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EXHIBIT 10.4
ASSET PURCHASE AGREEMENT
dated as of September 30, 1999
by and among
ARLINGTON INDUSTRIES, INC.,
▇▇▇▇▇ ▇▇▇▇,
ARLINGTON ACQUISITION CORP.
AND
DAISYTEK, INCORPORATED
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS.......................................................................................................1
ARTICLE II
PURCHASE AND SALE.................................................................................................9
2.1 Purchase and Sale of Assets.....................................................................9
2.2 Transfer and Conveyance........................................................................10
2.3 Assumption of Certain Obligations..............................................................10
ARTICLE III
PURCHASE PRICE...................................................................................................11
3.1 Purchase Price.................................................................................11
3.2 Method of Payment of Purchase Price; Other Amounts Payable at the Closing......................11
3.3 Pre-Closing Balance Sheet......................................................................12
3.4 Closing Balance Sheet..........................................................................12
3.5 Resolution of Accounting Disputes..............................................................12
3.6 Adjustment of Closing Payment..................................................................13
3.7 Allocation of Purchase Price...................................................................13
3.8 Earnouts.......................................................................................13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND FUNK................................................................15
4.1 Due Organization and Qualification; Title to Stock; No Subsidiaries............................15
4.2 Corporate Power and Authority..................................................................16
4.3 Real Property..................................................................................16
4.4 Personal Property; Title to Property...........................................................18
4.5 Intellectual Property; Year 2000...............................................................18
4.6 Permits........................................................................................19
4.7 Compliance with Laws...........................................................................19
4.8 Contracts......................................................................................19
4.9 Contract Defaults..............................................................................20
4.10 Litigation.....................................................................................20
4.11 Inventory......................................................................................20
4.12 Financial Condition and Results of Operations..................................................20
4.13 Employee Benefits..............................................................................20
4.14 Employees; Employee Relations..................................................................21
4.15 Consents.......................................................................................22
4.16 Insurance......................................................................................22
4.17 Taxes..........................................................................................22
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4.18 Environmental Laws and Regulations.............................................................23
4.19 Absence of Certain Changes or Events...........................................................23
4.20 Accounts Receivable; Evidences of Indebtedness................................................23
4.21 Customers......................................................................................24
4.22 Suppliers......................................................................................24
4.23 Accounts, Lockboxes; Safe Deposit Boxes; Powers of Attorney....................................24
4.24 True, Correct and Complete Information.........................................................24
4.25 Broker's and Finder's Fees.....................................................................25
4.26 Disclaimer of Other Representations and Warranties.............................................25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT...........................................................25
5.1 Organization and Authority.....................................................................25
5.2 Consents.......................................................................................26
5.3 Litigation.....................................................................................26
5.4 Broker's and Finder's Fees.....................................................................26
5.5 Purchase for Resale............................................................................26
5.6 Disclaimer of Other Representations and Warranties.............................................26
ARTICLE VI
COVENANTS OF SELLER AND FUNK.....................................................................................26
6.1 Affirmative Covenants..........................................................................26
6.2 Negative Covenants.............................................................................27
6.3 Access to Properties and Records...............................................................27
6.4 Notice of Developments.........................................................................28
6.5 Employees of Seller............................................................................28
6.6 Approvals of Third Parties.....................................................................28
6.7 Notices........................................................................................28
6.8 Access to Books and Records....................................................................28
6.9 No Solicitation of Offers......................................................................29
6.10 Receivables Guaranteed.........................................................................29
6.11 Prepaid Revenue................................................................................29
6.12 Release of Financing Statements................................................................29
6.13 Release of Seller Under Guaranty...............................................................30
ARTICLE VII
COVENANTS OF PURCHASER AND PARENT................................................................................30
7.1 Furnishing of Information......................................................................30
7.2 Approvals of Third Parties.....................................................................30
7.3 Access to Books and Records....................................................................30
7.4 Discharge of Assumed Liabilities...............................................................30
7.5 Tax Notification...............................................................................30
7.6 Employees and Agents of Seller.................................................................31
7.7 Bank Debt......................................................................................31
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ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF PURCHASER AND PARENT................................................................32
8.1 Representations and Warranties of Seller and Funk..............................................32
8.2 Covenants of Seller and Funk...................................................................32
8.3 Seller's Certificate...........................................................................32
8.4 Noncompetition and Employment Agreements.......................................................32
8.5 Escrow Agreement...............................................................................32
8.6 No Casualty Losses.............................................................................32
8.7 Certificates of Authorities....................................................................32
8.8 Litigation.....................................................................................33
8.9 Satisfactory to Purchaser's Counsel............................................................33
8.10 Opinion of Seller's Counsel....................................................................33
8.11 No Material Adverse Effect.....................................................................33
8.12 Consents.......................................................................................33
8.13 Satisfactory Pre-Closing Balance Sheet.........................................................33
8.14 Bank Debt and Indebtedness to Vendors..........................................................33
8.15 Guaranty Documents.............................................................................34
8.16 Due Diligence..................................................................................34
8.17 Pre-Closing Balance Sheet......................................................................34
8.18 Further Assurances.............................................................................34
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER AND FUNK.....................................................................34
9.1 Representations and Warranties of Purchaser and Parent.........................................34
9.2 Covenants of Purchaser and Parent..............................................................34
9.3 Purchaser's/Parent's Certificate...............................................................34
9.4 Assumption Agreement...........................................................................34
9.5 Noncompetition and Employment Agreements.......................................................35
9.6 Escrow Agreement...............................................................................35
9.7 Certificates of Authorities....................................................................35
9.8 Satisfactory to Seller's Counsel...............................................................35
9.9 Opinion of Counsel to Parent and Purchaser.....................................................35
9.10 Pre-Closing Balance Sheet......................................................................35
9.11 Bank Debt......................................................................................35
9.12 Resale Certificate.............................................................................35
ARTICLE X
DATE AND PLACE OF CLOSING........................................................................................35
10.1 Date and Place of Closing......................................................................35
10.2 Effective Date.................................................................................35
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ARTICLE XI
CLOSING..........................................................................................................36
11.1 Performance by Seller and Funk.................................................................36
11.2 Performance by Purchaser and Parent............................................................37
11.3 Other Instruments..............................................................................37
ARTICLE XII
SURVIVAL AND INDEMNIFICATION.....................................................................................38
12.1 Survival of Covenants, Agreements, Representations and Warranties..............................38
12.2 Purchaser's Losses.............................................................................38
12.3 Employee Compensation and Benefits.............................................................39
12.4 Seller's Losses................................................................................39
12.5 Limitations on Losses..........................................................................40
12.6 Notice of Loss.................................................................................40
12.7 Right to Defend................................................................................40
12.8 Cooperation....................................................................................41
12.9 Payment Through Escrow.........................................................................41
12.10 Exclusive Remedy...............................................................................42
ARTICLE XIII
TERMINATION......................................................................................................42
13.1 Termination....................................................................................42
13.2 No Further Force or Effect.....................................................................42
ARTICLE XIV
MISCELLANEOUS....................................................................................................43
14.1 Expenses.......................................................................................43
14.2 Entire Agreement...............................................................................43
14.3 Publicity......................................................................................43
14.4 Successors and Assigns.........................................................................43
14.5 Counterparts...................................................................................43
14.6 Headings.......................................................................................43
14.7 Use of Certain Terms...........................................................................43
14.8 Modification and Waiver........................................................................43
14.9 Notices........................................................................................44
14.10 GOVERNING LAW..................................................................................45
14.11 Time...........................................................................................45
14.12 Reformation and Severability...................................................................45
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SCHEDULES
1.1 GAAP Exceptions
2.1A Excluded Assets
2.3(d) Contracts, Leases, Arrangements, and Commitments
2.3(e) Executory Vendor Purchase Orders
3.7 Allocation of Purchase Price
3.8(a) Standards for Determining PBT
3.8(b) Calculation of 1998 Adjusted PBT
3.8(f) Exceptions to Business Practices
4.1(a) Jurisdictions where Seller is Qualified or Licensed to do Business
4.1(b) Encumbrances on Stock
4.2 Modifications of Licenses, Franchises, Permits and Other Authorizations
4.3 Leased Real Property
4.4 Personal Property
4.5 Intellectual Property
4.6 Material Permits
4.8 Contracts
4.10 Litigation
4.11 Inventory Locations
4.13 Employee Benefit Plans
4.14 Employees, Collective Bargaining Agreements and Labor Relations
4.15 Seller's Consents
4.16 Insurance
4.18 Environmental Laws and Regulations
4.19 Certain Changes or Events
4.20 Accounts Receivable
4.21 Customers
4.22 Suppliers
4.23 Bank Accounts
5.2 Purchaser's Consents
7.6 Employees and Agents of Seller
EXHIBITS
Exhibit A--▇▇▇▇ of Sale and Assignment
Exhibit B--Assumption Agreement
Exhibit C--Escrow Agreement
Exhibit D--Noncompetition Agreement
Exhibit E--Employment Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 30th day of September, 1999, by and among ARLINGTON INDUSTRIES,
INC., an Illinois corporation with its principal offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Seller"), ▇▇▇▇▇ ▇▇▇▇, the sole stockholder of
Seller ("Funk"), having an address of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ARLINGTON ACQUISITION CORP., a Delaware corporation with its
principal offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
("Purchaser"), and DAISYTEK, INCORPORATED, a Delaware corporation with its
principal offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
("Parent").
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
buy from Seller, substantially all of the assets of the wholesale computer and
office equipment, supplies and consumables distribution business conducted by
Seller (the "Business"); and
WHEREAS, Purchaser is a wholly-owned subsidiary of Parent, and Parent
will benefit from Purchaser's purchase of substantially all of Seller's assets;
and
WHEREAS, in connection with the purchase by Purchaser from Seller of
the assets described herein, (i) Purchaser and Seller and Funk will enter into a
noncompetition agreement (the "Noncompetition Agreement"), and (ii) Funk will
enter into an employment agreement with Purchaser (the "Employment Agreement").
NOW, THEREFORE, for and in consideration of the mutual representations,
warranties, covenants and agreements hereinafter set forth and other good and
valuable consideration, and upon the terms and subject to the conditions
hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Accounts Receivable" has the meaning specified in Section 6.10.
"Acquisition Proposal" has the meaning specified in Section 6.8.
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"Action" means any claim, action, suit, arbitration, or other
proceeding, in each case, by or before any Governmental Authority.
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"Additional Documents" means the Escrow Agreement, the Employment
Agreement, and the Noncompetition Agreement.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Allocation Modifications" has the meaning specified in Section 3.4.
"Assets" has the meaning specified in Section 2.1(h).
"Assumed Liabilities" has the meaning specified in Section 2.3.
"Bank Debt" means the Indebtedness owing by Seller to American National
Bank and Trust Company of Chicago ("ANB") under that certain Loan and Security
Agreement dated May 2, 1997, as the same may have been amended, modified or
supplemented, including the Indebtedness evidenced by that certain Promissory
Note (Secured) dated June 1, 1999 (the "Revolving Note"), issued by Seller and
payable to the order of ANB, in a maximum principal amount of $14,000,000, and
that certain Installment Business Loan Note dated February 29, 1996 (the "Term
Note"), issued by Seller and payable to the order of NBD Bank (of which ANB is
the successor lender), in the original principal amount of $325,000.
"Business" has the meaning specified in the recitals to this Agreement.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in The City of
New York.
"Cash Payment" has the meaning specified in Section 3.2(a).
"CAP" means, with respect to the Seller, GAAP applied consistently by
Seller throughout the periods involved, with only such exceptions to GAAP
principles and practices as are set forth in Schedule 1.1.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and the rules and regulations promulgated
thereunder.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System.
"Claim" has the meaning specified in Section 12.9.
"Closing" and "Closing Date" have the meanings specified in Section
10.1.
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"Closing Balance Sheet" has the meaning specified in Section 3.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" has the meaning specified in Section 4.8.
"Control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly, or as trustee or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor or by contract, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"Director" has the meaning specified in Section 7.5.
"Earnout Accounting Firm" has the meaning specified in Section 3.8(c).
"Effective Date" has the meaning specified in Section 10.2.
"Employee Claims" has the meaning specified in Section 12.3.
"Employment Agreement" has the meaning specified in the recitals to
this Agreement.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge or
encumbrance, other than (a) mechanic's, materialmen's, and similar liens or (b)
liens for taxes not yet due and payable or for taxes that the taxpayer is
contesting in good faith through appropriate proceedings and as to which the
Company has provided adequate reserves in its Pre-Closing Balance Sheet.
"Environmental Laws" means any federal, state or local law or any
foreign law, including any statute, rule, regulation, ordinance, code or rule of
common law, now or hereafter in effect and in each case as amended, including
any judicial or administrative order, consent decree or judgment, relating to
the environment, health, safety or Hazardous Materials, including, without
limitation, CERCLA; the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
Sections 6901 et seq.; the Clean Water Act, 33 U.S.C. Sections 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq.; the Clean Air
Act, 42 U.S.C. Sections 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Sections 300 et seq.; the Atomic Energy Act, 42 U.S.C. Sections 2011 et seq.;
and the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections
136 et seq.
"Environmental Permits" means all permits, written approvals, U.S.
Environmental Protection Agency or state generator numbers, licenses and other
authorizations from applicable
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Governmental Authorities required under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Escrow Agreement" has the meaning specified in Section 3.2(b).
"Excluded Assets" has the meaning specified in Section 2.1.
"Excluded Consents" has the meaning specified in Section 2.2.
"Financial Statements" has the meaning specified in Section 4.12.
"Fiscal 2000" means the 12-month period commencing on the Effective
Date.
"Fiscal 2001" means the 12-month period commencing on the first
anniversary of the Effective Date.
"GAAP" means generally accepted accounting principles and practices in
effect from time to time applied consistently throughout the periods involved.
"Governmental Authority" means any United States federal, state, local,
possession or foreign governmental, regulatory or administrative authority,
agency or commission, or any political subdivision thereof, or any court,
tribunal or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Growth Earnout Payment" has the meaning specified in Section 3.8(a).
"Growth Earnout Payment Statement" has the meaning specified in Section
3.8(b).
"Guaranty Documents" has the meaning specified in Section 6.13.
"Hazardous Materials" means (a) petroleum and petroleum fuels,
lubricants and cleaning agents, radioactive materials, friable asbestos material
as defined under 40 C.F.R. 61.141, urea formaldehyde foam insulation,
transformers or other equipment that contain polychlorinated biphenyls in
concentrations of 50 ppm, and radon gas; (b) any other chemicals, materials or
substances defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials" or "extremely hazardous wastes"; and
(c) any other chemical, material or substance exposure to which is regulated
pursuant to any applicable Environmental Law.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
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"Income Taxes" means any and all income taxes (together with any and
all interest, penalties, and additional amounts imposed with respect thereto)
imposed by any Governmental Authority or other taxing authority.
"Incremental Earnout Multiple" has the meaning specified in
Section 3.8(a).
"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money; (b) all
obligations of such Person for the deferred purchase price of property or
services; (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments; (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property); (e) all obligations of such Person as
lessee under leases which have been or should be, in accordance with GAAP,
recorded as capital leases; (f) all obligations, contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities, (g) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of such Person or any warrants, rights or
options to acquire such capital stock, valued, in the case of redeemable
preferred stock, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends; (h) all Indebtedness of others
referred to in clauses (a) through (g) above guaranteed directly or indirectly
in any manner by such Person, or in effect guaranteed directly or indirectly by
such Person through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness, (ii)
to purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make payment
of such Indebtedness or to assure the holder of such Indebtedness against loss,
(iii) to supply funds to or in any other manner invest in the debtor (including
any agreement to pay for property or services irrespective of whether such
property is received or such services are rendered) or (iv) otherwise to assure
a creditor against loss; and (i) all Indebtedness referred to in clauses (a)
through (g) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Encumbrance on
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.
"Intellectual Property" means (a) inventions, whether patentable or not
and whether or not yet made the subject of a pending patent application or
applications; (b) ideas and conceptions of potentially patentable subject
matter, including, without limitation, any patent disclosures, whether or not
reduced to practice and whether or not yet made the subject of a pending patent
application or applications; (c) statutory invention registrations, patents,
patent registrations and patent applications (including all reissues, divisions,
continuations and continuations-in-part) and all improvements to the inventions
covered in each such registration, patent or application; (d) trademarks,
service marks, trade dress, logos, trade names and corporate names and
registrations and applications for registration thereof, including, but not
limited to, all marks registered in the United States Patent and Trademark
Office, the Trademark Offices of the States and Territories of the United States
of America, and the Trademark Offices of other nations throughout the world; (e)
copyrights (registered or otherwise) and registrations and applications
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for registration thereof; (f) computer software and programs, data and
documentation; (g) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions, and conceptions of
inventions, whether patentable or unpatentable and whether or not reduced to
practice), technology (including know-how), manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data and copyrightable
works; (h) copies and tangible embodiments of all of the foregoing, in whatever
form or medium; (i) all rights to obtain and rights to apply for patents, and to
register trademarks and copyrights; and (j) all rights to ▇▇▇ for present and
past infringement of any of the intellectual property rights hereinabove set
out.
"Inventories" and "Inventory" mean all inventory, merchandise, goods,
raw materials, finished goods, packaging and supplies, including, but not
limited to, those related to the Business, maintained, held (including, without
limitation, on consignment) or stored by or for Seller and any prepaid deposits
for any of the same.
"IRS" means the Internal Revenue Service.
"Knowledge" (including the terms "to the knowledge of" or "to the best
knowledge of") means, with respect to Seller and Funk, the actual personal
knowledge of one or more of Seller's officers or directors (including without
limitation Funk) at the time when the applicable statement is made.
"Leased Real Property" means the real property leased by Seller, as
landlord or tenant, together with, to the extent leased by such entity, all
buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures attached or appurtenant thereto, and all
easements, licenses, rights and appurtenances relating to the foregoing, all to
the extent of Seller's rights therein.
"Losses" has the meaning specified in Section 12.4.
"Maintenance Earnout Payment" has the meaning specified in
Section 3.8(g).
"Material Adverse Effect" means any circumstance, change in, or effect
on, the Business that individually, or in the aggregate with any other
circumstances, changes in, or effects on, the Business, taken as a whole: (a)
would have a material adverse effect on the financial condition of the Business
as taken as a whole or (b) would materially adversely affect the ability of
Purchaser to operate or conduct the Business in the manner in which it is
currently operated or conducted by Seller.
"Material Permits" has the meaning specified in Section 4.6.
"Most Recent Balance Sheet" has the meaning specified in Section 4.12.
"Net Worth" means, as of any date of determination, the difference
between the Assets
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and Assumed Liabilities and Bank Debt, as determined in accordance with CAP.
"Net Worth Deficit" shall mean, as of any date of determination, the
amount, if any, by which the Net Worth of Seller is less than $13,000,000.
"Noncompetition Agreement" has the meaning specified in the recitals to
this Agreement.
"Overpayment" has the meaning specified in Section 3.6.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PBT" has the meaning specified in Section 3.8(a).
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Exchange Act.
"Plan" has the meaning specified in Section 4.13.
"Pre-Closing Balance Sheet" has the meaning specified in Section 3.3.
"Pre-Closing Balance Sheet Date" means August 31, 1999, or such later
date as the parties hereto shall mutually agree.
"Purchase Price" has the meaning specified in Section 3.1.
"Purchase Price Bank Account" means the account to be designated by the
Seller in a written notice to Purchaser prior to the Closing.
"Purchaser's Losses" has the meaning specified in Section 12.2.
"Purchase Price Accounting Firm" has the meaning specified in
Section 3.5(c).
"Receivables" means all Accounts Receivable, promissory notes, contract
rights, commercial paper, debt securities and other rights to receive money as
of any applicable date of determination, all as determined in accordance with
CAP.
"Receivable Writeback Amount" has the meaning specified in
Section 6.10.
"Receivable Writeback Date" has the meaning specified in Section 6.10.
"Remedial Action" means all action required under any applicable
Environmental Law or Environmental Permit and all action required by a
Governmental Authority to (i) clean up, remove, treat or handle in any other way
Hazardous Materials in the environment; (ii) prevent the release of Hazardous
Materials so that they do not migrate, endanger or threaten to endanger
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public health or the environment; or (iii) perform remedial investigations,
feasibility studies, corrective actions, closures, and postremedial or
postclosure studies, investigations, operations, maintenance and monitoring on,
about or in any real property, including, without limitation, Seller's Leased
Real Property.
"Seller's Losses" has the meaning specified in Section 12.4.
"Seller's Report" has the meaning specified in Section 3.5(a).
"Seller's Notice" has the meaning specified in Section 3.8(c).
"Subject Property" has the meaning specified in Section 4.19(b).
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs' duties, tariffs, and
similar charges.
"Vendor Debt" has the meaning specified in Section 8.15.
"Working Capital" shall mean, as of any date of determination, Seller's
current assets less the Assumed Liabilities which are current liabilities, each
determined in accordance with CAP.
"Working Capital Deficit" shall mean, as of any date of determination,
the amount, if any, by which the Working Capital is less than $13,000,000.
"Work Papers" has the meaning specified in Section 3.5(b).
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale of Assets. Seller will sell, convey, transfer,
assign and deliver to Purchaser, and Purchaser will acquire and accept from
Seller, at the Closing all of Seller's right, title and interest in and to the
following assets and properties, free and clear of any and all Encumbrances,
except as set forth on Schedule 4.4:
(a) All of the leases relating to the Leased Real Property of
Seller described on Schedule 4.3, including, without limitation, Seller's
leasehold rights in and to the buildings,
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improvements, rights-of-way, easements, rights, liberties, privileges,
hereditaments and appurtenances thereto or located thereon;
(b) All of the personal property of Seller located on the
Leased Real Property described on Schedule 4.3 and all other tangible assets and
properties of Seller, wherever located and whether or not described or referred
to herein, including, without limitation, all equipment, machinery, tools,
vehicles, Inventories, prepaid accounts and prepaid expenses, furniture,
fixtures, fixed assets, books, reports and records (including customer lists);
(c) Seller's customer accounts, contracts, leases, franchises,
arrangements and commitments;
(d) All intangible properties and rights (other than
contracts, leases, arrangements and commitments), wherever located and whether
or not described or referred to herein, including, without limitation, all
know-how, trade secrets, technology, all patents and patent applications and
rights and licenses thereunder, trade names, trademark registrations and
applications, common law trademarks, service marks, copyrights and copyright
registrations and applications and any other forms of Intellectual Property;
(e) The name "Arlington Industries" and "Arlington Sales," and
all derivations thereof, including without limitation any and all Internet
domain names relating thereto;
(f) All licenses, permits, certificates and authorizations
relating to the business operations of Seller;
(g) All cash, deposits, bank accounts, prepaid expenses,
certificates of deposit, securities, accounts receivable, evidences of
indebtedness and choses-in-action of Seller;
(h) Any other property or right, tangible or intangible, of
Seller (the items in (a) through (h) hereof hereinafter collectively referred to
as the "Assets");
provided, however, that "Assets" shall not include and Seller will not sell,
convey, transfer, assign or delivery to Purchaser, and Purchaser will not
acquire from Seller, (i) the corporate charter, qualifications to conduct
business as a foreign corporation, arrangements with registered agents relating
to foreign qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance and existence of the Seller
as a corporation, (ii) any of the rights of the Seller under this Agreement (or
under any Additional Documents or other agreements between the Seller on the one
hand and the Purchaser and/or Parent on the other hand entered into on or after
the date of this Agreement), (iii) claims (and benefits to the extent they arise
therefrom) which relate to Seller's liabilities other than the Assumed
Liabilities, and (iv) the items listed on Schedule 2.1A (collectively, the
"Excluded Assets").
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2.2 Transfer and Conveyance. Seller shall execute and deliver to
Purchaser at the Closing a ▇▇▇▇ of Sale and Assignment in substantially the form
attached hereto as Exhibit A, and all such other assignments, endorsements and
instruments of transfer as shall be necessary or appropriate to carry out the
intent of this Agreement and as shall be sufficient to vest in Purchaser title
to all of the Assets and all right, title and interest of Seller thereto and to
evidence Purchaser's assumption of the Assumed Liabilities; provided, that the
parties have agreed that Seller need not obtain the required consents described
in Schedule 4.15 (the "Excluded Consents") as of the Closing Date. Seller and
Funk shall use their respective best efforts (which shall not include
litigation) to obtain the Excluded Consents following the Closing Date (unless
the Purchaser and Seller hereafter agree that such consent is unnecessary or
undesirable) until December 31, 1999; provided, however, that neither Seller nor
Funk shall have any liability to Purchaser or Parent in connection with not
obtaining such Excluded Consents. Following the Closing Date, if Purchaser is
unable to (i) operate under any Contract which has been transferred to Purchaser
and for which a consent has not been obtained, or (ii) obtain substantially
similar products and services as to those which could be obtained under such
Contracts, on terms and conditions reasonably equivalent to those under such
Contracts, then during the period from the Closing Date through December 31,
1999, Seller shall, to the extent possible, purchase goods under such Contracts
on behalf of and for the account of Purchaser; provided, however, that neither
Seller nor Funk shall have any liability to Purchaser or Parent due to Seller's
inability to purchase such goods under such Contracts. Purchaser acknowledges
and agrees that Purchaser shall be solely responsible for the payment of all
such purchases and further agrees to pay for such purchases in accordance with
their terms. Purchaser and Parent, jointly and severally, agree to indemnify and
hold harmless Seller and Funk from, against, for and in respect of any and all
damages (of any nature whatsoever), obligations, claims, costs and expenses
including, without limitation, reasonable attorneys fees and costs, suffered,
sustained, incurred or required to be paid by Seller or Funk by reason of such
purchases. Seller shall not be entitled to a commission or other compensation
(other than the foregoing indemnification payments) for its services in
connection herewith. In addition, Seller shall file, within three Business Days
after the Closing Date, an amendment to its Articles of Incorporation so as to
change its name to a name which shall not include the words "Arlington
Industries" or any derivation thereof, and to file in the State of Florida all
documents necessary to relinquish its right to use the assumed name "Arlington
Sales" in the State of Florida.
2.3 Assumption of Certain Obligations. Effective at the Closing and
subject to the terms set forth herein, Purchaser shall assume and be liable
solely for the following liabilities and obligations of Seller (collectively,
the "Assumed Liabilities"):
(a) the accounts payable set forth on the Pre-Closing Balance
Sheet and those incurred in the ordinary course of business consistent with past
practice thereafter through the Closing Date (to the extent not paid or
otherwise satisfied on or before the Closing Date);
(b) the accrued expenses of Seller set forth on the
Pre-Closing Balance Sheet and those incurred in the ordinary course of business
consistent with past practice thereafter through the Closing Date (to the extent
not paid or otherwise satisfied or before the Closing Date), including, without
limitation, accrued payroll, payroll taxes, bonuses, commissions,
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401K/profit sharing (but not the plans themselves), and all other accrued
expenses in respect of Seller's employees set forth on the Pre-Closing Balance
Sheet and those incurred in the ordinary course of business consistent with past
practice thereafter through the Closing Date (to the extent not paid or
otherwise satisfied or before the Closing Date);
(c) the cash deficit of Seller set forth on the Pre-Closing
Balance Sheet and changes therein occurring in the ordinary course of business
thereafter through the Closing Date (to the extent not paid or otherwise
satisfied on or before the Closing Date);
(d) the liabilities and obligations of Seller set forth in the
contracts, leases, arrangements and commitments listed on Schedule 2.3(d), the
performance of which shall be due following the Closing Date (but not for any
obligation for performance by Seller prior to the Closing Date or obligation or
liability of Seller due under said contracts, leases, arrangements or
commitments prior to the Closing Date (other than accruals which are otherwise
Assumed Liabilities under this Section 2.3), or obligation or liability of
Seller for default or nonperformance under said contracts, leases, arrangements
and commitments arising prior to the Closing Date), but specifically excluding
any and all liabilities and obligations of Seller in any contract, arrangement
or commitment with any of its employees with respect to the distribution of any
Growth Earnout Payment, Maintenance Earnout Payment or other amount under
Section 3.8; and
(e) obligations of continued performance under executory
vendor purchase orders for the purchase of supplies, Inventory, equipment or
services to the extent accrued on the Pre-Closing Balance Sheet and those
incurred in the ordinary course of business consistent with past practice
thereafter (to the extent not paid or otherwise satisfied on or before the
Closing Date), including without limitation those (i) specifically set forth on
Schedule 2.3(e), or (ii) as to which the supplies, Inventory, equipment or
services subject thereto have not been received by the Seller prior to the
Closing Date, but not including any obligation or liability for any breach
occurring with respect thereto prior to the Closing Date.
Purchaser will not assume and will not be liable for any other debts,
contracts, leases, liabilities, arrangements, commitments, obligations,
restrictions, disabilities or duties of Seller, other than the Assumed
Liabilities.
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price. The purchase price for the Assets shall be the sum
of (i) $19,000,000, less the greater of the Net Worth Deficit, if any, as of the
Closing Balance Sheet Date, or the Working Capital Deficit, if any, as of the
Closing Balance Sheet Date, plus (ii) the Growth Earnout Payment plus (iii) the
Maintenance Earnout Payment, plus (iv) the assumption by Purchaser of the
Assumed Liabilities (collectively, the "Purchase Price").
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3.2 Method of Payment of Purchase Price; Other Amounts Payable at the
Closing. The Purchase Price for the Assets shall be payable by Purchaser to
Seller as follows:
(a) At the Closing, Purchaser shall deliver to Seller by wire
transfer of immediately available funds to the Purchase Price Bank Account the
amount of $16,000,000, less the greater of the Net Worth Deficit, if any, as of
the Pre-Closing Balance Sheet Date, or the Working Capital Deficit, if any, as
of the Pre- Closing Balance Sheet Date (the "Cash Payment").
(b) At the Closing, $3,000,000 of the Purchase Price in
immediately available funds shall be held in escrow in accordance with the
escrow agreement attached hereto as Exhibit C (the "Escrow Agreement") for an
initial period of one year and one day from the Closing Date as security and as
an offset for any breach of the representations, warranties, covenants and
agreements of Seller and Funk and for Seller's and Funk's indemnification
obligations, each as set forth herein, following which time such Payment Shares
shall be delivered to Seller in accordance with the terms of the Escrow
Agreement.
(c) The Growth Earnout Payment and the Maintenance Earnout
Payment, if any, shall be payable as provided in Section 3.8.
(d) Purchaser shall execute and deliver to Seller and Funk an
Assumption Agreement in substantially the form attached hereto as Exhibit B.
3.3 Pre-Closing Balance Sheet. As soon as reasonably practicable, but
in no event later than five days prior to the Closing Date, Purchaser and Seller
shall jointly prepare (a) an unaudited balance sheet of Seller, including,
without limitation, accruals and prepaid items (the "Pre-Closing Balance
Sheet"), dated as of the Pre-Closing Balance Sheet Date, prepared in accordance
with CAP, and (b) a statement setting forth the Net Worth Deficit and the
Working Capital Deficit, all determined as of the Pre-Closing Balance Sheet
Date. It shall be a condition to Closing that the parties to this Agreement
agree upon the Pre-Closing Balance Sheet, the Net Worth Deficit and the Working
Capital Deficit (each as of the Pre-Closing Balance Sheet Date).
3.4 Closing Balance Sheet. As soon as practicable following the Closing
Date, but in no event later than 90 days thereafter, Purchaser shall cause to be
prepared and delivered to Seller (a) an unaudited consolidated balance sheet of
Seller (the "Closing Balance Sheet") as of the close of business on the Closing
Date prepared in accordance with CAP consistently applied with the Pre-Closing
Balance Sheet, (b) a statement setting forth the Net Worth Deficit and the
Working Capital Deficit, all determined as of the Closing Date, and the
calculation of the Purchase Price based thereon and (c) any modifications to the
allocation of the Purchase Price among the Seller's assets which had been
prepared pursuant to Section 3.7 hereof (the "Allocation Modifications").
3.5 Resolution of Accounting Disputes.
(a) Within 45 days after the later of Seller's receipt of (i)
the Closing Balance Sheet or (ii) if Seller shall have requested the Work Papers
in accordance with Section 3.5(b) hereof, receipt of the Work Papers, Seller may
deliver to Purchaser a written report (the "Seller's
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Report") setting forth any disagreement of Seller with the determination of the
Net Worth Deficit, the Working Capital Deficit, the Purchase Price based thereon
or the Allocation Modifications. If Seller does not submit a Seller's Report
within such period, the Net Worth Deficit, the Working Capital Deficit, the
Purchase Price based thereon and the Allocation Modifications, all determined
pursuant to Section 3.4 hereof, shall be final and binding on the parties hereto
for the purposes hereof.
(b) Upon the written request of the Seller made within 15
Business Days following Seller's receipt of the Closing Balance Sheet, Purchaser
shall provide to the Seller the work papers and related documents as are
necessary in Seller's reasonable judgment to enable Seller to review the
calculation of the Net Worth Deficit, the Working Capital Deficit, the Purchase
Price based thereon and the Allocation Modifications (collectively, the "Work
Papers").
(c) If the Seller's Report is delivered to Purchaser in a
timely fashion and the parties are unable to resolve any disagreement set forth
therein within 30 days of Purchaser's receipt of the Seller's Report, either
party may elect to have such dispute submitted to an independent accounting firm
of recognized national standing (the "Purchase Price Accounting Firm"). If the
Purchaser and Seller are unable to agree on the choice of the Purchase Price
Accounting Firm, then the Purchase Price Accounting Firm shall be a "Big 5"
accounting firm selected by lot (after the Purchaser and the Seller each
eliminate one such firm). The Purchaser and the Seller shall request that the
Purchase Price Accounting Firm render a determination as to each unresolved
matter within 30 days after its retention, and the Purchaser and the Seller
shall cooperate fully with the Purchase Price Accounting Firm so as to enable it
to make such determination as quickly as practicable. The Purchase Price
Accounting Firm's determination as to each dispute submitted to it shall be in
writing, shall conform with this Section 3.5, and shall be conclusive and
binding upon all parties hereto and the Net Worth Deficit, Working Capital
Deficit, the Purchase Price based thereon and the Allocation Modifications shall
be adjusted if necessary to reflect such determination. The Purchase Price
Accounting Firm shall allocate its costs and expenses between the Purchaser and
the Seller based upon the percentage which the portion of the contested amount
not awarded to each party bears to the amount actually contested by such party.
3.6 Adjustment of Closing Payment. If the Purchase Price paid at
Closing is greater than the Purchase Price as finally determined in accordance
with Section 3.4 or 3.5 hereof (such excess being hereinafter referred to as the
"Overpayment"), then, within 10 days after such determination, the Escrow Agent
shall deliver to Purchaser cash being held by it pursuant to the Escrow
Agreement equal to the Overpayment.
3.7 Allocation of Purchase Price. Subject to adjustment as set forth in
Section 3.4 hereof, the Purchase Price shall be allocated among the Assets as
set forth on Schedule 3.7. Purchaser and Seller shall report the allocation on
Internal Revenue Service Form 8594 in a manner consistent with the allocation
provided in Schedule 3.7 subject to the adjustments set forth herein.
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3.8 Earnouts.
(a) Seller shall be paid a growth earnout ("Growth Earnout
Payment"), if any, in accordance with this Section 3.8, upon attainment by
Purchaser of varying targeted levels of annual growth in operating the Business
of profits before taxes, but after interest, depreciation and amortization
(other than amortization of any goodwill relating to the acquisition of the
Business), all as determined in accordance with GAAP and the standards set forth
on Schedule 3.8(a) ("PBT"), for each of Fiscal 2000 and Fiscal 2001. The Growth
Earnout Payment for each of Fiscal 2000 and Fiscal 2001 shall equal the product
of (i) $6,500,000 and (ii) the applicable incremental earnout multiple
("Incremental Earnout Multiple") for Fiscal 2000 and Fiscal 2001 as determined
in accordance with the following table; provided, however, that Seller shall not
be entitled to a Growth Earnout Payment for Fiscal 2001 unless the PBT for
Fiscal 2001 exceeds the PBT for Fiscal 2000 by more than 10%; and provided,
further, that any Growth Earnout Payment for Fiscal 2001 shall be reduced by the
amount of any Growth Earnout Payment theretofore paid to Seller for Fiscal 2000.
Fiscal Year 2000 Fiscal Year 2001
---------------------------- Incremental Earnout ------------------------- Incremental Earnout
Target PBT Range Multiple Target PBT Range Multiple
---------------------------- ------------------- ------------------------- -------------------
less than $6,756,250 -- less than $7,769,687.50 --
$6,756,250 to $7,050,000 .25 $7,769,687.50 to $8,460,000 .5
$7,050,000 to $7,343,750 .50 $8,460,000 to $9,179.687.50 1.0
greater than $7,343,750 .75 greater than $9,179.687.50 1.5
(b) Within sixty (60) days of the end of the applicable
12-month period, Purchaser shall deliver to Seller a statement (the "Growth
Earnout Payment Statement") of Purchaser's chief financial officer setting forth
for such 12-month period the calculations of the (i) PBT and (ii) Growth Earnout
Payment. Seller and its representatives and agents shall have the right to
review and inspect, and shall be afforded the opportunity to examine and make
copies of, all work papers and supporting books, records and other documentation
reasonably requested to verify the accuracy of the Growth Earnout Payment
Statement.
(c) Seller shall have the right to dispute any amount set
forth in the Growth Earnout Payment Statement, provided, however, Seller shall
notify (the "Seller's Notice") Purchaser in writing of the nature and basis of
such dispute within 45 days of the Purchaser's delivery of the Growth Earnout
Payment Statement. Purchaser and Seller shall attempt to resolve all disputes
set forth in Seller's Notice. If Purchaser and Seller shall be unable to resolve
any dispute within 20 days of the Purchaser's receipt of Seller's Notice, such
dispute shall be submitted to an independent accounting firm of recognized
national standing (the "Earnout Accounting Firm"). If the Purchaser and Seller
are unable to agree on the choice of the Earnout Accounting Firm, then the
Earnout Accounting Firm shall be a "Big 5" accounting firm selected
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by lot (after the Purchaser and the Seller each eliminate one such firm). The
Purchaser and the Seller shall request that the Earnout Accounting Firm render a
determination as to each unresolved matter within 30 days after its retention,
and the Purchaser and the Seller shall cooperate fully with the Earnout
Accounting Firm so as to enable it to make such determination as quickly as
practicable. The Earnout Accounting Firm's determination as to each dispute
submitted to it shall be in writing, shall conform with this Section 3.8, and
shall be conclusive and binding upon all parties hereto and the Growth Earnout
Payment Statement for such period shall be adjusted if necessary to reflect such
determination. The Earnout Accounting Firm shall allocate its costs and expenses
between the Purchaser and the Seller based upon the percentage which the portion
of the contested amount not awarded to each party bears to the amount actually
contested by such party.
(d) Within two Business Days following the earlier of (i) the
acceptance by Seller of the Growth Earnout Payment Statement (which, if not
otherwise set forth in writing by Seller, shall be deemed to occur on the 46th
day following Purchaser's delivery of the Growth Earnout Payment Statement;
unless Seller shall deliver Seller's Notice prior thereto) or (ii) the final
Growth Earnout Payment Statement adjusted to reflect the resolution of all
disputes as provided in the preceding paragraph, Purchaser and Seller shall
execute the agreed upon Growth Earnout Payment Statement.
(e) Within 10 Business Days following the execution and
delivery of the Growth Earnout Payment Statement, but in no event later than 120
days following the end of Fiscal 2000 or Fiscal 2001, as the case may be (or
such longer period of time as may be reasonably required by the Accounting Firm
to resolve all disputes under Section 3.8(c)), the Purchaser shall wire transfer
in immediately available funds to the Purchase Price Bank Account (or such other
account as Seller shall designate in writing) the applicable Growth Earnout
Payment.
(f) Purchaser agrees that during Fiscal 2000 and Fiscal 2001,
the Business shall be conducted substantially in accordance with Seller's
present practices, except as otherwise set forth in Schedule 3.8(f).
(g) Purchaser shall be paid by wire transfer of immediately
available funds to the Purchase Price Bank Account (or such other account as
Seller shall designate in writing) an additional earnout of $1,000,000 (the
"Maintenance Earnout Payment") on or before the date which is two years and four
months from the Effective Date, but solely if (i) the Employment Agreement shall
not have been terminated during the Initial Term (as defined therein) by
Purchaser for Cause (as defined therein), or by Funk other than for Good Reason
(as defined therein) and (ii) PBT for each of Fiscal 2000 and Fiscal 2001 (as
determined on the same basis as for the Growth Earnout Payment) shall be not
less than $5,875,000 in each such year. Any disputes under this Section 3.8(g)
shall be resolved in the same manner as set forth in Section 3.8(c).
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND FUNK
Each of Seller and Funk, jointly and severally, represents and warrants
to Purchaser as follows:
4.1 Due Organization and Qualification; Title to Stock; No
Subsidiaries.
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois, and has all
requisite corporate power and authority to own, lease or operate its properties
and to carry on its business as it is presently being operated and in the place
where such properties are owned, leased or operated and such business is
conducted. Seller is duly qualified or licensed and has all permits necessary to
transact business, and is in good standing as a foreign corporation in each of
the jurisdictions set forth in Schedule 4.1(a), which are the only jurisdictions
wherein either the nature of the business conducted by Seller or its ownership
or use of the properties owned or used by it requires it to be so qualified or
licensed. Funk is the sole stockholder of Seller and owns all shares of capital
stock of Seller free and clear of any and all Encumbrances, except as set forth
on Schedule 4.1(b).
(b) Seller has no direct or indirect subsidiaries and has no
ownership or equity interest, or right to acquire any ownership or equity
interest, whether by conversion, option exercise, or otherwise, in any
corporation, partnership, association, business trust, limited liability
company, or any other entity.
4.2 Corporate Power and Authority. The execution, delivery and
performance of this Agreement and the Additional Documents by Seller and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all requisite corporate action and no further action or
approval is required to permit Seller or Funk to consummate the transactions
contemplated hereby and thereby. This Agreement and the Additional Documents
when executed and delivered in accordance with the terms thereof, will
constitute, the legal, valid and binding obligations of Seller and Funk,
enforceable in accordance with their terms. Each of Seller and Funk has full
power, authority and legal right to enter into this Agreement and the Additional
Documents, and to consummate the transactions contemplated hereby and thereby.
Except as set forth in Schedule 4.2, the making and performance of this
Agreement and the Additional Documents and the consummation of the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof
will not (a) conflict with the Articles of Incorporation or the Bylaws of
Seller, (b) result in any breach or termination of, or constitute a default
under, or constitute an event that with notice or lapse of time, or both, would
become a default under, or result in the creation of any Encumbrance upon any of
the Assets under, or create any rights of termination, cancellation or
acceleration in any person under, any Contract, or violate any order, writ,
injunction or decree, to which Seller or Funk is a party, by which any of the
Assets, business or operations of Seller or Funk may be bound or affected or
under which any of the Assets, business or operations of Seller receive
benefits, (c) result in the loss or adverse modification of any license,
franchise, permit or other
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authorization granted to or otherwise held by Seller and required for its
present business operations or (d) result in the violation of any provisions of
law applicable to Seller or Funk, the violation of which could have an adverse
effect upon the Assets, Business or operations of Seller.
4.3 Real Property.
(a) Seller does not currently own and has never owned any real
property.
(b) Schedule 4.3 lists: (i) the address of each parcel of
Leased Real Property, (ii) the identity of the lessor, lessee and current
occupant (if different from lessee) of each such parcel of Leased Real Property
and (iii) the term pertaining to each such parcel of Leased Real Property.
(c) Except as described in Schedule 4.3, (i) there is no
material violation of any law, regulation or ordinance relating to the Leased
Real Property and (ii) Seller has not received any written notice of any
material violation of any law, regulation or ordinance relating to any of the
Leased Real Property. Seller has made available to Purchaser true and correct
copies of, if any, all certificates of occupancy, environmental reports and
appraisals which it possesses in respect of the Leased Real Property. Seller, as
the lessee of each parcel of Leased Real Property, is in peaceful and
undisturbed possession of such parcel of Leased Real Property, and there are no
contractual or legal restrictions which preclude or restrict the ability to use
the subject premises for the purposes for which they are currently being used.
All existing utilities required for the use, occupancy, operation and
maintenance of the Leased Real Property are adequate for the conduct of the
Business as presently conducted. There are no material adverse physical
conditions or, to Seller's or Funk's Knowledge, material latent defects
affecting the Leased Real Property, other than ordinary wear and tear. Except as
set forth in Schedule 4.3, Seller has not leased or subleased any parcel of
Leased Real Property to any other Person, nor has Seller assigned its interest
under any lease or sublease set forth in Schedule 4.3 to any third party.
(d) Seller has delivered to Purchaser correct and complete
copies of all leases and subleases set forth in Schedule 4.3 and any and all
amendments. With respect to each of these leases and subleases:
(i) such lease or sublease, as amended, is legal,
valid, binding, enforceable and in full force and effect with respect
to Seller, and, to the Knowledge of Seller, with respect to all other
parties thereto and is the entire agreement between the parties thereto
with respect to such property;
(ii) except as otherwise set forth in Schedule 4.3,
such lease or sublease will not cease to be legal, valid, binding,
enforceable and in full force and effect on terms identical to those
currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, nor will the consummation of the
transactions contemplated hereby constitute a breach or default under
such lease or sublease or otherwise give the landlord a right to
terminate, recapture or modify such lease or sublease;
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(iii) except as otherwise disclosed in Schedule 4.3,
with respect to each such lease or sublease: (A) Seller has not
received any notice of cancellation or termination under such lease or
sublease and, no lessor has any right of termination or cancellation
under such lease or sublease except in connection with the default of
Seller thereunder, (B) Seller has not received any notice of a breach
or default by Seller under such lease or sublease, and (C) Seller has
not granted to any other Person any material rights, adverse or
otherwise, under such lease or sublease; and
(iv) except as set forth in Schedule 4.3, neither
Seller nor (to the Knowledge of Seller) any other party to such lease
or sublease is in breach or default in any material respect, and no
event has occurred which, with notice or lapse of time, would
constitute such a material breach or default by Seller or (to Seller's
Knowledge) any other party to such lease or sublease or permit
termination under or acceleration of such lease or sublease.
(e) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or, to the Knowledge of Seller, threatened
against the Leased Real Property.
(f) Except as set forth in Schedule 4.3, to the extent
required by applicable law, all the Leased Real Property is occupied under a
valid and current certificate of occupancy or similar permit, the transactions
contemplated by this Agreement will not require the issuance of any new or
amended certificate of occupancy and there are no facts which would prevent the
Leased Real Property from being occupied after the Closing Date in the same
manner as before.
(g) All improvements on the Leased Real Property constructed
by or on behalf of Seller were constructed in compliance with all applicable
federal, state and local statutes, laws, ordinances, regulations, rules, codes,
orders or requirements (including, but not limited to, any building or zoning
laws or codes) affecting such Leased Real Property.
4.4 Personal Property; Title to Property.
(a) Set forth on Schedule 4.4 is a list of (i) all vehicles
owned or leased by Seller and included among the Assets (showing motor vehicle
identification numbers and whether owned or leased), (ii) all production and
warehouse machinery and equipment owned or leased by Seller and included among
the Assets with an original purchase price of $50,000 or greater, and (iii) all
physical properties (other than the types of properties referred to in (i) and
(ii) above), real, personal or mixed, owned by or leased to Seller and included
among the Assets with an original purchase price per Asset of $50,000 or
greater. All such properties are in good operating condition, reasonable wear
and tear excepted, exclusive of Inventory. Seller enjoys peaceable possession of
all properties owned or leased by it.
(b) Seller has, and upon conveyance of the Assets to Purchaser
by Seller at the
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Closing, Purchaser will acquire and hold good title to all of the Assets,
whether real, personal or mixed, described in Schedule 4.4 as owned by it, free
and clear of any and all Encumbrances except as set forth on Schedule 4.4.
4.5 Intellectual Property; Year 2000.
(a) Seller has no registered patents, trademarks or
copyrights. Unless otherwise indicated on Schedule 4.5, Seller has the right to
use and license the Intellectual Property with an original purchase price of
$5,000 or more and to transfer and convey the Intellectual Property. Except as
stated on Schedule 4.5, there are no pending proceedings or adverse claims made
or, to Seller's or Funk's Knowledge, threatened against Seller with respect to
the Intellectual Property; there has been no litigation commenced or, to
Seller's or Funk's Knowledge, threatened against Seller within the past five
years with respect to the Intellectual Property or the rights of Seller therein;
and to Seller's or Funk's Knowledge, the Intellectual Property or the use
thereof by Seller does not conflict with any trade names, trademarks, service
marks, trademark or service ▇▇▇▇ registrations or applications of others.
(b) Except as set forth on Schedule 4.5, based upon internal
and external reviews (furnished to Purchaser), Seller has no reason to believe
that the material computer equipment and software used by Seller will not
function properly with respect to dates in 2000 and thereafter or calculations
which accommodate same century and multicentury formulas and date values.
4.6 Permits. Seller owns and holds all licenses, franchises, permits,
titles and other governmental authorizations (including, without limitation,
motor vehicle titles and current registrations), fuel permits, Environmental
Permits, licenses, and franchises necessary to the conduct of Seller's Business
in the manner and jurisdictions in which it presently conducts business (the
"Material Permits"). An accurate list and summary description of all such
Material Permits is set forth on Schedule 4.6 hereto. Except as set forth in
Schedule 4.6 and except for the Excluded Assets, the Material Permits are valid
and may be transferred to Purchaser at the Closing, and Seller has not received
any notice that any governmental authority intends to cancel, terminate or not
renew any such Material Permit. Seller has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the applicable Material Permits and is not in violation of any of
the foregoing except where such noncompliance or violation would not have a
Material Adverse Effect. Except as specifically provided on Schedule 4.6, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to Seller, or to Purchaser after the Closing, by any such Material
Permits.
4.7 Compliance with Laws. Seller (i) has complied with all laws,
regulations, licensing requirements and orders applicable to its business or
personnel and (ii) has filed with the proper authorities all statements and
reports required by the laws, regulations, licensing requirements and orders to
which it or any of its employees (because of their activities on behalf of their
employer) is subject.
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4.8 Contracts. Set forth on Schedule 4.8 is a list of all contracts,
leases and commitments (whether oral or written), other than the agreements set
forth on Schedule 2.1A (Other Excluded Assets) by which any of the Assets are
directly affected or are bound to which the Seller is a party the performance of
which involved for the 12-month period ending July 31, 1999, or will or is
likely to involve for the 12-month period ending July 31, 2000, in excess of
$50,000 in aggregate payments or obligations (the "Contracts") such that relate
to: (i) the employment of any person; (ii) collective bargaining with, or any
representation of any employees by, any labor union or association; (iii) the
acquisition of services, supplies, equipment or other personal property; (iv)
the purchase or sale of real property; (v) distribution, agency or construction;
(vi) lease of real or personal property as lessor or lessee or sublessor or
sublessee; (vii) lending or advancing of funds other than the extension of
credit to trade purchasers in the ordinary course of Seller's business
consistent with past business practice; (viii) borrowing of funds, receipt of
credit or other evidence of Indebtedness except for trade payables in amounts
and on terms consistent with past practice; (ix) the sale or purchase of
personal property (other than sales of Inventory in the ordinary course of
business consistent with past business practice) or services; and (x) any matter
or transaction not in the ordinary course of the business of Seller or that is
inconsistent with past business practice of Seller.
4.9 Contract Defaults. Except as set forth in Schedule 4.8, Seller has
not been declared to be, nor to its Knowledge is, in default in any respect
under any Contract, and such Contracts are legal, valid and binding obligations
of the respective parties thereto in accordance with their terms and have not
been amended; and no defenses, offsets or counterclaims thereto have been
asserted by any party thereto other than Seller nor has Seller expressly waived
any substantial rights thereunder.
4.10 Litigation. Set forth on Schedule 4.10 is a list of all Actions
pending against Seller or, to the Knowledge of Seller, threatened against
Seller, Seller's business or any property or rights of Seller, at law or in
equity or before or by any Governmental Authority. None of the Actions listed on
Schedule 4.10 either (i) results or would, if adversely determined, have a
Material Adverse Effect or (ii) affects or would, if adversely determined,
affect the right or ability of Seller to carry on its business substantially as
now conducted.
4.11 Inventory. The Inventory consists of current items of a quality
and quantity that are usable or marketable in the ordinary course of the
business of Seller. Inventory is valued at the lower of cost or market. To the
Knowledge of Seller and Funk, all of the Inventory is authentic for what it
purports to be and none of the Inventory is counterfeit. Except as stated on
Schedule 4.11, none of the Inventory is obsolete, based on the expiration dates
on such products and in accordance with customary industry practices, and all of
the Inventory is located in the warehouse comprising a portion of the Leased
Real Property described in Schedule 4.3.
4.12 Financial Condition and Results of Operations. Seller has
previously furnished to Purchaser true, correct and complete copies of the
balance sheet of Seller as of December 31, 1998 and as of April 30, 1999 (the
latter being referred to herein as the "Most Recent Balance
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Sheet"), and the related statements of operations, shareholders' equity and cash
flows for the twelve and four months then ended, respectively, and will furnish
to Purchaser the Pre-Closing Balance Sheet (collectively, the "Financial
Statements"). The Financial Statements (i) are accurate and in accordance with
the books and records and accounting methods of Seller and (ii) constitute true,
full and complete disclosure of the financial position and results of operations
of Seller as of the dates and for the periods indicated in accordance with CAP.
Except as may be set forth on the Financial Statements or disclosed in the
Schedules hereto, there are no liabilities, contingent or otherwise, by which
Seller or any of the Assets or the Business may be bound or affected other than
those incurred in the ordinary course of business consistent with past practice.
Seller has previously permitted Purchaser full access to papers pertaining to
the Financial Statements, including those work papers in the possession of or
prepared by ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇, Ltd.
4.13 Employee Benefits. Each employee benefit plan within the meaning
of Section 3(3) of ERISA, maintained or contributed to by Seller or any of its
Group Members (as defined below) (collectively, the "Plans") is listed on
Schedule 4.13, is in substantial compliance with applicable law and has been
administered and operated in all material respects in accordance with its terms
and applicable law, and any liabilities thereunder have been properly reflected
in the Financial Statements. For purposes of this Agreement, "Group Member"
shall mean any member of any "affiliated service group" as defined in Section
414(m) of the Code that includes Seller, any member of any "controlled group of
corporations" as defined in Section 1563 of the Code that includes Seller, or
any member of any group of "trades or businesses under common control" as
defined by Section 414(c) of the Code that includes Seller. Neither Seller nor
any of its Group Members has incurred, and as of the Closing Date will not
incur, any liability with respect to any benefit plan which creates a lien upon,
or can be collected from, the Assets being purchased under this Agreement, nor
which may impose, directly or indirectly, any obligation or liability on
Purchaser, as a successor employer or otherwise. It is expressly understood and
agreed that Purchaser is not assuming any of the benefit plans and that Seller
shall retain all liabilities (other than Assumed Liabilities) with respect to
the benefit plans.
4.14 Employees; Employee Relations.
(a) Schedule 4.14 sets forth (i) the name and current annual
salary (or rate of pay) and other compensation (including, without limitation,
normal bonus, profit-sharing and other compensation) now payable by Seller to
each employee whose current total annual compensation or estimated compensation
is $50,000 or more, (ii) any increase to become effective after the date of this
Agreement in the total compensation or rate of total compensation payable by
Seller to each such person other than any increase made prior to the Closing
Date of no more than 6% in accordance with Seller's past practices, (iii) any
increase to become payable after the date of this Agreement by Seller to
employees other than those specified in clause (i) of this Section 4.14(a), (iv)
all presently outstanding loans and advances (other than routine travel advances
to be repaid or formally accounted for within sixty 60 days) made by Seller to,
or made to Seller by, any director, officer or employee, (v) all other
transactions between Seller and any director, officer or employee of Seller
since January 1, 1999, and (vi) all accrued but unpaid
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vacation or other pay owing to any officer or employee which is not reflected in
the Pre-Closing Balance Sheet or incurred in the ordinary course of business
thereafter consisted with past practices.
(b) Except as disclosed on Schedule 4.14, Seller is not a
party to, or bound by, the terms of any collective bargaining agreement, and
Seller has not experienced any material labor disputes during the last five
years. Except as set forth on Schedule 4.14, there are no labor disputes
existing, or to the best knowledge of Seller, threatened involving strikes, work
stoppages, slowdowns, picketing, or any other interference with work or
production, or any other concerted action by employees. No charges or
proceedings before the National Labor Relations Board, or similar agency, exist,
or to the best Knowledge of Seller, are threatened. Except as disclosed on
Schedule 4.14, Seller is not a party to any written employment contract with any
employee.
(c) No Actions have been commenced nor to the Seller's
Knowledge are threatened against Seller by any employee of Seller under any
federal, state or local laws in respect of the employment relationship of such
employee including, but not limited to, such under: (i) anti-discrimination
statutes such as the Americans with Disabilities Act and Title VII of the Civil
Rights Act of 1964, as amended (or similar state or local laws prohibiting
discrimination because of race, sex, religion, national origin, age and the
like); (ii) the Fair Labor Standards Act or other federal, state or local laws
regulating hours of work, wages, overtime and other working conditions; (iii)
requirements imposed by federal, state or local governmental contracts such as
those imposed by Executive Order 11246; (iv) state laws with respect to tortious
employment conduct, such as slander, harassment, false light, invasion of
privacy, negligent hiring or retention, intentional infliction of emotional
distress, assault and battery, or loss of consortium; or (v) the Occupational
Safety and Health Act, as amended, as well as any similar state laws, or other
regulations respecting safety in the workplace; and to the Knowledge of Seller,
no proceedings, charges, or complaints are threatened under any such laws or
regulations and no facts or circumstances exist that would give rise to any such
liabilities. Seller is not subject to any consent decree, order or judgment
imposing any continuing obligations on Seller in respect to its employment
practices. Notwithstanding anything to the contrary in this Agreement, Purchaser
is not assuming any of the liabilities or potential liabilities described in
this Section 4.14(c) as Assumed Liabilities (whether known or unknown, or
whether material or immaterial) and Seller shall retain all of such liabilities
and potential liabilities.
(d) Since December 31, 1995 Seller has not incurred any
liability or obligation under the Worker Adjustment and Retraining Notification
Act or similar state laws. Seller has not laid off more than 10% of its
employees at any single site of employment in any 90-day period during the
12-month period ending June 30, 1999.
4.15 Consents. Except as set forth in Schedule 4.15 no consent,
approval, authorization or order of any court, Governmental Authority or any
other person or under any Contract is required to permit Seller to consummate
the transactions contemplated by this Agreement.
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4.16 Insurance. Set forth on Schedule 4.16 is a summary description of
all policies of fire, casualty, liability and other forms of insurance and all
fidelity bonds held by Seller. Seller has provided Purchaser with true and
complete copies of all such insurance policies. All premiums due on or prior to
the Closing Date on such insurance policies have been paid in full. Seller has
not received any notice of non-renewal or termination on any such insurance
policy from the insurance company issuing such policy and, except as set forth
on Schedule 4.16, is not subject to any dispute regarding the payment of
proceeds under any such policy or coverage thereunder.
4.17 Taxes. Seller has duly filed all Income Tax and all other Tax
returns required to be filed by it and such returns are true, correct and
complete in all respects. Seller has paid all Taxes which have become due or
have been assessed against it or the Assets and all Taxes which any taxing
authority has proposed or asserted to be owing, except for Taxes which Seller is
contesting in good faith and as to which it has provided adequate reserves on
its Pre-Closing Balance Sheet. All Tax liabilities to which the properties of
Seller may have been subjected have been discharged, except for Taxes assessed
but not yet payable. There are no Tax claims presently being asserted against
Seller or the Assets and, to Seller's Knowledge, there is no basis for any such
claim. Seller has not granted any extension to any taxing authority of the
limitation period during which any Tax liability may be asserted thereby. No Tax
shall be assumed by the Purchaser as part of the Assumed Liabilities other than
Taxes (excluding Federal and state personal income taxes, it being understood
that income taxes imposed by the State of California in respect of the Seller's
operations are not personal income taxes) set forth in the Pre-Closing Balance
Sheet and those accrued in the ordinary course of business through the Closing
Date.
4.18 Environmental Laws and Regulations.
(a) (i) To the Knowledge of Seller and Funk, the
operations of the Subject Property (as defined below) and any use, storage,
treatment, disposal or transportation of Hazardous Materials which has occurred
in or on the Subject Property prior to the date of this Agreement have been in
compliance with Environmental Law; (ii) to the Knowledge of Seller and Funk, no
release, leak, discharge, spill, disposal or emission of Hazardous Materials has
occurred in, on or under the Subject Property in a quantity or manner which
violates or requires further investigation or Remedial Action under
Environmental Law; (iii) to the Knowledge of Seller and Funk, the Subject
Property is free of Hazardous Materials in violation of Environmental Law as of
the date of this Agreement; (iv) there is no pending or, to Seller's or Funk's
Knowledge, threatened litigation or administrative investigation or proceeding
concerning the Subject Property involving Hazardous Materials or Environmental
Laws; (v) to the Knowledge of Seller and Funk, there are no above-ground or
underground storage tank systems located at the Subject Property; (vi) except as
set forth on Schedule 4.18, Seller has never owned, operated or leased any real
property other than the Subject Property; (vii) to the Knowledge of Seller and
Funk, Seller's transportation to or disposal at any off-site location of any
Hazardous Materials from property now or formerly owned, operated or leased by
Seller at the time of Seller's ownership, operation or lease thereof was
conducted in full compliance with applicable Environmental Permits; and (ix) to
the Knowledge of Seller and Funk, none of the operations of ITC has caused, or
could
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reasonably be expected to cause, any liability to Seller under any Environmental
Permits or Environmental Laws.
(b) For purposes of this Section 4.18, "Subject Property"
means all real property comprising a portion of the Assets and any properties
listed on Schedules 4.3 and 4.18.
4.19 Absence of Certain Changes or Events. Since April 30, 1999, Seller
has not (i) suffered any extraordinary losses or expressly waived any rights of
substantial value; (ii) amended its Articles of Incorporation or Bylaws; (iii)
except as set forth in Schedule 4.19, made any material change in its mode of
management or any change in its method of operation or method of accounting;
(iv) except as set forth in Schedule 4.19, made or become obligated to make any
capital expenditures other than such expenditures or commitments not exceeding
$20,000 individually or $40,000 in the aggregate; (v) suffered any event or
circumstance which would reasonably be expected to have a Material Adverse
Effect; (vi) entered into any transaction, except in the ordinary course of its
business consistent with past practice; (vii) received any notice of any claim
asserted against it by any Governmental Authority which would reasonably be
expected to have a Material Adverse Effect; or (viii) incurred or agreed to
incur any material obligation outside the ordinary course of business that has
not been disclosed in the Schedules.
4.20 Accounts Receivable; Evidences of Indebtedness. All Receivables
reflected in the Pre-Closing Balance Sheet or acquired since that date are
legal, valid and binding obligations of the obligors and Seller has no Knowledge
of any fact impairing the collectability of such Receivables in accordance with
their terms, except as set forth in Schedule 4.20. Except as set forth on
Schedule 4.20, the reserves for doubtful receivables and uncollectible accounts
reflected in the Pre-Closing Balance Sheet were established in accordance with
GAAP and are sufficient to provide for any losses which may arise in connection
with the collection of such Receivables. Since June 30, 1999, Seller has not (i)
written off, canceled, committed or become obligated to cancel or write off any
Receivables; (ii) disposed of or transferred any Receivables except through the
collection thereof in accordance with their terms; or (iii) acquired or
permitted to be created any Receivables, except in each instance in the ordinary
course of its business consistent with past practice.
4.21 Customers. Schedule 4.21 sets forth the names and addresses of all
the customers of the Business which ordered and have been shipped goods or
merchandise with an aggregate purchase price of $100,000 or more during the
period commencing on January 1, 1999 and ended July 31, 1999 and the amount for
which each such customer was invoiced during such period. Except as disclosed in
Schedule 4.21, Seller has not received any written notice that any customer set
forth on Schedule 4.21 has ceased, or will cease, to use the products,
equipment, goods or services of Seller, or has substantially reduced, or will
substantially reduce, the use of such products, equipment, goods or services
following the Closing Date. Also set forth on Schedule 4.21 are the names and
addresses of each Person holding goods or merchandise on consignment from Seller
and the cost to Seller of the goods or merchandise shipped to such Person.
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4.22 Suppliers. Schedule 4.22 sets forth the names and addresses of all
the suppliers from which Seller ordered materials, supplies, merchandise and
other goods for the Business and to which Seller paid, or is obligated to pay,
an aggregate purchase price of $200,000 or more during the period commencing
January 1, 1999 and ended on July 31, 1999 and the amount for which each such
supplier invoiced such member during such period. Except as disclosed in
Schedule 4.22, Seller has not received any written notice that any supplier set
forth on Schedule 4.22 will not sell materials, supplies, merchandise and other
goods to Seller at any time after the Closing Date on terms and conditions
similar to those imposed on current sales subject to general and customary price
increases.
4.23 Accounts, Lockboxes; Safe Deposit Boxes; Powers of Attorney.
Schedule 4.23 is a true and complete list of (i) the names of each bank, savings
and loan association, or other financial institution in which Seller has an
account, and the names of all persons authorized to draw thereon or have access
thereto, (ii) the location of all lockboxes and safe deposit boxes of Seller and
the names of all Persons authorized to draw thereon or have access thereto and
(iii) the names of all Persons, if any, holding powers of attorney from Seller
relating to the Business. On the Closing Date, Seller shall not have any such
account, lockbox or safe deposit box other than those listed in Schedule 4.23,
nor shall any additional Person have been authorized, from the date of this
Agreement, to draw thereon or have access thereto or to hold any such power of
attorney, without prior written notice to the Purchaser.
4.24 True, Correct and Complete Information. No representation or
warranty by Seller or Funk contained in this Agreement, in the schedules
attached hereto or in any certificate furnished by Seller or Funk to Purchaser
in connection herewith or pursuant hereto contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make any
statement herein or therein, in light of the circumstances in which it was made,
not misleading. There is no fact known to Seller or Funk that has specific
application to Seller, the Business or the Assets (other than general economic
or industry conditions) and that materially adversely affects the business,
prospects, financial condition, or results of operations of Seller, the Business
or the Assets, taken as a whole, which has not been set forth in this Agreement
or any Schedule hereto.
4.25 Broker's and Finder's Fees. Except for the fees of Banc One
Capital Markets, Inc. which fees are to be paid by Seller, neither Seller nor
Funk has made any agreement with any person, or taken any action which would
cause any person, to become entitled to an agent's, broker's or finder's fee or
commission in connection with the transactions contemplated by this Agreement.
4.26 Disclaimer of Other Representations and Warranties. Except as
expressly set forth in this Agreement and in the Additional Documents, neither
Seller nor Funk makes any representation or warranty, express or implied, at law
or in equity, in respect of any of its assets (including, without limitation,
the Assets), liabilities or operations, including, without limitation, with
respect to merchantability or fitness for any particular purpose, and any such
other
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representations or warranties are hereby expressly disclaimed. Parent and
Purchaser hereby acknowledge and agree that, except to the extent specifically
set forth in this Article IV, the Purchaser is purchasing the Assets on an
"as-is, where-is" basis.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Purchaser and Parent, jointly and severally, represent and warrant to
Seller and Funk as follows:
5.1 Organization and Authority. Each of Purchaser and Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
own or lease its properties and to carry on its business as it is presently
being operated and in the place where such properties are owned or leased and
such business is conducted. The execution, delivery and performance of this
Agreement by each of Purchaser and Parent, and all other agreements by and among
the parties, and the consummation by it of the transactions contemplated hereby
and thereby, have been duly authorized by all requisite corporate action and no
further action or approval is required to permit Purchaser and/or Parent to
consummate the transactions contemplated hereby and thereby. This Agreement
constitutes, and all other agreements by and among the parties, when executed
and delivered in accordance with the terms thereof, will constitute the legal,
valid and binding obligations of each of Purchaser and/or Parent, enforceable in
accordance with their terms. Each of Purchaser and Parent has full power,
authority and legal right to enter into this Agreement and all other agreements
by and among the parties and to consummate the transactions contemplated hereby
and thereby. The making and performance of this Agreement, and all other
agreements by and among the parties, and the consummation of the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof
will not (i) conflict with the Certificate of Incorporation or the Bylaws of
Purchaser or Parent, (ii) result in any breach or termination of, or constitute
a default under, or constitute an event which with notice or lapse of time, or
both, would become a default under, or result in the creation of any Encumbrance
upon any asset of Purchaser or Parent under, or create any rights of
termination, cancellation or acceleration in any person under, any contract,
lease, arrangement or commitment, or violate any order, writ, injunction or
decree, to which Purchaser or Parent is a party or by which Purchaser or Parent
or their respective assets, businesses or operations may be bound or affected or
under which Purchaser or Parent or their respective assets, businesses or
operations receive benefits, (iii) result in the loss or adverse modification of
any material license, franchise, permit or other authorization granted to or
otherwise held by Purchaser or Parent that is material to the business or
financial condition of Purchaser or Parent (iv) result in the violation of any
provisions of law applicable to Purchaser or Parent, the violation of which
could have a material adverse effect upon the business, operations or assets of
Purchaser or Parent.
5.2 Consents. Except as set forth on Schedule 5.2, no consent,
approval, authorization or order of any court, Governmental Authority or any
other person is required in
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order to permit Purchaser or Parent to consummate the transactions contemplated
by this Agreement.
5.3 Litigation. There is no pending or, to the knowledge of Parent and
Purchaser, threatened Action before any Governmental Authority (i) in which it
is sought to restrain, prohibit, invalidate or obtain damages in respect of the
consummation of the purchase and sale of the Assets or the other transactions
contemplated hereby, (ii) which could, if adversely determined, result in any
material adverse change in the business, operations or assets or the condition,
financial or otherwise, or results of operations of Purchaser or Parent or
(iii) which could, if adversely determined, have a material adverse effect on
the right or ability of Purchaser or Parent to carry on its business
substantially as now conducted.
5.4 Broker's and Finder's Fees. Neither Purchaser nor Parent has made
any agreement with any person, or taken any action which would cause any person,
to become entitled to an agent's, broker's or finder's fee or commission in
connection with the transactions contemplated by this Agreement.
5.5 Purchase for Resale. Purchaser's purchase of Inventory is for
wholesale, resale or components to be resold in the normal course of Purchaser's
Business.
5.6 Disclaimer of Other Representations and Warranties. Except as
expressly set forth in this Agreement and in the Additional Documents, neither
Parent nor Purchaser makes any representation or warranty, express or implied,
at law or in equity, in respect of any of its assets, liabilities or operations.
ARTICLE VI
COVENANTS OF SELLER AND FUNK
Each of Seller and Funk covenants and agrees with Purchaser as follows:
6.1 Affirmative Covenants. Prior to the Closing Date, Seller will
operate its business only in the usual, regular and ordinary course of business
consistent with past practices, and will use its best efforts to: (i) preserve
intact its business organization and the Assets; (ii) maintain its properties,
machinery and equipment in good operating condition and repair, ordinary wear
and tear excepted; (iii) continue all existing policies of insurance (or
comparable insurance) in full force and effect up to and including the Closing
Date (and will not cancel any such insurance or take (or fail to take) any
action which would enable the insurers under such policies to avoid liability
for claims arising out of any occurrence prior to the Closing Date without the
prior written consent of Purchaser); (iv) use its best efforts to keep available
the services of its present officers, employees and agents; (v) use its best
efforts to preserve its present relationships, suppliers and customers; and
(vi) except as set forth in Schedule 4.19, maintain its books, accounts and
records in the usual, regular and ordinary manner on a basis consistently
applied. Seller or Funk will notify Purchaser in writing within five Business
Days of learning of any facts,
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events or circumstance which is reasonably likely to have a Material Adverse
Effect.
6.2 Negative Covenants. Prior to the Closing Date, Seller will operate
its business only in the ordinary course of business consistent with past
practices, and will not, without the prior written consent of Purchaser:
(i) make any increase in the compensation payable or to become payable by it to
any employee or contribute or make any commitment to or representation that it
will contribute any amounts to any bonus or other employee benefit plan for
employees of Seller, except as required by law or by the terms of any such plan
or in the ordinary course of business consistent with past practice; (ii) make
any amendment to its Articles of Incorporation, Bylaws or other organizational
documents, except as required or permitted herein; (iii) make any material
change in the character of its business; (iv) incur any obligation or liability
(fixed or contingent) except in the ordinary course of business consistent with
past practices; (v) discharge or satisfy any Encumbrance or pay any obligation
or liability (fixed or contingent) other than in the ordinary course of business
consistent of past practice; (vi) mortgage, pledge, transfer or otherwise
dispose of or subject to any Encumbrance any of the Assets, except in the
ordinary course of business consistent with past practice; (vii) acquire any
assets or properties, except in the ordinary course of business consistent with
past practices; (viii) cancel or compromise any Indebtedness, except in the
ordinary course of business consistent with past practice; (ix) expressly waive
or release any rights of material value; (x) transfer, grant or terminate any
contract, lease, arrangement or commitment rights under any concessions, leases,
licenses, agreements, or Intellectual Property; (xi) modify or change or
terminate any existing contract, lease, arrangement or commitment required to be
listed on Schedule 4.8; (xii) undertake any borrowing of money other than under
the existing Bank Debt; (xiii) make any loans or extensions of credit, except in
the ordinary course of business consistent with past practices; (xiv) except as
set forth in Schedule 4.19, make or become obligated to make any capital
expenditures or enter into commitments therefor exceeding $20,000 individually
or $40,000 in the aggregate; (xv) sell, discount or otherwise dispose of any
Receivables; and (xvi) make or become obligated to make any distributions to
Funk, except that Seller may, to the extent that the Net Worth of Seller exceeds
$13,000,000, prior to the Closing Date, distribute to Funk liquid assets of the
Business equal to such excess or borrow such excess under the Bank Debt and
distribute the proceeds to Funk.
6.3 Access to Properties and Records. Seller will keep Purchaser
advised of all material developments relevant to the consummation of the
transactions contemplated hereby and will cooperate fully in (i) permitting
Purchaser and its representatives to make a full investigation of the business,
properties, financial condition and investments of Seller. Seller will afford to
Purchaser and its representatives full access during normal business hours to
the offices, buildings, real properties, machinery and equipment, inventory and
supplies, records, files, books of account, tax returns, agreements and
commitments, corporate record books and stock books and personnel of Seller,
that Purchaser shall reasonably determine to be necessary for it to make a full
investigation of the Business. Seller will furnish to Purchaser all such further
information concerning the business and affairs of Seller as Purchaser may
reasonably request. Purchaser and Parent shall use their best efforts to conduct
such investigation in a manner to minimize disruption to Seller's Business. In
the event of the termination of this Agreement, Purchaser and Parent will
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forthwith deliver to Seller all documents, work papers and other material
(including copies thereof) obtained by Purchaser or Parent or on their behalf
from Seller as a result of this Agreement or in connection herewith, whether so
obtained before or after the execution hereof and, if the transactions
contemplated hereby are not consummated, Purchaser and Parent will hold such
information in confidence pursuant to that certain confidentiality agreement
between the parties dated on or about February 26, 1999.
6.4 Notice of Developments. Seller will update by amendment or
supplement each of the Schedules referred to herein promptly upon any material
change in the information set forth in such Schedules, and Seller hereby
represents and warrants that such Schedules and such written disclosures, as so
amended or supplemented, shall be true, correct and complete as of the date or
dates thereof. Unless the Purchaser or Parent has the right to terminate this
Agreement pursuant to Section 13.1 by reason of such updated disclosure and
exercises that right within the period of 10 Business Days referred to in
Section 13.1, the amendment or supplement pursuant to this Section 6.3 will be
deemed to have amended the Schedule, to have qualified the representations and
warranties contained in Article IV, and to have cured any misrepresentation or
breach of warranty which otherwise might have existed hereunder by reason of the
development.
6.5 Employees of Seller. Seller shall pay all salaries, wages and
bonuses, and all amounts due in lieu of holiday, sick or vacation pay, to all
employees of Seller employed in the Business in the ordinary course of its
business until the Closing, and effective on the Closing Date shall terminate
all of such employees.
6.6 Approvals of Third Parties. As soon as practicable after the date
hereof, each of Seller and Funk will use its or his best efforts to secure all
necessary consents, approvals and clearances of third parties that shall be
required to consummate the transactions contemplated hereby including, without
limitation, approvals required under the HSR Act, and will otherwise use its
best efforts to cause the consummation of such transactions in accordance with
the terms and conditions of this Agreement; provided, that the parties have
agreed that Seller need not obtain Excluded Consents and that neither Seller nor
Funk shall have any liability to Purchaser or Parent in connection with not
obtaining such Excluded Consents.
6.7 Notices. Seller will timely give all notices required to be given
relating to the transactions contemplated hereby, including without limitation,
(i) those required to be given to employees, (ii) any notices required to be
given to all creditors or claimants against Seller and (iii) any notices
required or requested to be given pursuant to applicable bulk sales laws or
similar laws.
6.8 Access to Books and Records. Seller agrees to provide Purchaser,
its accountants, counsel and other representatives, during normal business hours
and upon reasonable notice, for a period of four years after the Closing Date,
access to the books, records, income tax returns, contracts and other underlying
data and documentation of Seller properly retained by Seller hereunder relating
to the period prior to the Closing Date and to make available to Purchaser
personnel of Seller in Purchaser's review thereof for the purpose of enabling
them to determine
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and calculate any tax liabilities in connection with the Assets. Seller agrees
that, for such four-year period, it will preserve and keep intact all such books
and records.
6.9 No Solicitation of Offers. Each of Seller and Funk covenants and
agrees that it or he will not solicit, entertain, encourage or assist any
acquisition proposal with respect to the purchase or exchange of the Assets or
any portion thereof, or with respect to any proposed merger, consolidation, sale
of securities or other acquisition involving Seller (an "Acquisition Proposal"),
by or with any person other than Purchaser until September 30, 1999. If Seller
or Funk receives such an Acquisition Proposal Seller or Funk shall notify
Purchaser within three Business Days of the substance of any inquiry or proposal
received thereby.
6.10 Receivables Guaranteed. Seller and Funk, jointly and severally,
warrant to Purchaser that all accounts receivable of Seller reflected on the
Closing Balance Sheet, net of any reserves for bad debt reflected on the Closing
Balance Sheet and net of prompt payment discounts taken in the ordinary course
of business in accordance with standard invoice terms, all as determined in
accordance with CAP (the "Accounts Receivable"), will be collected by Purchaser
no later than 120 days following the Closing Date (the "Receivable Writeback
Date"). For greater certainty, the parties acknowledge and agree that the
Accounts Receivable reflected on the Closing Balance Sheet and warranted
hereunder are net of the unapplied cash and credits as of the Closing Date. For
purposes of this Section 6.10, Purchaser and Seller shall use their good faith
best efforts to contact the payor of any amounts received by Purchaser following
the Closing Date which are not designated as to payment of a particular invoice,
to determine which invoice or Account Receivable to credit with such payment. If
Purchaser shall fail to collect such amount of the Accounts Receivables by the
Receivable Writeback Date, then Seller shall acquire the uncollected Accounts
Receivable from Purchaser in an amount equal to such excess (the "Receivable
Writeback Amount") in consideration of the Escrow Agent delivering to the
Purchaser in accordance with the terms of the Escrow Agreement cash equal to the
Receivable Writeback Amount. Proceeds from Accounts Receivable collected after
the Receivable Writeback Date and for which Purchaser has received payment under
this Section 6.10 shall be promptly and in any event within five Business Days
of collection delivered by Purchaser to Seller. Proceeds from any Accounts
Receivable written off by Seller in the ordinary course of business consistent
with CAP prior to the Closing Balance Sheet Date which are collected after the
Closing Balance Sheet Date shall reduce any Receivable Writeback Amount.
6.11 Prepaid Revenue. Seller agrees to remit to Purchaser payments
received by Seller on or after the Closing Date, within five Business Days for
any revenue received by Seller for goods or services rendered with respect to
any period following the Effective Date.
6.12 Release of Financing Statements. Seller shall obtain and file in
the appropriate jurisdictions Termination Statements or payoff letters
reasonably acceptable to Purchaser properly executed by any parties holding a
security interest or other Encumbrance which will be paid by Seller at the
Closing with respect to the Assets as identified by lien searches provided by
Seller and acceptable to Purchaser with respect to Seller and the Assets.
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6.13 Release of Seller Under Guaranty. Funk shall have obtained the
full release and discharge of Seller under that certain Guaranty dated April 10,
1998, and that certain Security Agreement -- Guarantor dated April 10, 1998
(collectively, the "Guaranty Documents"), from Seller in favor of American
National Bank and Trust Company of Chicago, on or prior to the Closing Date.
ARTICLE VII
COVENANTS OF PURCHASER AND PARENT
Each of the Purchaser and Parent covenants and agrees with Seller and Funk as
follows:
7.1 Furnishing of Information. Purchaser will keep Seller advised of
all material developments relevant to the consummation of the transactions
contemplated hereby and will cooperate fully with Seller in bringing about the
consummation of the transactions contemplated hereby. Purchaser will update by
amendment or supplement each of the Schedules referred to herein from Purchaser
promptly upon any changes in the information set forth in such Schedule, and
Purchaser hereby represents and warrants that such Schedules, as so amended or
supplemented, shall be true, correct and complete as of the date or dates
thereof. In the event of the termination of this Agreement, Seller will deliver
to Purchaser all documents, work papers and other material (including copies
thereof) obtained by Seller or on its behalf from Purchaser as a result of this
Agreement or in connection herewith, whether so obtained before or after the
execution hereof and, if the transactions contemplated hereby are not
consummated, Seller will hold such information in confidence pursuant to that
certain confidentiality agreement between the parties dated on or about February
26, 1999.
7.2 Approvals of Third Parties. As soon as practicable after the date
hereof, Purchaser and Parent will use their best efforts to secure all necessary
consents, approvals and clearances of third parties that shall be required to
consummate the transactions contemplated hereby including, without limitation,
approvals required under the HSR Act, and will otherwise use their best efforts
to cause the consummation of such transactions in accordance with the terms and
conditions of this Agreement.
7.3 Access to Books and Records. Purchaser agrees to provide Seller,
its accountants, counsel and other representatives during normal business hours
and upon reasonable notice, for a period of four years after the Closing Date,
access to the books, records, tax returns, contracts and other underlying data
and documentation of Purchaser relating to the period prior to the Closing Date
and to make available to Seller personnel of Purchaser in Seller's review
thereof for the purpose of enabling them to review any tax liabilities for such
period. Purchaser agrees that, for such four-year period, it will preserve and
keep intact all such books and records.
7.4 Discharge of Assumed Liabilities. Purchaser shall pay, perform and
discharge, according to their terms, the Assumed Liabilities.
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7.5 Tax Notification. Purchaser and Seller shall jointly determine
whether notification of the Division of Taxation or its equivalent in the states
in which Seller conducts its Business (which Seller represents and warrants to
be the States of Illinois, California, Georgia or Florida) is required prior to
the consummation of the transactions contemplated hereby. If notification is
required, Purchaser shall notify the Director (a "Director") of the applicable
Divisions of Taxation (or its equivalent) of the transactions contemplated
hereby within the time periods required by such statutes and submit such notices
and/or documentation as may be required. Seller shall provide Purchaser with all
information required to complete such notice(s) and documentation. If a Director
notifies Purchaser of any taxes due and owing to such state from Seller or that
an amount must be escrowed, then such amount shall be designated as being held
in escrow under the Escrow Agreement from the amount set forth in Section
3.2(b), to be disbursed as directed by the Director. Notwithstanding the
foregoing, any such taxes which a Director determines are due and owing on or
prior to the Closing Balance Sheet Date shall be contributed (i) by Purchaser to
the extent such amount was accrued on the Pre-Closing Balance Sheet or incurred
in the ordinary course of business consistent with past practices thereafter
through the Closing Date and (ii) by Seller to the extent such amount exceeds
any such accrual or amount. If Purchaser is required to pay any taxes which
Seller should have paid (as being in excess of any accruals on the Pre-Closing
Balance Sheet or incurred in the ordinary course of business consistent with
past practices thereafter through the Closing), Seller and Funk, jointly and
severally, shall replenish the escrowed amounts under Section 3.2(b) by the
amount so paid by Purchaser.
7.6 Employees and Agents of Seller. Effective as of the Closing Date,
Seller will terminate all employees of the Seller and Purchaser shall offer all
employees of Seller, except for those listed in Schedule 7.6, employment by
Purchaser at their present locations as of the Closing Date with wages, terms
and conditions of employment benefits or benefit plans substantially similar to
such that currently exist for Seller's employees and which have been disclosed
in Schedule 7.6 or in the other Schedules hereto and with credit for all
vacation pay accrued as of the Closing Date and set forth in the Closing Balance
Sheet. If any employee who accepts employment with Purchaser demands payment of
vacation pay accrued as of the Closing Date and set forth in the Closing Balance
Sheet, Purchaser shall pay such accrued vacation pay. The parties agree that the
persons so designated on Schedule 7.6 shall be offered one-year employment
contracts with Purchaser with wages, terms and conditions of employment benefits
or benefit plans substantially similar to such as currently exist for such
employees. Notwithstanding the foregoing, no such employee shall have any third
party beneficiary rights arising as a result of this Section 7.6 or any
contractual rights to employment with Purchaser as a result hereof. All offers
of employment shall be contingent upon employment commencing with Purchaser only
following the Closing Date. The parties agree not to discourage any individuals
who are offered employment with Purchaser from accepting such employment with
Purchaser.
7.7 Bank Debt. Purchaser shall pay and discharge the Bank Debt as of
the Closing Date.
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ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF PURCHASER AND PARENT
The obligations of Purchaser and Parent to cause the purchase of the
Assets and the other transactions contemplated hereby to occur at Closing shall
be subject to the satisfaction on or prior to the Closing Date of all of the
following conditions, except such conditions as Purchaser and Parent may waive
in writing:
8.1 Representations and Warranties of Seller and Funk. All of the
representations and warranties of Seller and Funk contained in this Agreement
and in any Schedule or other disclosure in writing from Seller or Funk shall
have been true and correct when made, and shall be true and correct on and as of
the Closing Date with the same force and effect as though such representations
and warranties had been made on and as of the Closing Date.
8.2 Covenants of Seller and Funk. All of the covenants and agreements
herein on the part of Seller and Funk to be complied with or performed on or
before the Closing Date shall have been fully complied with and performed.
8.3 Seller's Certificate. There shall be delivered to Purchaser a
certificate dated as of the Closing date and signed by the President or a Vice
President of Seller and by Funk to the effect set forth in Sections 8.1 and 8.2,
which certificate shall have the effect of a representation and warranty made by
each of Seller and Funk on and as of the Closing Date.
8.4 Noncompetition and Employment Agreements. Seller and Funk shall
have executed and delivered to Purchaser the Noncompetition Agreement in
substantially the form attached hereto as Exhibit ▇. ▇▇▇▇ shall have executed
and delivered to Purchaser the Employment Agreement in substantially the form
attached hereto as Exhibit E.
8.5 Escrow Agreement. Seller shall have executed and delivered to
Purchaser the Escrow Agreement.
8.6 No Casualty Losses. The Assets shall not have suffered any
destruction or damage by fire, explosion or other casualty or any taking by
eminent domain which has materially impaired the operation of the Assets or
otherwise had a Material Adverse Effect.
8.7 Certificates of Authorities. Seller shall have furnished to
Purchaser (i) certificates of the Secretary of State of Illinois and the
Franchise Taxing Authority of Illinois, each dated as of a date not more than
twenty (20) days prior to the Closing Date, attesting to the organization,
existence and good standing of Seller, (ii) a copy, certified by the Secretary
of State of Illinois as of a date not more than twenty (20) days prior to the
Closing Date, of Seller's Articles of Incorporation and all amendments thereto,
(iii) a copy, certified by the Secretary of Seller, of the Bylaws of Seller, as
amended and in effect at the Closing Date, (iv) a copy, certified by an
authorized officer of Seller, of resolutions duly adopted by the Board of
Directors of Seller duly authorizing the transactions contemplated in this
Agreement and (v) evidence satisfactory to Purchaser that all Taxes relating to
the transactions contemplated by the Agreement have been
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paid in full, or adequate provision has been made therefor, including, without
limitation, any and all Taxes described in Section 7.5.
8.8 Litigation. At the Closing Date, there shall not be pending or
threatened any litigation in any court or any proceeding before any Governmental
Authority, (i) in which it is sought to restrain, invalidate, set aside or
obtain damages in respect of the consummation of the purchase and sale of the
Assets or the other transactions contemplated hereby, (ii) that could, if
adversely determined, result in any Material Adverse Effect, or (iii) as a
result of which, in the reasonable judgment of Purchaser, Purchaser would be
deprived of the material benefits of its ownership of the Assets.
8.9 Satisfactory to Purchaser's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto and all other related matters shall have been satisfactory to ▇▇▇▇▇ &
Samson, P.A., counsel for Purchaser.
8.10 Opinion of Seller's Counsel. Purchaser and Parent shall have
received an opinion of Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, counsel for Seller and
Funk, dated as of the Closing Date, reasonably acceptable to Purchaser and its
counsel.
8.11 No Material Adverse Effect. There shall not have occurred any
Material Adverse Effect. Purchaser shall receive a certificate from Seller,
dated as of the Closing Date and in form and substance satisfactory to
Purchaser, as to the fulfillment of the conditions set forth in this Section
8.11.
8.12 Consents. Seller shall have obtained all orders, approvals,
estoppel certificates or consents of third parties, including, without
limitation, any orders, approvals, certificates or consents deemed necessary by
counsel to Purchaser which shall be required to consummate the transactions
contemplated hereby, including, without limitation, on or promptly following the
Closing, consents to the assignment of the Assumed Liabilities listed on
Schedule 2.3(d) (other than any Excluded Consents) and any waiting period (and
any extensions thereof) under the HSR Act shall have expired or shall have been
terminated.
8.13 Satisfactory Pre-Closing Balance Sheet. Purchaser shall have been
satisfied with the results of Seller's operations and financial condition as
reflected in the Pre-Closing Balance Sheet.
8.14 Bank Debt and Indebtedness to Vendors. Purchaser shall have
received a certificate or written statement of a duly authorized representative
of the holder of the Bank Debt, the holder of the indebtedness guaranteed by the
Seller under the Guaranty Documents and each other vendor having a lien on any
of the Assets as security for a debt owed by Seller to such vendor (each, a
"Vendor Debt") (other than Vendor Debt being assumed), dated prior to the
Closing Date, setting forth (i) the amount necessary to repay the Bank Debt or
Vendor Debt in full (including all principal, interest, fees and other charges)
together with a per diem amount for each day thereafter, (ii) the address (or
wire transfer account) to which such payment should be
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delivered and (iii) the acknowledgment of such holder that upon its receipt (and
collection) of such amount, the Bank Debt or Vendor Debt, as applicable, will be
satisfied and paid in full and all collateral and security given therefor will
be released and such holder will execute and deliver such further termination
statements and similar releases as Purchaser may reasonably request to evidence
the foregoing.
8.15 Guaranty Documents. Funk shall have obtained the full release and
discharge of Seller under the Guaranty Documents.
8.16 Due Diligence. Purchaser shall have completed to its satisfaction
(in its sole and absolute discretion) its due diligence review and analysis of
the Business of Seller.
8.17 Pre-Closing Balance Sheet. Purchaser shall have agreed with the
Pre-Closing Balance Sheet.
8.18 Further Assurances. Each of Seller and Funk shall take all such
further action as may be reasonably requested by Purchaser to effectuate the
consummation of the transactions contemplated by this Agreement. If Purchaser
shall reasonably determine that any further conveyance, assignment or other
document or any further action is necessary to vest in it full title to the
Assets, Seller and Funk shall cause the appropriate officers to execute and
deliver all such instruments and take all such action as Purchaser may
reasonably determine to be necessary.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER AND FUNK
The obligations of Seller and Funk to cause the sale of the Assets and
the other transactions contemplated hereby to occur at Closing shall be subject
to the satisfaction on or prior to the Closing Date of all of the following
conditions, except such conditions as Seller and Funk may waive in writing.
9.1 Representations and Warranties of Purchaser and Parent. All of the
representations and warranties of Purchaser and Parent contained in this
Agreement and in any Schedule or other disclosure in writing from Purchaser or
Parent shall have been true and correct when made, and shall be true and correct
on and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
9.2 Covenants of Purchaser and Parent. All of the covenants and
agreements herein on the part of the Purchaser and Parent to be complied with or
performed on or before the Closing Date shall have been fully complied with and
performed.
9.3 Purchaser's/Parent's Certificate. There shall be delivered to
Seller and Funk a certificate dated as of the Closing Date and signed by the
President or a Vice President of
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Purchaser and Parent to the effect set forth in Sections 9.1 and 9.2, which
certificate shall have the effect of a representation and warranty made by
Purchaser and Parent on and as of the Closing Date.
9.4 Assumption Agreement. Purchaser shall have executed and delivered
to Seller and Funk the Assumption Agreement.
9.5 Noncompetition and Employment Agreements. Purchaser shall have
executed and delivered to Seller and Funk the Noncompetition Agreement.
Purchaser shall have executed and delivered to Funk the Employment Agreement.
9.6 Escrow Agreement. Purchaser shall have executed and delivered to
Seller the Escrow Agreement.
9.7 Certificates of Authorities. Purchaser and Parent shall have
furnished to Seller (i) a certificate of the Secretary of State of Delaware,
dated as of a date not more than 20 days prior to the Closing Date, attesting to
the organization, existence and good standing of Purchaser and Parent, and (ii)
a copy, certified by an authorized officer of Purchaser and Parent, of
resolutions duly adopted by the Board of Directors of each of Purchaser and
Parent duly authorizing the transactions contemplated in this Agreement.
9.8 Satisfactory to Seller's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto and all other related legal matters shall have been satisfactory to
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, counsel for Seller and Funk.
9.9 Opinion of Counsel to Parent and Purchaser. Seller shall have
received an opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇, P.A., counsel to Parent and Purchaser,
dated as of the Closing Date, reasonably satisfactory to Seller and its counsel.
9.10 Pre-Closing Balance Sheet. Seller shall have agreed with the
Pre-Closing Balance Sheet.
9.11 Bank Debt. Purchaser shall have paid and discharged the Bank Debt
as of the Closing Date.
9.12 Resale Certificate. Purchaser shall have executed and delivered a
resale certificate to Seller for the applicable jurisdictions.
ARTICLE X
DATE AND PLACE OF CLOSING
10.1 Date and Place of Closing. Subject to satisfaction or waiver of
the conditions to
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the obligations of the parties, the purchase and sale of the Assets pursuant to
this Agreement shall be consummated at a closing (the "Closing") to be held in
the offices of Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place as mutually agreed to by the
parties, at 10:00 a.m., Chicago time, on September 30, 1999, or such other date
as the parties may mutually agree upon (the "Closing Date").
10.2 Effective Date. Subject to the terms and conditions of this
Agreement, the Closing shall be deemed effective as of 12:01 a.m. on October 1,
1999 (the "Effective Date").
ARTICLE XI
CLOSING
11.1 Performance by Seller and Funk. At the Closing, concurrently with
performance by Purchaser and Parent of their respective obligations to be
performed at the Closing, Seller and Funk shall:
(a) Conveyances. Seller shall execute and deliver to
Purchaser, in form and substance acceptable to Purchaser (i) a ▇▇▇▇ of Sale and
Assignment in substantially the form attached hereto as Exhibit A conveying to
Purchaser all items of personally included among the Assets, assignments of each
of the contracts, leases, arrangements and commitments listed on Schedule 2.3(d)
and (iii) all other assignments, endorsements and instruments of transfer as
shall be necessary or appropriate to carry out the intent of this Agreement and
as shall be sufficient to vest in Purchaser title to all of the Assets and all
right, title and interest of Seller thereto. If requested by Purchaser, such
documents shall be in a form suitable for recording.
(b) Records. Seller shall deliver to Purchaser all documents,
agreements, reports, books, records and accounts pertaining specifically to the
Assets that are in Seller's possession.
(c) Certificates. Seller and Funk shall execute and deliver to
Purchaser the certificates referred to in Sections 8.3 and 8.13.
(d) Noncompetition Agreement, Employment Agreement and Escrow
Agreement. Seller and Funk shall execute and deliver to Purchaser and Parent, as
applicable, the Noncompetition Agreement referred to in Section 8.4, the
Employment Agreement referred to in Section 8.4 and the Escrow Agreement
referred to in Section 8.5.
(e) Certificates of Authorities. Seller shall deliver to
Purchaser the certificates of authorities referred to in Section 8.7.
(f) Opinion of Counsel to Seller and Funk. Seller and Funk
shall deliver to Purchaser and Parent the opinion of their counsel, dated the
Closing Date, as to the matters specified in Section 8.10.
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(g) Consents. Seller shall deliver to Purchaser the consents
and approvals required by Section 8.14.
(h) Other Actions. Each of Seller and Funk shall take all such
other steps as may be necessary or appropriate to put Purchaser in actual and
complete ownership and possession of the Assets.
11.2 Performance by Purchaser and Parent. At the Closing, concurrently
with the performance by Seller of its obligations to be performed at the
Closing, Purchaser and Parent, as applicable, shall:
(a) Purchase Price. Deliver to Seller the funds specified in
Section 4.3(a) and deliver the Payment Shares to the Escrow Agent.
(b) Assumption Agreement. Execute and deliver to Seller the
Assumption Agreement in substantially the form attached hereto as Exhibit B.
(c) Certificate. Execute and deliver the certificate referred
to in Section 9.3.
(d) Noncompetition Agreement, Employment Agreement and Escrow
Agreement. Execute and deliver to Seller and Funk the Noncompetition Agreement
referred to in Section 9.5, to Funk the Employment Agreement referred to in
Section 9.5 and to Seller the Escrow Agreement referred to in Section 9.6.
(e) Certificates of Authorities. Deliver to Seller the
certificates of authorities referred to in Section 9.7.
(f) Opinion of Counsel to Purchaser and Parent. Purchaser and
Parent shall deliver to Seller and Funk the opinion of their counsel, dated as
of the Closing Date, as to the matters specified in Section 9.9.
(g) Resale Certificate. Deliver to Seller the resale
certificates referred to in Section 9.12.
11.3 Other Instruments. In addition to the foregoing, Purchaser,
Parent, Seller and Funk agree as follows:
(a) Further Action by Seller and Funk. At any time and from
time to time, at or after the Closing, upon request of Purchaser, each of Seller
and Funk shall do, execute, acknowledge and deliver or shall cause to be done,
executed, acknowledged and delivered all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances as may reasonably be
required to evidence, vest in and confirm to Purchaser full and complete title
to, possession of, and the right to use and enjoy, the Assets.
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(b) Further Action by Purchaser and Parent. At any time and
from time to time, at or after the Closing, upon request of Seller or Funk, each
of Purchaser and Parent shall do, execute, acknowledge and deliver or shall
cause to be done, executed, acknowledged and delivered all such further acts and
assurances as may reasonably be required to better assure and confirm to Seller
and Funk the assumption by Purchaser of the obligations to render performance
that are to be assumed by Purchaser pursuant to this Agreement.
ARTICLE XII
SURVIVAL AND INDEMNIFICATION
12.1 Survival of Covenants, Agreements, Representations and Warranties.
(a) Covenants and Agreements. All covenants and agreements
made under this Agreement shall survive the Closing and shall continue in full
force and effect thereafter according to their terms for the applicable statute
of limitations or such other period as shall be provided in this Agreement.
(b) Representations and Warranties. All representations and
warranties contained herein shall survive the Closing and shall continue in full
force and effect thereafter for a period of two years and four months following
the Effective Date, except that (a) the representations and warranties contained
in Section 4.17 hereof shall survive until the earlier of (i) the expiration of
the applicable periods (including any extensions) of the respective statutes of
limitation applicable to the payment of the taxes to which such representations
and warranties relate without an assertion of a deficiency in respect thereof by
the applicable taxing authority or (ii) the completion of the final audit and
determinations by the applicable taxing authority and final disposition of any
deficiency resulting therefrom, (b) the representations and warranties contained
in Section 4.18 hereof shall survive for a period of five years following the
Closing, (c) the representations and warranties contained in Section 4.13 hereof
shall survive until the expiration of the applicable period of the statutes of
limitation applicable to ERISA matters, and (d) the representations and
warranties contained in Sections 4.1 and 4.2 (other than Section 4.2(b)-(d))
shall survive for the applicable statute of limitations. The right to
indemnification provided for herein based on a party's representations,
warranties, covenants, and obligations will not be affected by any investigation
conducted by any other party with respect to, or any knowledge acquired (or
capable of being acquired by any other party) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation, except as to matters set
forth in the Schedules.
(c) Claims Made Prior to Expiration. Notwithstanding the
foregoing survival periods set forth in this Section 12.1, the termination of a
survival period shall not affect the rights of an Indemnified Party in respect
of any claim made by such party with specificity, in good faith and in writing
to the Indemnifying Party in accordance with Sections 12.6 and 14.9 hereof prior
to the expiration of the applicable survival period.
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12.2 Purchaser's Losses. Each of Seller and Funk, jointly and
severally, but subject to the limitations of Section 12.5 hereof and provided
there is an applicable survival period pursuant to Section 12.1 hereof, agrees
to indemnify and hold harmless Purchaser, and its directors, officers,
employees, representatives, agents and attorneys from, against, for and in
respect of any and all damages (including, without limitation, amounts paid in
settlement with Seller's consent, which may not be unreasonably withheld),
penalties, fines, interest and monetary sanctions, losses, obligations,
liabilities, claims, deficiencies, costs and expenses, including, without
limitation, reasonable attorneys' fees and other costs and expenses incident to
any suit, action, investigation, claim or proceeding (hereinafter referred to
collectively as "Purchaser's Losses") suffered, sustained, incurred or required
to be paid by any of them by reason of (i) the failure by Seller to comply with
all applicable laws relating to bulk transfers including the provisions of the
Uniform Commercial Code of the States of Illinois, California, Georgia and
Florida; (ii) any representation or warranty made by Seller and Funk in or
pursuant to this Agreement being untrue or incorrect in any respect; (iii) any
failure by Seller or Funk to observe or perform its covenants and agreements set
forth in this Agreement; or (iv) any failure by Seller or Funk to satisfy and
discharge any other liability or obligation of Seller which is not an Assumed
Liability; provided, however, that "Purchaser's Losses" shall not include, and
neither Seller nor Funk shall be liable for, any Purchaser Losses resulting from
any misrepresentation or breach of warranty of which Parent or Purchaser has
actual knowledge, as evidenced solely by the Schedules hereto.
12.3 Employee Compensation and Benefits. Each of Seller and Funk,
jointly and severally, but subject to the limitations of Section 12.5 hereof and
provided there is an applicable survival period pursuant to Section 12.1 hereof,
agrees to indemnify and hold Purchaser, and its directors, officers, employees,
representatives, agents and attorneys harmless from and against any and all
claims made by employees of Seller for wages, salaries, bonuses, pension,
workmen's compensation, medical insurance, disability, vacation, severance, pay
in lieu of notice, sick benefits or other compensation or benefit arrangements
to the extent the same are based solely on employment service rendered to Seller
prior to the Closing Date or injury or sickness occurring prior to the Closing
Date and are not Assumed Liabilities (collectively, "Employee Claims").
12.4 Seller's Losses. Purchaser and Parent, jointly and severally, but
subject to the limitations of Section 12.5 hereof and provided there is an
applicable survival period pursuant to Section 12.1 hereof, agree to indemnify
hold harmless Seller and Seller's directors, officers, employees,
representatives, agents and attorneys and Funk and his representatives, agents
and attorneys from, against, for and in respect of any and all damages
(inclosing, without limitation, amounts paid in settlement with Purchaser's
consent, which may not be unreasonably withheld), penalties, fines, interest and
monetary sanctions, losses, obligations, liabilities, claims, deficiencies,
costs and expenses, including, without limitation, reasonable attorneys' fees
and other costs and expenses incident to any suit, action, investigation, claim
or proceeding (hereinafter referred to collectively as "Seller's Losses";
Seller's Losses or Purchaser's Losses are sometimes referred to herein as
"Losses") suffered, sustained, incurred or required to be paid by any of them by
reason of (i) any representation or warranty made by Purchaser in or pursuant to
this Agreement being
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untrue or incorrect in any respect; (ii) any liability arising from or with
respect to the Assets after the Closing Date; (iii) any failure by Purchaser or
Parent to observe or perform its covenants and agreements set forth in this
Agreement; or (iv) any failure by Purchaser to satisfy and discharge any of the
Assumed Liabilities after the Closing; provided, however, that "Seller's Losses"
shall not include, and neither Purchaser nor Parent shall be liable for, any
Seller's Losses resulting from any misrepresentation or breach of warranty of
which Seller or Funk has actual Knowledge, as evidenced solely by the Schedules
hereto.
12.5 Limitations on Losses.
(a) In case any event shall occur which would otherwise
entitle any party to assert a claim for indemnification hereunder, no Losses
shall be deemed to have been sustained by such party to the extent of (i) any
actual Tax savings realized by such party with respect thereto or (ii) any
proceeds (net of deductibles, taxes and collection costs) received by such party
from any property insurance policies maintained by or on behalf of such party
with respect to losses to such party's property. The parties agree to submit a
claim under such property insurance policies prior to or promptly following
making a request for indemnification hereunder.
(b) The aggregate liability of (i) Seller and Funk under
Section 12.2(ii) shall not exceed (A) the sum of $6,000,000 until the first
anniversary of the Closing Date; (B) the sum of $5,000,000 (less the aggregate
amount of claims covered by clause (i)(A) of this Section 12.5(b)) from the
first anniversary to the second anniversary of the Closing Date; and (C) the sum
of $4,000,000 (less the aggregate amount of claims covered by clauses (i)(A) or
(i)(B) of this Section 12.5(b)) from and after the second anniversary of the
Closing Date; and (ii) Purchaser and Parent under Section 12.4(i) shall not
exceed the sum of the Assumed Liabilities, any Growth Earnout Payments and any
Maintenance Earnout Payment.
(c) The sum of all Losses incurred by Purchaser and Parent in
the aggregate under Section 12.2(ii), or the sum of all Losses incurred by
Seller in the aggregate under Section 12.4(i), must exceed $225,000 before such
parties shall be entitled to indemnification hereunder; provided, however, once
such Losses exceed $225,000 such parties shall be entitled to indemnification
for all Losses in excess of $150,000.
(d) Purchaser's Losses shall be reduced by the amounts of any
Overpayment or Receivable Writeback Amounts related to such Losses received by
Purchaser.
12.6 Notice of Loss. Except to the extent set forth in the next
sentence, a party to this Agreement shall not have any liability under the
indemnity provisions of this Agreement with respect to a particular matter
unless a notice setting forth in reasonable detail the breach which is asserted
has been given to the Indemnifying Party (as hereafter defined) and, in
addition, if such matter arises out of a suit, action, investigation or
proceeding, such notice is given promptly, but in any event within 30 days after
the Indemnified Party (as hereafter defined) is given notice of the commencement
of this suit, action, investigation or proceeding. Notwithstanding the preceding
sentence, failure of the Indemnified Party to give notice hereunder shall not
release the
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Indemnifying Party from its obligations under this Article XII, except to the
extent the Indemnifying Party is actually prejudiced by such failure to give
notice. With respect to Purchaser's Losses and Employee Claims, Seller and Funk,
jointly and severally, shall be the Indemnifying Party and Purchaser shall be
the Indemnified Party. With respect to Seller's Losses, Purchaser and Parent,
jointly and severally, shall be the Indemnifying Party and Seller and Funk shall
be the Indemnified Party.
12.7 Right to Defend. Upon receipt of notice of any suit, action,
investigation, claim or proceeding for which indemnification might be claimed by
an Indemnified Party, the Indemnifying Party shall be entitled to defend,
contest or otherwise protect against such suit, action, investigation, claim or
proceeding at its own cost and expense, and the Indemnified Party must cooperate
in any such defense or other action. The Indemnified Party shall have the right,
but not the obligation, to participate at its own expense in a defense thereof
by counsel of its own choosing, but the Indemnifying Party shall be entitled to
control the defense unless the Indemnified Party has relieved the Indemnifying
Party from liability with respect to the particular matter or the Indemnifying
Party fails to assume defense of the matter. If the Indemnifying Party shall
fail to defend, contest or otherwise protect in a timely manner against any such
suit, action, investigation, claim or proceeding, the Indemnified Party shall
have the right, but not the obligation, to defend, contest or otherwise protect
against the same and make any compromise or settlement thereof and recover the
entire cost thereof from the Indemnifying party including reasonable attorneys'
fees, disbursements and all amounts paid as a result of such suit, action,
investigation, claim or proceeding or the compromise or settlement thereof;
provided, however, that the Indemnified Party must send a written notice to the
Indemnifying Party of any such proposed settlement or compromise, which
settlement or compromise the Indemnifying Party may reject, in its reasonable
judgment, within 30 days of its receipt of such written notice. A failure by the
Indemnifying Party to reject such settlement or compromise within such 30 day
period shall be deemed an acceptance of such settlement or compromise. The
Indemnified Party shall have the right to effect a settlement or compromise over
the objection of the Indemnifying Party; provided, that if (i) the Indemnifying
Party is contesting such claim in good faith or (ii) the Indemnifying Party has
assumed the defense from the Indemnified Party, the Indemnified Party waives any
right to indemnity therefor. If the Indemnifying Party undertakes the defense of
such matters, the Indemnified Party shall not, so long as the Indemnifying Party
does not abandon the defense thereof, be entitled to recover from the
Indemnifying Party any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof other than the
reasonable costs of investigation undertaken by the Indemnified Party with the
prior written consent of the Indemnifying Party.
12.8 Cooperation. Each of Parent, Purchaser, Seller and Funk and each
of their affiliates, successors and assigns shall cooperate with each other in
the defense of any suit, action, investigation, proceeding or claim by a third
party and, during normal business hours, shall afford each other access to their
books and records and employees relating to such suit, action, investigation,
proceeding or claim and shall furnish each other all such further information
that they have the right and power to furnish as may reasonably be necessary to
defend such suit, action, investigation, proceeding or claim, including, without
limitation, reports, studies,
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correspondence and other documentation relating to Environmental Protection
Agency, Occupational Safety and Health Administration, and Equal Employment
Opportunity Commission matters.
12.9 Payment Through Escrow. During the term of the Escrow Agreement,
if Seller or Funk is determined to owe an indemnification amount pursuant to the
procedures set forth in this Article XII (a "Claim"), then the amount due the
Indemnified Party hereunder shall be satisfied or partially satisfied first by
the delivery to the Indemnified Party pursuant to the Escrow Agreement of funds
equal in value to the amount of the applicable Claim, or if the value of the
funds being held under the Escrow Agreement is less than the amount of the
Claim, by delivery of all of the funds in partial satisfaction of such Claim and
by setoff against any Growth Earnout Payment or Maintenance Earnout Payment
which has been ascertained at such time and is then due and payable, with any
remaining balance of such Claim then to be satisfied by Seller and Funk
directly.
12.10 Exclusive Remedy. The Purchaser, Parent, Seller and Funk
acknowledge and agree that, in the absence of fraud (in which event any affected
party shall have all remedies available at law or in equity), the foregoing
indemnification provisions in this Article XII shall be the exclusive remedy of
the Purchaser, Parent, Seller and Funk with respect to the Business and the
transactions contemplated by this Agreement.
ARTICLE XIII
TERMINATION
13.1 Termination. This Agreement may be terminated and abandoned at any
time on or prior to the Closing Date:
(a) By the consent in writing of Purchaser, Parent, Seller and
Funk;
(b) By Purchaser or Parent in writing if any of the conditions
to the obligations of Purchaser contained herein shall not have been satisfied
or, if unsatisfied, waived by Purchaser as of the Closing Date;
(c) By Purchaser or Parent by giving written notice to the
Seller at any time prior to the Closing if the Seller has within the then
previous 10 Business Days given the Purchaser and Parent any notice pursuant to
Section 6.4 and the development that is the subject of the amendment or
supplement would be reasonably expected by Purchaser or Parent to have a
Material Adverse Effect;
(d) By Seller or Funk in writing if any of the conditions to
the obligations of Seller contained herein shall not have been satisfied or, if
unsatisfied, waived by Seller as of the Closing Date;
(e) By Purchaser or Parent, or Seller or Funk, in writing if
the Closing shall not have occurred by September 30, 1999; and
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(f) By Purchaser, upon written notice to Seller, if the
results of its due diligence review of the Business of Seller are not
satisfactory to it in its sole and absolute discretion.
13.2 No Further Force or Effect. In the event of termination and
abandonment of this Agreement pursuant to the provisions of Section 12.1, this
Agreement shall be of no further force or effect, except for Sections 5.3, 6.1
and 13.1, which shall not be affected by termination of this Agreement.
ARTICLE XIV
MISCELLANEOUS
14.1 Expenses. Except as otherwise expressly provided herein, Parent
and Purchaser shall pay their own expenses and Funk shall pay the expenses of
Seller and Funk in connection with the preparation of this Agreement, and the
consummation of the transactions contemplated hereby, including, without
limitation, fees of their own counsel, auditors and other experts, whether or
not such transactions be consummated.
14.2 Entire Agreement. This Agreement (including the exhibits and
schedules hereto) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties hereto
with respect to the subject matter thereof, and no party shall be liable or
bound to the other in any manner by any representations or warranties not set
forth herein.
14.3 Publicity. Except as otherwise required by law, no party hereto
shall issue any press release or make any public statement, in either case
relating to or in connection with or arising out of this Agreement or the
matters contained herein, without obtaining the prior written approval of the
other parties hereto to the content and manner of presentation and publication
thereof, which consent shall not be unreasonably withheld or delayed.
14.4 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law), and the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties and their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of such
agreements.
14.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
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14.6 Headings. The headings of the paragraphs and subparagraphs of this
Agreement are inserted for convenience of reference only and shall not be deemed
to constitute part of this Agreement or to affect the construction hereof.
14.7 Use of Certain Terms. As used in this Agreement, the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision.
14.8 Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended by a written
instrument executed by Purchaser and Seller and Funk. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by all of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
14.9 Notices. All notices of communication required or permitted
hereunder shall be in writing and may be given by (a) depositing the same in
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, (b) delivering the same
in person to an officer or agent of such party, or (c) telecopying the same with
electronic confirmation of receipt.
(i) If to Seller and/or to Funk:
c/o Arlington Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇, Chairman
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to Purchaser and/or to Parent:
c/o Daisytek, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
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With copies to:
▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address or counsel as any party hereto shall specify pursuant
to this Section 14.9 from time to time.
14.10 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PRINCIPLES THEREOF.
14.11 Time. Time is of the essence with respect to this Agreement.
14.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
[remainder of page left intentionally blank]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed in counterparts all as of the date first above written.
SELLER:
ARLINGTON INDUSTRIES, INC.
By:
---------------------------------------
▇▇▇▇▇ ▇▇▇▇
Chairman and Chief Executive Officer
FUNK:
-------------------------------------------
▇▇▇▇▇ ▇▇▇▇
PURCHASER:
ARLINGTON ACQUISITION CORP.
By:
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Vice President
PARENT:
DAISYTEK, INCORPORATED
By:
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Vice President