary (whether accrued, absolute,
contingent, unliquidated or otherwise), in each case to the extent required by
GAAP to be disclosed or reserved against in the Financial Statements, other than
those that (a) are accrued, reflected, disclosed or reserved against in the
Financial Statements, (b) have arisen in the ordinary course of business since
the Balance Sheet Date, (c) were incurred pursuant to the transactions
contemplated by this Agreement, (d) were discharged or paid in full prior to the
date hereof in the ordinary course of business, or (e) would not reasonably be
expected to result in a Company Material Adverse Effect.
5.8 ABSENCE OF CHANGES. Since the Balance Sheet Date, Company's business
has operated in all material respects in the ordinary course and consistent with
past practice, and there has not been any Company Material Adverse Effect.
5.9 REAL PROPERTY.
(a) Section 5.9 of the Disclosure Schedule sets forth a true and
complete list of the addresses of all Properties (identifying those that are
Owned Properties and those that are Leased Properties) that are owned, used by
or occupied by and, in each case, material to the operations of Company and the
Company Subsidiaries, taken as a whole.
18
(b) Company has valid title in fee simple to all of the Owned
Properties and valid leasehold interests in all Leased Properties, in each case
free and clear of any Encumbrance, except for Permitted Encumbrances.
(c) Neither Seller nor Company has received written notice with
respect to any Owned Property or to any Leased Property in either case that is
material to the operation of Company and the Company Subsidiaries taken as a
whole:
(1) that any building or structure thereon, any equipment
therein or the operation or maintenance thereof violates
any Law in any material respect (including applicable
zoning ordinances);
(2) that any building or other improvement owned by Company
encroaches upon property of others or encroaches over
applicable setback lines in a way that would be material to
the operation of such building or improvement; or
(3) that any condemnation proceeding is pending or threatened.
(d) Except as would not reasonably be expected to result in a Company
Material Adverse Effect:
(1) neither Company nor any Company Subsidiary is in default
under any lease for any Leased Property and there are no
events which with the passage of time or the giving of
notice or both would constitute a default by Company or a
Company Subsidiary under any such lease; and
(2) there are no outstanding written notices of breach or
default given to Company or a Company Subsidiary by any
party to any such lease that remains uncured.
5.10 COMPANY CONTRACTS. Section 5.10 of the Disclosure Schedule sets forth
a true and complete list of the following Contracts to which Company or a
Company Subsidiary is a party:
(a) material distributor, dealer, advertising, agency, sales
representative or similar material Contracts relating to the marketing or sale
of Company's products (excluding customer purchase orders accepted in the
ordinary course of business);
(b) Contracts in amounts in excess of $500,000 for the future purchase
or lease by Company or a Company Subsidiary of material, supplies, equipment,
services or finished products purchased for resale;
(c) Contracts having a term exceeding one year or involving amounts in
excess of $500,000 for the future sale of products by Company or a Company
Subsidiary;
(d) collective bargaining agreements with any labor union;
19
(e) Contracts for the employment of any officer, director or employee,
or any other material Contracts with or commitments to any officer, director or
employee;
(f) Material joint venture, partnership, design or license agreements;
(g) indenture, mortgage, promissory note, loan agreement,
reimbursement agreement, guaranty, or other Contract or commitment for the
borrowing of money, for a line of credit or letter of credit, or for a leasing
transaction of a type required to be capitalized in accordance with FASB
Statement of Financial Accounting Standards No. 13;
(h) agreement for the sale of assets of Company and Company
Subsidiaries, which assets have a book value of $500,000 or more in the
aggregate, other than sales of inventory in the ordinary course of business;
(i) all product licensing Contracts in which Company has guaranteed an
annual obligation of $500,000 or more; and
(j) all Contracts or commitments for capital expenditures with respect
to which the remaining unpaid balance exceeds $500,000.
Neither Company nor any Company Subsidiary (i) is in breach or default with
respect to any material term of any Company Contract and, to the Knowledge of
Seller, no other party to any Company Contract is in breach or default with
respect to any material term of any Company Contract, or (ii) has received any
written notice since January 1, 2005 of any breach or default with respect to
any Company Contract which remains uncured.
5.11 LITIGATION. Section 5.11 of the Disclosure Schedule sets forth a list,
as of the date of this Agreement, of all: (a) Proceedings pending or, to the
Knowledge of Seller, threatened against Company or a Company Subsidiary, which
(i) if resolved unfavorably to Company or any Company Subsidiary, is reasonably
likely to result in payments by Company or Company Subsidiary in excess of
$500,000, (ii) would materially adversely affect the ability of Seller or
Company to consummate the transactions contemplated by this Agreement, (iii)
would materially adversely affect the ability of Buyer to operate the Business
following the Closing in substantially the same manner as operated by Company
prior to the Closing, or (iv) involve or relate to any trade practices of
Company, including any pricing, promotion, rebate, discount, commission,
allocation, merchandising practice or territorial restriction; and (b)
judgments, decrees, injunctions or orders of any Governmental Body having a
material continuing effect against Company or a Company Subsidiary.
5.12 COMPLIANCE.
(a) Company and each Company Subsidiary is in compliance with, and has
not received any written notice of any violation of, applicable Laws (including
the U. S. Foreign Corrupt Practices Act and applicable import and export Laws),
except, in each case, for such non-compliance or violations as would not result
in a Company Material Adverse Effect.
(b) Except as would not result in a Company Material Adverse Effect,
(i) Company and the Company Subsidiaries have all governmental licenses and
permits necessary in
20
the conduct of their business as currently conducted ("GOVERNMENTAL
AUTHORIZATIONS"), which Governmental Authorizations are in full force and
effect, and (ii) no violations are outstanding or uncured with respect to any
such Governmental Authorizations and, as of the date hereof, no Proceeding is
pending or, to the Knowledge of Seller, threatened to revoke any of them.
5.13 ENVIRONMENTAL.
(a) Notwithstanding the generality of any other representations and
warranties in this Agreement, this Section 5.13 shall be deemed to contain the
only representations and warranties in this Agreement or arising out of the
transactions contemplated by this Agreement with respect to Environmental Laws,
Hazardous Substances, Environmental Claims, the environment or workplace health
and safety. Section 5.13(a) of the Disclosure Schedule lists each Environmental
Site with respect to which Company has incurred costs to investigate, remediate
or settle Environmental Claims that are, to Seller's Knowledge, not fully
resolved or has received notification of potential Environmental Claims against
Company or any Company Subsidiary.
(b) Seller has provided Buyer true and complete copies of the
environmental reports listed in Section 5.13(b) of the Disclosure Schedule
(which, together with the environmental audits obtained by Buyer as referred to
in Section 6.10, are collectively referred to as the "REPORTS"). To the
Knowledge of Seller and except as set forth in the Reports, since May 1, 2003
there has been no storage, disposition, generation, treatment, Release or
discharge of any Hazardous Substance by Company or any Company Subsidiary, in
any manner or at a level that is in violation of applicable Environmental Laws
in any material respect, on, in, under, about or from the Properties or the land
and buildings on and in which Company or the Company Subsidiaries previously
conducted their operations.
(c) To the Knowledge of Seller and except as set forth in the Reports,
Company and each Company Subsidiary is in compliance in all material respects
with all Environmental Laws and since May 1, 2003 has not received written
notice of any unresolved potential liability with respect to any Environmental
Law that would be material to the conduct of Company's business.
(d) Except as set forth in the Reports or Section 5.11 of the
Disclosure Schedule, there is no material Environmental Claim pending or, to the
Knowledge of Seller, threatened against Company or any Company Subsidiary or
otherwise relating to any of the Properties. Section 5.13(d) of the Disclosure
Schedule sets forth insurance settlement and PRP agreements related to
Environmental Sites to which Company or a Company Subsidiary is a party.
(e) Each of Company and the Company Subsidiaries have obtained all
permits, licenses and approvals ("PERMITS") relating to the Environmental Laws
necessary for its operation, except as would not have a Company Material Adverse
Effect.
5.14 EMPLOYMENT MATTERS.
(a) To the Knowledge of Seller, Company and the Company Subsidiaries
are in material compliance with all applicable Laws respecting labor, employment
and employment
21
practices, terms and conditions of employment and wages and hours. There is no
material labor strike or work stoppage pending or, to the Knowledge of Seller,
threatened involving Company or any Company Subsidiary. There is no material
unfair labor practice complaint against Company or any Company Subsidiary
pending before the National Labor Relations Board or other Governmental Body. To
the Knowledge of Seller, there are no union organizational activities currently
underway with respect to non-union employees of Company or any Company
Subsidiary.
(b) As of the date of this Agreement, there are no pending or, to the
Knowledge of Seller, threatened material investigations, audits, complaints or
Proceedings against Company by or before any Governmental Body, respecting or
involving any applicant for employment, any employee or any former employee, or
any class of the foregoing, including:
(1) the Equal Employment Opportunity Commission or any other
corresponding state or local agency relating to any claim or
charge concerning discrimination,
(2) the United States Department of Labor or any other
corresponding state or local agency relating to any claim or
charge concerning hours or wages,
(3) the Occupational Safety and Health Administration or any
other corresponding state or local agency relating to any
claim or charge concerning the safety and health of
employees or former employees,
(4) the Office of Federal Contract Compliance or any
corresponding state agency, and
(5) the U. S. Citizenship and Immigration Services, a bureau of
the Department of Homeland Security, with respect to matters
involving employees of Company who hold a temporary work
authorization, including H-1B, F-1 or J-1 visas or work
authorizations.
(c) Company is not obligated as of the date of this Agreement to pay
any amounts pursuant to the requirements of the Worker Adjustment and Retraining
Notification Act of 1988.
5.15 EMPLOYEE BENEFIT PLANS.
(a) Section 5.15(a) of the Disclosure Schedule lists each material
plan, agreement, arrangement or policy providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance (including any
self-insured arrangements), health or medical benefits, employee assistance
program, disability or sick leave benefits, workers' compensation, supplemental
unemployment benefits, change in control benefits, severance benefits and
post-employment or retirement benefits (including compensation, pension, health,
medical or life
22
insurance benefits), or other employee benefits, in each case, which is
maintained, administered, sponsored or contributed to by Company or any
Affiliate of Company for the benefit of any current or former employee
(excluding, as to employees of Company who also are or were employed by Seller,
those benefits attributable solely to their employment with Seller) of Company
or any Company Subsidiary or which is between Company or any of its Affiliates
and any such individual (each, individually, a "PLAN" and collectively, the
"PLANS"). The Disclosure Schedule specifically denotes each Plan that is either
sponsored by Company or a Company Subsidiary or to which Company or a Company
Subsidiary is party (each, a "COMPANY PLAN").
(b) With respect to each Company Plan, Seller has made available to
Buyer: (i) a true, correct and complete copy of such Company Plan; (ii) the most
recent Annual Report (Form 5500 Series) and accompanying schedules, if any;
(iii) the most recent annual financial report, if any; (iv) the most recent
actuarial report, if any; and (v) the most recent determination letter from the
Internal Revenue Service, if any. Seller has also made available to Buyer the
current summary plan description and any material modifications thereto for each
Plan in respect of which there exists a summary plan description.
(c) Section 5.15(c) of the Disclosure Schedule identifies each Company
Plan that is intended to be a "qualified plan" within the meaning of Section
401(a) of the Code ("QUALIFIED PLAN"). The Internal Revenue Service has issued a
favorable determination letter with respect to each Qualified Plan and the
related trust that has not been revoked, and, to the Knowledge of Seller, no
events have occurred that would adversely affect the qualified status of any
Qualified Plan or the related trust.
(d) Company or a Company Subsidiary has in all material respects
timely made or accrued all contributions required with respect to any Qualified
Plan subject to Title IV of ERISA. No "accumulated funding deficiency"
(determined under the rules set forth in Section 412 of the Code and related
Code sections and regulations), whether or not waived, exists with respect to
any Qualified Plan subject to Title IV of ERISA. There have not, within the past
five years, been any "reportable events" (within the meaning of Section 4043 of
ERISA) with respect to any Qualified Plan subject to Title IV of ERISA.
(e) Neither any Plan nor any other employee benefit plan maintained by
an ERISA Affiliate of Company is a Multiemployer Plan or a Multiple Employer
Plan. None of Company, any Company Subsidiary or any of their respective ERISA
Affiliates has (i) at any time during the last six years, contributed to or been
obligated to contribute to any Multiemployer Plan or Multiple Employer Plan, or
(ii) incurred any Withdrawal Liability that has not been satisfied in full.
(f) The Plans are in material compliance both in form and operation
with ERISA, the Code and other applicable Laws, and have been administered in
all material respects in accordance with their terms.
(g) Consummation of the transactions contemplated by this Agreement
will not be a factor causing payments to be made by Company or any Tax Affiliate
that are not deductible (in whole or in part) as a result of the application of
Section 280G of the Code.
23
5.16 INTERCOMPANY TRANSACTIONS. Section 5.16 of the Disclosure Schedule
sets forth a list of all material Contracts between Seller or its subsidiaries
(other than Company and Company Subsidiaries), on the one hand, and Company or a
Company Subsidiary, on the other hand, and other material arrangements whereby
Seller or its subsidiaries (other than Company and Company Subsidiaries) provide
goods or services to, or obtain goods or services from, Company or Company
Subsidiaries. All such arrangements will cease as of the Closing Date other than
(a) those provided for in Contracts specifically noted at Section 5.16 of the
Disclosure Schedule as continuing in effect after Closing, which will continue
in effect in accordance with their respective terms, and (b) as provided in the
Transition Services Agreement.
5.17 INTELLECTUAL PROPERTY.
(a) Company or the Company Subsidiaries own all right, title and
interest in and to, or have valid licenses to use, all Intellectual Property
that is material to the current operations of Company and the Company
Subsidiaries taken as a whole, free and clear of all Encumbrances other than
Permitted Encumbrances.
(b) Section 5.17(b) of the Disclosure Schedule sets forth a true and
complete list of all material patents, patents pending, trademark/service ▇▇▇▇
applications and registrations, copyright applications and registrations, and
domain name registrations that are owned by Company or any Company Subsidiary.
(c) To the Knowledge of Seller:
(1) there is no material infringement, misappropriation or other
misuse being made by any third person of any Intellectual
Property material to the business of Company and Company
Subsidiaries as a whole;
(2) no claim is pending or threatened to the effect that the
operations of Company or Company Subsidiaries infringe or
conflict with the asserted rights of others in respect of
any Intellectual Property material to the business of
Company and Company Subsidiaries as a whole; and
(3) no claim is pending or threatened to the effect that any
Intellectual Property material to the business of Company
and Company Subsidiaries as a whole is invalid or
unenforceable.
(d) Section 5.17(d) of the Disclosure Schedule sets forth the licenses
pursuant to which Company or any Company Subsidiary grants to any other Person
(other than Company or any Company Subsidiary) the right to use Intellectual
Property owned by Company or any Company Subsidiary material to the business of
Company and Company Subsidiaries as a whole, and the licenses pursuant to which
any other Person grants to Company or any Company Subsidiary the right to use
Intellectual Property material to the business of Company and Company
Subsidiaries as a whole owned by any other Person (other than licenses to use
off-the-shelf software). To the Knowledge of Seller:
24
(1) neither Company nor any Company Subsidiary is in material
breach or default with respect to any of such licenses;
(2) no other party thereto is in material breach or default with
respect to any of such licenses; and
(3) no event has occurred which, with due notice or lapse of
time or both, would constitute such a default.
5.18 OWNERSHIP OF NECESSARY ASSETS AND RIGHTS.
(a) Except for
(1) those assets and services to be provided pursuant to the
terms of the Transition Services Agreement,
(2) those assets and services that, prior to the Closing, were
provided to Company or any Company Subsidiary by Seller or
any of its other Affiliates, and
(3) the capital stock of the UK Subsidiary and the related
trademarks and other intangible assets that are described at
Section 5.18 of the Disclosure Schedule (which have been
distributed to Seller prior to the execution of this
Agreement),
the assets of Company and Company Subsidiaries are and as of the Closing will be
in all material respects sufficient for the conduct of the Business immediately
following the Closing in substantially the same manner as currently conducted,
subject to such changes as are implemented in accordance with Article 7.
(b) Company has good and valid title to, or a valid leasehold interest
in, all machinery, equipment and other tangible assets and personal property
used by the Business, wherever located, or shown in the Balance Sheet or
acquired after the date thereof, which in any case are material to and necessary
for the conduct of the Business as a whole as presently conducted, free and
clear of all Encumbrances, except for Permitted Encumbrances and except for
properties and assets disposed of in the ordinary course of business since the
Balance Sheet Date.
(c) Since May 1, 2005, Company has not reduced in any material respect
its ordinary course practices with respect to the maintenance and repair of its
material operating assets.
5.19 TAX MATTERS. Notwithstanding the generality of any other
representations and warranties in this Agreement, this Section 5.19 shall be
deemed to contain the only representations and warranties in this Agreement or
arising out of the transactions contemplated herein with respect to Taxes.
Except as would not reasonably be expected to have a Company Material Adverse
Effect:
25
(a) Company and any affiliated combined or unitary group of which
Company is a member, as the case may be ("TAX AFFILIATES") have filed within the
time and in the manner prescribed by Law all Tax Returns required to be filed by
it or any Company Subsidiary. All such Tax Returns are true and complete.
Company and its Tax Affiliates have paid or will pay all Taxes which are due and
payable with respect to such Tax Returns and Company has set up in its financial
records adequate reserves for all Taxes in dispute or not yet due and payable.
(b) there are no liens for Taxes outstanding against Company, any
Company Subsidiary, their respective assets or against the Shares, except for
Permitted Encumbrances.
(c) all Taxes and assessments that Company or a Company Subsidiary is
required to withhold or to collect have been duly withheld or collected, and all
such withholdings and collections have either been duly and timely paid over to
the appropriate Taxing Authorities or are, together with the payments due or to
become due in connection therewith, duly reflected in Company's financial
records in accordance with GAAP.
(d) there are no outstanding waivers or comparable consents regarding
the application of the statute of limitations with respect to any Taxes that
have been given by Company or any Company Subsidiary.
(e) no federal, state, local or foreign audits or other administrative
or court proceedings are presently pending against Company or any Company
Subsidiary with regard to any Taxes or Tax Returns. No deficiency for any Taxes
has been proposed, asserted or assessed against Company or any Company
Subsidiary which has not been resolved and paid in full.
(f) neither Company nor any Company Subsidiary has any liability for
Taxes in a jurisdiction where it does not file a Return, nor has Company or any
Company Subsidiary received notice from a taxing authority in such a
jurisdiction that it is or may be subject to taxation by that jurisdiction.
(g) neither Company nor any Subsidiary constitutes either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of shares qualifying for
tax-free treatment under Section 355 of the Code which took place during the two
year period ending on the date of this Agreement.
5.20 PRODUCTS. Company has not, during the past three years, whether
voluntarily or as a result of any action by any Governmental Body or regulatory
authority or trade or consumer group, generally recalled or withdrawn a product
for any reason, including any manufacturing or labeling defect, or issued any
press release or public statements advising its trade customers or consumers of
its products to treat such products in any manner other than in the ordinary
course.
5.21 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations
and warranties contained herein or in the certificate to be delivered by Seller
pursuant to Section 3.3(a) of this Agreement, none of Seller, any Affiliate of
Seller, any of its or its Affiliates' officers, directors, employees, agents,
advisors, representatives or any other Person makes any representations or
warranties, and Seller hereby disclaims any other representations or warranties,
whether made by Seller or any Affiliate of Seller, or any of their respective
officers, directors, employees, agents, advisors, representatives or other
Person, with respect to the
26
execution and delivery of this Agreement, the transactions contemplated hereby
or Company, the Company Subsidiaries or their respective businesses, assets or
liabilities, notwithstanding the delivery or disclosure to Buyer or its
representatives of any documentation or other information with respect to any
one or more of the foregoing.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
6.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
6.2 POWER. Buyer has all requisite corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
purchase of the Shares and other transactions contemplated by this Agreement.
6.3 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate and stockholder action on
the part of Buyer. This Agreement has been duly and validly executed and
delivered by Buyer and is a valid and binding obligation of Buyer, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general principles of equity.
6.4 NONCONTRAVENTION. Neither the execution, delivery and performance of
this Agreement, nor the consummation of the transactions contemplated hereby,
nor compliance by Buyer with any of the provisions hereof will:
(a) conflict with or result in a breach of any provision of its
Certificate of Incorporation or By-laws or similar governing documents;
(b) cause a default (or give rise to any right of termination,
cancellation or acceleration) under any material agreement or other material
obligation to which Buyer is a party, except for such matters as would not
reasonably be expected to result in a material adverse effect upon the ability
of Buyer to perform its obligations under this Agreement; or
(c) assuming compliance with the HSR Act, violate any Law applicable
to Buyer, except as would not reasonably be expected to result in a material
adverse effect upon the ability of Buyer to perform its obligations under this
Agreement.
6.5 CONSENTS. No consent or approval by, or any notification of or filing
with, any Governmental Body is required in connection with the execution,
delivery and performance by Buyer of this Agreement, or the consummation by
Buyer of the transactions contemplated hereby, except for compliance with the
HSR Act and except for any such consent, approval, notification or filing the
failure of which to obtain or make would not reasonably be expected to result in
a material adverse effect upon Buyer's ability to perform its obligations under
this Agreement.
27
6.6 INVESTMENT INTENT. Buyer is acquiring the Shares for its own account
for investment without a view to the sale, distribution, subdivision, transfer
or fractionalization thereof. Buyer acknowledges that the Shares (a) have not
been registered under the Securities Act of 1933, as amended, or any state
securities law and there is no commitment to register the Shares, (b) have no
public or other market, and (c) cannot be resold, unless they are subsequently
registered or an exemption from registration is available. Buyer has such
knowledge and experience in financial and business matters and in investments of
this type that it is capable of evaluating the risks and merits of its
investment in the Shares and of making an informed investment decision.
6.7 LITIGATION. No Proceeding has, as of the date of this Agreement, been
commenced or, to the knowledge of Buyer, threatened against Buyer that
challenges the validity of this Agreement or the transactions contemplated
hereby or that may have the effect of preventing, delaying or impairing, or
making illegal the transactions contemplated hereby, or materially affecting
Buyer's ability to perform its obligations hereunder or to consummate the
transactions contemplated hereby.
6.8 BROKERS. Buyer has not employed any broker, finder or investment banker
in connection with the transactions contemplated by this Agreement which would
be entitled to a fee or commission in connection with such transactions, except
for any broker, finder or investment banker whose fees or commissions shall be
the sole responsibility of Buyer.
6.9 FINANCIAL CAPABILITY.
(a) Buyer will have, as of the Closing Date, and subject to the terms
and conditions of the financing commitment letter addressed to Buyer from UBS
Loan Finance LLC and UBS Securities LLC, dated July 21, 2005 (the "COMMITMENT
LETTER") and previously delivered to Seller, access to funds which will be in an
amount sufficient to effect the Closing, including payment of the Purchase
Price, and all other transactions contemplated by this Agreement and the
Transition Services Agreement.
(b) Since January 1, 2005, Buyer has not undertaken any acquisition of
any business, division or material assets (other than inventory acquired in the
ordinary course of business); incurred, assumed, guaranteed or otherwise become
liable for any indebtedness or other liabilities other than trade payables or
borrowings under existing lines of credit, in each case, in the ordinary course
of business; undertaken any other transaction outside the ordinary course of
business that would reasonably be expected to impair, delay or prevent Buyer's
ability to consummate the transactions contemplated hereby, including its
ability to obtain the financing for payment of the Purchase Price; or suffered a
Buyer Material Adverse Effect.
6.10 ENVIRONMENTAL AUDITS. Schedule 6.10 attached hereto is a true and
complete list of all Phase 1 environmental audits and other environmental audits
or reports obtained by Buyer or its representatives with respect to any of the
Properties. Buyer has furnished true and complete copies of such audits and
reports to Seller and all matters disclosed by such audits and reports shall be
deemed for all purposes of this Agreement as having been disclosed by Seller
pursuant to Section 5.13.
28
6.11 NON-RELIANCE. Buyer acknowledges that it, together with its advisors,
has made its own investigation of Company, Company Subsidiaries and their
respective businesses and assets. Buyer is not relying on any representations,
warranties or statements other than those expressly set forth in this Agreement
and is not relying on implied warranties (whether of merchantability or fitness
for a particular purpose or otherwise), or upon any representation or warranty
whatsoever as to the prospects (financial or otherwise), or the viability or
likelihood of success, of the businesses of Company and Company Subsidiaries as
conducted after the Closing Date, or upon the information (including any
forecasts or projections) contained in the Confidential Memorandum furnished by
▇▇▇▇▇▇▇, Sachs & Co. on behalf of Seller, or in any other materials provided by
Seller, Company, their Affiliates or any of their respective officers,
directors, employees, agents, advisers or representatives, including any data
room or management presentations, and none of Seller, Company, their Affiliates,
or their respective officers, directors, employees, agents, advisers or
representatives shall have any liability resulting therefrom.
ARTICLE 7
COVENANTS OF THE PARTIES UNTIL CLOSING
7.1 CONDUCT OF BUSINESS PENDING CLOSING. Except as set forth in Section 7.1
of the Disclosure Schedule or as otherwise provided in this Agreement, between
the date hereof and the Closing, Seller shall cause Company and each Company
Subsidiary to:
(a) operate its respective business in the ordinary course consistent
with past practice in accordance with applicable Laws, unless Seller obtains the
prior written consent of Buyer, which consent shall not be unreasonably
withheld, delayed or conditioned;
(b) use its reasonable best efforts to preserve its business
organization and goodwill, keep available the services of its officers and
employees, and maintain satisfactory relationships with vendors, customers and
others having business relationships with it; and
(c) notify Buyer of any governmental or third party complaint,
investigations or hearings involving Company or a Company Subsidiary (or written
communications indicating that the same are contemplated) if such complaint,
investigation or hearing would have a Company Material Adverse Effect.
7.2 NEGATIVE COVENANTS. Except as set forth in Section 7.2 of the
Disclosure Schedule, as otherwise provided in this Agreement or as required by
applicable Law, between the date hereof and the Closing, unless Seller obtains
the prior written consent of Buyer, which consent shall not be unreasonably
withheld, delayed or conditioned, Seller shall cause Company and each Company
Subsidiary not to:
(a) make any change in Company's or such Company Subsidiary's
authorized or issued capital stock, grant any option, warrant or other right to
purchase or otherwise acquire any capital stock of Company or any Company
Subsidiary, issue or make any security convertible into capital stock of Company
or any Company Subsidiary, grant any registration rights, or purchase, redeem,
retire or make any other acquisition of any shares of capital stock of Company
or any Company Subsidiary;
29
(b) amend (as applicable) the articles or certificate of
incorporation, bylaws, or other organizational document of Company or any
Company Subsidiary, or enter into any merger, share exchange or dissolution with
respect to Company or any Company Subsidiary;
(c) enter into, adopt, amend in any material respect or terminate any
Company Contract, other than in the ordinary course of business;
(d) sell, assign, transfer or abandon assets of Company or any Company
Subsidiary or any part thereof (including the factoring of accounts receivable)
that are material to the operations of Company, except (i) transactions pursuant
to existing Company Contracts (or Company Contracts entered into after the date
hereof that do not violate Section 7.2(c)), and (ii) dispositions of inventory
or worn-out or obsolete equipment and machinery, in each case in the ordinary
course of business and consistent with past practice, provided that nothing in
this Section 7.2 shall restrict Company or any Company Subsidiary from making
any cash dividend or cash distribution to its respective shareholder;
(e) make or commit for capital expenditures of more than $250,000 in
the aggregate in excess of those provided for in Company's capital expenditure
budget for its current fiscal year;
(f) settle any material litigation if the settlement requires Company
or any Company Subsidiary to agree to take, or refrain from taking, any action
after the Closing Date (other than a payment of money that is entirely reflected
in the computation of the Adjustment Amount);
(g) make any change in the financial accounting principles or policies
of Company or any Company Subsidiary, except as required by applicable Law or
GAAP;
(h) enter into any loan agreement, credit agreement, promissory note
or other agreement for borrowing money (other than intercompany arrangements
with Company Subsidiaries, Seller or its Affiliates in the ordinary course of
business) or issue any debt securities or assume, guarantee or endorse the
obligations of any other persons;
(i) acquire, or enter into an agreement to acquire, the capital stock
or substantially all the assets or business of any other entity;
(j) adopt, grant or extend any increase in compensation or benefits
for directors, officers or employees of Company, except as required by the terms
of existing Company Contracts and except for budgeted annual merit increases
scheduled to be effective August 1, 2005 as disclosed in Section 7.2 of the
Disclosure Schedule;
(k) issue or sell any additional shares or equity interest or any
options, warrants, conversion privileges or rights of any kind to acquire any
shares of capital stock or equity interests of Company;
(l) fail to maintain and repair Company's facilities in the ordinary
course of business consistent with Company's past practices;
30
(m) fail to carry out promotional and marketing programs in the
ordinary course of business consistent with Company's past practices; or
(n) adopt or amend any bonus, profit sharing, stock option, pension,
retirement, deferred compensation or other employee benefit plan, agreement,
trust, fund or arrangements for the benefit or welfare of any director or
employee of the Company, except as required by Law.
7.3 ACCESS.
(a) Prior to Closing, Buyer and its officers, directors, partners,
members, attorneys, accountants and representatives shall be afforded reasonable
access during normal business hours to the books and records of Company and each
Company Subsidiary, upon reasonable prior notice, and Company shall promptly
make available to Buyer other information concerning Company and the Company
Subsidiaries, their business, properties and personnel as Buyer may reasonably
request; provided, however, that any such access shall be conducted at Buyer's
expense, under the reasonable supervision of Company's personnel and in such a
manner as to maintain the confidentiality of such information and not to
interfere with the normal operation of the business of Company or the Company
Subsidiaries.
(b) Notwithstanding anything to the contrary contained in this
Agreement, none of Company, any Company Subsidiary or Seller shall have any
obligation to disclose any information to Buyer to the extent such disclosure
would (a) result in a material breach of any Contract to which Company, such
Company Subsidiary or Seller is a party or is otherwise bound, (b) reasonably be
expected to jeopardize any attorney-client or other legal privilege of Company,
such Company Subsidiary or Seller, or (c) result in a violation of any Laws or
fiduciary duties applicable to Company, such Company Subsidiary or Seller. The
information contained in the Disclosure Schedule or delivered to Buyer or its
authorized representatives pursuant hereto shall be subject to the
Confidentiality Agreement, and, for that purpose and to that extent, the terms
of the Confidentiality Agreement are incorporated herein by reference. The
Confidentiality Agreement will terminate effective as of the Closing.
7.4 CONSENTS. Prior to Closing, Seller, Company and Buyer shall cooperate
and use commercially reasonable efforts to obtain all consents, permits,
approvals of, and exemptions by, any Governmental Body and all consents of any
third party, in each case, necessary for the consummation of the transactions
contemplated by this Agreement; PROVIDED that Seller and its Affiliates
(including Company and the Company Subsidiaries) shall not be required to expend
any money to obtain such consents, and PROVIDED FURTHER, that, notwithstanding
the foregoing, the actions of Seller and Buyer with respect to filings,
approvals and other matters pursuant to the HSR Act and any local, state,
federal (other than the HSR Act) or foreign antitrust Law applicable to the
Share Purchase ("OTHER ANTITRUST REGULATIONS") shall be governed by Section 7.5.
Each of the parties hereto shall diligently assist and cooperate in preparing
and filing all documents required to be submitted to any Governmental Body in
connection with such transactions and in obtaining any consents, waivers,
authorizations or approvals which may be required to be obtained in connection
with such transactions. With respect to the New Jersey Department of
Environmental Protection (NJDEP) ISRA approval referred to in Sections 8.3 and
9.3, Seller, at its cost, will cause Company to file such notices, assessments,
remediation
31
agreement applications and other documents and information required for review
by NJDEP in order to allow Seller to transfer ownership of Company to Buyer
prior to Company's compliance with ISRA. Seller will obtain Buyer's input and
approval, not to be unreasonably withheld, in regards to any ISRA filing. Buyer
shall cooperate with Seller and execute and deliver to NJDEP such information,
certificates and other information as may be required under ISRA. Seller agrees
to use reasonable efforts to obtain approval by NJDEP of an ISRA remediation
agreement and funding source to be provided by and in the name of Company, if
required, that are limited to the existing remediation work at the Pomona
property and an ISRA remediation funding source not to exceed Company's existing
estimated reserves for Pomona. If, however, NJDEP requires an ISRA remediation
funding source in excess of Company's existing estimated reserves for Pomona,
Buyer agrees that Company will provide an ISRA remediation funding source in the
amount required by NJDEP.
7.5 HSR ACT. Seller and Buyer shall each promptly prepare and file any
notifications and reports which may be required with respect to this Agreement
by the HSR Act, including a request for early termination of the waiting period,
and respond promptly to inquiries from the Federal Trade Commission or the
Department of Justice resulting from the filings of such notifications, and
otherwise shall use their best efforts to comply with the requirements of such
Act. Buyer shall pay the fee required for filing such notification. If any
Governmental Body requests information or documents concerning the transactions
contemplated by this Agreement, each party agrees to consult with the other
party's counsel about any communications with such Governmental Body (in
advance, where practicable, and in any event promptly), to use its reasonable
best efforts to respond appropriately to such request, as soon as reasonably
practicable, to cooperate with the other party in responding to any request, and
to allow the other party to participate in meetings with any Governmental Body.
The parties hereto shall use their respective commercially reasonable best
efforts and take all necessary action to obtain any clearance under the HSR Act
or other authorization of any Governmental Body required under Other Antitrust
Regulations in connection with the transactions contemplated hereby or to
resolve any objections that may be asserted by any Governmental Body with
respect to the transactions contemplated hereby. In order to avoid any
Governmental Body from filing suit, or taking any other action, to forbid or
delay consummation of the transaction, Buyer shall offer undertakings acceptable
to the relevant Governmental Body, including proposing, negotiating, committing
to and effecting, by consent decree, hold separate order or otherwise, the sale,
divestiture or disposition of, or the imposition of any limitation upon, such
assets or businesses of Buyer (including its subsidiaries) or Company or any
Company Subsidiary (so long as conditioned upon, and not occurring prior to, the
Closing), along with any ancillary agreements.
7.6 PUBLIC STATEMENTS. Except as required by applicable Law or securities
exchange rules (in which event the parties shall, to the extent reasonably
practicable, consult with each other in advance), prior to the Closing Date, no
press release or other public announcement (if materially different than those
previously made) relating to the transactions contemplated by this Agreement
shall be made by any party to this Agreement or its representatives without
prior consultation among Seller and Buyer.
7.7 SATISFACTION OF COMPANY DEBT. At or before Closing, Seller shall repay,
or cause to be repaid, on behalf of Company, all indebtedness for borrowed money
of Company or any Company Subsidiary, and shall obtain the release of any
Encumbrance (other than Permitted
32
Encumbrances) securing such indebtedness, PROVIDED that the $150,000 conditional
loan from the Maryland Department of Business and Economic Development and the
$100,000 conditional grant from Washington County, Maryland shall not be
considered to be "indebtedness for borrowed money" for purposes of this Section
7.7.
7.8 SATISFACTION OF CONDITIONS.
(a) Between the date of this Agreement and the Closing, each party
shall use its reasonable best efforts to cause the conditions to Closing set
forth in Articles 8 and 9 below to be satisfied, to the extent within the
control of such party.
(b) Notwithstanding anything else contained herein, Buyer shall use
its best efforts to cause the condition to Closing set forth in Section 8.6
(Financing) below to be satisfied as promptly as practicable, including using
its best efforts to satisfy all conditions within the control of Buyer that are
required to obtain such financing under the Commitment Letter; PROVIDED that in
the event that such financing is not obtained from the sources referred to in
the Commitment Letter, Buyer shall use its best efforts to obtain financing from
other sources as promptly as practicable (it being understood that Buyer will
not be required to accept financing that would be on economic terms (including
restrictive covenants) that would be materially worse in the aggregate to Buyer
than the economic terms associated with the financing available to Buyer under
the Commitment Letter). In furtherance and not in limitation of the preceding
sentence, prior to Closing, Buyer shall not undertake any acquisition of any
business, division or material assets (other than inventory in the ordinary
course of business); incur, assume, guarantee or otherwise become liable for any
indebtedness or other liabilities other than trade payables or borrowings under
existing lines of credit, in each case, in the ordinary course; or undertake any
other transaction outside the ordinary course of business that would reasonably
be expected to impair, delay or prevent Buyer's ability to consummate the
transactions contemplated hereby, including its ability to obtain financing for
payment of the Purchase Price.
7.9 NO SALE. Between the date of this Agreement and the Closing Date (or
earlier termination of this Agreement in accordance with its terms), Seller
agrees not to sell, pledge, transfer or otherwise place any Encumbrance on the
Shares.
7.10 NO NEGOTIATIONS.
(a) Until the earliest to occur of the Closing Date or the termination
of this Agreement in accordance with its terms, Seller shall not, and shall
direct the officers of Company and Seller's agents or representatives, including
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., not to solicit any proposal, indication of interest or
offer from any Person (including any of the officers or employees of Company)
relating to any liquidation, dissolution, recapitalization, merger,
consolidation or acquisition or purchase of all or a material portion of the
assets (other than inventory in the ordinary course of business) of, or any
equity interest in, Company or other similar transaction or business combination
involving the Business, or participate in any negotiations regarding any such
transaction; PROVIDED, however, that if Seller, after 60 days from the date of
this Agreement, determines in good faith that Buyer will not likely be able to
consummate the Closing by the date this Agreement terminates in accordance with
its terms, Seller may provide Buyer with written notice of such determination,
following which notice
33
Buyer and Seller will, within five business days, consult with each other
regarding the prospects for consummating the Closing. If, following such
consultation, Seller in good faith again determines that Buyer will not likely
be able to consummate the Closing by the date this Agreement terminates in
accordance with its terms, Seller may provide Buyer with a written notice
regarding such determination and Seller's obligations under this Section 7.10
will cease ten days following Buyer's receipt of such second written notice.
(b) The foregoing subsection (a) shall not preclude Seller, or
Seller's agents or representatives from taking any action to solicit any
proposal, indication of interest or offer from any Person relating to, or
otherwise take any action with respect to, any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of all or a
material portion of the assets of, or any equity interest in, Seller taken as a
whole or any Subsidiary of Seller (other than Company and Company Subsidiaries),
or other similar transaction or business combination involving an interest in
Seller taken as a whole or any Subsidiary of Seller (other than Company and
Company Subsidiaries).
ARTICLE 8
CONDITIONS TO OBLIGATION OF BUYER
The obligation of Buyer to consummate the transactions contemplated by this
Agreement is subject to the satisfaction at or prior to the Closing Date of the
following conditions unless waived by Buyer in its sole discretion:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Seller in this Agreement that are qualified as to Company Material Adverse
Effect shall be true and correct, and the representations and warranties of
Seller in this Agreement that are not so qualified shall be true and correct
except as would not reasonably be expected to have a Company Material Adverse
Effect, in each case as of the date hereof, and, except to the extent such
representations and warranties refer to a specific date, as of the Closing Date
as though made on the Closing Date.
8.2 PERFORMANCE OF AGREEMENTS. Seller shall have performed and complied in
all material respects with all covenants, obligations and agreements to be
performed or complied with by it on or before the Closing pursuant to this
Agreement or any Schedule or Exhibit hereto, including each of Seller's
obligations under Section 3.3.
8.3 APPROVALS. All waiting periods applicable under the HSR Act shall have
expired or been terminated. Except as would not reasonably be expected to result
in a Company Material Adverse Effect or a Buyer Material Adverse Effect, all
other consents, authorizations, approvals of, and expirations of waiting periods
imposed by, any Governmental Body, the failure of which to obtain or occur would
make the consummation of the transactions contemplated hereby illegal (including
action by the New Jersey Department of Environmental Protection under the New
Jersey Industrial Site Recovery Act allowing the Share Transfer or approving a
remediation agreement to allow the Closing to proceed pending such action),
shall have been obtained or shall have occurred.
34
8.4 LEGAL MATTERS. No preliminary or permanent injunction or other
judgment, order or decree issued by a court of competent jurisdiction which
prevents or materially delays the consummation of the transactions contemplated
hereby shall have been issued and remain in effect, no Governmental Body shall
have commenced a Proceeding that remains pending seeking any such injunction or
other judgment, order or decree, and no statute, rule or regulation shall have
been enacted, promulgated or enforced by any Governmental Body that prohibits or
materially delays the consummation of, or imposes material limitations on the
parties' ability to consummate the transactions contemplated by this Agreement.
8.5 MATERIAL ADVERSE EFFECT. No Company Material Adverse Effect shall have
occurred since the date of this Agreement and no change, event, effect or
occurrence shall have occurred since the date of this Agreement that would
reasonably be expected to result in a Company Material Adverse Effect.
8.6 FINANCING. Buyer shall have obtained funds in an amount sufficient to
finance the payment of the Purchase Price.
ARTICLE 9
CONDITIONS TO OBLIGATION OF SELLER
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to the satisfaction at or prior to the Closing Date of
the following conditions unless waived by Seller in its sole discretion:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Buyer in this Agreement shall be true and correct except as would not reasonably
be expected to have a Buyer Material Adverse Effect, in each case as of the date
hereof and as of the Closing Date as though made on the Closing Date.
9.2 PERFORMANCE OF AGREEMENTS. Buyer shall have performed and complied in
all material respects with all covenants, obligations and agreements to be
performed or complied with by it on or before the Closing pursuant to this
Agreement or any Schedule or Exhibit hereto, including each of Buyer's
obligations under Section 3.4.
9.3 APPROVALS. All waiting periods applicable under the HSR Act shall have
expired or been terminated. Except as would not reasonably be expected to have a
material adverse effect on Seller and its Affiliates (other than Company and
Company Subsidiaries) and their businesses, all other consents, authorizations,
approvals of, and expirations of waiting periods imposed by, any Governmental
Body, the failure of which to obtain or occur would make the consummation of the
transactions contemplated hereby illegal (including action by the New Jersey
Department of Environmental Protection under the New Jersey Industrial Site
Recovery Act allowing the Share Transfer or approving a remediation agreement to
allow the Closing to proceed pending such action), shall have been obtained or
shall have occurred.
9.4 LEGAL MATTERS. No preliminary or permanent injunction or other
judgment, order or decree issued by a court of competent jurisdiction which
prevents or materially delays the consummation of the transactions contemplated
hereby shall have been issued and remain in effect, no Governmental Body shall
have commenced a Proceeding that remains pending seeking
35
any such injunction or other judgment, order or decree, and no statute, rule or
regulation shall have been enacted, promulgated or enforced by any Governmental
Body that prohibits or materially delays the consummation of, or imposes
material limitations on the parties' ability to consummate the transactions
contemplated by this Agreement.
9.5 RELEASE OF GUARANTEES. Seller and any Affiliates of Seller (other than
Company or any Company Subsidiary) shall have been released from the arrangement
by which Seller or any Affiliate of Seller (other than Company or any Company
Subsidiary) guarantees any obligations or liabilities of Company or any
Subsidiary listed at Section 9.5 of the Disclosure Schedule.
ARTICLE 10
TERMINATION
10.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by Seller or Buyer at any time after October 31, 2005 other than
if caused by the failure of the party seeking to terminate this Agreement to
perform in all material respects its obligations under this Agreement required
to be performed at or prior to the Closing or a breach of such party's
representations or warranties;
(b) by Buyer, (i) in the event of a breach of any representation,
warranty, covenant or other agreement contained in this Agreement which would
give rise to the failure of the conditions in Section 8.1 or 8.2, and which,
with respect to any such breach that is capable of being cured, is not cured
within 60 days after receipt of written notice thereof by Seller, or (ii) in the
event any of the conditions in Article 8 have become impossible to satisfy;
(c) by Seller, (i) in the event of a breach of any representation,
warranty, covenant or other agreement contained in this Agreement which would
give rise to the failure of the conditions in Section 9.1 or 9.2, and which,
with respect to any such breach that is capable of being cured, is not cured
within 60 days after receipt of written notice thereof by Buyer, or (ii) in the
event any of the conditions in Article 9 have become impossible to satisfy;
(d) if a Governmental Body issues a permanent injunction or other
order prohibiting the Closing and such injunction or order shall have become
final and non-appealable; provided that the party seeking to terminate this
Agreement pursuant to this clause (d) shall have used its reasonable best
efforts to reverse or lift such injunction or order; or
(e) by mutual written consent of Buyer and Seller.
10.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
and abandonment of the transactions contemplated hereby pursuant to Section
10.1, written notice thereof shall forthwith be given to the other party and the
transactions contemplated hereby shall be abandoned, without further action by
either party. The provisions of this Article 10 and Article 14 shall survive any
such termination. In addition, the Confidentiality Agreement shall survive any
such termination in accordance with its terms. Nothing in this Article 10 shall
be
36
deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement.
ARTICLE 11
POST-CLOSING COVENANTS; TAX MATTERS
11.1 ACCESS TO RECORDS. Following the Closing, Buyer shall (a) upon
reasonable request provide Seller, its Affiliates, accountants, attorneys and
other representatives reasonable access during normal working hours to the
books, records and personnel of Company and Company Subsidiaries relating to
transactions and the operation of the business of Company and Company
Subsidiaries through the Closing Date and the right to make copies thereof at
Seller's expense; and (b) maintain such books and records for a period of at
least five years after the Closing Date and give Seller the opportunity to keep
any books and records relating to the pre-Closing period which Buyer thereafter
intends to no longer maintain.
11.2 FURTHER ASSURANCES. Each party shall at any time and from time to time
after the Closing, upon the request of the other, do, execute, acknowledge and
deliver, and cause to be done, executed, acknowledged or delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney or
assurances as may be required for the better transferring, assigning, conveying,
granting, assuring and confirming to Buyer, or for aiding and assisting in the
collection of or reducing to possession by Buyer, of the Shares or to vest in
Buyer title to the Shares and otherwise to consummate the transactions
contemplated by this Agreement. Upon written request by Buyer or Company at any
time within three years after the Closing Date, to the extent that Seller has
records or files concerning Company, Company Subsidiaries or their respective
operations, assets, liabilities or employees, and such records were not as of
the Closing Date also available at a Company location, Seller will provide such
records or files or copies thereof to Buyer.
11.3 TAX MATTERS.
(a) All transactions not in the ordinary course of business occurring
after the Closing shall be reported on Buyer's consolidated U.S. federal Income
Tax Return in accordance with Treasury Regulation ss. 1.338-1(d). No election
shall be made under Treasury Regulation ss. 1.1502-76(b)(2)(ii) (relating to
ratable allocation of a year's items) in connection with the transactions
contemplated by this Agreement.
(b) Anything in any other agreement to the contrary notwithstanding,
all Tax allocation, indemnity, sharing or similar agreements or arrangements
(other than this Agreement), whether or not written, by and among Seller or any
of its Affiliates on the one hand and Company or any Company Subsidiary on the
other hand (other than those agreements that are solely among Company and
Company Subsidiaries) shall be terminated immediately prior to the Closing, and
after the Closing, neither Company nor any Company Subsidiary shall be bound
thereby or have any liability or any rights thereunder.
(c) Seller shall be responsible for, pay, or cause to be paid, and
indemnify Buyer and each of its Affiliates (including Company and Company
Subsidiaries after the Closing
37
Date) (each a "BUYER TAX INDEMNITEE") and hold each Buyer Tax Indemnitee
harmless from and against
(1) all U.S. federal Income Taxes of Company or any Company
Subsidiary, including all U. S. federal Income Taxes
attributable to a 338(h)(10) Election, for all Tax periods
that end on or prior to the Closing Date,
(2) all state Income Taxes of Company or any Company Subsidiary
for all Tax periods that end on or prior to the Closing Date
to the extent that such state Income Taxes are reportable on
a consolidated, combined or unitary Tax Return which
includes any member of the Seller Group, and
(3) any state Income Taxes of Company or any Company Subsidiary
that are not reportable on a consolidated, combined or
unitary Tax Return which includes a member of the Seller
Group and any Other Taxes of Company or any Company
Subsidiary, in each case, for any Tax period that ends on or
prior to the Closing Date to the extent such Taxes arise out
of any breach of any representation or warranty contained in
Section 5.19 (Tax Matters).
Notwithstanding anything to the contrary in this Agreement, Seller shall not be
responsible for, pay, cause to be paid or indemnify or otherwise hold harmless
any Buyer Tax Indemnitee for any Taxes taken into account in the Closing Working
Capital Statement or any Taxes for any Tax period that ends after the Closing
Date. Seller shall be entitled to any refund of Taxes to the extent that such
refund relates to a Tax liability paid or caused to be paid by Seller or that is
otherwise the responsibility of Seller under this Section 11.3(c).
(d) Buyer shall, except to the extent that such Taxes are the
responsibility of Seller under Section 11.3(c), be responsible for, pay or cause
to be paid, and indemnify Seller and its Affiliates (other than Company and
Company Subsidiaries) (each a "SELLER TAX INDEMNITEE") and hold each Seller Tax
Indemnitee harmless from and against all Taxes imposed upon or relating to
Company and Company Subsidiaries. Buyer shall be entitled to any refunds
relating to Company and Company Subsidiaries except to the extent that Seller is
entitled to such refund under Section 11.3(c) or Section 11.3(k).
(e) Seller shall prepare and file or cause to be prepared and filed
(including causing Company to continue to prepare and file those Tax Returns
that Company has historically prepared in the ordinary course of its business)
(i) all United States consolidated federal Income Tax Returns for the affiliated
group of which Seller is the common parent, (ii) any Tax Return which includes
Seller or any other member of the Seller Group (including any state Income Tax
Returns filed on a consolidated basis), (iii) any Tax Return due on or before
the Closing Date, and (iv) any other Tax Return on which Taxes that are the
responsibility of Seller, or refunds to which Seller is entitled, under Section
11.3(c) are reportable.
38
(f) Buyer shall, except to the extent that such Tax Returns are the
responsibility of Seller under Section 11.3(e), file or cause to be filed all
Tax Returns with respect to Company and Company Subsidiaries.
(g) As soon as practicable, but in any event within 30 days after
Buyer's or Seller's request, as the case may be, from and after the Closing
Date, Buyer and Seller shall cooperate and shall deliver to each other such
information and data concerning Company and Company Subsidiaries and make
available such knowledgeable employees of Company and Company Subsidiaries as
either party may request, including providing the information and data required
to complete and file all Tax Returns which Seller or Buyer may be required to
file with respect to Company and Company Subsidiaries or to respond to audits by
any Taxing Authority with respect to Company and Company Subsidiaries, and to
otherwise enable the parties to satisfy their accounting, Tax and other
legitimate requirements. Such cooperation and information shall include
designation of an officer of Seller as an officer of Company or any of Company
Subsidiaries for the purpose of signing Tax Returns and defending audits and
promptly forwarding copies of appropriate notices and forms or other
communications received from or sent to any Taxing Authority which relate to
Company or Company Subsidiaries, and providing copies of all relevant Tax
Returns, together with accompanying schedules and related work papers, documents
relating to rulings or other determinations by Taxing Authorities and records
concerning the ownership and tax basis of property, which Buyer, Company or
Company Subsidiaries may possess. Each of Seller, Buyer, Company and Company
Subsidiaries shall make its employees and facilities available during normal
business hours on a mutually convenient basis to provide explanation of any
documents or information provided hereunder.
(h) For a period of 10 years after the Closing Date (or such longer
period as is required by Law), Buyer shall, and shall cause Company and Company
Subsidiaries to, retain all Tax Returns, books and records (including computer
files) of, or with respect to the activities of, Company and Company
Subsidiaries for all Tax periods ending on or prior to the Closing Date.
Thereafter, Buyer shall not, and shall cause Company and Company Subsidiaries
not to, dispose of any such Tax Returns, books or records unless it first offers
such Tax Returns, books and records to Seller and Seller fails to accept such
offer within 60 days of its being made.
(i) Buyer and Seller shall, and shall cause their respective
subsidiaries to, cooperate in the preparation of all Tax Returns relating in
whole or in part to Tax periods ending on or before the Closing Date that are
required to be filed after such date and all Tax Returns for Tax periods
beginning before the Closing Date and ending after the Closing Date; PROVIDED
that Seller shall have the sole authority to make all determinations and
elections with respect to such Tax Returns to the extent such determinations and
elections may affect the amount of Taxes for which Seller is liable. Any state
Income Tax Return that is not a consolidated, combined or unitary Tax Return of
Company or any Company Subsidiary and any Other Tax Return of Company or any
Company Subsidiary, in each case, for any Tax period, or portion thereof, ending
on or prior to the Closing Date, shall be prepared in a manner consistent with
past practices of Seller.
(j) Buyer shall promptly notify Seller upon receipt by Buyer or any of
its Affiliates of notice of any claim, assessment or dispute relating to any Tax
Proceeding which Seller is entitled to control hereunder and shall promptly
forward to Seller any communications
39
received from or sent to any Taxing Authority in connection with any such Tax
Proceeding. Notwithstanding anything to the contrary contained in this
Agreement, Seller shall have the right to control, contest, resolve and defend
any Tax Proceeding (including having the right to determine whether and when to
settle any Tax Proceeding) which may affect the amount of Taxes for which Seller
is liable (or refunds to which Seller is entitled) hereunder or otherwise,
PROVIDED, HOWEVER, that, to the extent that such Tax Proceeding may reasonably
be expected to affect a material amount of Taxes for which Buyer is liable (or
refunds to which Buyer is entitled) hereunder, Seller shall keep Buyer informed
in a timely manner of all material actions taken or proposed to be taken by
Seller with respect to such Tax Proceeding and shall consult with Buyer and
offer Buyer a reasonable opportunity to comment before submitting any material
written materials prepared or furnished in connection with such Tax Proceeding.
Notwithstanding any other provision, neither Buyer, Company nor any of their
respective subsidiaries or Affiliates shall be entitled to participate in any
Tax Proceeding with respect to any United States consolidated federal Income Tax
Return which includes Seller or any other consolidated, combined or unitary Tax
Return which includes any member of the Seller Group, nor shall Buyer, Company
or any of their respective subsidiaries or Affiliates be entitled to any
information, except to the extent relating solely to Company or Company
Subsidiaries, regarding any such Tax Return (or any Tax Returns of Seller).
(k)
(1) Buyer agrees that if as the result of any audit adjustment
(or adjustment in any other Tax Proceeding) made with
respect to any Tax Item which relates to any Tax for which
Seller is responsible under Section 11.3(c), by any Taxing
Authority with respect to a Tax period (or portion thereof)
ending on or prior to the Closing Date, Buyer or any of its
Affiliates, including Company and Company Subsidiaries,
receives a Tax Benefit, then Buyer shall pay to Seller the
amount of such Tax Benefit within 15 days of filing the Tax
Return in which such Tax Benefit is realized or utilized.
For purposes of determining the amount and timing of any Tax
Benefit, the recipient of the Tax Benefit shall be deemed to
pay Tax at the actual tax rate in effect in the year such
Tax Benefit is realized or utilized and shall be deemed to
realize or utilize any Tax Benefit in the first taxable year
that such Tax Benefit may be realized or utilized under Law.
(2) Seller shall be entitled to any Tax Benefit arising from any
deduction arising in respect of any expense, liability or
Loss that is borne or paid by Seller or for which Seller is
responsible pursuant to this Agreement (each such expense,
liability or Loss, a "SELLER EXPENSE") and Buyer
acknowledges and agrees that neither Buyer nor any of its
Affiliates shall claim any such deduction on any Tax Return
that is the responsibility of Buyer pursuant to Section
11.3(f); provided, however, that if any deduction arising in
respect of any Seller Expense is not permitted by Law or
administrative practice to be reported on a Tax Return for
which Seller has filing
40
responsibility and is permitted by Law or administrative
practice to be reported on any Tax Return that is the
responsibility of Buyer pursuant to Section 11.3(f), then
Buyer shall claim such deduction and pay to Seller the
amount of any Tax Benefit that results from such deduction.
(l) Claims for indemnification with respect to Taxes shall be governed
by this Section 11.3 and Sections 13.2(b), 13.4, 13.5 and 13.6 (but not any
other provision of Article 13). It is agreed and understood that the rights set
forth in this Section 11.3 in respect of Taxes are the exclusive remedy and
allocation in respect of Taxes in connection with this Agreement. The
representations and warranties set forth in Section 5.19 shall survive the
Closing until six months after expiration of the state and federal statute of
limitations applicable to the matters covered thereby.
(m) For the absence of doubt, the covenants of Buyer, Company and
Company Subsidiaries set forth in this Section 11.3 shall apply to Buyer,
Company and Company Subsidiaries regardless of any post-Closing disposition of
Company or any Company Subsidiary by Buyer or any of its Affiliates.
(n)
(1) Buyer shall make (and cause such of its subsidiaries as are
necessary to make), and Seller shall join (and cause such of
its subsidiaries as are necessary to join) in timely making,
irrevocable elections under ss. 338(h)(10) of the Code (and
any corresponding election that is available under state or
local law) with respect to the purchase and sale of the
Shares and the deemed purchase and sale of shares of any
Company Subsidiary (such elections, the "338(H)(10)
ELECTIONS").
(2) The Purchase Price (including any adjustments made thereto
pursuant to this Agreement) shall be allocated among the
assets of Company in a manner consistent with SCHEDULE
11.3(N) and ▇▇.▇▇. 338 and 1060 of the Code and the Treasury
Regulations promulgated thereunder.
(3) Buyer and Seller shall, and shall cause their respective
subsidiaries and Affiliates to, treat the assets and capital
stock of the UK Subsidiary that have been distributed by
Company to Seller, as referred to in Section 5.18(a) of this
Agreement, and any cash or intercompany receivables
distributed by Company to Seller pursuant to Section 11.5 of
this Agreement, as having been distributed in the deemed
liquidation resulting from the 338(h)(10) Elections.
(4) Seller and Buyer shall and shall cause their respective
subsidiaries and Affiliates to
41
(A) treat the 338(h)(10) Elections as valid,
(B) file all Tax Returns in a manner consistent with such
338(h)(10) Elections and this Section 11.3, and
(C) take no position or other action contrary to the
338(h)(10) Elections or this Section 11.3,
in each case, except to the extent required to do otherwise
pursuant to a determination (as defined in ss. 1313(a) of
the Code or any similar provision of state or local Tax
Law).
(5) In furtherance of this Section 11.3(n):
(A) prior to Closing, Buyer and Seller shall prepare IRS
Form 8023 ("FORM 8023") on which the 338(h)(10)
Elections shall be made for U.S. federal income Tax
purposes;
(B) at or prior to Closing, Seller (and such of its
subsidiaries as are necessary) and Buyer (and such of
its subsidiaries as are necessary) shall execute Form
8023, which Buyer and Seller shall promptly file or
cause to be filed with the Internal Revenue Service;
(C) upon Seller's request, Seller, Buyer and such of their
respective subsidiaries as are necessary shall
cooperate in the preparation and timely filing of any
corrections, amendments or supplements to Form 8023,
including IRS Form 8883 ("FORM 8883"); and
(D) Seller, Buyer and such of their respective subsidiaries
as are necessary shall cooperate with each other to
file such other forms or Tax Returns as may be required
to effect the 338(h)(10) Elections, including
corrections, amendments or supplements thereto;
in each case in a manner that is consistent with (and to
the extent applicable incorporates and reflects) SCHEDULE
11.3(N).
(6) Neither Seller nor Buyer shall, or shall permit any of its
respective subsidiaries to, modify any of the forms or
reports (including any corrections, amendments and
supplements thereto) that are required for the making of the
338(h)(10) Elections after their execution or modify or
revoke the 338(h)(10) Elections following the filing of Form
8023 without the written consent of the other party, except
as may be required pursuant to a determination (as defined
in ss. 1313(a) of the Code or any similar provision of state
or local Tax Law), provided, however, that Form 8883 may be
42
filed without the consent of the other party so long as such
form is filed in a manner that incorporates, reflects and is
consistent with SCHEDULE 11.3(N).
11.4 ENVIRONMENTAL OBLIGATIONS.
(a) Effective as of Closing, Seller hereby assumes and agrees to carry
out and be responsible for the following:
(1) those Remediation obligations of Company or Company
Subsidiaries that are described on SCHEDULE 11.4;
(2) Environmental Claims, Environmental Damages and Remediation
obligations (whether now known or subsequently discovered
and without regard to disclosures made in the Disclosure
Schedule or the Reports) of Company or a Company Subsidiary
related to the ownership or operation of any property that
was owned or operated prior to the Closing Date by Company,
a Company Subsidiary or any entity that merged into Company
or a current or former subsidiary of Company, but which
property is not owned or operated by Company or a Company
Subsidiary as of the Closing Date; and
(3) Environmental Claims, Environmental Damages and Remediation
obligations (whether now known or subsequently discovered
and without regard to disclosures made in the Disclosure
Schedule or the Reports) of Company or a Company Subsidiary
related to the disposal at other locations of Hazardous
Substances from any property described in subsection (a)(2)
above.
(b) For the avoidance of doubt, it is understood that the assumption
by Seller set forth in subsection (a) will not include (and, effective as of
Closing, Buyer assumes and will, or will cause Company to, carry out and be
responsible for) Environmental Claims, Environmental Damages or Remediation
obligations related to facilities or properties now owned or operated by Company
or a Company Subsidiary or related to disposal at other locations of Hazardous
Substances from such facilities or properties, unless the Environmental Claim,
Environmental Damages or Remediation obligation is expressly described on
SCHEDULE 11.4.
(c) Following Closing, Buyer will (or will cause Company and Company
Subsidiaries to), upon request, provide Seller, its Affiliates, attorneys,
consultants and other representatives reasonable access during normal working
hours to the books, records and personnel of Company or Company Subsidiaries
relating to such assumed Remediation obligations and the related operations,
facilities and properties of Company and Company Subsidiaries. Prior to
disposing of any such books or records, Buyer will (or will cause Company to)
give Seller a reasonable opportunity to take possession thereof.
43
(d) Any claim for indemnification or other claim arising under this
Section 11.4 shall be subject to the procedures set forth in Sections 13.3,
13.4, 13.5 and 13.6 (but not by any other provisions of Article 13).
11.5 CASH SWEEP. In the ordinary course of business, all cash balances
remaining in Company's bank accounts after the payment of obligations due are
transferred each business day on a same day basis to Seller. Each such transfer
of cash between Company and Seller is recorded as a receivable or payable, as
applicable, on each entity's accounting records. Any cash balances remaining in
Company's or Company's Subsidiaries' bank accounts, after the payment of normal
obligations then due, on the last business day immediately preceding the Closing
Date will be transferred on the Closing Date to an account designated by Seller.
Deposits into such accounts of Company or Company Subsidiaries made on and after
the Closing Date will not be transferred to Seller. In addition, any payable
balance on the accounting records of Seller representing sweeps of cash from
Company or Company Subsidiaries will be cleared on the last business day
preceding Closing in the form of a dividend from Company to Seller and any cash
that had previously been swept to Seller will remain with Seller.
11.6 CONFIDENTIALITY.
(a) "CONFIDENTIAL INFORMATION" means the following types of
information concerning the Business and affairs of Company and the Company
Subsidiaries to the extent that Company currently treats such information as
proprietary and confidential in the ordinary course of business:
(1) the Intellectual Property, including product specifications,
formulae, compositions, processes, designs, sketches,
photographs, graphs, drawings, samples, inventions and
ideas, past, current and planned research and development,
current and planned manufacturing and distribution methods
and processes, customer lists, current and anticipated
customer requirements, price lists, market studies, business
plans, Software, database technologies, systems, structures,
architectures and data (and related processes, formulae,
compositions, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and
information) of the Business,
(2) any and all information of Company concerning the Business
(including historical financial statements, financial
projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and
backgrounds of key personnel, personnel training and
techniques and materials), other than in connection with
Seller's financial reporting, and
(3) any and all notes, analyses, compilations, studies,
summaries and other material containing or based, in whole
or in part, on any information of Company included in the
foregoing.
44
Information that is available to the public (other than as a result of any
breach of this Agreement by Seller or its Affiliates) is not Confidential
Information.
(b) For a period of three years after the Closing, Seller and its
Affiliates will keep confidential all of the Confidential Information, and
refrain from using or disclosing any of the Confidential Information, except to
the extent reasonably required in connection with the performance of any of its
duties or enforcement of any of its rights under this Agreement or the
Transition Services Agreement.
(c) Seller agrees that the provisions and restrictions contained in
Section 11.6(b) hereof are necessary to protect the legitimate continuing
interests of Buyer in acquiring the Business and entering into this Agreement,
that agreements contained in Section 11.6(b) have been specifically bargained
for, that any violation or breach of such provisions and restrictions will
result in irreparable injury to Buyer for which a remedy at law may be
inadequate and that, in addition to any relief at law which may be available to
Buyer for such violation or breach and regardless of any other provision
contained in this Agreement, Buyer will be entitled to injunctive and other
equitable relief restraining such violation or breach (without any requirement
that Buyer provide any bond or other security if such injunction or other relief
is awarded after an evidentiary hearing at which Seller has the opportunity to
be present and heard).
(d) Notwithstanding the foregoing, if Seller is requested or required
(in connection with any Proceeding, interrogatory, subpoena, civil investigative
demand or similar process) to disclose any Confidential Information, Seller
shall notify Buyer promptly of the request or requirement so that Buyer may seek
an appropriate protective order or waive compliance with the provisions of
Section 11.6(b). If, in the absence of a protective order or the receipt of a
waiver hereunder, Seller is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal, Seller may disclose the Confidential
Information to the tribunal; PROVIDED, HOWEVER, that Seller will use its best
efforts to obtain, at the request and expense of Buyer, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as Buyer designates.
(e) Effective upon the Closing, Seller shall assign to Buyer all of
Seller's right, title and interest in and to any confidentiality agreements to
which Seller or any of its agents is a party relating to the confidentiality of
information of the Business or the hiring of employees of Company.
45
11.7 NONCOMPETE; NONSOLICIT. (a) As an inducement for Buyer to enter into
this Agreement and as additional consideration for the consideration to be paid
to Seller under this Agreement, for a period of three years from the Closing
Date, Seller will not directly or indirectly engage in, acquire, own or hold a
business anywhere in the United States, Canada or Mexico that engages in the
Business in competition with Company (the "SELLER RESTRICTED BUSINESS"),
including as a proprietor, principal, agent, partner, officer, director,
stockholder, employee, member of any association, consultant or otherwise. For
the avoidance of doubt, it is agreed that Kentucky Ceramics, LLC (d/b/a
"Louisville Stoneware"), which is owned by family members of the Chairman of
Seller's Board of Directors and trusts for their or his benefit, is not covered
by this subsection (a).
(b) Notwithstanding the foregoing subsection (a), Seller and its
Subsidiaries shall not be precluded from directly or indirectly:
(1) acquiring or owning interests in or securities of any person
for passive investment purposes (whether or not such person
is engaged in the Seller Restricted Business) to the extent
that such ownership does not confer on Seller more than 10%
of the equity or voting power of such person;
(2) acquiring interests in or securities of any person as an
investment by any pension fund or fund of any other benefit
plan of Seller or its Subsidiaries, whether or not such
person is engaged in the Seller Restricted Business;
(3) acquiring interests in or securities of any person PROVIDED
that not more than 35% of the consolidated revenues of such
person (based on its consolidated revenues for its most
recently completed fiscal year prior to the acquisition),
were derived from engaging in the Seller Restricted
Business;
(4) engaging or proposing to engage in an acquisition of or by,
or business combination transaction or other similar
transaction with, another person (the "OTHER PARTY") or an
acquisition of a portion of the equity or assets of an Other
Party, including any such acquisition, combination or other
similar transaction in which, after giving effect to the
transaction, Seller, its Subsidiaries or the persons
surviving or resulting from such acquisition, business
combination or other similar transaction, as the case may be
(the "SURVIVING ENTITY"), is engaged in the Seller
Restricted Business, PROVIDED that, if more than 10% of the
aggregated consolidated revenues of the Surviving Entity,
calculated on a pro forma basis based on the respective
aggregate consolidated revenues of each of the Seller Group
and the Other Party (or the portion of the assets thereof
subject to the transaction) in their respective most
recently completed fiscal years prior to completion of such
acquisition, business combination or other similar
transaction, were derived,
46
directly or indirectly, from the Seller Restricted Business
and Seller is or controls the Surviving Entity, then Seller
shall use its commercially reasonable efforts to, or to
cause the Surviving Entity to, divest that portion of the
business of the Surviving Entity which is primarily engaged
in the Seller Restricted Business within 18 months of
completion of such acquisition, business combination or
other similar transaction, provided that no divestment is
required to be made more than three years after the Closing
Date.
(c) For a period of 18 months from the Closing Date, except as
otherwise agreed to in writing by Buyer, Seller agrees not to, and shall not
cause or permit any of Seller's Subsidiaries to directly or indirectly (i)
solicit for employment any employee of Buyer or Company or (ii) induce or
attempt to induce any customer or supplier of Buyer or Company to cease doing
business with Buyer or Company; PROVIDED that solicitations through newspapers
of general circulation or similar means not targeted by Seller at the employees
of Buyer or Company shall not be deemed to be a breach of this subsection.
(d) The parties intend that each of the covenants contained in this
Section 11.7 shall be construed as a series of separate covenants, one for each
state of the United States, each county of each state of the United States and
each province of Canada and Mexico. Except for geographic coverage, each such
separate covenant shall be deemed identical in terms to the covenant contained
in the preceding subsections of this Section 11.7. If, in any judicial
proceeding, a court shall refuse to enforce any of the separate covenants (or
any part thereof) deemed included in these subsections, then such unenforceable
covenant (or such part) shall be deemed eliminated from this Agreement for the
purpose of those proceedings to the extent necessary to permit the remaining
separate covenants (or portions thereof) to be enforced. In the event that the
provisions of this Section 11.7 should ever be deemed to exceed the time or
geographic limitations, or the scope of this covenant permitted by applicable
law, then such provisions shall be reformed to the maximum time or geographic
limitations, as the case may be, permitted by applicable laws. The
unenforceability of any other of said covenants or provisions or of any other
obligation of Seller or Buyer hereunder, and the existence of any claim or cause
of action of Seller or Buyer against the other whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Seller or Buyer of any of said covenants.
(e) It is understood and agreed that damages will be an inadequate
remedy in the event of a breach or intended or threatened breach by Seller of
any of the covenants of Seller in this Section 11.7, and that any such breach
will cause Buyer irreparable injury and damage. Accordingly, Seller agrees that
Buyer shall be entitled, without waiving any additional rights or remedies
otherwise available to Buyer, to injunctive and other such equitable relief in
the event of a breach or intended or threatened breach of any of said covenants
by Seller (without any requirement that Buyer provide any bond or other security
if such injunction or other relief is awarded after an evidentiary hearing at
which Seller has the opportunity to be present and heard).
(f) In addition, if (A) any third party (i) acquires 40% or more of
the voting securities of Seller, including by way of share purchase, exchange
offer, merger, other business combination or other similar transaction with
Seller, (ii) acquires all or substantially all of the assets of Seller or (iii)
otherwise acquires "control" of Seller, or (B) if any other merger, business
47
combination or other transaction occurs as a result of which (i) the holders of
the outstanding capital stock of Seller immediately prior to such transaction
beneficially own, after giving effect to such transaction, 60% or less of the
outstanding equity securities of the Surviving Entity of such transaction
(whether Seller, such other person party to such transaction or the person
surviving or resulting from such transaction) or (ii) the individuals who, prior
to the initiation of such transaction, constituted the board of directors of
Seller cease for any reason to constitute at least a majority of the board of
directors of the Surviving Entity of such transaction, then nothing contained in
this Section 11.7 shall be a limitation on any activities of such third party or
the Surviving Entity of such transaction or any entity directly or indirectly
controlled by, controlling or under common control with, such third party or
Surviving Entity.
11.8 LITIGATION SUPPORT. In the event and for so long as Buyer or Company
is actively contesting or defending against any Proceeding in connection with
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction existing or
occurring on or prior to the Closing Date involving Company, Seller will
reasonably cooperate in the contest or defense, and provide testimony, if
necessary in connection with the contest or defense, all at the sole cost and
expense of Buyer (unless and to the extent Buyer is entitled to indemnification
therefor under Article 13).
11.9 INSURANCE. Following the Closing, any claims or other matters
involving insurance policies procured by Seller and insuring Company, Company
Subsidiaries or their respective operations, assets, directors, officers and
employees, and any proceeds of such insurance policies, will be handled as set
forth in Schedule 11.9, all of which is incorporated herein by reference.
ARTICLE 12
EMPLOYEE MATTERS COVENANTS
12.1 GENERAL.
(a) The provisions of this Article 12 are solely for the benefit of
the parties to this Agreement. No employee or former employee of Company or a
Company Subsidiary or any other individual shall be a third party beneficiary of
the provisions of this Article 12.
(b) From and after the Closing and until December 31, 2006, Buyer
shall provide compensation and employee benefits to the continuing employees of
Company and the Company Subsidiaries and to the former employees of Company and
the Company Subsidiaries (such employees and former employees, the "EMPLOYEE
BENEFICIARIES") that, in the aggregate, are no less favorable for each Employee
Beneficiary than those provided to such individual immediately prior to the
Closing.
(c) From and after the Closing, Buyer shall cause Company, Company
Subsidiaries and their respective successors and assigns to honor all Company
Plans, subject to the right to amend, modify, alter or terminate any Company
Plan to the extent the terms of such Plan permit such action, except to the
extent any such action is contrary to any other provisions of this Article 12,
and provided that if any such action is effective prior to December 31, 2006,
Buyer must remain in compliance with Section 12.1(b) above.
48
(d) For all purposes under the employee benefit plans, practices or
arrangements of Buyer and its Affiliates providing benefits to any Employee
Beneficiary after the Closing Date, each Employee Beneficiary shall be credited
with all years of service for which such Employee Beneficiary was credited
before the Closing Date under any similar employee benefit plans, practices or
arrangements of Seller and its Affiliates, except for purposes of benefit
accrual under any final average pay defined benefit plan; provided, however,
that notwithstanding the fact that Seller and its Affiliates do not maintain a
severance program, each Company employee shall be credited with all years of
service to Company and its Affiliates (and their respective predecessors) for
all purposes under any severance plan or program of Buyer and its Affiliates.
12.2 WELFARE PLANS.
(a) The participation by Employee Beneficiaries in Welfare Plans
maintained by Seller and its Affiliates (excluding for this purpose Company and
Company Subsidiaries) shall cease at the Closing. Buyer shall permit each
Employee Beneficiary to enroll as of the Closing in Welfare Plans sponsored by
Buyer and its Affiliates (including for this purpose Company and Company
Subsidiaries) that are substantially similar to the Welfare Plans applicable to
such Employee Beneficiaries immediately prior to the Closing. With respect to
such coverage of Employee Beneficiaries under the Welfare Plans of Buyer and its
Affiliates:
(1) limitations on benefits due to pre-existing conditions shall
be waived for any Employee Beneficiary enrolled in any
Welfare Plan maintained by Seller and its Affiliates as of
the Closing Date,
(2) any out-of-pocket annual maximums and deductibles taken into
account under Welfare Plans maintained by Seller and its
Affiliates for any Employee Beneficiary in the calendar year
which contains the Closing Date shall be credited under the
Welfare Plans of Buyer and its Affiliates for the same
calendar year, and
(3) with respect to aggregate lifetime maximum benefits
available under Welfare Plans of Buyer and its Affiliates,
an Employee Beneficiary's prior claim experience under
Welfare Plans maintained by Seller and its Affiliates will
not be taken into account.
(b) Except as otherwise provided in this Article 12 with respect to
specific benefits or Plans, after the Closing:
(1) Seller and its Affiliates (excluding for this purpose
Company and Company Subsidiaries) shall be solely
responsible for:
(A) claims for Welfare Benefits that are incurred by or
with respect to any Employee Beneficiary before the
Closing Date; and
49
(B) claims relating to COBRA Coverage attributable to
"qualifying events" with respect to any Employee
Beneficiary and his or her beneficiaries and dependents
that occur before the Closing Date; and
(2) Buyer and its Affiliates (including for this purpose Company
and Company Subsidiaries) shall be solely responsible for:
(A) claims for Welfare Benefits that are incurred by or
with respect to any Employee Beneficiary on or after
the Closing Date, and
(B) claims relating to COBRA Coverage attributable to
"qualifying events" with respect to any Employee
Beneficiary and his or her beneficiaries and dependents
that occur on or after the Closing Date.
(3) For purposes of the foregoing, a medical/dental claim shall
be considered incurred when the services are rendered, the
supplies are provided or medication is prescribed, and not
when the condition arose.
(c) Notwithstanding anything herein to the contrary, if any Company
employee covered by Seller's Short Term Disability Plan has become disabled
(within the meaning of such plan) prior to the Closing Date, any short-term
disability salary continuation income benefits relating to such disability shall
be the sole responsibility of Seller, whether payable before or after the
Closing Date. Seller's Long Term Disability Plan shall be responsible for any
Company employee covered by Seller's Long Term Disability Plan who has become
disabled (within the meaning of such plan) prior to Closing but has not
qualified for benefits because the elimination period has not then expired,
subject to the elimination period requirement being met after Closing.
(d) From and after the Closing Date, Buyer, through Company and the
Company Subsidiaries, shall honor all vacation days of Company employees that
accrued prior to the Closing Date and that remain outstanding as of the Closing
Date.
(e) The amount in each Company employee's account under Seller's
Dependent Care Assistance Plan (which is part of Seller's Cafeteria Plan) as of
the Closing Date will be transferred by Seller as soon as practicable after
Closing to a plan to be set up by Company (or by Buyer or one of its Affiliates
for the benefit of Company employees) that provides equivalent or better
benefits to Company employees than Seller's Dependent Care Assistance Plan.
(f) Subject to applicable Law, Seller shall cooperate and use its
reasonable best efforts in assisting Buyer's efforts to transition the employees
and Plans including providing access and making available to Buyer employee
records and benefit information necessary for Buyer to fulfill its obligations
under this Article 12, but such cooperation shall not require Seller to incur
out-of-pocket costs unless Buyer agrees to reimburse Seller therefor.
50
12.3 SEVERANCE BENEFIT. Buyer and its Affiliates shall provide each Company
employee whose employment is terminated in a Qualifying Termination during the
period from the Closing Date through the first anniversary of the Closing Date a
payment of no less than the product of
(1) such employee's weekly rate of base pay, multiplied by
(2) the greater of
(A) 8, or
(B) such employee's years of service with Company and its
Affiliates (including service with predecessor
entities) multiplied by two, but not more than 52,
as well as welfare benefits continuation (at no cost to the employee) for a
period of weeks not less than the multiple determined in clause (2) above. The
benefits described in this Section 12.3 are contingent on Company employee's
signing a release agreement provided by Company. Payments will be made on a
semi-monthly basis in Company's normal payroll cycle and will be subject to all
applicable tax withholdings. This Section 12.3 does not apply with respect to
(i) any Company employee with whom Company has entered into a retention
agreement or other agreement providing for severance pay in an amount equal to
or greater than determined under this subsection, or (ii) any Company employee
covered by a collective bargaining agreement.
12.4 OMNIBUS COMPENSATION PLANS. Outstanding equity awards to Company
employees under Seller's Omnibus Compensation Plan and Seller's 2004 Omnibus
Compensation Plan will be honored by Seller in accordance with the terms of such
awards.
ARTICLE 13
INDEMNIFICATION
13.1 SURVIVAL.
(a) All representations and warranties of Buyer and Seller contained
herein shall survive the Closing for a period of 18 months following the
Closing, provided that the representations and warranties set forth in Section
5.19 (Tax Matters) shall survive the Closing until six months after the
expiration of the state and federal statute of limitations applicable to the
matters covered thereby. The covenants and agreements of Seller or Buyer
contained in this Agreement shall survive, if at all, until, by their respective
terms, they are no longer effective (together with the dates in the preceding
sentence, each is referred to herein as a "SURVIVAL DATE").
(b) In all instances with respect to any specific representation or
warranty under which an Indemnified Party shall have delivered a notice of a
claim prior to the Survival Date applicable to such representation or warranty
and as to which such claim has not been completely and finally resolved prior to
such termination date, such representation or warranty shall survive for
purposes of such claim for the period of time beyond such termination date
sufficient to resolve, completely and finally, the claim relating to such
representation or warranty
51
in accordance with this Agreement. Except as otherwise provided herein, the
parties agree that no claims or causes of action may be brought against Seller
or Buyer based upon the representations and warranties contained in this
Agreement after the applicable Survival Date.
13.2 INDEMNIFICATION.
(a) Seller shall indemnify, defend and save the Buyer Parties harmless
from, against, for and in respect of any damages, losses, obligations,
liabilities, claims and expenses (including interest, penalties, reasonable
attorneys' fees and expenses and all reasonable amounts paid in investigation,
defense or settlement of any of the foregoing) (collectively, "LOSSES")
sustained or suffered by any of the Buyer Parties, whether or not arising out of
third party claims, arising from (i) a breach, misrepresentation or inaccuracy
of any representation or warranty of Seller contained in this Agreement or in
the certificate to be delivered by Seller pursuant to Section 3.3(a) of this
Agreement, and (ii) any breach of any of the covenants and agreements of Seller
contained in this Agreement, including any agreement of Seller to indemnify
Buyer with respect to specific matters contained elsewhere in this Agreement
("BUYER DAMAGES"). Notwithstanding anything to the contrary contained in this
Agreement, for purposes of determining whether Seller is obligated to provide
indemnification under Article 13 of this Agreement and for purposes of
determining the amount of Buyer Damages to which such indemnification applies,
each representation and warranty in this Agreement
(1) (except Section 5.6(b), and
(2) except Section 5.9(a), clauses (a), (e) and (f) of Section
5.10, Section 5.15(a), Section 5.16, Section 5.17(b) and the
first sentence of Section 5.17(d), PROVIDED that Seller's
failure to list an item on the Disclosure Schedule, when
listing is required pursuant to such provisions (taking into
account the term "material" or "material adverse effect" or
similar phrases), shall not prevent other representations
and warranties made by Seller with respect to such item from
applying to all such items that should have been listed
pursuant to such provisions (taking into account the term
"material" or "material adverse effect" or similar phrases)
and in the certificate to be delivered pursuant to Section 3.3(a) of this
Agreement shall be read without regard and without giving effect to the term
"material" or "material adverse effect" or similar phrases contained in such
representation or warranty which has the effect of making such representation
and warranty less restrictive (as if such word(s) were deleted from such
representation and warranty).
(b) Notwithstanding anything contained herein to the contrary, the
following limitations shall apply with reference to any indemnification claim
against Seller under Sections 13.2(a) or 11.3(c)(3) with respect to an alleged
breach of any representations or warranties:
(1) No indemnification claim shall be brought against Seller
unless Buyer, at any time prior to the applicable Survival
Date, gives Seller written notice, with reasonable
specificity, of the existence
52
of any such indemnification claim. Subject to the procedures
with respect to Claims under Section 13.3 hereof which shall
in all events govern third party claims (or Section 11.3(j)
in the case of Taxes), if such written notice (or an amended
notice) states the amount of Buyer Damages claimed and
Seller notifies Buyer that Seller does not dispute the claim
described in such notice or fails to notify Buyer within 60
days after receipt of such notice by Seller whether Seller
disputes the claim described in such notice, Seller shall be
responsible for the payment of such Buyer Damages to the
Buyer Party. If Seller has timely disputed Seller's
liability with respect to such claim by delivery of notice
in accordance with this section, Buyer and Seller will
proceed in good faith to negotiate a resolution of such
dispute. Any written notice delivered by Seller to Buyer for
purposes of disputing a claim for Buyer Damages shall, to
the extent practicable, provide an explanation with
reasonable specificity for any objection to the matters set
forth in Buyer's notice and the portion of the claim (if
less than all) which is the subject of the dispute notice.
(2) No indemnification shall be made under Sections 13.2(a)(i)
or 11.3(c)(3) by Seller (i) for any individual item or group
of substantially similar items where the Loss or Tax
relating thereto is less than $200,000 (the "BASKET") and
such items shall not be aggregated for purposes of
determining whether the Threshold Amount has been exceeded
pursuant to Section 13.2(b)(2)(ii), and (ii) unless and
until the aggregate amount of the Losses and Taxes suffered
by the Buyer Parties exceeds 2% of the Purchase Price (the
"THRESHOLD AMOUNT"), and then only to the extent of any such
excess.
(3) The amount of Loss or Tax suffered by the Buyer Parties
shall be determined after offsetting the amount of any
applicable reserve or allowance included in the Financial
Statements, and any Tax Benefit, insurance proceeds or third
party indemnification received.
(4) The amount of Losses or Taxes from a matter shall be reduced
to the extent such matter is reflected in the final
determination of the Adjustment Amount pursuant to Article
2.
(5) Seller's liability for all such indemnification claims shall
in no event exceed 10% of the Purchase Price (the "CAP
AMOUNT"), except in the event that such obligation to
indemnify arises from fraud by Seller.
(c) Seller will pay the amount of any Buyer Damages to the Buyer Party
within ten days following the determination of Seller's liability for and the
amount of such Buyer
53
Damages (whether such determination is made pursuant to the procedures set forth
in this Article 13, by agreement between Buyer and Seller, by arbitration award
or by final adjudication in accordance with the terms of this Agreement). Seller
agrees that if, following the Closing, any payment is made by Seller in respect
of any Buyer Damages, (i) Seller shall have no rights against Company or any
Company Subsidiary arising out of any pre-Closing action or omission, whether by
reason of contribution, indemnification, subrogation or otherwise, in respect of
any such payment, and shall not take any action against Company or any Company
Subsidiary with respect thereto, and (ii) any rights with respect to any such
payment that Seller may, by operation of law or otherwise, have against Company
or any Company Subsidiary arising out of any pre-Closing action or omission
shall, effective at the time of the Closing, be deemed hereby to be expressly
and knowingly waived.
(d) Buyer shall indemnify, defend and save the Seller Parties harmless
from, against, for and in respect of any Losses sustained or suffered by any of
the Seller Parties ("SELLER PARTIES") and arising from (i) a breach,
misrepresentation or inaccuracy of any representation or warranty of Buyer
contained in this Agreement or in the certificate to be delivered by Buyer
pursuant to Section 3.4(a), and (ii) any breach of any of the covenants and
agreements of Buyer contained in this Agreement, including any agreement of
Buyer to indemnify Seller with respect to specific matters contained elsewhere
in this Agreement.
(e) Notwithstanding anything contained herein to the contrary, the
following limitations shall apply with reference to any indemnification claim
against Buyer under Section 13.2(d) with respect to an alleged breach of any
representations or warranties:
(1) No indemnification claim shall be brought against Buyer
unless Seller, at any time prior to the applicable Survival
Date, gives Buyer written notice, with reasonable
specificity, of the existence of any such indemnification
claim. Subject to the procedures with respect to Claims
under Section 13.3 hereof which shall in all events govern
third party claims, if such written notice (or an amended
notice) states the amount of Seller Damages claimed and
Buyer notifies Seller that Buyer does not dispute the claim
described in such notice or fails to notify Seller within 60
days after receipt of such notice by Buyer whether Buyer
disputes the claim described in such notice, Buyer shall be
responsible for the payment of such Seller Damages to the
Seller Party. If Buyer has timely disputed its liability
with respect to such claim by delivery of a notice Seller
and Buyer will proceed in good faith to negotiate a
resolution of such dispute. Any written notice delivered by
Buyer to Seller for purposes of disputing a claim for Seller
Damages shall, to the extent practicable, provide an
explanation with reasonable specificity for any objection to
the matters set forth in the Seller notice and the portion
of the claim (if less than all) which is the subject of the
dispute notice.
(2) No indemnification shall be made under Section 13.2(d)(i) by
Buyer (i) for any individual item where the Loss relating
thereto is
54
less than the Basket and such items shall not be aggregated
for purposes of determining whether the Threshold Amount has
been exceeded pursuant to Section 13.2(e)(2)(ii), and (ii)
unless and until the aggregate amount of the Losses suffered
by the Seller Parties exceeds the Threshold Amount, and then
only to the extent of any such excess.
(3) Buyer's liability for all such indemnification claims shall
in no event exceed the Cap Amount, except in the event that
such obligation to indemnify arises from fraud by Buyer.
(f) Buyer will pay the amount of any Seller Damages to Seller on
behalf of the Seller Parties within ten days following the determination of
Buyer's liability for and the amount of Seller Damages (whether such
determination is made pursuant to the procedures set forth in this Article 13,
by agreement between Buyer and Seller, by arbitration award or by final
adjudication in accordance with the terms of this Agreement).
13.3 THIRD PARTY CLAIMS. With respect to any claim for indemnification
resulting from the assertion of liability by third parties (a "CLAIM"), the
obligations and liabilities of the party allegedly responsible for
indemnification (the "INDEMNIFYING PARTY") hereunder with respect to the Claim
by the party allegedly entitled to indemnity (the "INDEMNIFIED PARTY") shall be
subject to the following terms and conditions:
(a) The Indemnified Party shall give prompt written notice to the
Indemnifying Party of any assertion of liability by a third party which might
give rise to a Claim by the Indemnified Party against the Indemnifying Party
based on the indemnity agreements contained in Section 13.2 hereof, stating the
nature and basis of said assertion and the amount thereof, to the extent known.
(b) If any Proceeding is brought against the Indemnified Party, with
respect to which the Indemnifying Party may have liability under the indemnity
agreement contained in Section 13.2 hereof, the Proceeding shall, upon the
written agreement of the Indemnifying Party, be defended (including all
Proceedings on appeal or for review which counsel for the defendant shall deem
appropriate) by the Indemnifying Party. The Indemnified Party shall have the
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless
(1) the employment of such counsel shall have been specifically
authorized by the Indemnifying Party in connection with the
defense of such Proceeding,
(2) the Indemnifying Party shall not have agreed, within 30 days
after the notice to it provided in subsection (a) above, to
assume the defense of such Proceeding, or
(3) the Indemnified Party shall have reasonably concluded, based
on advice of counsel, that there may be defenses available
to it which conflict with those available to the
Indemnifying Party;
55
in any of which events (A) that portion of such reasonable fees and expenses
reasonably related to matters covered by the indemnity agreement contained in
Section 13.2 hereof shall be borne by the Indemnifying Party, and (B) the
Indemnifying Party shall not be responsible for the fees and expenses of more
than one counsel for the Indemnified Party. The Indemnified Party shall be kept
reasonably informed of such Proceeding at all stages thereof whether or not it
is so represented. The Indemnified Party shall make available to the
Indemnifying Party and its attorneys, accountants and other representatives all
books and records of the Indemnified Party relating to such Proceedings and the
parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such Proceeding.
(c) The Indemnifying Party shall not make any settlement of any claims
without the written consent of the Indemnified Party, which consent may not be
unreasonably withheld, delayed or conditioned, provided, however, that the
Indemnified Party's consent shall not be required if the settlement involves
only payment of money and the settlement includes a full written release of
liability of the Indemnified Party with respect to such suit, proceeding or
claim. If an Indemnified Party does not consent to a settlement proposed by the
Indemnifying Party and accepted by the adverse third party that involves only
the payment of money by, or other consideration from, the Indemnifying Party,
the liability of the Indemnifying Party shall be limited to the amount that
would have been paid in such settlement. The Indemnified Party shall not settle
any claim for which it seeks indemnification without the prior written consent
of the Indemnifying Party, which consent may be withheld in the sole and
absolute discretion of the Indemnifying Party.
(d) Buyer shall not be deemed to have notice of any claim or breach by
Seller of any representation, warranty, covenant or agreement under this
Agreement by virtue of knowledge acquired on or prior to the Closing Date by an
employee of Company.
13.4 REMEDIES EXCLUSIVE. If the Closing occurs, the remedies provided for
in this Article 13 shall be the exclusive remedies available to a party arising
out of an alleged breach of a representation, warranty, covenant or agreement
made in this Agreement; PROVIDED, HOWEVER, that any indemnification matters
relating to Taxes, including any indemnification matters relating to any breach
of any representation or warranty contained in Section 5.19 (Tax Matters), shall
instead be governed exclusively by Section 11.3 and by such specific portions of
this Article 13 as are incorporated by Section 11.3(l). Neither party will be
liable for special, incidental, consequential, punitive, exemplary or similar
damages arising from a breach of this Agreement, except to the extent, and
subject to the limitations on indemnification set forth in this Article 13, such
party actually paid to a third party any such damages in respect of a matter for
which such party is entitled to indemnification under Section 13.2(a) or
13.2(d), as the case may be.
13.5 RECOVERIES. If an Indemnified Party subsequently receives payment
(including proceeds of insurance, third party indemnification, payments on
accounts receivable and Tax Benefits) with respect to a matter for which it has
been fully indemnified by the Indemnifying Party, the Indemnified Party shall
promptly pay the amount of such payment, up to the indemnification received, to
the Indemnifying Party. Such Indemnified Party shall be obligated to use
commercially reasonable efforts to seek any such payments to which it may be
entitled.
56
13.6 CHARACTERIZATION. Any amounts paid by an Indemnifying Party to an
Indemnified Party pursuant to this Article 13 or Section 11.3 shall be treated
for all Tax purposes as adjustments to the Purchase Price.
ARTICLE 14
MISCELLANEOUS
14.1 EXPENSES. Except as otherwise expressly provided herein, each party
shall bear its own expenses in connection with the negotiation, preparation and
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement.
14.2 BINDING EFFECT. This Agreement shall become binding and effective when
executed by Buyer and by Seller. This Agreement shall not be assignable by
either Buyer or Seller without the prior written consent of the other, except
that without relieving a party of any of its obligations under this Agreement,
either party may assign this Agreement to any of its wholly-owned subsidiaries.
Subject to the foregoing, this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the respective successors, legal
representatives and permitted assigns of the parties hereto. This Agreement
constitutes an agreement among the parties hereto and none of the agreements,
covenants, representations or warranties contained herein shall be for the
benefit of, or create any third party beneficiary rights in, any Person not a
party to this Agreement (other than the Seller Parties and the Buyer Parties to
the extent expressly provided in Article 13).
14.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement (including the Schedules
and Exhibits attached hereto) and the Confidentiality Agreement contain the
entire understanding of the parties with respect to their subject matter. The
making, execution and delivery of this Agreement by the parties have not been
induced by any representations, warranties, statements or agreements other than
those expressed in this Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the subject
matter hereof except for the Confidentiality Agreement. This Agreement may be
amended only by a written instrument duly executed by the parties.
14.4 NOTICES. All notices or other communications hereunder shall be in
writing and shall be delivered by hand or sent by facsimile transmission or
sent, postage prepaid, by registered, certified or express mail, return receipt
requested, or by reputable overnight courier service, as follows:
if to Seller: General Counsel
▇▇▇▇▇-▇▇▇▇▇▇ Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
fax: ▇▇▇-▇▇▇-▇▇▇▇
57
with copies to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(which shall not ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ PLLC
constitute notice 1700 PNC Plaza, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
to Seller): ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
fax: ▇▇▇-▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
fax: ▇▇▇-▇▇▇-▇▇▇▇
if to Buyer: Department 56, Inc.
One Village Place
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to ▇▇▇▇▇▇ & Whitney LLP
(which shall not ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
constitute notice ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
to Buyer): fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such
communication shall be deemed effective on the earlier of the date of receipt
(or, if received on a non-business day, on the first business day after the date
of receipt) or, if sent by registered, certified or express mail, on the fifth
calendar day after such mailing.
14.5 COUNTERPARTS. This Agreement may be signed by each party upon a
separate copy or separate signature page, and any combination of separate copies
signed by all parties or including signature pages so signed will constitute a
single counterpart of this Agreement. This Agreement may be signed in any number
of counterparts, each of which will be deemed to be an original, but all of
which together will constitute one and the same agreement. It will not be
necessary, in proving this Agreement in any proceeding, to produce or account
for more than one counterpart of this Agreement. This Agreement will become
effective when one or more counterparts have been signed by each party, and
delivered to the other party. Any party may deliver an executed copy of this
Agreement (and an executed copy of any documents contemplated by this Agreement)
by facsimile transmission to the other party, and such delivery will have the
same force and effect as any other delivery of a manually signed copy of this
Agreement (or such other document).
58
14.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to conflicts
of laws principles.
14.7 JURISDICTION. Each party irrevocably submits to the jurisdiction of
the courts of the State of Delaware in connection with any legal proceeding
arising out of or relating hereto or the transactions contemplated hereby, and
hereby irrevocably agrees that all claims in respect of such legal proceeding
shall be heard and determined in such state or federal court. Each party
irrevocably waives (and agrees not to plead or claim) any objection to the
laying of venue of any legal proceeding arising out of or relating hereto or the
transactions contemplated thereby in the courts of Delaware and the defense of
an inconvenient forum to the maintenance of such action or proceeding. Each
party further agrees, to the fullest extent permitted by law, that a final and
non-appealable judgment against it in any legal proceeding contemplated above
shall be conclusive and may be enforced in any other jurisdiction within or
outside the United States by suit on the judgment, a certified copy of which
shall be conclusive evidence of the fact and amount of such judgment. Each party
agrees that service of process, summons, notice or document by U.S. registered
mail to such person's respective notice address determined in accordance with
Section 14.4 herein shall be effective service of process for any legal
proceeding with respect to any matters to which it has submitted to jurisdiction
pursuant to this Section 14.7.
14.8 WAIVERS. Any provision of this Agreement may be waived only by a
written instrument executed by the party to be charged with such waiver. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach. Any condition
to a party's obligations under this Agreement may be waived only in writing by
such party.
[signatures follow]
59
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement
to be executed and delivered effective as of the date first above written.
▇▇▇▇▇-▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President and Chief
Financial Officer
DEPARTMENT 56, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
60