EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
Dated as of November 24, 2003
by and among
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇; ▇▇▇▇▇ ▇. ▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇▇▇; D. ▇▇▇▇▇
▇▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇; D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ AS TRUSTEES
UNDER TRUST AGREEMENT DATED DECEMBER 29, 1987, FOR THE BENEFIT OF D. ▇▇▇▇▇
▇▇▇▇▇▇▇▇; D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ AS TRUSTEES UNDER TRUST
AGREEMENT DATED DECEMBER 31, 1990, FOR THE BENEFIT OF D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇; D.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ AS TRUSTEES UNDER TRUST AGREEMENT DATED
DECEMBER 29, 1987, FOR THE BENEFIT OF ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇; D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AND
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ AS TRUSTEES UNDER TRUST AGREEMENT DATED DECEMBER 31, 1990,
FOR THE BENEFIT OF ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇; AND ▇▇▇▇▇ ▇▇▇▇▇ AS TRUSTEE OF THE ▇▇▇▇▇
FAMILY TRUST CREATED UNDER THE WILL OF ▇▇▇▇▇ ▇. ▇▇▇▇▇, as Shareholders,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ AND D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as Shareholders' Representatives,
and
DAY INTERNATIONAL, INC., as Purchaser
TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS
SECTION 1.1. Certain Definitions....................................................................... 1
ARTICLE II TERMS OF PURCHASE
SECTION 2.1. Sale and Purchase......................................................................... 6
SECTION 2.2. Payment for the Shares.................................................................... 6
SECTION 2.3. Escrow.................................................................................... 7
SECTION 2.4. Working Capital Adjustment................................................................ 7
SECTION 2.5. Closing................................................................................... 9
SECTION 2.6. Additional Payments....................................................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
SECTION 3.1. Organization; Books and Records........................................................... 10
SECTION 3.2. Capitalization............................................................................ 10
SECTION 3.3. Consent and Approvals; No Violations...................................................... 11
SECTION 3.4. Financial Statements, etc................................................................. 11
SECTION 3.5. Absence of Certain Changes or Events...................................................... 12
SECTION 3.6. Undisclosed Liabilities................................................................... 13
SECTION 3.7. Accounts Receivable....................................................................... 13
SECTION 3.8. Benefit Plans............................................................................. 14
SECTION 3.9. Litigation................................................................................ 16
SECTION 3.10. Compliance with Applicable Law............................................................ 16
SECTION 3.11. Tax Matters............................................................................... 17
SECTION 3.12. Broker.................................................................................... 18
SECTION 3.13. Material Contracts; Capital Expenditures.................................................. 18
SECTION 3.14. Labor Matters............................................................................. 21
SECTION 3.15. Environmental Matters..................................................................... 21
SECTION 3.16. Proprietary Rights........................................................................ 22
SECTION 3.17. Title to and Condition of Assets; Leases.................................................. 23
SECTION 3.18. Inventory................................................................................. 24
SECTION 3.19. Product Warranties and Product Liabilities................................................ 24
SECTION 3.20. Insurance................................................................................. 25
SECTION 3.21. Bank Accounts............................................................................. 25
SECTION 3.22. Guaranties................................................................................ 25
SECTION 3.23. Related Parties........................................................................... 25
SECTION 3.24. Employees................................................................................. 26
SECTION 3.25. Customers and Suppliers................................................................... 26
SECTION 3.26. Absence of Certain Payments............................................................... 27
SECTION 3.27. Indebtedness.............................................................................. 27
SECTION 3.28. Noncompete................................................................................ 27
SECTION 3.29. Disclaimer................................................................................ 27
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ARTICLE IV REPRESENTATIONS CONCERNING THE SHAREHOLDERS
SECTION 4.1. Authorization and Enforceability.......................................................... 28
SECTION 4.2. Consents and Approvals; No Violations..................................................... 28
SECTION 4.3. Litigation................................................................................ 28
SECTION 4.4. Shareholder Action........................................................................ 28
SECTION 4.5. Transfer.................................................................................. 29
SECTION 4.6. Shareholder Tax Matters................................................................... 29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 5.1. Organization.............................................................................. 29
SECTION 5.2. Authorization............................................................................. 29
SECTION 5.3. Consents and Approvals; No Violations..................................................... 29
SECTION 5.4. Litigation................................................................................ 30
SECTION 5.5. Broker.................................................................................... 30
SECTION 5.6. Financing................................................................................. 30
SECTION 5.7. Investment Representations................................................................ 30
SECTION 5.8. Accredited Investor Status................................................................ 30
ARTICLE VI ADDITIONAL AGREEMENTS
SECTION 6.1. Public Announcements...................................................................... 30
SECTION 6.2. Expenses.................................................................................. 30
SECTION 6.3. Post-Closing Cooperation.................................................................. 31
SECTION 6.4. Covenant Not to Compete................................................................... 31
SECTION 6.5. Non-Solicitation.......................................................................... 31
SECTION 6.6. Books and Records......................................................................... 31
SECTION 6.7. Termination of Employees.................................................................. 32
SECTION 6.8. Payment of Obligations.................................................................... 32
SECTION 6.9. Transfer of Title......................................................................... 32
SECTION 6.10. Shareholders' Representatives............................................................. 32
SECTION 6.11. Shareholders' Agreement................................................................... 33
SECTION 6.12. D&O Indemnification....................................................................... 33
SECTION 6.13. Resignations.............................................................................. 33
ARTICLE VII CLOSING CONDITIONS
SECTION 7.1. Conditions to Obligations of the Shareholders............................................. 34
SECTION 7.2. Conditions to Obligations of the Purchaser................................................ 34
ARTICLE VIII AMENDMENT AND WAIVER
SECTION 8.1. Amendment................................................................................. 36
SECTION 8.2. Waiver.................................................................................... 36
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ARTICLE IX INDEMNIFICATION AND SURVIVAL
SECTION 9.1. Indemnification........................................................................... 36
SECTION 9.2. Survival.................................................................................. 39
SECTION 9.3. Indemnification on Terminated Employee Obligations and Claims............................. 40
SECTION 9.4. Bellwether................................................................................ 40
SECTION 9.5. Aggregation of Certain Claims............................................................. 40
SECTION 9.6. Certain Tax Matters....................................................................... 41
SECTION 9.7. Settlement of Claims...................................................................... 41
SECTION 9.8. Right of Setoff........................................................................... 41
ARTICLE X GENERAL PROVISIONS
SECTION 10.1. Notices................................................................................... 41
SECTION 10.2. Headings.................................................................................. 42
SECTION 10.3. Transfer Taxes............................................................................ 42
SECTION 10.4. Entire Agreement.......................................................................... 43
SECTION 10.5. Severability.............................................................................. 43
SECTION 10.6. Assigns/Assignments....................................................................... 43
SECTION 10.7. No Third-Party Beneficiaries.............................................................. 43
SECTION 10.8. Governing Law............................................................................. 43
SECTION 10.9. Disclosure Schedules...................................................................... 43
SECTION 10.10. Personal Legal Representation of Shareholders............................................. 43
SECTION 10.11. Counterparts.............................................................................. 44
SECTION 10.12. Venue..................................................................................... 44
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 24th day of November 2003 by and among the shareholders named on
the signature pages hereto (the "Shareholders"); ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and D. ▇▇▇▇▇
▇▇▇▇▇▇▇▇, in their capacities as the representatives of the Shareholders (the
"Shareholders' Representatives"); Day International, Inc., a Delaware
corporation (the "Purchaser" or "Day"); Network Distribution International, a
Massachusetts business trust (the "Company"), for purposes of Section 6.11 only;
and each of Carver Golf Enterprises, Inc., a Massachusetts corporation ("Carver
Golf"), and ▇▇▇▇▇▇▇▇ Ink Company, an Ohio corporation ("▇▇▇▇▇▇▇▇ Ink"), for
purposes of Section 9.4 only.
WHEREAS, the Shareholders own all of the issued and outstanding shares
of beneficial interests (the "Shares") of the Company; and
WHEREAS, the Shareholders wish to sell to the Purchaser and the
Purchaser wishes to purchase from the Shareholders all of the Shares;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1. Certain Definitions. As used in this Agreement, the
following terms shall have the respective meanings set forth below:
(a) "Affiliate" means, with respect to any Person, any other
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, such Person. For purposes
hereof, the concept of controls or controlled by means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. No Person shall be deemed an Affiliate of any Person by
reason of the exercise or existence of rights, interests, or remedies under this
Agreement.
(b) "Applicable GAAP" means, with respect to the financial
statements and books of account of any Person, generally accepted accounting
principles as in effect in the United States, applied consistently with prior
periods, subject (except where Applicable GAAP as of a particular date is
specified) to any applicable subsequent changes in such generally accepted
accounting principles.
(c) "Bellwether" means Bellwether Distributions, L.L.C., a
Delaware limited liability company.
(d) "Bellwether Purchase Agreement" means the Purchase Agreement,
dated as of November 24, 2003, by and among Day, as purchaser, and ▇▇▇▇▇▇▇▇ Ink
and ▇▇▇▇▇▇ Golf, as sellers, with respect to the sale and purchase of the 39.57%
minority interest in Bellwether.
(e) "Business Day" means any day other than a day on which banks
in the City of New York are authorized or obligated to be closed; provided that
if this Agreement requires performance on any day that is not a Business Day,
such performance shall be deemed to be required on the next subsequent day that
is a Business Day.
(f) "Cash" means the sum of all cash, cash equivalents and
marketable securities, less the amount of any outstanding (but not "cleared")
checks issued.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Company Cash" means all Cash of the Company, NDI and
Bellwether.
(i) "Company Indebtedness" means any Indebtedness of the Company,
NDI and Bellwether.
(j) "Company Net Indebtedness" means the Net Indebtedness of the
Company, NDI and Bellwether as of the Closing Date.
(k) "Environmental Indemnification Amount" means Four Million
Dollars ($4,000,000).
(l) "Environmental Indemnification Claims" means claims for
indemnification under Article IX based on a breach of the representations and
warranties set forth in Section 3.15 or pursuant to clause (ii) of Section
9.1(a).
(m) "General Indemnification Amount" means Five Million Dollars
($5,000,000).
(n) "General Indemnification Claims" means claims for
indemnification under Article IX other than Environmental Indemnification Claims
and Tax Indemnification Claims.
(o) "Huntington Bank" means The Huntington National Bank.
(p) "Huntington Debt" means all indebtedness due and owing by the
Company and the Company Subsidiaries to Huntington Bank, excluding any
indebtedness under the letters of credit listed on Item 2.2(a)(B) of the
Disclosure Schedule.
(q) "Indebtedness" means, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade payables
and other current liabilities incurred in the Ordinary Course of Business), (iv)
any commitment by which a Person assures a creditor against loss (including
contingent reimbursement obligations with respect to letters of credit), (v) any
indebtedness guaranteed in any manner by a Person (including guarantees in the
form of an agreement to repurchase or reimburse, but excluding the endorsement
of checks or other negotiable instruments for deposit or collection), (vi) any
obligations under capitalized leases with respect to which a Person is liable,
contingently or
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otherwise, as obligor, guarantor or otherwise, or with respect to which
obligations a Person assures a creditor against loss, (vii) any indebtedness
secured by a Lien on a Person's assets, (viii) any outstanding letter of credit,
sight draft, performance bond or similar surety obligation of the Company or any
Company Subsidiary; provided that any such obligation shall only be considered
Indebtedness to the extent such obligation has actually been drawn (or
circumstances exist which entitle the beneficiary to draw on) at or prior to the
Closing Date and (ix) any interest, principal, prepayment penalty, fees or
expenses to the extent paid in respect of those items listed in clauses (i)
through (viii) of this defined term.
(r) "Knowledge" (or words of similar import) attributed to the
Company or those Company Subsidiaries that are majority-owned by the Company
means the actual knowledge of the Operating Shareholders, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, in each case, without the
requirement of inquiry or investigation outside his ordinary duties and
responsibilities.
(s) "Material Adverse Effect" means a material adverse effect on
the business, properties, assets, financial condition or results of operations
of the Company and the Company Subsidiaries, taken as a whole (other than
changes, events, occurrences or effects relating to (i) the United States or
global economy or securities or capital markets in general (to the extent not
disproportionately affecting the Company in comparison to its competitors), or
(ii) the offset blanket printing or pressroom consumable products industry in
general (to the extent not disproportionately affecting the Company in
comparison to its competitors)). Notwithstanding the foregoing, changes, events,
occurrences or effects relating to or caused by this Agreement (or the
transactions contemplated herein) shall not be considered a Material Adverse
Effect.
(t) "NDI" means Network Distribution International, Inc., a
Massachusetts company, and a wholly-owned, direct subsidiary of the Company.
(u) "Net Indebtedness" means Indebtedness less Cash.
(v) "Operating Shareholders" means ▇▇▇▇▇ ▇. ▇▇▇▇▇, D. ▇▇▇▇▇
▇▇▇▇▇▇▇▇, and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇.
(w) "Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice.
(x) "Permitted Liens" means (i) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the Ordinary Course of
Business, (ii) Liens arising under equipment leases with third parties entered
into in the Ordinary Course of Business and under which neither the Company nor
a Company Subsidiary is in default, (iii) Liens for current taxes and utilities
not yet due and payable, (iv) easements, covenants, rights-of-way and other
similar restrictions of record, and (v) (A) zoning, building and other similar
restrictions imposed by applicable laws, (B) Liens that have been placed by any
landlord or other third party on property over which the Company or a Company
Subsidiary has easement rights or, on any leased real property, under any lease
of which the Company or a Company Subsidiary is in default, and subordination or
similar agreements relating thereto, and (C) unrecorded easements, covenants,
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rights-of-way and other similar restrictions on real property, none of which,
individually or in the aggregate, materially impairs the continued use and
operation of such real property.
(y) "Person" means an individual, a partnership, a corporation, a
limited company, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization, or any
similar business entity.
(z) "Pledge Agreement" means the First Amendment and Spreader of
Commercial Pledge and Security Agreement among the Company, as grantor,
Bellwether, NDI and Huntington Bank, dated June 30, 2003, pursuant to which 100%
of the issued and outstanding stock of NDI and 100% of the issued and
outstanding interests of Bellwether was pledged by the Company to Huntington
Bank as security for the issued and outstanding loans by Huntington Bank to the
Company.
(aa) "Representatives" means, with respect to each of the
Purchaser, the Company and the Company Subsidiaries, its officers, trustees,
directors, employees, financial advisors, accountants, consultants, legal
counsel and other representatives.
(bb) "Rockmont" means Rockmont Graphics, LLC, a Colorado limited
liability company.
(cc) "Target Working Capital" means Sixteen Million Four Hundred
Thousand Dollars ($16,400,000).
(dd) "Tax Indemnification Amount" means Two Million Dollars
($2,000,000).
(ee) "Tax Indemnification Claims" means claims for indemnification
under Article IX based on a breach of the representations and warranties set
forth in Section 3.11 or pursuant to clause (iii) of Section 9.1(a).
(ff) "Transfer Taxes" means all transfer taxes (excluding taxes
measured by net income), including sales, real property, use, excise, stock,
stamp, documentary, filing, recording, permit, license, authorization, and
similar taxes, filing fees and similar charges.
Each of the following terms shall have the meaning set forth in the
section set opposite it in the table below:
Term Section
---- -------
Audited Financial Statements............................................................... 3.4(a)
Bellwether Damages......................................................................... 9.4
Bellwether Purchase Price.................................................................. 2.2(a)
Benefit Plans.............................................................................. 3.8(a)
By-laws.................................................................................... 3.1(c)
Charters................................................................................... 3.1(c)
CHG........................................................................................ 10.10
Claimed Amount............................................................................. 9.8
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Closing.................................................................................... 2.5
Closing Balance Sheet...................................................................... 2.4(b)
Closing Date............................................................................... 2.5
Closing Date Statement..................................................................... 2.4(b)
Closing Payment............................................................................ 2.2(b)
Closing Working Capital.................................................................... 2.4(c)
Company.................................................................................... Introduction
Company's Accounting Policies.............................................................. 3.4(a)
Company Financial Statements............................................................... 3.4(a)
Company Permits............................................................................ 3.10
Company Required Approvals................................................................. 3.3
Company Subsidiary......................................................................... 3.1(a)
Company Subsidiaries....................................................................... 3.1(a)
Compensation Agreements.................................................................... 3.8(b)
Customer Schedule.......................................................................... 3.25(a)
Damages.................................................................................... 9.1(a)
Day........................................................................................ Introduction
Declaration of Trust....................................................................... 3.1(c)
Deloitte................................................................................... 2.4(e)
Disclosure Schedule........................................................................ Article III
Environmental Law.......................................................................... 3.15
ERISA...................................................................................... 3.8(a)
Escrow Agent............................................................................... 2.3
Escrow Agreement........................................................................... 2.3
Escrow Amount.............................................................................. 2.2(b)
Governmental Entity........................................................................ 3.3(ii)
Hazardous Substance........................................................................ 3.15
Independent Accounting Firm................................................................ 2.4(e)
Initial Purchase Price..................................................................... 2.2(a)
Interim Balance Sheet...................................................................... 3.4(a)
Interim Financial Statements............................................................... 3.4(a)
Interim Rockmont Financial Statements...................................................... 3.4(b)
Key Employees and Consultants.............................................................. 7.2(c)
Liens...................................................................................... 2.1
Material Contracts......................................................................... 3.13(b)
Multiemployer Pension Plans................................................................ 3.8(d)
Pension Plans.............................................................................. 3.8(a)
Proprietary Rights......................................................................... 3.16
Purchase Price............................................................................. 2.2(a)
Purchaser.................................................................................. Introduction
Purchaser Indemnitees...................................................................... 9.3
PWC........................................................................................ 2.4(e)
Release.................................................................................... 6.7(a)
Resigning Employees........................................................................ 6.7(b)
Rockmont Audited Financial Statements...................................................... 3.4(b)
Rockmont Financial Statements.............................................................. 3.4(b)
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S Corporation Shareholders................................................................. 4.6
Shareholders............................................................................... Introduction
Shareholders' Representatives.............................................................. Introduction
Shares..................................................................................... Introduction
Supplier Schedule.......................................................................... 3.25(b)
Systems.................................................................................... 3.16
Taxes...................................................................................... 3.11(g)
Taxpayer................................................................................... 3.11(a)
Terminated Employee Obligations and Claims................................................. 9.3
Terminated Employees....................................................................... 6.7(a)
Unaudited Financial Statements............................................................. 3.4(a)
Working Capital............................................................................ 2.4(a)
Working Capital Adjustment................................................................. 2.4(c)
Working Capital Excess..................................................................... 2.4(g)
Working Capital Shortfall.................................................................. 2.4(g)
ARTICLE II
TERMS OF PURCHASE
SECTION 2.1. Sale and Purchase. Upon the terms and subject to the
conditions set forth in this Agreement and in reliance upon the representations
and warranties contained herein, at the Closing, each of the Shareholders shall
sell and deliver to the Purchaser the Shares owned by such Shareholder as set
forth on Schedule 1, and the Purchaser shall purchase the Shares from the
Shareholders free and clear of all pledges, adverse claims, liens (including
federal and state estate tax liens), charges, restrictions (except for those
imposed by or under federal or state securities laws), encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens"), for the
Purchase Price determined in accordance with this Article II. At the Closing,
the Shareholders shall convey and deliver to the Purchaser, certificates
representing all of the Shares, duly endorsed in blank or accompanied by stock
powers duly executed in blank, against payment of the Initial Purchase Price for
the Shares, as provided in Section 2.2.
SECTION 2.2. Payment for the Shares. (a) The Purchaser shall pay to the
Shareholders at Closing for the Shares an aggregate amount equal to (I) Thirty
Million Five Hundred Thousand Dollars ($30,500,000) minus (II) the sum of (A)
Seven Hundred Ninety-One Thousand Four Hundred Dollars ($791,400), representing
the purchase price for the 39.57% interest in Bellwether not owned by the
Company (the "Bellwether Purchase Price") and (B) the Company Net Indebtedness
(except for such letters of credit set forth on Item 2.2(a)(B) of the Disclosure
Schedule) (such aggregate amount, the "Initial Purchase Price"). The Initial
Purchase Price shall be subject to a Working Capital Adjustment in accordance
with Section 2.4 and as so adjusted shall be the "Purchase Price."
(b) On the Closing Date:
(i) The Purchaser shall pay and deliver to the
Shareholders an aggregate amount in cash (the "Closing Payment") equal
to the Initial Purchase Price minus Two
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Million Dollars ($2,000,000) (the "Escrow Amount"). The Closing Payment
shall be paid by wire transfer in immediately available funds to such
account as shall be designated by the Shareholders' Representatives at
least one (1) Business Day prior to the Closing Date;
(ii) The Purchaser shall pay and deliver to Huntington
Bank an amount equal to the Huntington Debt outstanding on the Closing
Date, as shown on a statement to be delivered by Huntington Bank at
least three (3) Business Days prior to the Closing, and Huntington Bank
shall deliver all stock certificates securing such Huntington Debt to
the Purchaser, along with a pay-off letter documenting payment of the
Huntington Debt by the Purchaser; and
(iii) The Purchaser shall pay and deliver to ▇▇▇▇▇▇▇▇ Ink
and ▇▇▇▇▇▇ Golf the Bellwether Purchase Price pursuant to the terms of
the Bellwether Purchase Agreement.
SECTION 2.3. Escrow. At the Closing, the Purchaser shall deliver to
Huntington Bank (the "Escrow Agent") an amount equal to the Escrow Amount to be
deposited and held in escrow in accordance with, and subject to, an escrow
agreement in the form of Exhibit A hereto (the "Escrow Agreement"). The Escrow
Agent shall hold the Escrow Amount (and any Claimed Amounts which may be set
aside in a separate escrow account pursuant to Section 9.8 hereof) subject to
the resolution of claims, if any, for indemnification made against the
Shareholders under this Agreement.
SECTION 2.4. Working Capital Adjustment.
(a) The Company's "Working Capital" shall be equal to the
difference between (i) the sum of accounts receivable from trade and other,
inventory and prepaid expenses of the Company, NDI and Bellwether and (ii) the
sum of accounts payable, accrued expenses and taxes payable of the Company, NDI
and Bellwether. Working Capital will be calculated in accordance with Applicable
GAAP and in a manner consistent with the Company's audited balance sheet as of
December 31, 2002, which is included in the Company's Audited Financial
Statements and, to the extent consistent therewith, the Company's Accounting
Policies.
(b) As promptly as practicable but not more than forty-five (45)
days following the Closing Date, the Purchaser shall cause the Company to
prepare and deliver to the Shareholders' Representatives and the Purchaser a
balance sheet (the "Closing Balance Sheet") of the Company as at the close of
business on the Closing Date, and a statement (the "Closing Date Statement")
derived from the Closing Balance Sheet showing only the items included in
Working Capital as of the Closing Date and a calculation of the Working Capital
Adjustment. The Closing Balance Sheet, including the value of the Company's
inventory reflected therein, shall be prepared in accordance with Applicable
GAAP and in a manner consistent with the Company's audited balance sheet as of
December 31, 2002 (which is included in the Company's Audited Financial
Statements) and, to the extent consistent therewith, the Company's Accounting
Policies. When calculating the Working Capital Adjustment, the value of the
inventory shall be based upon the physical count of inventory conducted by the
Company on November 21, 2003; provided that the Purchaser and its
representatives shall be permitted to observe such physical count. Such
inventory value shall be adjusted by the Purchaser for
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transactions occurring between November 21, 2003 and the Closing if the Closing
occurs after November 21, 2003. The Closing Balance Sheet shall not, and nothing
herein shall be interpreted as indicating that such balance sheet will, report,
give effect to, or otherwise take into account, events, occurrences, effects or
circumstances that may arise after the Closing as a result of this Agreement, or
any plans, transactions or changes that the Purchaser intends to implement with
respect to the business of the Company or the Company Subsidiaries, or the
transactions contemplated hereby, including possible tax liabilities
contemplated by Section 9.1(a)(iii).
(c) The "Working Capital Adjustment" shall be calculated from the
Closing Date Statement and shall be equal to the difference between (i) the
Target Working Capital and (ii) the Working Capital as of the Closing Date, as
finally determined pursuant to this Section 2.4 (the "Closing Working Capital").
(d) If adjustments are made related to items contained on the
Closing Date Statement when determining the Working Capital Adjustment pursuant
to this Section 2.4, such adjustments shall not be deemed, to the extent of the
amount thereof, to be breaches of the representations and warranties pertaining
to such items and such adjustments may not be the basis of a claim for Damages
under Article IX, except to the extent the amount of such Damages (measured on a
dollar for dollar basis) with respect to any item shall prove to be greater than
the reserves, if any, reflected on the Closing Balance Sheet (as finally
resolved pursuant to Section 2.4(e)) with respect to such item.
(e) The Closing Balance Sheet and the Closing Date Statement shall
be final and binding upon all parties hereto unless and to the extent that
within fifteen (15) days following its receipt by the Shareholders'
Representatives, the Shareholders' Representatives notify the Purchaser in
writing that the Shareholders' Representatives object to any item on, or other
matter relating to, the Closing Balance Sheet or the Closing Date Statement. If,
within such fifteen (15)-day period, the Shareholders' Representatives notify
the Purchaser that they do so object, and if the Purchaser and the Shareholders'
Representatives are unable within thirty (30) days after receipt by the
Purchaser of such notice of objection, to resolve all disputes regarding the
Closing Balance Sheet, the Closing Date Statement and the related Working
Capital Adjustment, the unresolved disputes shall be referred for decision to
the Cleveland, Ohio offices of either Deloitte & Touche LLP ("Deloitte") or
PricewaterhouseCoopers LLC ("PWC"); provided, however, that if either firm shall
be engaged in providing services to the Shareholders or the Purchaser or any of
their Affiliates, another nationally recognized accounting firm shall be
selected by the Purchaser, which firm shall be reasonable acceptable to the
Shareholders (either Deloitte, PWC or such other firm, an "Independent
Accounting Firm"). The Independent Accounting Firm shall be instructed to decide
only the disputed items within thirty (30) days of such referral and its
decision shall be final, binding and conclusive on the Shareholders and the
Purchaser. Upon resolution of such disputed items, the Independent Accounting
Firm shall provide a revised Closing Balance Sheet, a revised Closing Date
Statement and a revised computation of the Working Capital Adjustment to the
Purchaser and the Shareholders' Representatives. The cost of retaining the
Independent Accounting Firm with respect to resolving disputes as to the Closing
Balance Sheet, the Closing Date Statement and the related Working Capital
Adjustment shall be borne equally by the Shareholders, on the one hand, and the
Purchaser, on the other hand.
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(f) The Purchaser shall cause the Company to give the
Shareholders' Representatives and their attorneys and accountants reasonable
access during normal business hours to such financial records, books of account
and any other information reasonably necessary for review of the Closing Balance
Sheet and the Closing Date Statement, as well as making appropriate
Representatives available on a mutually convenient basis to provide additional
information and explanation of materials provided hereunder. The Purchaser and
the Shareholders shall, and the Purchaser shall cause the Company to, fully
cooperate with any Independent Accounting Firm selected to resolve any disputes
in accordance with the provisions of this Section 2.4.
(g) If the Target Working Capital exceeds the Closing Working
Capital (a "Working Capital Shortfall"), the Shareholders shall pay the
Purchaser an amount equal to the Working Capital Shortfall, in the manner and
with interest as provided in Section 2.4(h) below. If the Closing Working
Capital exceeds the Target Working Capital (a "Working Capital Excess"), the
Purchaser shall pay the Shareholders an amount equal to the Working Capital
Excess, in the manner and with interest as provided in Section 2.4(h) below.
(h) Any Working Capital Excess due to the Shareholders or any
Working Capital Shortfall due to the Purchaser pursuant to this Section 2.4
shall be paid within five (5) Business Days after the Working Capital Adjustment
is finally determined. Any such payment shall be made together with interest on
such payment amount from the Closing Date to the date of payment at the prime
rate as published in the edition of the Wall Street Journal published on the
Closing Date.
SECTION 2.5. Closing. Upon the terms and subject to the conditions of
this Agreement, the closing of the stock purchase contemplated hereunder (the
"Closing") shall take place at the offices of Stroock & Stroock & ▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. local time, on November 24,
2003 (the "Closing Date"), or such other date and time mutually agreed to in
writing by the Shareholders' Representatives and the Purchaser. The transfers
and deliveries described in this Agreement as conditions precedent to the
consummation of the transactions contemplated hereunder shall be mutually
interdependent and shall be regarded as occurring simultaneously and no transfer
or delivery shall become effective or shall be deemed to have occurred until all
of the transfers and deliveries provided for in this Agreement shall also have
occurred. Such transfers and deliveries shall be deemed to have occurred, and
the Closing shall be effective, as of the opening of business on the Closing
Date.
SECTION 2.6. Additional Payments. The Purchaser shall cause the Company
to make additional payments in accordance with the terms of an Earnout Agreement
among the Purchaser, certain of the Shareholders and other parties named therein
(the "Earnout Agreement").
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Shareholders jointly and severally represent and warrant to the
Purchaser, subject, in the case of each Section of this Article III, to the
exceptions set forth and identified in the separate disclosure schedule
delivered by the Shareholders concurrently with the execution and
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delivery of this Agreement (the "Disclosure Schedule"). The Disclosure Schedule
will be arranged in sections corresponding to the lettered and numbered sections
contained in this Article III. Except for the representation and warranty set
forth in Section 3.4(b) regarding those subsidiaries or equity investments which
are not majority-owned by the Company, the representations and warranties
included in this Article III shall be interpreted, as if each such
representation and warranty were modified by the statement, "to the actual
knowledge of D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, without the requirement of any investigation or
inquiry of any kind." The representation and warranty set forth in Section
3.4(b) shall be read as written.
SECTION 3.1. Organization; Books and Records.
(a) Each of the Company's direct and indirect subsidiaries and
equity investments (along with the percentage interest held by the Company in
such subsidiary and equity investment) is listed on Item 3.1(a) of the
Disclosure Schedule (each, a "Company Subsidiary" and collectively, the "Company
Subsidiaries"). The Company and each of the Company Subsidiaries is a business
trust, corporation or limited liability company, duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization as set forth opposite its name on Item 3.1(a) of
the Disclosure Schedule and has all requisite trust or corporate power and has
been duly authorized by all necessary approvals and orders, to own, lease and
operate it assets and properties to the extent owned, leased and operated and to
carry on its business as now being conducted.
(b) Each of the Company and the Company Subsidiaries is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary (each
of which jurisdictions is identified in Item 3.1(b) of the Disclosure Schedule),
except for such jurisdictions where any failure to be so duly qualified or
licensed and in good standing would not, individually or in the aggregate, have
a Material Adverse Effect. Each of the Company and the Company Subsidiaries has
all licenses, permits, and authorizations necessary to carry on the businesses
in which it is engaged and to own and use the properties owned and used by it,
except where the failure to have such licenses, permits or authorizations would
not, individually or in the aggregate, have a Material Adverse Effect.
(c) The Company has delivered to the Purchaser complete and
correct copies of its declaration of trust (the "Declaration of Trust") and the
organization documents of each of the Company Subsidiaries, each as in effect on
the date hereof (the "Charters"), and the By-laws of the Company and each of the
Company Subsidiaries, as in effect on the date hereof (the "By-laws").
(d) The minute books and stock ledger of the Company and each of
the Company Subsidiaries, copies of which have been previously provided to the
Purchaser, are complete, accurate and current in all material respects.
SECTION 3.2. Capitalization. The authorized, issued and outstanding
shares of beneficial interests or capital stock, as applicable, of the Company
and each of the Company Subsidiaries, and the beneficial owner thereof, as of
the date hereof is set forth on Item 3.2 of the Disclosure Schedule. All of such
outstanding shares are duly authorized, validly issued, fully
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paid and nonassessable. Such shares are not subject to any preemptive rights.
There are no bonds, debentures, notes or other indebtedness of the Company or
the Company Subsidiaries having the right to vote (or convertible into, or
exercisable or exchangeable for, securities having the right to vote) on any
matters on which shareholders of the Company or the Company Subsidiaries may
vote. Except as set forth on Item 3.2 of the Disclosure Schedule, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any Company
Subsidiary is a party or by which it is bound obligating the Company or any
Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other voting securities of the
Company or any Company Subsidiary or obligating the Company or any Company
Subsidiary to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Company Subsidiary. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Company or any Company Subsidiary. There are no voting trusts,
proxies, or other agreements or understandings with respect to the voting of the
capital stock of the Company or any Company Subsidiary, except as described in
Item 3.2 of the Disclosure Schedule.
SECTION 3.3. Consent and Approvals; No Violations. Except for the
matters referred to in Item 3.3 of the Disclosure Schedule (collectively, the
"Company Required Approvals"), neither the execution, delivery or performance of
this Agreement by the Shareholders nor the consummation by the Shareholders of
the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the Declaration of Trust, the Charters or the
By-laws, (ii) require any filing with, or permit, authorization, consent or
approval of, any federal, state or local government or any court, tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency, domestic or foreign (a "Governmental Entity"), (iii) result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any Material Contract or (iv) violate any law, order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or any Company
Subsidiary, or any of their properties or assets.
SECTION 3.4. Financial Statements, etc.
(a) The Company's consolidated audited financial statements for
its fiscal years ended December 31, 2002 and 2001 and the balance sheet for the
seven (7) months ended December 31, 2000 (the "Audited Financial Statements"),
its unaudited financial statements for the seven (7) months ended December 31,
2000 (the "Unaudited Financial Statements") and its unaudited financial
statements for the nine (9)-month period ended September 30, 2003 (the "Interim
Financial Statements" and together with the Audited Financial Statements and the
Unaudited Financial Statements, the "Company Financial Statements") fairly
present, in all material respects, the financial position of the Company, NDI
and Bellwether as at the dates thereof and the results of their operations and
cash flows for the periods indicated therein, subject, in the case of the
Interim Financial Statements, to normal, year-end audit adjustments and the
omission of footnote disclosure. The Company Financial Statements have been
prepared
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(i) in accordance with the accounting policies and procedures described on Item
3.4(a) of the Disclosure Schedule (the "Company's Accounting Policies") and (ii)
in accordance with Applicable GAAP. The financial books and records of the
Company, NDI and Bellwether fairly set forth the transactions to which the
Company, NDI and Bellwether is a party or by which any of their properties are
bound, and such books and records have been properly kept and maintained in
accordance with Applicable GAAP. The Company Financial Statements are set forth
on Item 3.4(a) of the Disclosure Schedule. The balance sheet dated as of
September 30, 2003, which is included in the Interim Financial Statements, is
herein referred to as the "Interim Balance Sheet."
(b) The Rockmont consolidated audited financial statements for its
fiscal years ended December 31, 2002, 2001 and 2000 (the "Rockmont Audited
Financial Statements") and its unaudited financial statements for the
nine(9)-month period ended September 30, 2003 (the "Interim Rockmont Financial
Statements" and together with the Rockmont Audited Financial Statements, the
"Rockmont Financial Statements") fairly present, in all material respects, the
financial position of Rockmont and the subsidiaries of Rockmont as at the dates
thereof and the results of their operations and cash flows for the periods
indicated therein, subject, in the case of the Interim Rockmont Financial
Statements, to normal, year-end audit adjustments and the omission of footnote
disclosure. The Rockmont Financial Statements have been prepared in accordance
with Applicable GAAP. To the actual knowledge of D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, without the
requirement of any investigation or inquiry of any kind, the financial books and
records of Rockmont and the subsidiaries of Rockmont fairly set forth the
transactions to which Rockmont and each of the subsidiaries of Rockmont is a
party or by which any of their properties are bound, and such books and records
have been properly kept and maintained in accordance with Applicable GAAP. The
Rockmont Financial Statements are set forth on Item 3.4(b) of the Disclosure
Schedule.
SECTION 3.5. Absence of Certain Changes or Events. Except as disclosed
in Item 3.5 of the Disclosure Schedule, since December 31, 2002, the Company and
each Company Subsidiary has conducted its business only in the Ordinary Course
of Business, and since such date, there has not been any event or circumstance
that, individually or in the aggregate, would have a Material Adverse Effect.
Without limiting the generality of the foregoing, except as set forth in Item
3.5 of the Disclosure Schedule, since December 31, 2002, neither the Company nor
any Company Subsidiary has (i) other than tax distributions made by the Company
to the Shareholders, declared, set aside or paid any dividend or other
distribution with respect to its capital stock or redeemed, purchased or
otherwise acquired any of its capital stock; (ii) split, combined or
reclassified any of its capital stock or issued or authorized any issuance of
any capital stock or any options, warrants, rights or other securities in
respect of, in lieu of or in substitution for, shares of its capital stock;
(iii) (A) granted or approved to any officer or employee of the Company or any
Company Subsidiary any increase in compensation, (B) granted or approved to any
such officer or employee any increase in severance or termination pay, or (C)
entered into any employment, severance or termination agreement with any such
officer or employee; (iv) experienced any damage, destruction or loss, whether
or not covered by insurance, constituting a Material Adverse Effect; (v)
revalued any of its assets; (vi) made any change in accounting methods,
principles or practices; (vii) adopted, amended or terminated any bonus, profit
sharing, incentive, severance or other plan, contract or commitment for the
benefit
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of any of its trustees, directors, officers or employees; (viii) sold, leased,
licensed, transferred, or assigned any of its assets, tangible or intangible,
other than, (A) disposing of assets in the Ordinary Course of Business and (B)
disposing of assets outside of the Ordinary Course of Business, the aggregate
fair market value of which does not exceed $10,000; (ix) entered into any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $50,000, except in
connection with the sale or purchase of inventory in the Ordinary Course of
Business; (x) nor has any other party, accelerated, terminated, modified, or
cancelled any Material Contract, except in the case of sales orders and purchase
orders; (xi) imposed any pledge, mortgage, lien, encumbrance or other security
interest upon any of its assets, tangible or intangible; (xii) made any capital
expenditure (or series of related capital expenditures) involving more than
$25,000; (xiii) made any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions); (xiv) issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation; (xv) delayed or postponed the
payment of any accounts payable or other liabilities outside the Ordinary Course
of Business; (xvi) cancelled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more than
$25,000 or outside the Ordinary Course of Business; (xvii) granted any license
or sublicense of any rights under or with respect to any Proprietary Right;
(xviii) made or authorized any change to the Declaration of Trust, Charters or
the By-laws; (xix) made any loan to, or entered into any other transaction with,
any of its employees (other than officers, trustees and directors) outside the
Ordinary Course of Business; (xx) made any change in employment terms for any of
such employees outside the Ordinary Course of Business; (xxi) made, or pledged
to make, any charitable or other capital contribution in excess of $5,000 in the
aggregate; or (xxii) committed, whether orally or in writing, to any of the
foregoing.
SECTION 3.6. Undisclosed Liabilities. Except for liabilities (whether
known or unknown, contingent, liquidated or otherwise) that: (i) are shown on
the face of the Interim Financial Statements, (ii) have arisen after June 30,
2003 in the Ordinary Course of Business, (iii) are pursuant to Material
Contracts set forth on Item 3.13 of the Disclosure Schedule (or which are not
required to be set forth thereon pursuant to Section 3.13), (iv) are set forth
on a Disclosure Schedule, or (v) arise in connection with warranties on products
sold or services performed by the Company or any Company Subsidiary, there are
no liabilities of the Company or any Company Subsidiary, which in any one case
or in the aggregate, would have a Material Adverse Effect.
SECTION 3.7. Accounts Receivable. All accounts receivable reflected on
the Interim Balance Sheet and accounts receivable arising after the date of the
Interim Balance Sheet and reflected on the books and records of the Company and
the Company Subsidiaries (i) are valid, genuine and existing (except as set
forth in Item 3.7 of the Disclosure Schedule) and (ii) are not more than 90 days
past due as of the date of the aging schedule attached hereto as part of Item
3.7 of the Disclosure Schedule (except as set forth on such aging schedule or as
otherwise described on Item 3.7 of the Disclosure Schedule). Except as indicated
in Item 3.7 of the Disclosure Schedule, the Company's allowances for doubtful
accounts (including those subject to setoff or counterclaim) as reflected on
such balance sheet are sufficient based on Applicable GAAP applied in a manner
consistent with the Company's audited balance sheet as of December
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31, 2002, and, to the extent consistent therewith, the Company's Accounting
Policies. The representation and warranty on accounts receivable set forth in
this Section 3.7 does not take into account or consider the impact on the
accounts receivable of any events, occurrences, effects or circumstances that
may arise after the Closing as a result of this Agreement or the transactions
contemplated hereby. The impact on the accounts receivable of any such
post-closing events, occurrences, effects or circumstances shall not constitute,
give rise to or result in a breach of this representation and warranty on
accounts receivable.
SECTION 3.8. Benefit Plans.
(a) Item 3.8(a) of the Disclosure Schedule contains a list of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Pension Plans"), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA) and all other bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer, trustee or director of the Company or the Company Subsidiary
or with respect to which the Company or any Company Subsidiary has any liability
or obligation to contribute (collectively "Benefit Plans"). The Company has
delivered or made available to the Purchaser true, complete and correct copies
of (i) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof) and all amendments thereto, (ii) the three most recent
annual reports on Form 5500 filed with the Internal Revenue Service with respect
to each Benefit Plan (if any such report was required), (iii) the most recent
summary plan description for each Benefit Plan for which such summary plan
description is required, (iv) each trust agreement and group annuity contract
relating to any Benefit Plan and (v) each Compensation Agreement (or in the case
of any unwritten Compensation Agreements, descriptions thereof) and all
amendments thereto.
(b) Except as disclosed in Item 3.8(b) of the Disclosure Schedule,
since the date of the Interim Financial Statements, there has not been any
adoption or amendment in any material respect by the Company or any Company
Subsidiary of any collective bargaining agreement or any Benefit Plan. Except as
disclosed in Item 3.8(b) of the Disclosure Schedule, there exist no employment,
consulting, severance, termination or indemnification agreement, split dollar
life insurance, rabbi trust, outplacement services or estate planning
arrangements or understandings between the Company or any Company Subsidiary and
any current or former employee, officer, trustee or director of the Company or
any Company Subsidiary (collectively, "Compensation Agreements").
(c) Except as disclosed in Item 3.8(c) of the Disclosure Schedule,
(i) no Pension Plan is a defined benefit pension plan, (ii) all Pension Plans
have been the subject of determination letters from the Internal Revenue Service
to the effect that such Pension Plans are qualified and exempt from Federal
income taxes under Section 401(a) and 501(a), respectively, of the Code, and
(iii) no such determination letter has been revoked nor, to the Company's
Knowledge, has revocation been threatened, nor has any such Pension Plan been
amended since the date of its most recent determination letter or application
therefor in any respect that would adversely affect
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its qualification or materially increase its costs. There is no pending or, to
the Company's Knowledge, threatened litigation relating to any of the Benefit
Plans or the Compensation Agreements.
(d) No Pension Plan that is subject to Title IV of ERISA and that
the Company or any Company Subsidiary maintains, or to which the Company or any
Company Subsidiary is obligated to contribute, other than any Pension Plan that
is a "multiemployer plan" (as such term is defined in Section 4001(a)(3) of
ERISA; collectively, the "Multiemployer Pension Plans"), had, as of the
respective last annual valuation date for each such Pension Plan, an "unfunded
benefit liability" (as such term is defined in Section 4001(a)(18) of ERISA),
based on actuarial assumptions contained in the Pension Plan's most recent
actuarial valuation, and there has been no material change in the financial
condition of such Pension Plan since such annual valuation date. Except as set
forth in Item 3.8(d) of the Disclosure Schedule, none of the Pension Plans has
an "accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived. Neither the Company
nor any Company Subsidiary has provided, nor are they required to provide,
security to any Pension Plan pursuant to Section 401(a)(29) of the Code. None of
the Company, any Company Subsidiary, any employee, officer, trustee or director
of the Company or of any Company Subsidiary or any of the Benefit Plans which
are subject to ERISA, including the Pension Plans, any trusts created thereunder
or any trustee or administrator thereof, has engaged in a "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) or any other breach of fiduciary responsibility that would subject the
Company or any Company Subsidiary or any officer of the Company or of any
Company Subsidiary to any tax or penalty on prohibited transactions imposed by
such Section 4975 or to any liability under Section 502(i) or (l) of ERISA. None
of such Benefit Plans or trusts has been terminated, nor has there been any
"reportable event" (as that term is defined in Section 4043 of ERISA) with
respect thereto, nor has any liability under Subtitle C or D of Title IV of
ERISA been incurred by the Company or any Company Subsidiary with respect to any
ongoing, frozen or terminated "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained or contributed to
by the Company or any other entity that, together with the Company, is or has
been treated as a single employer under Code Section 414. Except as disclosed in
the Company Financial Statements, neither the Company nor any Company Subsidiary
has suffered or otherwise caused a "complete withdrawal," or a "partial
withdrawal" (as such terms are defined in Section 4203 and Section 4205,
respectively, of ERISA) since the effective date of such Sections 4203 and 4205
with respect to any of the Multiemployer Pension Plans or any other
multiemployer plan.
(e) With respect to any Benefit Plan that is an employee welfare
benefit plan, except as disclosed in Item 3.8(e) of the Disclosure Schedule, (i)
no such Benefit Plan is unfunded or funded through a "welfare benefits fund," as
such term is defined in Section 419(e) of the Code, (ii) each such Benefit Plan
that is a "group health plan," as such term is defined in Section 5000(b)(1) of
the Code, complies in all material respects with the applicable requirements of
Section 4980B(f) of the Code and (iii) each such Benefit Plan (including any
such Plan covering retirees or other former employees) may be amended or
terminated without liability to the Company or any Company Subsidiary at any
time. There has been no written or, to the Knowledge of the Company, oral
communication to employees by the Company or any
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Company Subsidiary that would be expected to promise or guarantee such employees
retiree health or life insurance or other retiree death benefits.
(f) Except as set forth in Item 3.8(f) of the Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement will not (x)
entitle any employees of the Company or any Company Subsidiary to severance pay,
(y) accelerate the time of payment or vesting or trigger any payment of
compensation or benefits under, increase the amount payable or trigger any other
obligation pursuant to, any of the Benefit Plans or the Compensation Agreements
or (z) result in any breach or violation of, or a default under, any of the
Benefit Plans or the Compensation Agreements.
(g) Except as set forth in Item 3.8(g) of the Disclosure Schedule,
all Benefit Plans covering current or former non-U.S. employees comply in all
material respects with applicable local law. Neither the Company nor any Company
Subsidiary has any unfunded liabilities with respect to any Benefit Plan that
covers such non-U.S. employees. Neither the Company nor any Company Subsidiary
has or has ever had any employees outside the United States or Benefit Plans
covering such employees.
SECTION 3.9. Litigation. Except as set forth in Item 3.9 of the
Disclosure Schedule, there is no suit, claim, action, grievance, arbitration,
proceeding or investigation pending or, to the Knowledge of the Company,
threatened against the Company or any Company Subsidiary. None of the items set
forth in Item 3.9 of the Disclosure Schedule, except as indicated in such Item,
individually or in the aggregate, would, if adversely determined, have a
Material Adverse Effect or otherwise prevent or delay the Closing. Except as set
forth in Item 3.9 of the Disclosure Schedule, neither the Company nor any
Company Subsidiary is subject to any outstanding judgment, order, writ,
injunction or decree.
SECTION 3.10. Compliance with Applicable Law. The Company and each
Company Subsidiary hold all material permits, licenses, variances, exemptions,
orders, concessions, franchises and approvals of all Governmental Entities
necessary to own or lease its assets and to conduct its businesses (the "Company
Permits"). Except as disclosed in Item 3.10 of the Disclosure Schedule, the
Company and each Company Subsidiary is in compliance, in all respects, with the
terms of the Company Permits and all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings and
charges of any Governmental Entity), except where the failure to be in
compliance would not have a Material Adverse Effect. Neither the Company nor any
Company Subsidiary has received on or after December 31, 1997, any written
notification or written communication from any Governmental Entity, nor after
July 1, 2000, any written or verbal notification or written or verbal
communication from any Governmental Entity, nor is there currently pending any
proceeding or investigation, asserting that the Company or any Company
Subsidiary is not in compliance with any of the laws, statutes, regulations or
ordinances which any such Governmental Entity enforces, except where the failure
to be in compliance would not have a Material Adverse Effect. As of the date of
this Agreement, to the Knowledge of the Company, no investigation or review by
any Governmental Entity with respect to the Company and any Company Subsidiary
is pending, or to the Knowledge of the Company, threatened, nor has any
Governmental Entity indicated an intention to conduct any such investigation or
review. The representations in this
-16-
Section 3.10 shall not apply to matters covered by the representations set forth
in Sections 3.8, 3.11, 3.14, 3.15 and 3.24 hereof, to the extent that the
representations in such Sections address the same subject matter as the subject
matter of the representations in this Section 3.10.
SECTION 3.11. Tax Matters. Except as set forth in Item 3.11 of the
Disclosure Schedule:
(a) Since January 1, 1998, the Company and each Company
Subsidiary, including any predecessor of the Company or a Company Subsidiary
(collectively, the "Taxpayer") has filed all federal income tax returns and all
other material tax returns and reports (including information returns) required
to be filed by them. All such returns and reports are complete and correct in
all material respects. The Taxpayer has paid all material taxes (as defined
below) required to be paid, and the balance sheet dated December 31, 2002
included in the Company Financial Statements reflects an adequate reserve for
all taxes payable by the Taxpayer for all taxable periods and portions thereof
through the date of such financial statements. All taxes which the Taxpayer has
been required to collect or withhold have been duly collected or withheld, and
have been either paid to the appropriate taxing authorities when required to be
paid or set aside in accounts for such purpose.
(b) No tax return of the Taxpayer is under audit or examination by
any taxing authority, and no written notice of such an audit or examination has
been received by the Taxpayer. Since December 31, 1997, no taxing authority in
any jurisdiction in which the Taxpayer does not file a tax return has asserted
in writing, or after July 1, 2000, in writing or verbally, that the Taxpayer is
subject to tax in such jurisdiction. Each deficiency resulting from any audit or
examination requiring a payment has been paid. Since December 31, 1997, no
material issues relating to taxes were raised in writing by the relevant taxing
authority during any audit or examination. None of the federal income tax
returns of the Taxpayer for any period since January 1, 1998, has been examined
by the Internal Revenue Service.
(c) There is no agreement or other document extending, or having
the effect of extending, the period of assessment or collection of any taxes of
any Taxpayer and no power of attorney with respect to any taxes has been
executed by any Taxpayer or filed with any taxing authority.
(d) No liens for taxes exist with respect to any assets or
properties of the Company or any Company Subsidiary, except for statutory liens
for taxes not yet due.
(e) Neither the Company nor any Company Subsidiary is or has ever
been a party to any agreement, understanding or arrangement relating to the
allocation or sharing of taxes.
(f) No property of the Company or any Company Subsidiary is
property which is or will be required to be treated as owned by another Person
pursuant to the provisions of Sections 168(f) (safe harbor leasing provisions)
of the Code. None of the Company, any Company Subsidiary or any Shareholder has
made a disclosure on a tax return pursuant to Section 6662 of the Code and the
regulations thereunder. Neither the Company nor any Company Subsidiary has
participated in, or cooperated with, an international boycott within the meaning
of Code Section 999. Neither the Company nor any Company Subsidiary has filed a
consent pursuant to the
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Code Section 341(f) or agreed to have Code Section 341(f)(2) apply to any
disposition of a subsection (f) asset (as such term is defined in Code Section
341(f)(4)) owned by the Company. Neither the Company nor any Company Subsidiary
has been required to include in income any adjustment pursuant to Code Section
481(a) by reason of a change in accounting method or otherwise. Neither the
Company nor any Company Subsidiary has made or is obligated to make any payment
or is a party to any agreement that would obligate it to make any payments that
will not be deductible under Section 280G of the Code (or any corresponding
provision of any state, local or foreign income tax law). Neither the Company
nor any Company Subsidiary has been a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(g) As used in this Agreement, "taxes" shall include all federal,
state, local and foreign income, profits, franchise, gross receipts, payroll,
employment, property, sales, excise, withholding and other taxes, tariffs or
governmental charges of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts.
(h) Set forth in Item 3.11(h) of the Disclosure Schedule is a list
of each "S" corporation election and qualified subchapter S subsidiary election
which has ever been made with respect to the Company and any Company Subsidiary
and the effective dates of such elections. Since the election, all such
elections remained in effect, and the Company and any Company Subsidiary
qualified as an "S" corporation and qualified subchapter S subsidiary,
respectively, within the meaning of Section 1361(a) of the Code and in each
state or local jurisdiction in which such elections were made.
SECTION 3.12. Broker. Neither the Company nor any Shareholder has
engaged any broker, investment banker, financial advisor or other Person
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement.
The Company has no obligation for any fees or expenses of any such broker,
investment banker, financial advisor or other Person.
SECTION 3.13. Material Contracts; Capital Expenditures.
(a) Except as expressly set forth in Item 3.13(a) of the
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to, or bound by, any written or oral:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to its current or former trustees, directors, officers or
employees or any other employee benefit plan, arrangement or practice,
whether formal or informal, that is not otherwise disclosed in Sections
3.8 or 3.14 (or the schedules thereto);
(ii) collective bargaining agreement or any other contract
with any labor union or labor organization, or severance agreements,
programs, policies or arrangements that is not otherwise disclosed in
Sections 3.8 or 3.15 (or the schedules thereto);
(iii) management agreement or contract for the employment
of any officer, individual employee or other Person on a full-time,
part-time, consulting or other basis
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(A) providing annual cash or other compensation in excess of $50,000 or
(B) providing for the payment of any cash or other compensation or
benefits upon the consummation of the transactions contemplated hereby
or (C) otherwise restricting its ability to terminate the employment of
any employee at any time for any lawful reason or for no reason without
penalty or liability; not otherwise disclosed in Sections 3.8 or 3.14
(or the schedules thereto);
(iv) contract or agreement with any Governmental Entity;
(v) agreement or indenture relating to borrowed money or
other Indebtedness or the mortgaging, pledging or otherwise placing a
Lien on any material asset or material group of assets of the Company
or any Company Subsidiary or any letter of credit arrangements;
(vi) guarantee, other than endorsements made for
collection in the Ordinary Course of Business;
(vii) lease or agreement under which the Company or any
Company Subsidiary is (A) lessee of, or holds or operates, any personal
property owned by any other party, except for any lease of personal
property under which the aggregate annual rental payments do not exceed
$25,000 or (B) lessor of, or permits any third party to hold or
operate, any property, real or personal, owned or controlled by the
Company or any Company Subsidiary;
(viii) contract or group of related contracts for the
purchase or sale of raw materials, commodities, supplies, products,
equipment or other personal property or services under which the
undelivered balance of such products and services has a selling price
in excess of $25,000;
(ix) other contract or group of related contracts
continuing over a period of more than six months from the date or dates
thereof, not terminable by the Company or any Company Subsidiary upon
thirty (30)-days' or less notice without penalty or involving more than
$25,000;
(x) contract relating to the marketing, advertising or
promotion of its products;
(xi) agreements relating to the ownership of, investments
in or loans and advances to any Person, including investments in joint
ventures and minority equity investments;
(xii) any license, permit, authorization, franchise or
concession necessary to carry on the businesses of the Company and the
Company Subsidiaries;
(xiii) license, royalty, indemnification or other agreement
with respect to any intangible property (including any Proprietary
Rights); not otherwise disclosed in Sections 3.8 or 3.14;
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(xiv) broker, agent, sales representative, sales or
distribution agreement;
(xv) power of attorney or other similar agreement or grant
of agency;
(xvi) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world, including
any nondisclosure or confidentiality agreements;
(xvii) contract or agreement containing a change of control
provision or other provision requiring the payment of severance;
(xviii) other agreement which involves a consideration in
excess of $25,000 annually, whether or not in the Ordinary Course of
Business; or
(xix) any other agreement which is material to the
businesses of the Company and the Company Subsidiaries.
(b) All of the contracts, agreements and instruments set forth or
required to be set forth in Item 3.13(a) of the Disclosure Schedule (the
"Material Contracts") are valid, binding and enforceable against the Company and
each Company Subsidiary in accordance with their respective terms and to the
Knowledge of the Company, are valid, binding and enforceable obligations of the
other party thereto, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity). Each of the Material Contracts shall be in full force and effect
without penalty in accordance with its terms upon consummation of the
transactions contemplated hereby. Except as set forth in Item 3.13(b) of the
Disclosure Schedule, the Company and each Company Subsidiary (as the case may
be) has performed in all material respects all obligations required to be
performed by it and is not in default under or in breach of, nor in receipt of
any written claim, or since July 1, 2000, any written or verbal claim, of
default or breach under, any Material Contract. Subject to the preceding
sentence, no event has occurred on the part of the Company or any Company
Subsidiary or, to the Knowledge of the Company, on the part of any other party
thereto, which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance by the Company or any
Company Subsidiary under any Material Contract; and the Company does not have
any Knowledge of any breach or cancellation or anticipated breach or
cancellation by the other parties to any Material Contract.
(c) The Company has provided or made available to the Purchaser a
true and correct copy of each written Material Contract, together with all
amendments, waivers or other changes thereto (all of which amendments, waivers
or other changes thereto are described in Item 3.13(a) of the Disclosure
Schedule).
(d) Except as set forth on Item 3.5 of the Disclosure Schedule,
the aggregate amount of capital expenditures committed to or undertaken by the
Company and each Company Subsidiary from and after the Closing Date does not
exceed $10,000.
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SECTION 3.14. Labor Matters. Except as disclosed in Item 3.14 of the
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to, or bound by, any collective bargaining agreement, with a labor union or
labor organization, nor is the Company or any Company Subsidiary the subject of
a proceeding asserting that it has committed an unfair labor practice (within
the meaning of the National Labor Relations Act) or seeking to compel it to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike or written grievance involving the Company or any
Company Subsidiary, pending or, to the Company's Knowledge, threatened, nor is
it aware of any activity involving its employees seeking to certify a collective
bargaining unit. Except as disclosed in Item 3.14 of the Disclosure Schedule,
neither the Company, since the time of its formation, nor any Company
Subsidiary, since December 31, 2000 has been the subject of or involved in any
(i) charge or complaint of employment discrimination before the Equal Employment
Opportunity Commission or any other federal, state, or local agency, court or
tribunal; (ii) charge or complaint for payment of wages or other benefits under
the Fair Labor Standards Act, as amended, or under any similar state or local
employment standards law; (iii) charge or complaint before the Occupational
Safety and Health Administration or any similar state or local agency; and (iv)
complaint or action by any current or former employee of the Company or any
Company Subsidiary, including, but not limited to, a complaint or action
alleging breach of an employment contract, wrongful discharge, employment
discrimination or breach of duty of good faith and fair dealing in the
employment relationship before any federal, state or local agency, court or
tribunal, in each case, which if adversely determined, would have a Material
Adverse Effect. Except as disclosed in Item 3.14 of the Disclosure Schedule,
there are no pending claims against the Company or any Company Subsidiary for
workers' compensation, unemployment insurance, or disability benefits under any
federal, state or local law, which, individually or in the aggregate, would have
a Material Adverse Effect. The Company and each Company Subsidiary is in
material compliance with all applicable employment laws, including those
pertaining to wages, hours, overtime, working conditions, collective bargaining,
employment discrimination, immigration, occupational safety and health,
termination or layoff notice, workers' compensation, unemployment insurance and
disability benefits.
SECTION 3.15. Environmental Matters. Except as set forth in Item 3.15
of the Disclosure Schedule: (i) the Company and each Company Subsidiary is in
material compliance with all applicable Environmental Laws; (ii) the Company and
each Company Subsidiary has obtained and has complied and is in compliance in
all material respects with all permits, licenses, approvals and other
authorizations required under Environmental Laws; (iii) no real property
(including buildings or other structures), currently or formerly owned or
operated by the Company or any Company Subsidiary or any of the predecessors of
the Company or any Company Subsidiary has been contaminated with, or has had any
release of, any Hazardous Substance which contamination or release was the
result of actions or operations of the Company or any Company Subsidiary, or for
which the Company or any Company Subsidiary could be held liable under any
Environmental Law; (iv) neither the Company nor any Company Subsidiary has
received any written notice, demand letter, claim or written request, or since
July 1, 2000, any written or verbal request, for information alleging any
violation of, or liability under, any Environmental Law; (v) neither the Company
nor any Company Subsidiary is subject to any order, decree, injunction or other
agreement with any Governmental Entity or any third party relating to any
Environmental Law; (vi) there are no circumstances or conditions with
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respect to the Company or any Company Subsidiary or any of the predecessors of
the Company or any Company Subsidiary, that have resulted or would result in any
claims, liability, obligations or investigations arising under any Environmental
Law in effect as of the Closing, for which the Company or any Company Subsidiary
has or would have any liability; and (vii) the Company has provided to the
Purchaser copies of all environmental reports, studies, sampling data,
correspondence, filings and other environmental information in its possession,
custody or control relating to the Company and each Company Subsidiary, their
past or present operations and any currently or formerly owned or operated real
property. For purposes of this Section 3.15, "predecessors" of the Company or
any Company Subsidiary shall mean any entity that merged with or consolidated
into, the Company (or any predecessor thereof) or any Company Subsidiary (or any
predecessor thereof), or any entity from which the Company (or any predecessor
thereof) or any Company Subsidiary (or any predecessor thereof) acquired all or
substantially all of such entity's assets.
As used herein, the term "Environmental Law" means any federal, state
or local law, regulation, order, decree, permit, authorization, common law or
agency requirement relating to: (A) pollution or the protection of the
environment, health, safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, indoor air, pollution, contamination or any injury or
threat of injury to Persons or property involving any Hazardous Substance. The
term "Hazardous Substance" means any hazardous, toxic or dangerous pollutant,
contaminant, substance, chemical or waste that is listed, classified or
regulated, or for which liability or standards of conduct are imposed under, any
Environmental Law.
SECTION 3.16. Proprietary Rights. Item 3.16 of the Disclosure Schedule
contains a complete and accurate list of all of the Proprietary Rights of the
Company and the Company Subsidiaries, except for those referred to in clause (v)
of the definition of "Proprietary Rights" insofar as the rights referred to in
such clause are not patented or registered or the subject of a pending patent
application or application for registration. The term "Proprietary Rights" shall
mean (i) registrations of trademarks and other marks, service marks, trade
names, domain names or other trade rights of the Company or any Company
Subsidiary, (ii) pending applications for any such registration of the Company
or any Company Subsidiary, (iii) registered patents and rights in or to patents
and copyrights and pending applications therefor of the Company or any Company
Subsidiary, (iv) computer software (including, but not limited to, source code,
executable code, data, databases and documentation, but excluding commercially
available software) of the Company or any Company Subsidiary and (v) right to
other trademarks, service marks and other marks, trade names, trade dress and
other trade rights and all other trade secrets, designs, plans, specifications,
technology, know-how, methods, designs, concepts, and other proprietary rights,
whether or not patented or registered, which are used, licensed or otherwise
necessary for the Company and each Company Subsidiary to conduct its business as
presently conducted. Except as indicated in Item 3.16 of the Disclosure
Schedule, (A) the Company and each Company Subsidiary (x) is the sole owner of,
and has the exclusive right to use, or (y) has a valid and enforceable license
or other right to use the Proprietary Rights, free from all Liens, and, no
Person has a right to receive a royalty or similar payment in respect of any
Proprietary Rights owned by the Company or any Company Subsidiary, whether
pursuant to any contractual arrangements entered into by the Company or any
Company Subsidiary; (B) neither the
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Company's nor any Company Subsidiary's use of the Proprietary Rights nor the
Company's or any Company Subsidiary's operation of its business, as of or prior
to the Closing Date, infringed or otherwise violated the rights of any third
party and neither the Company nor any Company Subsidiary has not received any
written notice or claim contesting the validity, enforceability, use or
ownership of any Proprietary Rights; and (C) to the Knowledge of the Company,
there is no infringement or violation of the Proprietary Rights by any third
party. Neither the Company nor any Company Subsidiary has any obligation to
compensate any Person for the use of any Proprietary Rights and neither the
Company nor any Company Subsidiary has granted any Person any license or other
rights to use in any manner any of the Proprietary Rights, whether requiring the
payment of royalties or not, except as set forth in Item 3.16 of the Disclosure
Schedule. All Proprietary Rights owned or used by the Company and any Company
Subsidiary prior to Closing shall be owned or available for use by the Company
and such Company Subsidiary on identical terms and conditions immediately
subsequent to Closing. The computer systems, including software, hardware,
networks and interfaces (collectively, "Systems") used in the conduct of the
Company's and any Company Subsidiary's business are sufficient for the present
needs of the Company and such Company Subsidiary as currently contemplated.
Except as set forth in Item 3.16 of the Disclosure Schedule, all Systems, other
than off-the-shelf software, used in the conduct of the Company's and any
Company Subsidiary's business are owned and operated by and are under the
control of the Company and any Company Subsidiary, and are not wholly or partly
dependent on any facilities which are not under the ownership, operation or
control of the Company or any Company Subsidiary.
SECTION 3.17. Title to and Condition of Assets; Leases.
(a) Item 3.17(a) of the Disclosure Schedule sets forth the address
of all parcels of real property owned, leased or operated by the Company and
each Company Subsidiary. Except as indicated on Item 3.17(a) of the Disclosure
Schedule, the Company and each Company Subsidiary has good and marketable title
in fee to such of its fixed assets as are owned real property, and good and
merchantable title to all of its other assets (tangible or intangible), located
on its premises, used by it or now carried on its books, including those
reflected in the Interim Balance Sheet, or acquired since the date of such
balance sheet (except personal property disposed of since said date in the
Ordinary Course of Business), free and clear of any Lien, except for Permitted
Liens. Except as set forth on Item 3.17(a) of the Disclosure Schedule, the
Company and each Company Subsidiary enjoys peaceful and undisturbed possession
under all leases (both capital and operating) under which it is operating, and
all said leases are valid and subsisting and in full force and effect.
(b) Except as set forth in Item 3.17(b) of the Disclosure
Schedule, the assets and properties owned or leased by the Company and each
Company Subsidiary and used in their businesses are, in all respects, in good
operating condition, order and repair, normal wear and tear excepted. The assets
and properties leased by the Company and each Company Subsidiary and used in
their respective businesses are described on Item 3.17(b) of the Disclosure
Schedule.
(c) Neither the Company nor any Company Subsidiary is in default
under nor has it breached its obligations under any of the leases of real and
personal property to which it is a party in any material respect, nor to the
Knowledge of the Company, is any other party thereto in
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default or breach in any material respect. Except as set forth on Item 3.17(c)
of the Disclosure Schedule, since December 31, 2000, or since the time of its
formation in the case of the Company, neither the Company nor any Company
Subsidiary has incurred any unreimbursed damage, expense or loss that has not
been paid in full, as a result of any violation of any law, ordinance,
regulation, order or requirement relating to its leased properties or received
any written notice from any Governmental Entity claiming any violation thereof
or calling attention to the need for any work, repairs, construction,
alterations or installations on or in connection with said properties. No
permits, licenses or certificates of occupancy pertaining to the operation by
the Company or any Company Subsidiary of any of the leased properties, other
than those held by it, are required by any Government Entity. Except as set
forth on Item 3.3 of the Disclosure Schedule or on Item 3.17(c) of the
Disclosure Schedule, no consent of any landlord is required under any lease in
order to keep such lease in full force and effect after the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. True and complete copies of all material leases to which the Company and
any Company Subsidiary is a party, including all amendments, addenda, waivers
and all documents relating thereto, have heretofore been delivered or been made
available by the Company to the Purchaser.
(d) The Company and each Company Subsidiary owns, has a valid
leasehold interest in, or has a valid license to use, all the assets, properties
and rights (whether tangible or intangible) necessary for the conduct of its
business as presently conducted.
SECTION 3.18. Inventory. The inventory of the Company and each Company
Subsidiary reflected on the Interim Balance Sheet has been, manufactured or
acquired in the Ordinary Course of Business and has been valued at the lower of
cost or market on a first-in, first out basis in accordance with Applicable
GAAP. All slow-moving, unmarketable, returned, rejected, damaged or obsolete
inventory has been written off or down in accordance with Applicable GAAP and in
accordance with the Company's Accounting Policies. Except as expressly set forth
in the two immediately preceding sentences, and subject to any reserves for
inventory listed on the Closing Balance Sheet, the Shareholders make no
representation or warranty regarding the usability or the salability of any
inventory of the Company or the Company Subsidiaries. The representation and
warranty on inventory set forth in this Section 3.18 does not take into account
or consider the impact on the inventory of any events, occurrences, effects or
circumstances that may arise after the Closing as a result of this Agreement or
the transactions contemplated hereby. The impact on the inventory of any such
post-closing events, occurrences, effects or circumstances shall not constitute,
give rise to or result in a breach of this representation and warranty on
inventory.
SECTION 3.19. Product Warranties and Product Liabilities. Item 3.19 of
the Disclosure Schedule sets forth an accurate and complete description of the
Company's and the Company Subsidiaries' warranty policies and all outstanding
warranties relating to any of the Company's and the Company Subsidiaries'
products other than warranties implied or imposed by law. Neither the Company
nor any Company Subsidiary has, or will incur, any liability not covered by
insurance, which liabilities arise out of any damage, loss or injury caused by,
or out of, the ownership, use or possession of any of its products or any breach
of any express or implied product warranty or any other similar claim with
respect to any of its products, other than claims under standard warranty
obligations (to replace, repair or refund) made by the
-24-
Company or any Company Subsidiary in the Ordinary Course of Business, and which,
if adversely determined against the Company or any Company Subsidiary, would not
in the aggregate exceed $25,000 with respect to products sold or manufactured by
the Company or any Company Subsidiary prior to the Closing.
SECTION 3.20. Insurance. The Company and each Company Subsidiary is the
named insured of the current policies of insurance set forth in Item 3.20 of the
Disclosure Schedule, all of such policies of insurance are in full force and
effect and Item 3.20 is a complete and accurate list of all of the insurance
policies of the Company and the Company Subsidiaries. All premiums due to date
on such policies have been paid in full or accrued on the Interim Balance Sheet.
Such policies provide coverage to insure the property and business of the
Company and each Company Subsidiary against such risks and in such amounts as
are prudent in the reasonable judgment of the Company. The current properties
used by the Company and each Company Subsidiary have been continually insured
under appropriate policies of insurance. With respect to each such insurance
policy listed on Item 3.20 of the Disclosure Schedule: to the Knowledge of the
Company, (i) the policy is legal, valid, binding, enforceable, and in full force
and effect; (ii) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms immediately
following the consummation of the transactions contemplated hereby; (iii)
neither the Company nor any Company Subsidiary, nor, to the Knowledge of the
Company, any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default on the part of the Company or any Company Subsidiary or, to the
Knowledge of the Company, any other party to the policy, or, to the Knowledge of
the Company, permit termination, modification, or acceleration, under the
policy; and (iv) no party to the policy has repudiated any provision thereof.
Except as set forth in Item 3.20 of the Disclosure Schedule, neither the Company
nor any Company Subsidiary has any self-insurance or co-insurance programs.
Copies of the insurance policies disclosed on Item 3.20 of the Disclosure
Schedule have been delivered to the Purchaser.
SECTION 3.21. Bank Accounts. Item 3.21 of the Disclosure Schedule lists
each bank in which the Company and any Company Subsidiary maintains an account
or safe deposit box, the number of each such account or safe deposit box and the
names of all Persons holding check signing or withdrawal powers or other
authority with respect thereto. Also set forth on Item 3.21 of the Disclosure
Schedule are the names of all Persons, if any, holding powers of attorney from
the Company and any Company Subsidiary.
SECTION 3.22. Guaranties. Except as described on Item 3.22 of the
Disclosure Schedule, there are no contracts or commitments by the Company or any
Company Subsidiary guaranteeing the payment or performance by others or by each
other, or whereby any such corporation is, or will be, in any way liable with
respect to the obligations of any other Person.
SECTION 3.23. Related Parties. Except as described in Item 3.23 of the
Disclosure Schedule, and except for dividends or distributions paid on the
Shares, exclusive of any obligations under the Earnout Agreement and the
employment and consulting agreements with the Key Employees and Consultants
disclosed elsewhere in this Agreement, neither the Company nor any Company
Subsidiary is, nor at any time since December 31, 2002 has it been,
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a party to any contract, agreement or transaction with, or any other commitment
to (i) the Shareholders or any partner, trustee or beneficiary of the
Shareholders, (ii) any Person related by blood, adoption or marriage to any of
such Persons, (iii) any director or officer of the Company or any Subsidiary,
other than as described in Item 3.23 of the Disclosure Schedule, or (iv) any
corporation or other entity in which any of such Persons, directly or
indirectly, has an equity, partnership, or similar interest, other than passive
ownership of less than 2% of any class of securities of any publicly traded
company. Except as described in Item 3.23 of the Disclosure Schedule, none of
the foregoing Persons has any interest in any property used by the Company or
any Company Subsidiary. Item 3.23 of the Disclosure Schedule sets forth all
dividends and distributions paid on the Shares since June 30, 2002 to the date
hereof.
SECTION 3.24. Employees. Item 3.24 of the Disclosure Schedule contains
a true and complete list as of September 30, 2003 of (i) the employees employed
by the Company and the Company Subsidiaries, whether on a full-time, part-time
or temporary basis, and including such employees employed through the assistance
of a temporary employment agency, (ii) the title or position of such employees,
(iii) the rate of all current compensation payable by the Company and each
Company Subsidiary to each such employee, including any vacation, bonus,
contingent or deferred compensation, and (iv) the trustees and directors of the
Company and each Company Subsidiary. To the Knowledge of the Company, no
executive or key employee of the Company or any Company Subsidiary and no group
of employees of the Company or any Company Subsidiary has any plans to terminate
employment with the Company or any Company Subsidiary. Neither the Company nor
any Company Subsidiary has engaged in any plant closing or employee layoff
activities within the twelve (12)-month period ended September 30, 2003 that
would violate, or in any way require the giving of notice under, the Worker
Adjustment Retraining and Notification Act of 1988, as amended, or any similar
state or local plant closing or mass layoff statute, rule or regulation.
SECTION 3.25. Customers and Suppliers.
(a) Item 3.25(a) of the Disclosure Schedule (the "Customer
Schedule") lists the ten largest customers of the Company and each Company
Subsidiary (on a consolidated basis) for each of the two most recent fiscal
years (i.e., the years ended December 31, 2002 and 2001) and sets forth opposite
the name of each such customer the amount and percentage of consolidated gross
sales attributable to such customer. The Customer Schedule also lists any
additional current customers which the Company and each Company Subsidiary
anticipates shall be among the ten largest customers for the twelve (12)-month
period ended December 31, 2003.
(b) Item 3.25(b) of the Disclosure Schedule (the "Supplier
Schedule") lists the ten largest suppliers of the Company and each Company
Subsidiary (on a consolidated basis) for each of the two most recent fiscal
years (i.e., December 31, 2002 and 2001) and sets forth opposite the name of
each such supplier the amount of purchases from such supplier. The Supplier
Schedule also lists any additional current suppliers which the Company and each
Company Subsidiary anticipates shall be among the ten largest suppliers for the
twelve (12)- month period ended December 31, 2003.
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(c) Except as set forth on Item 3.25(c) of the Disclosure Schedule,
since June 30, 2002, no supplier listed on Item 3.25(b) of the Disclosure
Schedule has indicated that it shall stop, or materially decrease the rate of,
supplying materials, products or services to the Company or any Company
Subsidiary, and no customer listed in Item 3.25(a) of the Disclosure Schedule
has indicated that it shall stop, or materially decrease the rate of, buying
materials, products or services from the Company or any Company Subsidiary.
SECTION 3.26. Absence of Certain Payments. Neither the Company, any
Company Subsidiary nor any of their officers, trustees, directors, employees or
Shareholders has with respect to the Company or such Company Subsidiary (i) made
or received any contributions, payments or gifts of its property to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contributions, payments or gifts is illegal under
the laws of the United States or any other jurisdiction; (ii) established or
maintained any unrecorded fund or asset for any purpose, or made any false or
artificial entries on its books or records for any reason; (iii) made any
payments to any Person with the intention or understanding that any part of such
payment was to be used for any other purpose other than that described in the
documents supporting the payment; (iv) made any contribution, or reimbursed any
political gift or contribution made by any other Person, to candidates for
public office where such contribution would be in violation of applicable law;
or (v) otherwise made or received any bribes, kickback payments or other illegal
payments.
SECTION 3.27. Indebtedness. Item 3.27 of the Disclosure Schedule sets
forth the Indebtedness of the Company and the Company Subsidiaries, including
the principal amount, interest rate, maturity date, prepayment penalty (if any)
and lender or party owed with respect to all such Indebtedness.
SECTION 3.28. Noncompete. Except as set forth in Item 3.28 of the
Disclosure Schedule, neither the Company nor any Company Subsidiary is subject
to any non-competition or similar contract, agreement or understanding that
restricts the ability of the Company or the Company Subsidiaries, or any of
their respective Affiliates, to conduct business in any geographic area.
SECTION 3.29. Disclaimer. The Shareholders do not make, and have not
made, any representations or warranties relating to the Shareholders, the
Company, any Company Subsidiary or the business of the Company or a Company
Subsidiary or otherwise in connection with the transaction contemplated hereby
other than those expressly set forth herein. It is understood that any cost
estimate, projection or other prediction, any data, any financial information or
any memoranda including, without limitation, any memoranda and materials
provided by any representative of the Shareholders are not, and shall not be
deemed to be or to include, representations or warranties of the Shareholders.
No Person has been authorized by the Shareholders to make any representation or
warranty relating to the Shareholders, the Company, any Company Subsidiary or
the business of the Company or a Company Subsidiary or otherwise in connection
with the transaction contemplated hereby and, if made, such representation or
warranty may not be relied upon as having been authorized by the Shareholders
and shall not be deemed to have been made by the Shareholders.
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ARTICLE IV
REPRESENTATIONS CONCERNING THE SHAREHOLDERS
Each of the Shareholders, as to such Shareholder, represents and
warrants to the Purchaser as follows:
SECTION 4.1. Authorization and Enforceability. Such Shareholder has the
requisite power and authority to execute and deliver this Agreement and, subject
to the Company Required Approvals, to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation by such Shareholder of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of such Shareholder and
no other proceeding on the part of such Shareholder is necessary to authorize
this Agreement or to consummate the transactions so contemplated (in each case,
other than with respect to the Company Required Approvals). This Agreement has
been duly executed and delivered by such Shareholder and, assuming this
Agreement constitutes a valid and binding obligation of the Purchaser,
constitutes a valid and binding obligation of such Shareholder, enforceable
against such Shareholder in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights generally and to general principles of equity.
SECTION 4.2. Consents and Approvals; No Violations. Neither the
execution, delivery or performance of this Agreement by such Shareholder nor the
consummation by such Shareholder of the transactions contemplated hereby will
(i) require any filing with, or permit, authorization, consent or approval of,
any Governmental Entity, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under any of
the terms, conditions or provisions of any loan or credit agreement, note, bond,
mortgage, indenture, permit, concession, franchise, license, lease, contract,
agreement, instrument of trust, or other instrument or obligation to which such
Shareholder is a party or by which any of such Shareholder's properties or
assets may be bound or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to such Shareholder, or any of his
properties or assets.
SECTION 4.3. Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of such Shareholder, threatened
against such Shareholder that would be expected to adversely affect such
Shareholder's performance under this Agreement or prevent or materially delay
the Closing. Such Shareholder is not subject to any outstanding order, writ,
injunction or decree that would materially and adversely affect such
Shareholder's performance under this Agreement.
SECTION 4.4. Shareholder Action. No Shareholder has taken any action
which would create any liability or obligation on the part of the Company after
the Closing to pay any broker's, finder's, financial advisor's or other similar
fee or commission, or any legal or accounting fees, in connection with the
transactions contemplated by this Agreement.
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SECTION 4.5. Transfer. Such Shareholder has full right, power and
authority to sell, assign, transfer and deliver the Shares to be sold by such
Shareholder hereunder. On the date hereof, such Shareholder is the lawful owner
of, and has, good and marketable title to the Shares set forth opposite its name
in Schedule 1, free and clear of all Liens, voting trusts, proxies and other
arrangements of any kind whatsoever, except for the Declaration of Trust. Upon
delivery of and payment for the Shares to be sold by such Shareholder hereunder
in accordance with the terms of this Agreement, good and marketable title to
such Shares will pass to the Purchaser, free and clear of all Liens.
SECTION 4.6. Shareholder Tax Matters. During the period in which the
Company has elected to be treated as an "S corporation" for federal income tax
purposes, such Shareholder (the "S Corporation Shareholders"), has duly and
timely filed all tax reports and returns required to be filed by him, her or it
that include or were required to include the income of the Company. All such
Shareholder tax returns were consistent with the tax returns filed by the
Company and all taxes shown or required to be shown on the Shareholder tax
returns have been timely paid in full. There are no pending or threatened
audits, inquiries, investigations or examinations relating to any of the
Shareholder tax returns, and there are no claims which have been or may be
asserted relating to any of the Shareholder tax returns which if determined
adversely would result in the assertion by any Governmental Entity of any tax
deficiency against the Company. There have been no waivers or extensions of
statutes of limitations executed by the S Corporation Shareholders with respect
to the Shareholder tax returns.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Shareholders, as follows:
SECTION 5.1. Organization. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted.
SECTION 5.2. Authorization. The Purchaser has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation by the Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Purchaser and no other corporate proceedings on the part of
the Purchaser are necessary to authorize this Agreement or to consummate such
transactions. This Agreement has been duly executed and delivered by the
Purchaser, and, assuming this Agreement constitutes a valid and binding
obligation of the Shareholders, constitutes a valid and binding obligation of
the Purchaser, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights generally and to general principles of equity.
SECTION 5.3. Consents and Approvals; No Violations. Neither the
execution, delivery or performance of this Agreement by the Purchaser nor the
consummation by the Purchaser of the transactions contemplated hereby will (i)
conflict with or result in any breach of any
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provision of the certificate of incorporation or by-laws of the Purchaser, (ii)
require any filing with, or permit, authorization, consent or approval of, any
Governmental Entity, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under any of
the terms, conditions or provisions of any loan or credit agreement, note, bond,
mortgage, indenture, permit, concession, franchise, license, lease, contract,
agreement or other instrument or obligation to which the Purchaser or any of its
subsidiaries is a party or by which any of them or any of their properties or
assets may be bound or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Purchaser, any of its subsidiaries
or any of their properties or assets.
SECTION 5.4. Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Purchaser, threatened against
the Purchaser or any of its subsidiaries that would reasonably be expected to
adversely affect the Purchaser's performance under this Agreement or prevent or
materially delay the Closing. Neither the Purchaser nor any of its subsidiaries
is subject to any outstanding order, writ, injunction or decree that would
reasonably be expected to affect the Purchaser's performance under this
Agreement.
SECTION 5.5. Broker. The Purchaser has no liability or obligation to
pay any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Purchaser.
SECTION 5.6. Financing. On and as of the date of the Closing, the
Purchaser will have sufficient funds to consummate the transactions contemplated
by this Agreement and to fulfill its obligations hereunder.
SECTION 5.7. Investment Representations. The Purchaser's present
intention is to acquire the Shares for its own account and the Shares are being
and will be acquired by it for the purpose of investment and not with a view to
distribution or resale thereof.
SECTION 5.8. Accredited Investor Status. The Purchaser is an
"accredited investor" as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1. Public Announcements. The Shareholders and the Purchaser
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the transactions contemplated by
this Agreement, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
applicable law.
SECTION 6.2. Expenses. Except as otherwise expressly provided herein,
all costs and expenses, including the fees of attorneys, accountants, brokers
and other advisors, incurred by
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the Shareholders or the Company in connection with this Agreement and the
transactions contemplated hereby, shall be paid by the Shareholders and any such
fees and expenses incurred by the Purchaser shall be paid by the Purchaser,
regardless of whether the Closing occurs.
SECTION 6.3. Post-Closing Cooperation. Each of the parties hereto
agrees that after the Closing, the parties shall cooperate with each other in
providing information reasonably required by another party in connection with
third-party claims against any party, including litigation, tax audits,
insurance audits and governmental investigations; provided that the
out-of-pocket costs of providing information shall be borne by the party
requesting such information (unless the requesting party is entitled to
indemnification therefor under Article IX below). In addition, in case at any
time after the Closing any further action is necessary or desirable to carry out
the purposes of this Agreement, each of the parties will take such further
action (including the execution and delivery of such further instruments and
documents) as any other party reasonably may request, all at the sole cost and
expense of the requesting party (unless the requesting party is entitled to
indemnification therefor under Article IX below).
SECTION 6.4. Covenant Not to Compete. As a material inducement to cause
the Purchaser to enter into this Agreement, the Shareholders (with the exception
of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇) agree that for a period of three (3) years from and after
the Closing Date, the Shareholders will not engage in the United States directly
or indirectly in the business of the manufacture and distribution of offset
printing blankets and pressroom chemistry; provided, however, that no passive
owner of less than 5% of the outstanding stock of any publicly traded
corporation shall be deemed to engage solely by reason thereof in the business
of the Company; provided, further, that those Shareholders listed on Item 6.4 of
the Disclosure Schedule may engage in the activities listed on Item 6.4 of the
Disclosure Schedule. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 6.4 is invalid or
unenforceable, the Shareholders and the Purchaser agree that the court making
the determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
SECTION 6.5. Non-Solicitation. Each of the Shareholders agrees that for
a period of three (3) years after the Closing Date, such party shall not
directly or indirectly solicit for employment or hire as an employee or
consultant any current employee of the Company or any Company Subsidiary,
without the written consent of the Purchaser, until such time as such Person has
been separated from employment by the Company for a period of one hundred eighty
(180) days.
SECTION 6.6. Books and Records. The Purchaser agrees that it shall
maintain the pre-closing books and records of the Company for a period of six
(6) years after the Closing Date; provided, however, that if, after the fourth
(4th) anniversary after the Closing Date, the Purchaser does not want to
continue to maintain such books and records, it will give the Shareholders
written notice thereof; and provided further that if the Shareholders inform
Purchaser within 30
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days of their receipt of such notice that they desire to maintain the Company's
books and records, then the Purchaser shall immediately deliver the Company's
pre-closing books and records to the Shareholders.
SECTION 6.7. Termination of Employees.
(a) The Shareholders shall cause the Company and the Company
Subsidiaries, as applicable, to terminate those employees listed on Item 6.7(a)
of the Disclosure Schedule ("Terminated Employees"), effective no later than the
Closing. The Company and the Company Subsidiaries, as the case may be, shall
bear sole responsibility for the payment of any obligations which may be owed to
such employees as a result of such termination, pursuant to the terms of their
employment agreement or otherwise. In connection with such termination, and in
consideration of any severance or other payment made by the Company and the
Company Subsidiaries, if any, to such Terminated Employees, the Company and the
Company Subsidiaries shall obtain a form of general release from the Terminated
Employees (the "Release"), which shall release and indemnify and hold harmless
the Company, the Company Subsidiaries and the Purchaser, and each of their
respective subsidiaries, predecessors, officers, directors, shareholders and
Representatives from any claim for damages, whether known by the Terminated
Employees as of the Closing Date, that is related to, or otherwise arising out
of, their employment.
(b) The employees listed on Item 6.7(b) of the Disclosure Schedule
shall have resigned from the Company or the Company Subsidiaries, as applicable,
effective no later than the Closing ("Resigning Employees"). The Company and the
Company Subsidiaries shall bear sole responsibility for the payment of any
obligations which may be owed to such employees as a result of such resignation,
pursuant to the terms of their employment agreement or otherwise. Each such
Resigning Employee shall have executed a Release in connection with such
resignation.
SECTION 6.8. Payment of Obligations. On or before January 10, 2004, the
Purchaser shall cause the Company to discharge the obligations of the Company
accrued for on the Closing Balance Sheet and set forth on Item 6.8 of the
Disclosure Schedule.
SECTION 6.9. Transfer of Title. The Shareholders shall, at any time
from and after the Closing, upon the request of the Purchaser and at the
Purchaser's expense, do, execute, acknowledge and deliver, and cause to be done,
executed, acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney or assurances as may be reasonably
required to transfer, convey, grant and confirm to and vest in the Purchaser
good title to all of the Shares, free and clear of all Liens.
SECTION 6.10. Shareholders' Representatives. The Shareholders hereby
designate the Shareholders' Representatives to execute any and all instruments
or other documents on behalf of the Shareholders, and to do any and all other
acts or things on behalf of the Shareholders, which the Shareholders'
Representatives may deem necessary or advisable, or which may be required
pursuant to this Agreement or otherwise, in connection with the consummation of
the transactions contemplated hereby and the performance of all obligations
hereunder at or following the Closing. Without limiting the generality of the
foregoing, the Shareholders'
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Representatives shall have the full and exclusive authority to: (i) agree
unanimously with the Purchaser with respect to any matter or thing calling for
the agreement of the Shareholders under the terms of this Agreement, (ii) give
and receive notices on behalf of all the Shareholders, (iii) act on behalf of
the Shareholders in connection with any matter as to which the Shareholders are
or may be obligated to do under this Agreement, all in the absolute discretion
of the Shareholders' Representatives, and (iv) in general, do all things and
perform all acts, including without limitation, executing and delivering all
agreements, certificates, receipts, consents, elections, instructions, and other
instruments or documents contemplated by, or deemed by the Shareholders'
Representatives to be necessary or advisable in connection with, this Agreement,
and (v) take all actions necessary or desirable in connection with the defense
and/or settlement of any indemnification claims pursuant to Article IX and
performance of obligations under Article II, including withholding funds for the
satisfaction of post-Closing liabilities. The Shareholders shall cooperate with
the Shareholders' Representatives and any accountants, attorneys or other agents
whom they may retain to assist in carrying out its duties hereunder. All
decisions by the Shareholders' Representatives shall be binding upon all of the
Shareholders, and no Shareholder shall have the right to object, dissent,
protest or otherwise contest the same. The Shareholders' Representatives may
communicate with any Shareholder or any other Person concerning his
responsibilities hereunder, but it is not required to do so. The Shareholders'
Representatives hereby acknowledges and agrees it has a duty to serve in good
faith the interests of the Shareholders and to perform its designated role under
this Agreement. The Shareholders hereby acknowledge and agree that the
Shareholders' Representatives shall have no financial liability whatsoever to
any Person relating to their service hereunder (including any action taken or
omitted to be taken), except that it shall be liable for harm which it directly
causes by an act of willful misconduct. The Shareholders further agree to
indemnify and hold harmless the Shareholders' Representatives against any loss,
expense (including reasonable attorney's fees and disbursements) or other
liability arising out of their service as the Shareholders' Representatives
under this Agreement, other than for harm directly caused by an act of willful
misconduct.
SECTION 6.11. Shareholders' Agreement. The Company and the shareholders
party thereto hereby terminate the Shareholders' Agreement, dated as of June 30,
2000, and acknowledge that all rights and obligations of the parties thereunder
are terminated.
SECTION 6.12. D&O Indemnification. The Purchaser agrees that it shall
not cause the Company or the majority-owned Company Subsidiaries to amend the
Charters or By-laws of the Company and the majority-owned Company Subsidiaries
in a way that adversely affects, on a retroactive basis, the indemnification,
expense reimbursement or expense advancement provided to the existing or former
directors and officers, and other covered persons, of the Company, NDI or
Bellwether by such Charters and By-laws as of the date hereof, with respect to
events, occurrences, or circumstances that occurred prior to the Closing.
SECTION 6.13. Resignations. On or prior to the Closing, the
Shareholders will cause to be delivered to the Purchaser the resignations,
effective as of the Closing, of such of the following as the Purchaser shall
have requested prior to the Closing: (i) the trustees of the Company and (ii)
the directors and officers of each of NDI and Bellwether.
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ARTICLE VII
CLOSING CONDITIONS
SECTION 7.1. Conditions to Obligations of the Shareholders. The
obligations of the Shareholders to effect the transactions contemplated herein
shall be subject to the satisfaction at or prior to the Closing of the following
conditions, any or all of which may be waived, in whole or in part, by the
Shareholders:
(a) Opinion of Purchaser's Counsel. The Shareholders shall have
received an opinion of Stroock & Stroock & ▇▇▇▇▇ LLP, counsel to the Purchaser,
dated the date of the Closing, substantially in the form of Exhibit B.
(b) Escrow Agreement. The Escrow Agent and the Purchaser shall
have executed and delivered the Escrow Agreement.
(c) Employment/Consulting Agreements. Each of D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ shall have entered into employment
agreements with the Purchaser and ▇▇▇▇▇ ▇. ▇▇▇▇▇ shall have entered into a
consulting agreement with the Purchaser.
(d) Earnout Agreement. The Earnout Agreement shall have been
executed and delivered by the parties thereto.
(e) Payments. The payments listed in Section 2.2(b)(i) hereof
shall have been paid by the Purchaser at the Closing.
SECTION 7.2. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to effect the transactions contemplated herein
shall be subject to the satisfaction at or prior to the Closing of the following
conditions, any or all of which may be waived, in whole or in part, by the
Purchaser:
(a) Third-Party Consents. All required consents of the
Shareholders shall have been obtained and shall be in full force and effect,
except for any consent or approval which has been waived by Purchaser, as set
forth on Item 7.2(a) of the Disclosure Schedule.
(b) Opinion of Shareholders' Counsel. The Purchaser shall have
received an opinion of ▇▇▇▇▇▇, Halter & ▇▇▇▇▇▇▇▇ LLP, counsel to the
Shareholders, dated the date of the Closing, substantially in the form of
Exhibit C.
(c) Employment/Consulting Agreements. The Purchaser shall have
entered into (i) employment agreements with each of D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and (ii) a consulting agreement with ▇▇▇▇▇ ▇.
▇▇▇▇▇ (collectively, the "Key Employees and Consultants"), in each case mutually
acceptable to the Purchaser and such Key Employees and Consultants.
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(d) Escrow Agreement. The Shareholders and the Escrow Agent shall
have executed and delivered the Escrow Agreement.
(e) Bellwether Purchase Agreement. Day, ▇▇▇▇▇▇▇▇ Ink and ▇▇▇▇▇▇
Golf shall have executed and delivered the Bellwether Purchase Agreement.
(f) Releases. Each of the Terminated Employees and each of the
Resigning Employees shall have delivered to the Purchaser at or prior to the
Closing a Release in the form attached hereto as Exhibit D.
(g) Resignations. The Resigning Employees shall have delivered to
the Purchaser at or prior to the Closing a letter of resignation from the
Company and the Company Subsidiaries, as applicable.
(h) Terminations. The Terminated Employees shall have been
terminated by the Company and the Company Subsidiaries, as applicable.
(i) Certificate of Good Standing and other Records. The
Shareholders shall have delivered to Purchaser at or prior to the Closing (i) a
certificate of good standing of the Company and each of the Company Subsidiaries
with respect to its jurisdiction of incorporation or organization (ii) such
other documents reasonably requested by Purchaser.
(j) Delivery of Huntington Pay-off Letter. Upon payment of the
Huntington Debt by Purchaser immediately prior to Closing, Huntington Bank shall
have delivered to the Purchaser a pay-off letter, accompanied by the collateral
securing the Huntington Debt. In connection therewith, the Pledge Agreement
shall also have been terminated.
(k) Repayment of Non-Assumed Liabilities. All liabilities of the
Company and the Company Subsidiaries listed on Item 2.2(a)(C) of the Disclosure
Schedule that are not being assumed by the Purchaser shall have been repaid by
the Shareholders.
(l) Reverse Split Dollar Life Insurance Policies. The Company's
reverse split dollar life insurance program, and the life insurance policies
included therein, shall have been terminated.
(m) Amendments to Leases. The Company shall have entered into
amendments to the lease agreements with the respective lessors for each of the
properties located in Rockland, Massachusetts; Cleveland, Ohio; and Little Elm,
Texas; each of which shall be mutually acceptable to the Purchaser and the
lessors of such properties.
(n) Compensation Agreements. All deferred compensation agreements,
incentive compensation agreements, executive life insurance agreements and
executive life insurance policies to which the Company or NDI is a party shall
have been assigned by the Company or terminated in their entirety, and all
conditions precedent in relation thereto shall have been satisfied.
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(o) Waiver of Rockmont Right. ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, on behalf of
Sunshine Graphics, Inc., shall have waived the call option upon a change of
control to purchase the Company's 45% interest in Rockmont as described in
Section 14.2 of the Second Amended and Restated Operating Agreement of Rockmont,
dated effective as of April 1, 2001.
ARTICLE VIII
AMENDMENT AND WAIVER
SECTION 8.1. Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties.
SECTION 8.2. Waiver. Either the Shareholders' Representatives, on the
one hand, or the Purchaser, on the other hand, may (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies of the other party in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement, and (iii) waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
INDEMNIFICATION AND SURVIVAL
SECTION 9.1. Indemnification.
(a) Subject to the provisions of Sections 9.1(b), 9.1(e), 9.2,
9.4, 9.7 and 9.8, following the Closing, the Shareholders (severally and pro
rata to their respective percentage interests as set forth adjacent to such
Shareholders' names on Schedule 1), on the one hand, and the Purchaser, on the
other, agrees to indemnify, defend and hold the other party or parties and any
of their respective Affiliates and Representatives (excluding financial
advisors, accountants, consultants and legal counsels), harmless from and
against all damages, losses, obligations, liabilities and expenses, including
reasonable attorneys' fees (whether incurred in disputes between the parties or
disputes with third parties or otherwise) (collectively "Damages") actually
incurred or suffered by an indemnified party (excluding any costs of internal
personnel of an indemnified party and excluding any consequential, indirect,
lost profits or special Damages) based upon, relating to, arising out of or
otherwise in respect of (i) any breach of any representation, warranty, covenant
or agreement of the indemnifying party contained in this Agreement, (ii) in the
case of the Purchaser, any actions undertaken (A) in order to bring the Company,
NDI or Bellwether into compliance with Environmental Laws or (B) to remediate
damage to the environment, it being understood that (I) this clause (ii) relates
only to circumstances known to exist on or prior to the Closing Date and (II)
except with respect to those actions specified in Item 9.1(a) of the Disclosure
Schedule (all such actions listed in Item 9.1(a) of the Disclosure Schedule, the
"Known Environmental Claims"), this clause (ii) shall be applicable only to such
actions as are required by, or undertaken by, the Company, NDI or Bellwether in
response to claims or alleged violations independently asserted against the
Purchaser, the Company, NDI or Bellwether by unaffiliated third parties, (iii)
any possible tax
-36-
liabilities (including, without limitation, state sales, state income, franchise
tax or personal property tax liabilities), of the Company, NDI or Bellwether (as
applicable) for any period through and including the Closing Date and (iv)
claims made by the landlord under the lease, dated as of September 17, 2001, for
the property located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in Hanover, Massachusetts, arising
out of or otherwise relating to defaults or alleged defaults by NDI under or
with respect to such lease that occurred or may occur prior to the execution of
an amendment to such lease. The Purchaser hereby agrees that it shall use
commercially reasonable efforts to minimize the costs associated with the Known
Environmental Claims, including utilizing its in-house resources as well as the
in-house resources of the Company, NDI and Bellwether after the Closing to
undertake and complete such actions to the extent practicable.
(b) With the exception of the Known Environmental Claims (which
shall not be subject to any minimum dollar threshold), the Purchaser shall be
entitled to make General Indemnification Claims and Environmental
Indemnification Claims under this Section 9.1 only for claims or a series of
related claims which are in excess of Two Thousand Five Hundred Dollars
($2,500). Except as otherwise provided in Section 9.1(e), the Shareholders shall
be liable for Damages under Section 9.1 in respect of General Indemnification
Claims and Environmental Indemnification Claims only if the aggregate amount of
all Damages for which they would be liable in respect of General Indemnification
Claims and Environmental Indemnification Claims exceeds One Hundred Thousand
Dollars ($100,000) at which point the Shareholders will be liable for all
amounts in excess thereof (i.e., excluding the first $100,000 of liability). The
limitations set forth in the foregoing two sentences of this Section 9.1(b) on
the liability of the Shareholders shall not be applicable to Tax Indemnification
Claims. Except as otherwise provided in Section 9.1(e), the Shareholders shall
not be liable for aggregate Damages in excess of:
(i) in the case of General Indemnification Claims, the
General Indemnification Amount less the amount of the General
Indemnification Amount used to satisfy Environmental Indemnification
Claims and Tax Indemnification Claims;
(ii) in the case of Environmental Indemnification Claims,
the Environmental Indemnification Amount plus, if the aggregate amount
of Damages relating to Environmental Indemnification Claims exceeds the
Environmental Indemnification Amount, the portion of the General
Indemnification Amount not used to satisfy General Indemnification
Claims, Tax Indemnification Claims and other Environmental
Indemnification Claims; and
(iii) in the case of Tax Indemnification Claims, the Tax
Indemnification Amount plus, if the aggregate amount of Damages
relating to Tax Indemnification Claims exceeds the Tax Indemnification
Amount, the portion of the General Indemnification Amount not used to
satisfy General Indemnification Claims, Environmental Indemnification
Claims and other Tax Indemnification Claims.
Notwithstanding any provision in this Agreement to the contrary, the
aggregate liability for Damages of the Shareholders shall not exceed Eleven
Million Dollars ($11,000,000) under any circumstance. For purposes of
determining the amount of Damages that are the subject
-37-
matter of a claim for indemnification hereunder (but not for the purpose of
determining whether any breach of a representation or warranty has occurred),
each representation and warranty contained in this Agreement shall be read
without regard to, and without giving effect to, any materiality standard or
qualification contained in such representation or warranty.
(c) Promptly after receipt by an indemnified party of notice of
any claim, liability or expense to which the indemnification obligations
hereunder would apply, the indemnified party shall give notice thereof in
writing to the indemnifying party but the omission to so notify the indemnifying
party promptly will not relieve the indemnifying party from any liability except
to the extent that the indemnifying party shall have been prejudiced as a result
of the failure or delay in giving such notice. Such notice shall state the
information then available regarding the amount and nature of such claim,
liability or expense and shall specify the provision or provisions of this
Agreement applicable thereto. If within thirty (30) days after receiving such
notice, the indemnifying party gives written notice to the indemnified party
stating that it disputes and intends to defend against such claim, liability or
expense at its own cost and expense, then counsel for the defense shall be
selected by the indemnifying party (subject to the consent of the indemnified
party which consent shall not be unreasonably withheld or delayed) and the
indemnifying party shall not be required to make any payment with respect to
such claim, liability or expense as long as it is conducting a good faith and
diligent defense at its own expense; provided, however, that the assumption of
the defense of any such matters by the indemnifying party shall relate solely to
the claim, liability or expense that is subject or potentially subject to
indemnification and provided further that if the defense is assumed by the
indemnifying party, the indemnifying party shall provide written notice to the
indemnified party whether the indemnifying party is asserting that the
underlying claim is, or is not, subject to the indemnification provided for in
this Article IX and if the indemnifying party asserts that such claim is not
subject to indemnification pursuant to this Article IX the indemnifying party
cannot assume such defense. The indemnifying party shall have the right to
settle all indemnifiable matters related to claims by third parties which are
susceptible to being settled, except to the extent that such settlement would
involve relief other than monetary damages. The indemnifying party shall keep
the indemnified party apprised of the status of the claim, liability or expense
and any resulting suit, proceeding or enforcement action and shall furnish the
indemnified party with all documents and information that the indemnified party
shall reasonably request. Notwithstanding anything herein stated, the
indemnified party shall at all times have the right to fully participate in such
defense at its own expense directly or through counsel. If the named parties to
the suit, action or proceeding include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
constitute a conflict of interest, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party. If no such notice of
intent to dispute and defend is given by the indemnifying party, the indemnified
party shall, at the expense of the indemnifying party, undertake the defense of
(with counsel selected by the indemnified party and reasonably acceptable to the
indemnifying party), and shall have the right to compromise or settle
(exercising reasonable business judgment), such claim, liability or expense with
the consent of the indemnifying party (which will not be unreasonably withheld).
Notwithstanding any provision in this Agreement to the contrary, the right of
the indemnifying party to contest the assertion by the indemnified party that
the indemnified party is entitled to indemnification with respect to the subject
claim or proceeding shall not be extinguished due to the failure or refusal
-38-
of the indemnifying party to deliver a notice of intent to dispute and defend.
If such claim is by, or such liability or expense arises out of a claim by, a
third party, regardless of whether such claim, liability or expense is one that
by its nature can be or is defended by the indemnifying party, the indemnified
party shall make available all information and assistance that the indemnifying
party may reasonably request and, if the indemnified party has assumed such
defense shall cooperate with the indemnifying party in such defense.
(d) No liability shall be enforced against an indemnifying party
to the extent of any insurance proceeds actually received by an indemnified
party with respect to Damages incurred or suffered by the indemnified party
(excluding self-insured amounts) and the amount of such Damages shall be reduced
by the amount of insurance proceeds actually received. If the indemnified party
receives any insurance proceeds after the indemnifying party shall have made any
payment to the indemnified party with respect to such Damages, the indemnified
party shall promptly remit such payment to the indemnifying party to the extent
of such insurance proceeds received. The Purchaser agrees to cause the Company
to, and the Company shall, make appropriate claims in good faith under its
insurance policies, if any, covering any liability for which the Shareholders
are providing any indemnity under this Article IX and use commercially
reasonable efforts to collect on such claims; provided that such claim or claims
would not material adversely affect the Purchaser with respect to its insurance
policies.
(e) Subject to the remainder of this Section 9.1(e), the
limitations set forth in Section 9.1(b) on the liability of the Shareholders
shall not be applicable in the case of any breach of the covenants set forth in
Sections 6.4, 6.5 and Article IX of this Agreement or a breach of the
representations and warranties set forth in Sections 4.1, 4.2, 4.4 or 4.5,
provided that any claim under such sections may be brought only against the
Shareholders breaching Sections 4.1, 4.2, 4.4 or 4.5, as the case may be. In
addition, the limitations on indemnification set forth in Section 9.1(b) shall
not be applicable to any claim based on fraud.
(f) From and after the Closing Date, the sole and exclusive remedy
of each indemnified party as against any Person, with respect to any and all
claims of any kind whatsoever relating to this Agreement, shall be the
indemnification provisions set forth in this Article IX.
SECTION 9.2. Survival. All representations, warranties, covenants and
agreements contained in this Agreement (including the Disclosure Schedule) shall
survive the execution and delivery of this Agreement and the Closing, but no
claim for breach thereof or failure to comply therewith by the Shareholders or
any of them may be brought after May 24, 2005, except (i) as provided below in
this Section 9.2 and (ii) that the covenants specified in Section 9.1(e) shall
survive without limitation, and no claim for breach of warranty or
misrepresentation may be brought except as provided in this Article IX. Claims
made with respect to the representations and warranties contained in (A)
Sections 3.8 (Benefit Plans), 3.11 (Tax Matters), 3.12 (Broker) and 4.4
(Shareholder Action) must be made prior to the expiration of the applicable
statutes of limitations (including all waivers, tollings or extensions thereof)
relating to the matters underlying such sections and (B) 3.15 (Environmental
Matters) and Section 9.1(a)(ii) (environmental compliance; remediation matters)
must be made prior to November 24, 2008. Claims made with respect to the
representations and warranties contained in 4.1 (Authorization
-39-
and Enforceability) and 4.5 (Transfer) shall survive indefinitely. If prior to
the applicable date after which a claim may not be brought hereunder a state of
facts shall have become known which may constitute or give rise to any Damages
as to which indemnity may be payable by the Shareholders and the Purchaser shall
have given to the Shareholders' Representatives written notice, in accordance
with Section 10.1, of such claim prior to expiry, then the right to
indemnification with respect thereto shall remain in effect without regard to
when such matter shall have been finally determined and disposed of.
SECTION 9.3. Indemnification on Terminated Employee Obligations and
Claims. The Shareholders shall jointly and severally indemnify and hold harmless
the Purchaser from and against any Damages on account of any Terminated Employee
Obligations and Claims now existing or hereafter arising against Company and/or
the Purchaser, and/or each of their respective subsidiaries, predecessors,
officers, directors, shareholders and other Representatives ("Purchaser
Indemnitees"), in connection with the termination of employees of the Company
and the Company Subsidiaries on or prior to the Closing Date, except to the
extent that the Company, the Purchaser or any Purchaser Indemnitee recovers the
amount of such Damages under any insurance policy held by the Company, the
Purchaser or any Purchaser Indemnitee. The term "Terminated Employee Obligations
and Claims" shall mean any obligation which may be owed to any employee as a
result of such employee's termination of employment with the Company or any of
the Company Subsidiaries on or before the Closing Date, and any severance or
other payment made by the Company to such employee in connection with such
termination, including, without limitation, all obligations and payments made by
the Company pursuant to Section 6.7, and any claim by a Terminated Employee
against the Company, the Purchaser or any Purchaser Indemnitee, relating to, or
arising from, such termination, including, without limitation, any claim of
employment discrimination, wrongful termination, or termination without cause.
SECTION 9.4. Bellwether. Notwithstanding any other provision in this
Agreement to the contrary, the Shareholders, ▇▇▇▇▇▇ Golf and ▇▇▇▇▇▇▇▇ Ink hereby
acknowledge and agree that all claims for Damages (if any) relating to the
representations, warranties and covenants relating to Bellwether contained in
the Bellwether Purchase Agreement or this Agreement ("Bellwether Damages") shall
be made, determined and disposed of pursuant to Article IX of this Agreement and
that the limitations described in this Article IX shall be applicable to any
claim for Bellwether Damages. The Shareholders (severally and pro rata to their
respective shares of the Purchase Price) shall be liable for 60.43% of
Bellwether Damages. ▇▇▇▇▇▇ Golf and ▇▇▇▇▇▇▇▇ Ink shall be liable for 22.95% and
16.62% of any Bellwether Damages, respectively.
SECTION 9.5. Aggregation of Certain Claims. Notwithstanding anything in
this Agreement to the contrary, if, at any time, the aggregate of all Damages
(excluding therefrom legal fees and disbursements incurred in connection with
seeking indemnification therefor) resulting from, arising out of, or imposed
upon or incurred by an indemnified party by reason of any state of fact which,
except for the inclusion of any qualification incorporating the concept of
"materiality" in the indemnifying party's representations and warranties, would
have constituted a breach of such representation or warranty, exceed One Hundred
Thousand Dollars ($100,000), exclusive of any Damages for which indemnification
pursuant to Section 9.1 would be available, then thereafter, any qualification
incorporating the concept of "materiality" included in any
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representation or warranty shall be deemed to be deleted and any indemnified
party entitled to indemnification may seek indemnification for all Damages,
subject to the provisions of Section 9.1.
SECTION 9.6. Certain Tax Matters. The Shareholders shall prepare or
cause to be prepared and file or cause to be filed all tax returns for the
Company and each Company Subsidiary with respect to each period ending on or
prior to the Closing Date which are required to be filed after the Closing Date.
The Purchaser shall prepare or cause to be prepared and file or cause to be
filed all tax returns for the Company and each Company Subsidiary with respect
to each period beginning or including any period after the Closing Date. The
parties shall give each other a reasonable opportunity to review and comment on
a draft of such returns (other than those with respect to periods beginning
after the Closing Date) prior to the filing thereof.
SECTION 9.7. Settlement of Claims. The Purchaser agrees that it shall
assert claims for indemnification under this Article IX either pursuant to this
Article IX or pursuant to the terms of the Escrow Agreement to the extent the
Escrow Agreement is in full force and effect; provided, further, that if there
are sufficient funds in the Escrow Amount to cover such claim or claims, such
claim or claims shall be satisfied first out of the Escrow Amount. If the
Shareholders' Representatives have any objection with respect to such claim or
claims, they shall notify the Purchaser in writing within fifteen (15) days of
their receipt of such claim or claims. If the Purchaser and the Shareholders'
Representatives are unable within thirty (30) days after Purchaser's receipt of
such objection to resolve all disputes regarding such claim or claims, the
parties hereto reserve their respective rights to pursue any other remedies
under this Agreement or otherwise at any time, including those set forth in
Section 9.8 below.
SECTION 9.8. Right of Setoff. Subject to Section 9.2, the Purchaser
shall have the option of setting off a portion of amounts claimed to be owed to
it which exceed the amounts then held in an escrow account under the Escrow
Agreement by notifying a Shareholder in writing that the Purchaser is reducing
any amounts owed to such Shareholder (which notice shall also state which
agreement or contract the Claimed Amount is being offset against) (the "Claimed
Amount") by an amount equal to the Claimed Amount multiplied by the percentage
set forth adjacent to such Shareholder's name on Schedule 1. In such event,
within ten (10) Business Days after having delivered the written notice
referenced in the preceding sentence, the Purchaser shall deposit the Claimed
Amounts with the Escrow Agent, to be set aside in a separate escrow account, in
accordance with, and subject to, the terms of the Escrow Agreement pending the
resolution of such claims.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at
-41-
the following addresses (or at such other address for a party as shall be
specified by like changes of address) or sent by electronic transmission to the
telecopier number specified below:
(a) If to the Purchaser:
Day International, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy (which shall not constitute notice) to:
Stroock & Stroock & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
(b) If to the Shareholders:
The applicable addresses are set forth on Schedule 2 hereto.
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇, Halter & ▇▇▇▇▇▇▇▇ LLP
1400 ▇▇▇▇▇▇▇▇ Investment Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
SECTION 10.2. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.3. Transfer Taxes. The Shareholders shall pay all Transfer
Taxes resulting from the sale of the Shares. Purchaser shall prepare and timely
file all tax returns or other documentation relating to such Transfer Taxes;
provided, however, that to the extent required by applicable law, Shareholders
will join in the execution of any such tax returns or other documents relating
to such Transfer Taxes. Purchaser shall provide the Shareholders with copies of
each such tax return or other document at least fifteen (15) days prior to the
date on which such tax return or other document is required to be filed for
review and approval by Shareholders, such approval not to be unreasonably
withheld.
-42-
SECTION 10.4. Entire Agreement. Except as otherwise provided herein,
this Agreement (together with the Exhibits, the Schedules and the other
documents delivered pursuant hereto) constitutes the entire agreement of the
parties and supersedes all prior agreements and undertakings, both written and
oral, between the parties, or any of them, with respect to the subject matter
hereof.
SECTION 10.5. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 10.6. Assigns/Assignments. This Agreement shall be binding upon
and inure to the benefit of the parties hereto any and all successors, assigns,
or other successors in interest of the Purchaser and the Shareholders. Neither
the Shareholders, on the one hand, nor the Purchaser, on the other, shall be
entitled to assign this Agreement or any rights hereunder without the written
consent of the other party; provided that the Purchaser may assign this
Agreement and its rights hereunder and delegate its obligations hereunder to one
of its Affiliates and to its lenders for collateral assignment purposes without
the consent of any other party.
SECTION 10.7. No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other Person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
SECTION 10.8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Ohio without giving
effect to applicable principles of conflicts of law.
SECTION 10.9. Disclosure Schedules. The parties acknowledge and agree
that the Disclosure Schedules are an integral part of this Agreement. Unless
otherwise defined therein, capitalized terms used in the Disclosure Schedule
shall have the meanings assigned to them in this Agreement.
SECTION 10.10. Personal Legal Representation of Shareholders. The
parties hereto acknowledge and agree that ▇▇▇▇▇▇, Halter & ▇▇▇▇▇▇▇▇ LLP ("CHG")
is representing and acting on behalf of the Shareholders as a group (but not
individually), and not as an attorney for the Company or any Company Subsidiary,
in connection with this Agreement and the transactions contemplated herein. The
parties hereto consent and agree that CHG shall be allowed to continue to
represent the Shareholders personally in all matters, including in any and all
matters and disputes adverse to the Purchaser, the Company or the Company
Subsidiaries (including matters and disputes arising out of this Agreement) and
shall be allowed to use any and all
-43-
information, including information of or about the Purchaser, the Company or the
Company Subsidiaries, which has been made available to it in the course of this
transaction
SECTION 10.11. Counterparts. This Agreement may be executed and
delivered in counterparts, including via facsimile, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 10.12. Venue. Unless the parties to such dispute hereunder
otherwise agree, each of the parties hereto agrees that any legal action or
proceeding with respect to this Agreement shall be brought in a state or federal
court located in Cuyahoga County, Ohio, and, by execution and delivery of this
Agreement, each party hereto irrevocably submits itself in respect of its
property, generally and unconditionally to the exclusive jurisdiction of the
aforesaid courts in any such legal action or proceeding arising out of this
Agreement. Each of the parties hereto hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings brought in the courts referred to in the
preceding sentence. Each of the parties hereto agrees that an enforceable
judgment in any action or proceeding so brought may be enforced by any court of
competent jurisdiction, whether by suit on judgment or in any other manner
provided by law or at equity.
(Next page is a signature page)
-44-
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed and delivered as of the date first written above.
DAY INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and CFO
SHAREHOLDERS:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇ Norcross
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇
/s/ D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
-45-
D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ as Trustees
under Trust Agreement dated December 29, 1987, for
the benefit of D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
---------------------------------------
D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, Trustee
---------------------------------------
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, Trustee
D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ as Trustees
under Trust Agreement dated December 31, 1990, for
the benefit of D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
----------------------------------------
D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, Trustee
----------------------------------------
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, Trustee
D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ as Trustees
under Trust Agreement dated December 29, 1987, for
the benefit of ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
/s/ D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
-----------------------------------------
D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, Trustee
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, Trustee
-46-
D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ as Trustees
under Trust Agreement dated December 31, 1990, for
the benefit of ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
/s/ D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
----------------------------------------
D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, Trustee
---------------------------------------
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, Trustee
▇▇▇▇▇ ▇▇▇▇▇ as Trustee of the ▇▇▇▇▇ Family Trust
created under the will of ▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Trustee
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With respect to Section 6.11 only:
NETWORK DISTRIBUTION INTERNATIONAL
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President/CEO
With respect to Section 9.4 only:
▇▇▇▇▇▇▇▇ INK COMPANY
By: /s/ D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇▇ GOLF ENTERPRISES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
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INDEX
EXHIBITS
A. Escrow Agreement
B. Opinion of Stroock & Stroock & ▇▇▇▇▇ LLP
C. Opinion of ▇▇▇▇▇▇, Halter & ▇▇▇▇▇▇▇▇ LLP
D. Release
SCHEDULES
1. Capitalization
2. Shareholders' Addresses
ANCILLARY AGREEMENTS:
1. Earnout Agreement
2. Employment Agreement between Day and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
3. Employment Agreement between Day and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
4. Employment Agreement between Day and D. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
5. Consulting Agreement between the Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇
6. Amendment of Leases:
6.1 ▇▇▇▇▇▇▇▇, ▇▇
▇.▇ ▇▇▇▇▇▇▇▇▇, ▇▇
6.3 Little Elm, TX
A copy of the Schedules, Exhibits and Ancillary Documents will be
furnished supplementally to the Commission upon request.
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