1
EXHIBIT 2
---------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STOCK PURCHASE AND SALE AGREEMENT
For the Acquisition of
All of the Outstanding Securities of
APP HOLDING CORPORATION
By
EKCO GROUP, INC.
From
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
FCP SOUTHEAST INVESTORS IV, L.P.,
BENJAMAX PROFIT SHARING PLAN,
AND
NATIONSCREDIT COMMERCIAL CORPORATION
DATED AS OF DECEMBER 15, 1997
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2
TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE OF THE SHARES.......................................................1
SECTION 1.01 Purchase and Sale of the Shares............................................1
SECTION 1.02 Purchase Price.............................................................2
SECTION 1.03 Contingent Consideration...................................................2
SECTION 1.04 Closing....................................................................5
SECTION 1.05 Further Assurances.........................................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS........................................7
SECTION 2.01 Title to Shares; Accrued Yield; No Inconsistent Actions....................7
SECTION 2.02 Seller's Authority to Execute and Perform Agreement........................8
SECTION 2.03 Capitalization............................................................10
SECTION 2.04 Organization and Qualification............................................10
SECTION 2.05 Subsidiaries..............................................................10
SECTION 2.06 Corporate Power and Authority.............................................11
SECTION 2.07 Validity, Etc.............................................................12
SECTION 2.08 Financial Statements; Specified Outstanding Debt..........................12
SECTION 2.09 Absence of Undisclosed Liabilities........................................13
SECTION 2.10 Absence of Adverse Change; Conduct of Business............................13
SECTION 2.11 Inventories...............................................................16
SECTION 2.12 Receivables...............................................................16
SECTION 2.13 Taxes.....................................................................16
SECTION 2.14 Litigation................................................................19
SECTION 2.15 Certain Practices.........................................................19
SECTION 2.16 Compliance with Law.......................................................20
SECTION 2.17 Licenses and Permits......................................................20
SECTION 2.18 Labor and Employee Relations..............................................20
SECTION 2.19 Certain Employees.........................................................21
SECTION 2.20 Employee Benefits.........................................................21
SECTION 2.21 Tangible Properties.......................................................22
SECTION 2.22 Owned Premises............................................................23
SECTION 2.23 Leased Premises...........................................................23
SECTION 2.24 Environmental Matters.....................................................24
SECTION 2.25 Insurance.................................................................24
SECTION 2.26 Outstanding Commitments...................................................25
SECTION 2.27 Intellectual Property.....................................................25
SECTION 2.28 Proprietary Information of Third Parties..................................26
SECTION 2.29 Significant Customers and Suppliers.......................................27
SECTION 2.30 Banks, Brokers and Proxies................................................27
SECTION 2.31 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons............27
SECTION 2.32 Transactions With Affiliates..............................................28
SECTION 2.33 Records...................................................................28
SECTION 2.34 Disclosure................................................................28
i
3
SECTION 2.35 Indebtedness..............................................................28
SECTION 2.36 No Broker or Finder.......................................................29
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER............................................29
SECTION 3.01 Investment Intent.........................................................29
SECTION 3.02 Organization..............................................................29
SECTION 3.03 Buyer Power and Authority.................................................29
SECTION 3.04 Validity, Etc.............................................................29
SECTION 3.05 Brokers...................................................................30
SECTION 3.06 Financing.................................................................30
ARTICLE IV COVENANTS OF THE SELLERS............................................................30
SECTION 4.01 Cooperation...............................................................30
SECTION 4.02 Access....................................................................30
SECTION 4.03 Insurance.................................................................31
SECTION 4.04 Compliance with Laws......................................................31
SECTION 4.05 Keeping of Books and Records..............................................32
SECTION 4.06 Actions Prior to Closing..................................................32
SECTION 4.07 Notice of Changes; Updates................................................34
SECTION 4.08 Preservation of Business..................................................34
SECTION 4.09 Litigation................................................................35
SECTION 4.10 Continued Effectiveness of Representations and Warranties.................35
SECTION 4.11 Obligations of Affiliates.................................................35
SECTION 4.12 No Negotiations...........................................................36
SECTION 4.13 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings.................................................36
SECTION 4.14 Resignations..............................................................36
SECTION 4.15 Certain Employment Agreements.............................................36
SECTION 4.16 Encumbrances..............................................................36
SECTION 4.17 Consents..................................................................36
ARTICLE V COVENANTS OF THE BUYER; OTHER COVENANTS..............................................37
SECTION 5.01 Cooperation...............................................................37
SECTION 5.02 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings.................................................37
SECTION 5.03 Tax Matters...............................................................37
ARTICLE VI CONDITIONS TO THE BUYER'S OBLIGATIONS...............................................37
SECTION 6.01 Consents..................................................................37
SECTION 6.02 Representations and Warranties True.......................................37
SECTION 6.03 Performance...............................................................38
SECTION 6.04 No Material Adverse Change................................................38
SECTION 6.05 Opinion of Counsel........................................................38
SECTION 6.06 Obligations of the Sellers................................................39
SECTION 6.07 Resignations..............................................................39
SECTION 6.08 No Actions, Suits or Proceedings..........................................39
SECTION 6.09 Investigation Satisfactory................................................39
SECTION 6.10 Employment Agreements.....................................................39
SECTION 6.11 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period..........................................39
SECTION 6.12 Pay-Off Letters...........................................................40
ii
4
SECTION 6.13 Delivery of Shares; Other Closing Documents...............................40
SECTION 6.14 Approval of the Buyer and Its Counsel.....................................40
ARTICLE VII CONDITIONS TO THE SELLERS' OBLIGATIONS.............................................40
SECTION 7.01 Representations and Warranties to be True and Correct.....................40
SECTION 7.02 Performance...............................................................40
SECTION 7.03 Opinion of the Buyer's Counsel............................................40
SECTION 7.04 No Actions, Suits or Proceedings..........................................40
SECTION 7.05 Closing Documents.........................................................41
SECTION 7.06 Approval of the Sellers and Their Counsel.................................41
SECTION 7.07 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Approval................................................41
ARTICLE VIII INDEMNIFICATION...................................................................41
SECTION 8.01 Survival..................................................................41
SECTION 8.02 Indemnification by the Sellers............................................42
SECTION 8.03 Indemnification by Buyer..................................................44
SECTION 8.04 Claims for Indemnification; Defense of Third Party Claims.................44
SECTION 8.05 No Contribution...........................................................46
SECTION 8.06 Insurance Proceeds........................................................46
SECTION 8.07 Exclusive Remedies........................................................47
ARTICLE IX TERMINATION.........................................................................47
SECTION 9.01 Termination...............................................................47
SECTION 9.02 Effect of Termination.....................................................48
SECTION 9.03 Specific Performance; Equitable Relief....................................49
ARTICLE X MISCELLANEOUS........................................................................49
SECTION 10.01 Notices..................................................................49
SECTION 10.02 Entire Agreement.........................................................51
SECTION 10.03 Modifications and Amendments.............................................52
SECTION 10.04 Waivers and Consents.....................................................52
SECTION 10.05 Assignment...............................................................52
SECTION 10.06 Parties in Interest......................................................52
SECTION 10.07 Governing Law............................................................53
SECTION 10.08 Jurisdiction and Service of Process......................................53
SECTION 10.09 Severability.............................................................53
SECTION 10.10 Interpretation...........................................................53
SECTION 10.11 Headings and Captions....................................................53
SECTION 10.12 Reliance.................................................................54
SECTION 10.13 Expenses.................................................................54
SECTION 10.14 Publicity................................................................54
SECTION 10.15 Counterparts.............................................................54
SECTION 10.16 Miscellaneous Definitions................................................54
SECTION 10.17 Appointment..............................................................55
SECTION 10.18 Preparation of Schedules.................................................55
iii
5
This Stock Purchase and Sale Agreement (including all Schedules hereto,
this "Agreement") is entered into as of this 15th day of December, 1997 by and
among EKCO GROUP, INC., a Delaware corporation (the "Buyer"), APP HOLDING
CORPORATION, a Delaware corporation ("APP" or the "Company"), the stockholders
of the Company identified on the signature pages hereto as Sellers (the
"Sellers") and the warrantholder of the Company identified on the signature page
hereto (the "Warrantholder").
W I T N E S E T H:
WHEREAS the Sellers are the owners of all of the issued and outstanding
shares of Class A Common Stock, par value $.01 per share (the "Class A Common"),
Class B-1 Common Stock, par value $.01 per share (the "Class B-1 Common") and
Class B-2 Common Stock, par value $.01 per share (the "Class B-2 Common," and
collectively with the Class B-1 Common, the "Class B Common") which shares
constitute all of the issued and outstanding shares of capital stock of every
kind and description of APP (all of such shares being referred to herein
collectively as the "Shares"); and
WHEREAS the Sellers desire to sell the Shares and the Buyer desires to
purchase the Shares upon the terms and conditions set forth herein; and
WHEREAS the Warrantholder is the owner of that certain warrant to
purchase 2,500 shares of Class C Common Stock, par value $.01 per share, dated
September 17, 1995 (the "Class C Warrant"); and
WHEREAS the Warrantholder desires to sell the Class C Warrant and the
Buyer desires to purchase the Class C Warrant upon the terms and conditions set
forth herein; and
WHEREAS the Buyer and the Sellers desire to enter into certain other
agreements for their mutual benefit.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby mutually
acknowledged, intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I PURCHASE AND SALE OF THE SHARES
SECTION 1.01 PURCHASE AND SALE OF THE SHARES. On the basis of the
representations, warranties and undertakings set forth in this Agreement, and on
the terms and subject to the conditions set forth in this Agreement, at the
Closing (as defined in Section 1.04), each Seller shall sell all of his, her or
its Shares to the Buyer, and the Buyer shall purchase such Shares from each
Seller, and the Warrantholder shall sell the Class C Warrant to the Buyer, and
the Buyer shall purchase the Class C Warrant from the Warrantholder, in each
case free and clear of all claims, charges, liens, contracts, rights, options,
pledges, security interests, mortgages, encumbrances and
6
restrictions of every kind and nature (together, "Encumbrances") for the
Purchase Price Consideration (as defined in Section 1.02).
SECTION 1.02 PURCHASE PRICE. The total consideration to be paid by the
Buyer for the Shares and the Warrant (the "Purchase Price Consideration") shall
be the sum of (a) a cash payment of $23,806,445.03 to be paid at the Closing by
the Buyer to the Sellers and the Warrantholder as set forth on SCHEDULE 1.02
(the "Cash Consideration"), (b) the Earnout Payments (as defined in Section
1.03), if any, payable in accordance with Section 1.03, and (c) a cash payment
equal to the Accrued Yield Amount (as defined in Section 1.04(h)) payable at the
Closing in accordance with Section 1.04(d). The amount of the Cash Consideration
payable to each Seller and the Warrantholder at the Closing is as set forth on
Schedule 1.02 hereto. The aggregate Accrued Yield Amount payable to the holders
of the Class B Common at the Closing is as set forth on Schedule 1.02.
SECTION 1.03 CONTINGENT CONSIDERATION.
(a) THE EARNOUT. Following the Closing and subject to the terms and
conditions of this Section 1.03, for each of the five (5) fiscal years ending
December 31, 1998, 1999, 2000, 2001 and 2002 (each an "Earnout Year"), the Buyer
shall pay or cause to be paid to sellers of Class A Common listed on SCHEDULE
1.03 hereto (the "Schedule 1.03 Sellers") in accordance with the percentages set
forth opposite their names and under the caption "Earnout Percentage" on such
Schedule, additional payments, in cash, (the "Earnout Payments" and each an
"Earnout Payment") equal, in the aggregate, to twenty-five percent (25%) (the
"Aggregate Earnout Percentage") of the amount, if any, by which the Gross Profit
(as defined in Section 1.03(c)) of APP in each such Earnout Year exceeds the
Base Profit Amount (as defined in Section 1.03(b)).
(b) DETERMINATION OF BASE PROFIT AMOUNT. As soon as practicable after
the Company's fiscal year ending December 31, 1997, but in no event later than
90 days thereafter, the Buyer, in accordance with Section 1.03(c) below, shall
calculate the consolidated Gross Profit of APP for the year ended December 31,
1997 (the "1997 Gross Profit Amount"). The Buyer shall notify the Schedule 1.03
Sellers in writing of its calculation of the 1997 Gross Profit Amount promptly
following its calculation thereof. The Base Profit Amount shall be equal to the
higher of (i) the 1997 Gross Profit Amount, or (ii) $12,000,000.
(c) CALCULATION OF GROSS PROFIT. As promptly as practicable, but in no
event later than 90 days after the end of each Earnout Year, the Buyer shall
prepare a statement (the "Gross Profit Statement") setting forth its calculation
of the Gross Profit of APP for such Earnout Year and the Earnout Payment, if
any, due to the Schedule 1.03 Sellers. As used herein, the term Gross Profit
shall mean gross profit calculated on a basis consistent with the principles
used by the Company in calculating gross profit for its audited consolidated
balance sheet and related statements of income and cash flow for the year ended
December 31, 1996 (the "1996 Financials") which principles are set forth on
SCHEDULE 1.03(c). To the extent that any of the principles used in the
preparation of the 1996 Financials appear to be or are inconsistent with the
principles set forth on SCHEDULE 1.03(c), the principles set forth on SCHEDULE
1.03(c) shall govern.
2
7
(d) PAYMENT OF EARNOUT PAYMENT. Within 30 days after the preparation of
the Gross Profit Statement, the Buyer shall remit to each Schedule 1.03 Seller
the Earnout Payment, if any, due to such Schedule 1.03 Seller, calculated in
accordance with the percentages set forth opposite each such Seller's name on
SCHEDULE 1.02 together with a certificate setting forth such calculation and a
copy of the Gross Profit Statement.
(e) RIGHT TO REVIEW CALCULATION OF 1997 GROSS PROFIT AMOUNT AND EARNOUT
PAYMENTS; ARBITRATION. If the Schedule 1.03 Sellers wish to dispute the 1997
Gross Profit Amount or the Earnout Payment they must, within 30 days after
delivery of the calculation of the 1997 Gross Profit Amount or Gross Profit
Statement, provide written notice (the "Schedule 1.03 Sellers' Notice") to the
Buyer, in accordance with the terms of Section 10.01 hereof, setting forth the
basis of such dispute, together with their calculation of Gross Profit for the
applicable period. The Buyer shall then review the issues raised in the Schedule
1.03 Seller's Notice and determine whether a recalculation of Gross Profit for
the applicable period is required. In the event that the Buyer determines that a
revision or adjustment is appropriate, Buyer shall thereafter recalculate either
(i) the 1997 Gross Profit Amount (in which case it shall promptly deliver its
revised calculation to the Schedule 1.03 Sellers) or (ii) the applicable Earnout
Payments then due in accordance with the revised Gross Profit Statement, and in
the case of clause (ii) of this sentence, promptly pay additional amounts, if
any, that Buyer determines are owed to the Schedule 1.03 Sellers in accordance
therewith within 15 days of receipt of the Schedule 1.03 Seller's Notice. If
Buyer shall determine that no revision or adjustment to the 1997 Gross Profit
Amount or Gross Profit Statement is necessary, it shall so notify the Schedule
1.03 Sellers in accordance with the terms of Section 10.01 hereof within 15 days
of receipt of the Schedule 1.03 Seller's Notice. If the Buyer does not notify
the Schedule 1.03 Sellers within such 15 day period, it shall be deemed to have
determined that no revision or adjustment to the 1997 Gross Profit Amount or
Gross Profit Statement is appropriate. If the Schedule 1.03 Sellers disagree
with the Buyer's revised or adjusted calculation of 1997 Gross Profit Amount or
Gross Profit Statement or its determination that no revision or adjustment is
appropriate, such Sellers may, within 30 days of the Buyer's delivery of the
revised 1997 Gross Profit Amount or Gross Profit Statement or its determination
that no revision is appropriate, request, in accordance with the terms of
Section 10.01 hereof, arbitration of such matter by any of the Boston,
Massachusetts offices of the four largest, nationally recognized, accounting
firms not currently representing the Buyer or any entity affiliated with any of
the Schedule 1.03 Sellers (the "Arbitration Accountants"), provided that Buyer
shall be entitled on each request for arbitration to disqualify the first choice
of the Schedule 1.03 Sellers if it reasonably believes it might be prejudiced in
any way thereby. Copies of such request for arbitration shall be sent
concurrently to Buyer in accordance with Section 10.01. If no request is made
within the 30 day period after the Buyer's delivery of the revised 1997 Gross
Profit Amount or revised Gross Profit Statement or determination that no
revision is necessary, the Schedule 1.03 Sellers shall be conclusively deemed to
have accepted such revised 1997 Gross Profit Amount or revised Gross Profit
Statement or determination that no revision is necessary and, in the case of a
Gross Profit Statement, shall be bound by Buyer's calculation of the Earnout
Payments in connection therewith. If arbitration is requested, the Buyer and the
Schedule 1.03 Sellers shall cooperate with the Arbitration Accountants in
furnishing information and shall have the right to present to the Arbitration
Accountants their views on the issues in dispute. The review of the Arbitration
Accountants and its calculation of 1997 Gross Profit
3
8
Amount or Gross Profit set forth on a Gross Profit Statement shall be governed
by the terms of this Section 1.03 and its decision rendered with respect to the
disputed issues shall be final. The fees and expenses of the Arbitration
Accountants shall be paid by the party whose calculation of 1997 Gross Profit
Amount or Gross Profit set forth on a Gross Profit Statement (which, in the case
of the Buyer shall include any revised calculation of 1997 Gross Profit Amount
or Gross Profit) deviates the most from the calculation of 1997 Gross Profit
Amount or Gross Profit set forth on a Gross Profit Statement by the Arbitration
Accountants. This Section 1.03(e) shall be the sole and exclusive remedy of the
Schedule 1.03 Sellers with respect to any disagreements, discrepancies or
challenges regarding this Section 1.03(e).
(f) POST CLOSING TRANSACTIONS. In the event that, following the Closing
and prior to December 31, 2002, the Buyer proposes to purchase or acquire all or
substantially all of the capital stock, business or assets of another entity in
the same field as the Company, which capital stock, business or assets the Buyer
proposes shall be owned and managed directly or indirectly by the Company (an
"Acquisition Transaction"), the Buyer, the Company and the Schedule 1.03 Sellers
agree that they shall meet and negotiate in good faith an appropriate and
equitable adjustment to the Base Profit Amount and the Aggregate Earnout
Percentage to fairly reflect the estimated impact of such Acquisition
Transaction.
In the event that, following the Closing and prior to December 31, 2002,
the Company proposes to enter into an Acquisition Transaction and the Company,
the Buyer and the Schedule 1.03 Sellers are unable to agree upon an appropriate
adjustment to the Base Profit Amount and Aggregate Earnout Percentage as set
forth above within 15 days of Buyer's first notifying the Company of such
proposed Acquisition Transaction, then, unless the Buyer shall withdraw its
proposal that the capital stock, business or assets to be acquired in the
proposed Acquisition Transition be owned and managed, directly or indirectly, by
the Company, the dispute over the appropriate adjustment to the Base Profit
Amount and Aggregate Earnout Percentage shall be resolved by binding arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration panel shall be composed of three arbitrators, one
of whom shall be chosen by the Buyer, one by the Schedule 1.03 Representative
(as defined in Section 10.17) and the third by the two so chosen. If both or
either of the Buyer or the Schedule 1.03 Representative fails to choose an
arbitrator or arbitrators within fourteen (14) days after receiving notice of
commencement of arbitration or if the two arbitrators fail to choose a third
arbitrator within fourteen (14) days after their appointment, the then President
of the American Arbitration Association shall, upon the request of both or
either of the parties to the arbitration, appoint the arbitrator or arbitrators
required to complete the board or, if he or she shall decline or fail to do so,
such arbitrator or arbitrators shall be appointed by the Boston office of the
American Arbitration Association. The decision of the arbitrators shall be by
majority vote and, at the request of either party, the arbitrators shall issue a
written decision. Costs shall be borne as determined by the arbitrators. Unless
the parties to the arbitration shall otherwise agree to a place of arbitration,
the place of arbitration shall be at Boston, Massachusetts, U.S.A. The
arbitration decision shall be final and binding and may be entered in any court
having jurisdiction. The arbitration provided for in this paragraph shall be the
sole and exclusive remedy of the parties with respect to any matter contemplated
by this Section 1.03(f). Upon receipt of the arbitration decision, the Buyer
shall, in its sole discretion, decide whether the capital stock, business or
assets
4
9
purchased or acquired (or to be purchased or acquired) in the Acquisition
Transaction shall be owned and managed by the Company or another entity,
including the Buyer.
SECTION 1.04 CLOSING. Subject to the satisfaction or waiver of each of
the conditions set forth in Articles VI and VII of this Agreement, the closing
of the transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One
Financial Center, Boston, at 10 o'clock a.m., on the first mutually agreeable
business day following the fulfillment or waiver of the conditions set forth in
Articles VI and VII hereof (but not more than ten business days following such
fulfillment), other than the conditions set forth in Sections 6.05, 6.13, 7.03,
and 7.05 which must be satisfied or waived immediately prior to the Closing (it
being understood that, notwithstanding the foregoing, except as expressly set
forth in any waiver, the obligation of the Buyer and the Seller to consummate
the transactions contemplated hereby at the Closing shall be subject to the
continued satisfaction of the conditions set forth in Article VI and VII,
respectively, at the Closing), or on such other date or at such other location
or time as may be agreed upon by the parties (such date and time being called
the "Closing Date").
At least two (2) business days prior to the Closing Date, the Company
shall deliver to the Buyer (i) a certificate, executed by the president of the
Company, setting forth the Outstanding Indebtedness Amount (as defined below)
and Accrued Yield Amount as of the Closing Date, (ii) a pay-off letter from each
of the Creditors (as defined below) in form reasonably satisfactory to the Buyer
(the "Pay-Off Letters"), and (iii) a certificate executed by each seller of the
Class B Common (each, a "Class B Seller") setting forth the Accrued Yield Amount
and the percentage of such amount payable to each Class B Seller as of the
Closing Date.
At the Closing:
(a) Each Seller shall deliver or cause to be delivered to the Buyer
the following:
(i) Certificates for the Shares in the name of such Seller
duly endorsed to the Buyer, or accompanied by the appropriate stock
powers;
(ii) The certificates to be delivered by such Seller as
required by Sections 6.02 and 6.03;
(iii) The opinion of counsel required by Section 6.05;
(iv) The resignations to be delivered by such Seller as
required by Section 6.07;
5
10
(v) A copy of the resolutions of each Seller which is a
corporation, partnership, trust or other entity, and of APP, certified
by its respective Secretary or Assistant Secretary, authorizing and
approving the execution, delivery and performance of this Agreement and
the transactions contemplated hereby and the acts of the officers and
employees of such Seller in carrying out the terms and provisions
hereof;
(b) The Warrantholder shall deliver or cause to be delivered to the
Buyer the Class C Warrant together with such appropriate instruments of transfer
as the Buyer may reasonably request in order to transfer and assign title to and
beneficial ownership of the Class C Warrant to the Buyer;
(c) The Buyer shall deliver or cause to be delivered to the Sellers
and the Warrantholder the following:
(i) The Cash Consideration, payable to each Seller and the
Warrantholder as set forth on Schedule 1.02 by wire transfer of
immediately available funds to an account or accounts which account(s)
are designated in writing by the Sellers and the Warrantholder at least
two business days prior to the Closing (and, with respect to any Seller
or the Warrantholder if any of them do not so designate an account or
accounts, by certified or official bank check payable in immediately
available funds to the order of such Seller or the Warrantholder);
(ii) The certificates required by Sections 7.01 and 7.02;
(iii) The opinion of counsel required by Section 7.03; and
(iv) A copy of the resolutions of the Buyer certified by its
Secretary or Assistant Secretary, authorizing and approving the
execution, delivery and performance of this Agreement and the
transactions contemplated hereby and the acts of the officers and
employees of the Buyer in carrying out the terms and provisions hereof.
(d) The Buyer shall deliver or cause to be delivered to each Class B
Seller the Accrued Yield Amount payable to such Class B Seller as set forth on
Schedule 1.02 by wire transfer of immediately available funds to an account
which is designated in writing by such Class B Seller at least two business days
prior to the Closing.
(e) The Buyer shall pay or cause to be paid to the Creditors (as
defined below) the Outstanding Indebtedness Amount by wire transfer of
immediately available funds to an account or accounts which account(s) are
designated by the Creditors in the applicable Pay-Off Letter.
(f) The parties shall deliver such further documents, resolutions,
certificates and instruments as any party or his, her or its counsel reasonably
requests to facilitate the consummation of the transactions contemplated hereby.
6
11
(g) (i) The Schedule 1.03 Sellers, the APP Companies and Ekco
shall deliver to the Class B Sellers a general release in the form
attached hereto as Exhibit 1.04(g)(i);
(ii) The Sellers shall deliver to the APP Companies and the
Buyer a general release in the form attached hereto as Exhibit
1.04(g)(ii); and
(iii) The Class B Sellers, the APP Companies and Ekco shall
deliver to the Schedule 1.03 Sellers a general release in the form
attached hereto as Exhibit 1.04(g)(iii).
(h) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Accrued Yield Amount" shall mean, with respect to each Class B
Seller, the total amount of Unpaid Yield (as such term is defined in APP
Holding Company's amended and restated Certificate of Incorporation)
which has accrued on the Class B Common held by such Class B Seller as
of the Closing.
(ii) "Specified Outstanding Debt" shall mean all amounts, whether or
not such amounts are currently due and payable, outstanding under the
agreements set forth on SCHEDULE 1.04(h)(ii) (the "Credit Agreements"),
which amounts shall include any and all accrued interest, penalties,
service payments or other amounts due thereon.
(iii) "Outstanding Indebtedness Amount" shall mean all amounts owning
by any APP Company as of the Closing Date and prior to the payment
provided in Section 1.04(e) on account of Specified Outstanding Debt,
including all prepayment fees, premiums, penalties and expenses of
releases associated with the payment in Section 1.04(e).
(iv) "Creditors" shall mean the holders of the Specified
Outstanding Debt.
SECTION 1.05 FURTHER ASSURANCES. At any time and from time to time after
the Closing Date, at the request of the Buyer and without further consideration,
each Seller (and, as and to the extent necessary or appropriate, the Company or
its officers) will execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation as may be reasonably requested in order
to more effectively transfer, convey and assign to the Buyer and to confirm the
Buyer's title to the Shares.
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS
A. As an inducement to the Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, each Seller and the
Warrantholder (with respect to Sections 2.01(b) and 2.02(b) only) severally but
not jointly hereby represents and warrants about himself or itself to and for
the benefit of the Buyer that:
SECTION 2.01 TITLE TO SHARES; ACCRUED YIELD; NO INCONSISTENT ACTIONS.
(a) In the case of the Sellers, such Seller owns, beneficially and of record,
free and clear of all Encumbrances (other than the Encumbrances set forth on
SCHEDULE 2.03, all of which shall terminate, be
7
12
terminated, discharged and irrevocably removed and be of no further force or
effect at or prior to the Closing), the number of shares of Class A Common,
Class B-1 Common and Class B-2 Common, as the case may be, set forth opposite
the name of such Seller on SCHEDULE 1.02 . Other than the Shares set forth
opposite such Seller's name on SCHEDULE 1.02, such Seller owns no capital stock
or other securities of any of the APP Companies nor any subscription, option,
warrant, right, call, convertible security or other instrument or obligation
that is or may become exchangeable for any shares of capital stock or other
securities of any APP Company, stock appreciation rights (phantom or otherwise),
joint venture, partnership or other commitments of any nature (collectively,
"Other Equity Interest") relating to shares of the capital stock or other
securities of any APP Company. Except for Encumbrances set forth on SCHEDULE
2.03, all of which Encumbrances shall terminate, be terminated, discharged and
irrevocably removed and of no further force and effect at or prior to Closing,
there is no restriction affecting the ability of such Seller to transfer the
legal and beneficial title and ownership of the Shares to the Buyer and, upon
delivery thereof to the Buyer pursuant to the terms of this Agreement and upon
payment of the Cash Consideration at the Closing, the Buyer will acquire good
and valid, record and beneficial title to the Shares, free and clear of all
Encumbrances. SCHEDULE 2.01 accurately sets forth the Accrued Yield Amount owing
to such Seller as of the date hereof and as of the end of the periods indicated
thereon. No such Seller (nor any of its employees, partners, officers, directors
or affiliates, (for purposes of this sentence, affiliates of the Seller's shall
not include APP Companies) has voted upon or has been notified that a vote has
been taken with respect to any action (either by the stockholders or directors
of any APP Company) which action was approved and is inconsistent with the
representations and warranties made in Section 2.03.
(b) In the case of the Warrantholder, the Warrantholder owns of record
and beneficially, free and clear of all Encumbrances (other than Encumbrances
set forth on SCHEDULE 2.03 all of which will terminate, be terminated,
discharged and irrevocably removed and be of no further force or effect at or
prior to the Closing), the Class C Warrant. The Class C Warrant is convertible
into the number of shares of Class C Common set forth opposite the name of the
Warrantholder on SCHEDULE 1.02. The Warrantholder holds no capital stock of any
of the APP Companies. Other than the Class C Warrant, the Warrantholder holds no
Other Equity Interests. Except for Encumbrances set forth on SCHEDULE 2.03, all
of which Encumbrances shall terminate, be terminated, discharged and irrevocably
removed and of no further force and effect at or prior to Closing, there is no
restriction affecting the ability of the Warrantholder to transfer the legal and
beneficial title and ownership of the Class C Warrant to the Buyer and, upon
delivery thereof to the Buyer pursuant to the terms of this Agreement and upon
payment of the portion of Cash Consideration due to the Warrantholder at the
Closing, the Buyer will acquire good and valid, record and beneficial title to
the Class C Warrant free and clear of all Encumbrances.
SECTION 2.02 SELLER'S AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. (a) In
the case of the Sellers, such Seller has the full legal right and power and all
authority and approval required by law to enter into this Agreement and to
perform his, her or its obligations hereunder. Such Seller has duly executed and
delivered this Agreement, and this Agreement is the legal, valid and binding
obligation of such Seller enforceable against such Seller in accordance with its
terms, except to the extent enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws generally
affecting creditors' rights and by equitable
8
13
principles (regardless of whether enforcement is sought in equity or at law). On
the Closing Date, neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor the performance of
this Agreement in compliance with its terms and conditions by such Seller will
(assuming the expiration of all waiting periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Anti
Trust Improvements Act of 1976, as amended (the "H-S-R Act")), (i) if such
Seller is not an individual, conflict with or result in any violation of any
trust agreement, certificate of incorporation or other charter document, bylaw,
partnership agreement or operating agreement applicable to such Seller, (ii)
conflict with or result in any violation of any judgment, decree, or Legal
Requirement applicable to such Seller or to the Shares of such Seller, or any
breach of any agreement to which said Seller is a party or by which such Seller
or his, her or its Shares is bound, or conflict with, violate, or constitute a
default thereunder, or result in the creation of any Encumbrance of any kind or
nature on, or with respect to, his, her or its Shares. Such Seller is not
subject to any judgment, order, writ, injunction, or decree that could
reasonably be expected to have a Material Adverse Effect (as defined below) or
that could adversely affect the ability of such Seller or the APP Companies to
consummate the transactions contemplated hereby.
(b) In the case of the Warrantholder, the Warrantholder has the full
legal right and power and all authority and approval required by law to enter
into this Agreement and to perform its obligations hereunder. The Warrantholder
has duly executed and delivered this Agreement, and this Agreement is the legal,
valid and binding obligation of the Warrantholder enforceable against the
Warrantholder in accordance with its terms, except to the extent enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws generally affecting creditors' rights and by
equitable principles (regardless of whether enforcement is sought in equity or
at law). On the Closing Date, neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, nor the
performance of this Agreement in compliance with its terms and conditions by the
Warrantholder will (assuming the expiration of all waiting periods under the
H-S-R Act) conflict with or result in (i) any violation of the Warrantholder's
certificate of incorporation or bylaw, or result in any violation of any
judgment, decree, or Legal Requirement applicable to the Warrantholder or to the
Class C Warrant, or (ii) any breach of any agreement to which the Warrantholder
is a party or by which the Warrantholder or the Class C Warrant is bound, or
conflict with, violate, or constitute a default thereunder, or result in the
creation of any Encumbrance of any kind or nature on, or with respect to, the
Class C Warrant. The Warrantholder is not subject to any judgment, order, writ,
injunction, or decree that could reasonably be expected to have a Material
Adverse Effect (as defined below) or that could adversely affect the ability of
the Warrantholder or the APP Companies to consummate the transactions
contemplated hereby.
B. As an inducement to the Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, the Class B Sellers, severally
and not jointly, hereby represent and warrant to the Buyer that, to their Actual
Knowledge (and without giving effect to limitations set forth in any of such
representations and warranties with respect to (i) any such representation's or
warranty's being applicable solely to the Schedule 1.03 Sellers and (ii) the
Actual Knowledge, Best Knowledge or similar knowledge or awareness
qualifications of the
9
14
Schedule 1.03 Sellers), each of the representations and warranties set forth in
Article II(C) below are accurate, true and correct in all respects.
C. As an inducement to the Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, the Schedule 1.03 Sellers,
jointly and severally, hereby represent and warrant to the Buyer as follows:
SECTION 2.03 CAPITALIZATION. The authorized, issued and outstanding
capital stock of APP consists of 45,000 shares of Class A Common, of which
42,500 shares have been issued and are outstanding, 55,000 shares of Class B-1
Common, of which 1,475 shares have been issued and are outstanding, 53,525
shares of Class B-2 Common, of which 53,525 shares have been issued and are
outstanding, and 5,000 shares of Class C Common, none of which has ever been
issued or are outstanding. SCHEDULE 1.02 sets forth the names of all of the
Company's stockholders and the number of Shares owned of record by each such
stockholder and the holder of the Class C Warrant and the number of shares of
Class C Common issuable upon conversion of the Class C Warrant. All of such
Class A Common and Class B Common shares are duly authorized, validly issued,
fully paid and non-assessable. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class and series
of authorized capital stock of the Company are as set forth in APP's Certificate
of Incorporation, as amended, and related certificate of designations, a copy of
which has been provided to the Buyer and is attached hereto as EXHIBIT 2.03, and
all such designations, powers, preferences, rights, qualifications, limitations
and restrictions are valid, binding and enforceable in accordance with all
applicable laws. There are no shares held in the corporate treasury of APP and,
other than the 2,500 shares of Class C Common Stock underlying the Class C
Warrant, there are no shares reserved for issuance. Other than the Class C
Warrant or as set forth on SCHEDULE 2.03, there are no Other Equity Interests
relating to shares of the capital stock or other securities of the Company.
Other than the Encumbrances set forth on Schedule 2.03 (all of which will
terminate, be terminated, discharged and irrevocable removed and be of no
further force or effect at or prior to the Closing), there is no obligation
(contingent or otherwise) to purchase, repurchase, redeem or otherwise acquire
any of the Company's equity securities or any interest therein. Except as set
forth on SCHEDULE 2.01(a), there is no obligation (contingent or otherwise) to
pay any dividend or make any other distribution in respect of the Company's
equity securities or any interest therein. The Sellers own all of the issued and
outstanding capital stock of APP.
SECTION 2.04 ORGANIZATION AND QUALIFICATION. APP is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
is duly licensed or qualified to transact business as a foreign corporation and
is not required to be in good standing under any other jurisdiction other than
jurisdictions in which the failure to so qualify would not have a material
adverse effect, either individually or in the aggregate, on the properties,
assets, operations or condition (financial or otherwise) or prospects of the APP
Companies, taken as a whole (a "Material Adverse Effect").
SECTION 2.05. (a) The sole subsidiary of APP is listed on SCHEDULE 2.05
(such subsidiary is sometimes referred to herein, as the "Subsidiary" on the
"APP Subsidiary"; APP and the APP Subsidiary are sometimes referred to herein,
individually, as an "APP
10
15
Company" and, collectively, as the "APP Companies"). The authorized and
outstanding securities of the APP Subsidiary is set forth on SCHEDULE 2.05. APP
owns beneficially and of record all of the outstanding securities of the APP
Subsidiary free and clear of all Encumbrances (other than Encumbrances set forth
on SCHEDULE 2.05 all of which will be completely removed and discharged
simultaneously with the payment of the Outstanding Indebtedness Amount). All of
such outstanding securities of the APP Subsidiary are duly authorized, have been
validly issued, and are fully paid and non-assessable. There are no shares held
in the corporate treasury of the APP Subsidiary and no shares reserved for
issuance. There are no Other Equity Interests relating to shares of the capital
stock or other securities of the APP Subsidiary.
The APP Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation as set forth on
SCHEDULE 2.05 and is duly licensed or qualified to transact business as a
foreign corporation and is in good standing in each jurisdiction listed on
SCHEDULE 2.05, such jurisdictions being the only jurisdictions in which the
failure to so qualify would have a Material Adverse Effect. The APP Subsidiary
has the corporate power and authority to own and hold its properties and to
carry on its business as presently conducted and as proposed to be conducted.
Except as set forth on SCHEDULE 2.05, APP does not (a) own of record or
beneficially, directly or indirectly, (i) any shares of capital stock or other
securities of any other corporation or entity or Other Equity Interest relating
to shares of capital stock or other securities of any other corporation or
entity (ii) any interest in any partnership, joint venture, limited liability
company or other non-corporate business enterprise or (b) control, directly or
indirectly, any other entity.
The APP Subsidiary does not (a) own of record or beneficially, directly
or indirectly, (i) any shares of capital stock or other securities of any other
corporation or entity or Other Equity Interest relating to shares of capital
stock or other securities of any other corporation or entity (ii) any interest
in any partnership, joint venture, limited liability company or other
non-corporate business enterprise or (b) control, directly or indirectly, any
other entity.
SECTION 2.06 CORPORATE POWER AND AUTHORITY. Each APP Company has the
corporate power and authority to own and hold its properties and to carry on its
business as presently conducted and as currently contemplated to be conducted by
such APP Company. APP has the corporate power and authority to execute, deliver
and perform this Agreement and the other documents and instruments contemplated
hereby. The execution, delivery and performance of this Agreement, the
employment agreements between the Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ dated as of the date hereof, and the documents and instruments
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby have been duly authorized and approved by APP. This Agreement does,
and each of the other agreements, documents and instruments to be executed and
delivered by APP when duly executed and delivered, shall constitute the legal,
valid and binding obligation of APP, enforceable against APP in accordance with
their terms, except to the extent enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
11
16
SECTION 2.07 VALIDITY, ETC. Except as set forth on SCHEDULE 2.07,
neither the execution and delivery of this Agreement and the other documents and
instruments contemplated hereby, the consummation of the transactions
contemplated hereby or thereby, nor the performance of this Agreement and such
other agreements in compliance with the terms and conditions hereof and thereof
will (i) violate, conflict with or result in any breach of any certificate of
incorporation, bylaw, judgment, decree, order, statute or regulation applicable
to any APP Company, (ii) require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Entity (as defined in
Section 2.14), except for filings, consents, permits, approvals and
authorizations required by the H-S-R Act, (iii) violate, conflict with or result
in a breach, default or termination or give rise to any right of termination,
cancellation or acceleration of the maturity of any payment date of any of the
obligations of any APP Company or increase or otherwise offset the obligations
of any APP Company under any Legal Requirement, permit, license or order or any
of the terms, conditions or provisions of any mortgage, indenture, note,
license, agreement or other instrument or obligation related to any APP Company
or any of its assets or the consummation of the transactions contemplated hereby
or thereby, except for such defaults (or rights of termination, cancellation or
acceleration) as to which (a) requisite waivers or consents have been obtained
in writing and provided to the Buyer or (b) could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect or adversely
affect the ability of the APP Companies to consummate the transactions
contemplated hereby, (iv) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to any APP Company or (v) result in the creation
of any Encumbrance upon the Shares or any assets, tangible or intangible, of any
APP Company.
SECTION 2.08 FINANCIAL STATEMENTS; SPECIFIED OUTSTANDING DEBT. APP has
previously furnished to the Buyer, and attached hereto as Exhibit 2.08 is set
forth, the audited consolidated balance sheet of APP as at December 31, 1996 and
as at December 31, 1995 and the unaudited consolidated balance sheet of APP as
at September 30, 1997 (the "Balance Sheet") and the related statements of income
and cash flows and notes thereto for the fiscal years ended December 31, 1996,
December 31, 1995 and the nine month period ended September 30, 1997. All such
financial statements (the "Financial Statements") have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
consistently applied (except that the interim Financial Statements lack
footnotes and other presentation items and are subject to normal year-end
adjustments) and were prepared from the books and records of the APP Companies,
which books and records are complete and correct in all material respects and
accurately reflect in all material respects all transactions of the APP
Companies' business. The Financial Statements fairly present in all material
respects the financial position of the APP Companies as of the dates thereof,
and the results of its operations and cash flows for the periods ended on the
dates thereof. The Financial Statements reflect reserves appropriate and
adequate for all known material liabilities and reasonably anticipated losses as
required by GAAP (including appropriate and adequate reserves for inventory, bad
debt and accrued liabilities). Since the date of the Balance Sheet, except as
described on Schedule 2.10, (a) there has been no change in the assets,
liabilities or financial condition of the Company from that reflected in the
Balance Sheet except for changes in the ordinary course of business consistent
with past practice and which have not had, and could not reasonably be expected
to have, a Material Adverse Effect, and (b) none of the business,
12
17
prospects, financial condition, operations, property or affairs of the Company
has been materially or adversely affected by any occurrence or development,
individually or in the aggregate, whether or not insured against. APP has
disclosed to the Buyer all material facts relating to the preparation of the
Financial Statements, including the basis of accounting for affiliated
transactions, and APP has delivered to the Buyer complete and correct copies of
all letters of representation from APP delivered to the accountants in
connection with the preparation of such Financial Statements which have been
audited, and all management letters from the accountants to any APP Company. As
of November 30, 1997, the Specified Outstanding Debt was $10,087,737 and as of
January 15, 1998 (assuming that no payments are made upon the Specified
Outstanding Debt and no additional amounts are borrowed pursuant to the Credit
Agreements) the Specified Outstanding Debt would be approximately $9,452,000.
SECTION 2.09 ABSENCE OF UNDISCLOSED LIABILITIES. No APP Company has any
liabilities or obligations of any nature whatsoever, due or to become due,
accrued, absolute, contingent or otherwise and to the Best Knowledge of the
Schedule 1.03 Sellers there is no basis for the assertion against any APP
Company of any liability or obligation other than: (i) liabilities reserved for
on the Balance Sheet, (ii) liabilities or obligations arising out of, in
connection with or related to the transactions contemplated hereby, (iii)
liabilities incurred for accounts payable and any accruals of current
liabilities since the Balance Sheet in each case in types and amounts which are
accrued in the ordinary course of the Company's business consistent with past
practice, (iv) obligations to perform under contracts, agreements, instruments,
licenses, permits, commitments and franchises (excluding any liabilities for
breach of contract, breach of warranty, tort or infringement or violation of
law); (v) liabilities disclosed on a Schedule hereto and (vi) undisclosed
liabilities which individually or in the aggregate could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 2.10 ABSENCE OF ADVERSE CHANGE; CONDUCT OF BUSINESS. Except as
set forth on SCHEDULE 2.10, since the date of the Balance Sheet, each APP
Company has conducted its business only in the ordinary course of business
consistent with past practice, there has been no material adverse change in or
affecting any APP Company or its business and there is no condition or
development or contingency of any kind existing which could reasonably be
expected to result in any such change. Without limiting the foregoing, except as
set forth on SCHEDULE 2.10, since the date of the Balance Sheet, there has not
been, occurred or arisen:
(i) any change in the business, or any change in the operations of the
business of any APP Company or in the manner of conducting any APP
Company's business, or sale or other disposition of any right, title or
interest in or to any assets or properties used in the business or any
revenues derived therefrom in each case other than changes, sales,
dispositions which (a) are in the ordinary course of business consistent
with past practice and (b) would not have nor could reasonably be
expected to have a Material Adverse Effect;
(ii) any loan, advance, agreement, arrangement or transaction between
the Company and any employees of any APP Company or its affiliates, or
any business or entity in which any APP Company, its affiliates, or any
employee of either has any direct or indirect
13
18
interest, except for compensation at rates not exceeding the rates of
compensation permitted by clause (xii) below and advances made to
employees of such APP Company for ordinary and customary business
expenses in reasonable amounts in the ordinary course of business
consistent with past practice;
(iii) any sale, assignment, transfer or grant of any license or
sublicense with respect to any patent, trademark, trade name, service
▇▇▇▇, copyright, trade secret or other intangible asset used or useful
in the business of any APP Company;
(iv) any grant, incurrence, discharge, pledge, placement or
satisfaction of any Encumbrance affecting or relating to, or any
material interruption in the use of, any asset, tangible or intangible,
of any APP Company, other than in connection with the payment of
Specified Outstanding Debt hereunder and Permitted Liens (as hereinafter
defined). "Permitted Liens" shall mean the following liens, security
interests and encumbrances, none of which could reasonably be expected
to have a Material Adverse Effect: (i) liens granted to secure Specified
Outstanding Indebtedness; (ii) liens for taxes, assessments or other
governmental charges or levies not yet due; (iii) statutory liens of
carriers, warehousemen, mechanics, materialmen and other Liens imposed
by law created in the ordinary course of business of any APP Company
consistent with past practices for amounts not yet due; (iv) liens
(other than any lien imposed by ERISA) incurred or deposits made in the
ordinary course of business of any APP Company consistent with past
practices in connection with worker's compensation, unemployment
insurance or other types of social security; (v) liens with respect to
interest in real property, defects of title, easements, rights-of-way,
restrictions and other similar encumbrances not materially detracting
from the value of such real property or interfering with the ordinary
conduct of the use of such property; (vi) liens created in favor of
lessors pursuant to real property leases; and (vii) liens created by or
through Buyer or any of its affiliates;
(v) any incurrence or payment of any material obligation or liability
(absolute, accrued or contingent) other than current liabilities shown
on the Balance Sheet and current liabilities incurred since the date of
the Balance Sheet in the ordinary course of business consistent with
past practice and repayments of Specified Outstanding Indebtedness;
(vi) any material transaction (which shall mean any transaction or
series of transactions totaling $100,000 or more) except in the ordinary
course of business consistent with past practice;
(vii) any declaration, setting aside or payment of any dividend or
other distribution on or in respect of any shares of any APP Company's
capital stock, or any direct or indirect redemption, retirement,
purchase, repurchase or other acquisition by any APP Company of any
shares of its capital stock or other securities;
(viii) any change by any APP Company in accounting methods, principles
or practices or any change in depreciation or amortization policies or
rates therefore adopted by it;
14
19
(ix) any material adverse change in, relating to, or affecting the
condition, assets, personnel, properties, working capital, liabilities
or business of any APP Company, including any material decline in sales
volume from the prior year period, any material loss, through
resignation, incapacity or otherwise, of the services of any key
personnel, any loss of a material source of supply, or any material
loss, damage or destruction to any assets of any APP Company;
(x) any change in the Certificate of Incorporation or bylaws of any
APP Company;
(xi) any creation of, or action relating to the creation of, any
subsidiary or purchase of or action relating to the purchase of, any
equity interest in any other entity;
(xii) any issuance or sale or authorization of the issuance or sale of
any shares of capital stock or other securities of any APP Company or
Other Equity Interest relating to shares of capital stock or other
securities of any APP Company (either by any APP Company or any of the
Sellers), other than to the Buyer hereunder;
(xiii) any direct or indirect waiver or waivers by any APP Company of
any right or rights (alleged, contingent or otherwise), or any direct or
indirect payment or payments of any liability owed to any APP Company,
in excess of $100,000 in the aggregate, in each case other than in the
ordinary course of business consistent with past practice;
(xiv) any payment or commitment entered into by any APP Company to pay
any bonus, severance, pension, termination or special compensation of
any kind to any of its officers, directors, consultants, agents, or
employees, any increase in the rate of compensation payable or to become
payable to any of its officers, directors, consultants, agents or
employees, except for increases in the ordinary course of business
consistent with past practice not in excess of 10% per annum for any
individual;
(xv) any purchase, sale, transfer, abandonment or other disposition of
assets by any APP Company, other than purchases, sales, or leases of
property in the ordinary course of business consistent with past
practice;
(xvi) any merger or consolidation of or by any APP Company with any
other corporation or entity, or any acquisition by it of all or any part
of the stock or the business or assets, other than inventory or
equipment in the ordinary course of business consistent with past
practice, of any other natural person, firm, association, corporation or
business organization;
(xvii) any execution, termination or amendment of any material contract,
agreement, franchise, permit, license or other instrument by any APP
Company except in the ordinary course of business consistent with past
practice or any loss or termination or, to the Actual Knowledge of the
Schedule 1.03 Sellers, threatened loss or termination, of any material
customer or supplier of any APP Company;
15
20
(xviii) any charitable contributions or any material non-business
expense incurred or agreed to be incurred by any APP Company;
(xix) any charge-off of any bad debt by any APP Company or any
increase in any bad debt reserve of any APP Company, in each case except
in the ordinary course of business consistent with past practice;
(xx) any election related to Tax (as defined in Section 2.13); or
(xxi) any understanding, with respect to any commitment (contingent or
otherwise) to do any of the foregoing.
SECTION 2.11 INVENTORIES. Except as listed on Schedule 2.11, all of the
inventory of the APP Companies reflected on the Balance Sheet or thereafter
acquired (and not subsequently sold in the ordinary course of business) consists
of items of a quality and quantity usable or saleable in the ordinary course of
the APP Companies' business, subject to appropriate reserves for inventory
write-down which are set forth on the face of the Balance Sheet, at prices
having a value equal to the amounts reflected on the Balance Sheet or, with
respect to after-acquired inventory, at least equal to the cost thereof plus
markups consistent with past practice. Each item of such inventory is valued on
the Balance Sheet at the lower of cost (on a first-in-first-out basis) or
market, in accordance with GAAP. Except as listed on Schedule 2.11, all items of
inventory are located on premises owned or leased by an APP Company. The
inventories and supplies of the APP Companies are on the date hereof, and will
be on the Closing Date, at normal and adequate levels for the continuation of
such business in the ordinary course of business.
SECTION 2.12 RECEIVABLES. SCHEDULE 2.12(a) provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of the APP Companies as of September 30, 1997. Except as set
forth on SCHEDULE 2.12(b), all such receivables listed or required to be listed
on SCHEDULE 2.12(a) and any such receivables acquired after September 30, 1997
(a) have arisen only from bona fide transactions in the ordinary course of
business consistent with past practice, (b) represent valid obligations, and (c)
are current and are expected to be collectible in the aggregate face amounts
thereof without any counterclaim or set-off when due, except to the extent of
the normal allowance for doubtful accounts with respect to accounts receivable
that are computed in a manner consistent with GAAP and past practice and as
reflected in the Balance Sheet or with respect to receivables arising subsequent
to September 30, 1997, the books and records of the APP Companies, and (d)
except as set forth on SCHEDULE 2.12(b) and Permitted Liens, are owned by the
APP Companies free of all Encumbrances. No discount or allowance from any
receivable has been made or agreed to (other than customary payment discounts in
the ordinary course of business consistent with past practice), and none
represents ▇▇▇▇▇▇▇▇ prior to actual sale of goods or provision of services.
SECTION 2.13 TAXES. (a) All Tax Returns required to be filed by or with
respect to each APP Company on or before the date hereof have been timely filed,
taking into account appropriate and allowable extensions (and, in the case of
such Tax Returns required to be filed after the date hereof and on or prior to
the Closing Date, will be so filed) except where the failure
16
21
to so file has not, would not and will not subject any APP Company to any
material liability, and all such Tax Returns are (and will be) true and complete
in all material respects. Each APP Company has timely paid, or there have been
paid on their behalf, all Taxes (whether or not shown on any Tax Return) that
are due, or except as set forth on Schedule 2.13, claimed or asserted by any
taxing authority to be due, from or with respect to it for taxable years or
periods ending prior to the date hereof (and, each APP Company will so pay in
the case of payments required to be made after the date hereof and on or prior
to the Closing Date) except to the extent adequately reserved in accordance with
GAAP on the Financial Statements. No APP Company files any material Tax Returns
in any jurisdiction other than those set forth in SCHEDULE 2.13. No claim has
been made by an authority in a jurisdiction where any of the APP Companies does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(b) The Financial Statements fully accrue all actual and contingent
liabilities for Taxes with respect to all periods through the dates thereof in
accordance with GAAP (except that the interim Financial Statements lack
footnotes and other presentation items and are subject to normal year-end
adjustments). The Company has established and will continue to establish, in the
ordinary course of business and consistent with its past practices, reserves
reasonably estimated to be adequate for the payment of all Taxes for the period
from September 30, 1997 through the Closing Date, and the Company will disclose
the dollar amount of such reserves to the Buyer on or prior to the Closing Date.
(c) Except as set forth on Schedule 2.13, no audit or other proceeding
by any court, Governmental Entity, or similar person is pending, or is
threatened in writing or otherwise, with respect to any Tax due from or with
respect to an APP Company or any such Tax Return filed by or with respect to an
APP Company. Except as set forth on Schedule 2.13, no assessment of Taxes has
been proposed in writing against an APP Company or any of their respective
assets that has not been paid.
(d) Except as set forth on Schedule 2.13, no issue relating to the APP
Companies has been raised in writing by any taxing authority in any audit or
examination which, by application of the same or similar principles, could
reasonably be expected to result in a material deficiency for any subsequent
period, including periods subsequent to the Closing Date. There are no
outstanding agreements, waivers or arrangements extending the statutory period
of limitation applicable to the period for the collection or assessment of,
Taxes due from or with respect to any APP Company for any taxable period, and no
power of attorney granted by or with respect to any APP Company relating to
Taxes is currently in force. With respect to Taxes for taxable years or periods
ending after 1994, no closing agreement pursuant to Section 7121 of the Code (or
any predecessor provision) or any similar provision of any state, local, or
foreign law has been entered into by or with respect to any APP Company.
(e) APP has previously delivered to Buyer true and complete copies of
each of (i) any audit reports issued within the last three years relating to the
United States federal, state, local or foreign Taxes due from or with respect to
any APP Company and (ii) the United States federal income Tax Return, and those
state, local and foreign Tax Returns for each of the last three taxable years,
filed by any APP Company.
17
22
(f) There are no Tax liens or other Encumbrances with respect to Taxes
upon any of the assets of any APP Company, other than with respect to Taxes not
yet due and payable.
(g) No consent to the application of Section 341(f)(2) of the Code (or
any predecessor provision) has been made or filed by or with respect to any APP
Company or any of their respective assets. None of the assets or properties of
any APP Company is an asset that is or will be required to be treated as being
(i) owned by any person (other than an APP Company) pursuant to the provisions
of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, and in
effect immediately before the enactment of the Tax Reform Act of 1986, or (ii)
tax-exempt use property within the meaning of Section 168(h)(1) of the Code.
(h) Each APP Company is in material compliance with all applicable laws
or regulations relating to the payment or withholding of Taxes. Each APP Company
is in material compliance with its obligation to withhold from employee
salaries, wages and other compensation and pay over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods
under all applicable laws and regulations. Each APP Company is in material
compliance with its obligations to withhold and pay all Taxes required to have
been withheld and paid in connection with amounts owing to any independent
contractor, creditor, stockholder or other third party.
(i) Effective as of the Closing no APP Company shall be a party to, be
bound by or have any obligation under, any Tax sharing, Tax indemnity or similar
contract or arrangement.
(j) Except as set forth on Schedule 2.13, there is no contract or
agreement, plan or arrangement by any APP Company (other than Section 1.03
hereof) covering any person that, individually or collectively, could give rise
to payment after the Closing of any amount that would not be deductible by an
APP Company by reason of Section 280G of the Code or would constitute
compensation in excess of the limitations set forth in Section 162(m) of the
Code.
(k) No APP Company has agreed to or is required to make any adjustment
pursuant to Section 481(a) of the Code (or any predecessor provision) by reason
of any change in its accounting method, and there is no application pending with
any taxing authority requesting permission for, nor has the Internal Revenue
Service ("IRS") proposed any changes, in any accounting method of any APP
Company.
(l) No APP Company (i) has been a member of an affiliated group (within
the meaning of the Code) filing a consolidated federal income Tax Return other
than a group the common parent of which is APP, or (ii) has any liability for
the Taxes of any person (other than an APP Company) under Reg. ss.1.1502-6 (or
any similar provision of state local or foreign law), as a transferee or
successor, by contract, or otherwise.
(m) None of the APP Companies has been a United States real property
holding corporation with the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(i)(A)(ii).
18
23
(n) "Tax" and "Taxes" means all taxes, charges, fees, levies, tariffs,
duties or other similar assessments, including, without limitation, (i) income,
gross receipts, gains, surtax, severance, payroll, production, ad valorem or
value added, surtax, premium, excise, real property, personal property, windfall
profit, sales, use, transfer, duty licensing, withholding, employment, payroll,
estimated and franchise taxes imposed by the United States of America, any
state, local, or foreign government, or any subdivision, agency, or other
similar Person of the United States or any such government, and (ii) any
interest, fines, penalties, assessments, or additions to tax resulting from,
attributable to or incurred in connection with any Tax or any contest, dispute
or refund thereto; whether or not imposed on a consolidated combined or unitary
basis or as a result of transferee, joint or several liability.
(o) "Tax Return" means any report, return, statement or other
information required to be supplied to a taxing authority in connection with
Taxes.
SECTION 2.14 LITIGATION. Except as set forth on SCHEDULE 2.14, there is
no (a) action, suit, claim, proceeding or investigation (i) pending, or (ii) to
the Actual Knowledge of the Schedule 1.03 Sellers, affecting (or which could
reasonably be expected to affect) any APP Company in a manner which could
reasonably be expected to have a Material Adverse Effect (whether or not such
APP Company is a party or prospective party thereto) or, to the Actual Knowledge
of the Schedule 1.03 Sellers, threatened against any APP Company or, in either
case at law or in equity, before or by any Federal, state, municipal or other
governmental department, commission, board, authority, entity, bureau, agency or
instrumentality, domestic or foreign ("Governmental Entity"), (b) arbitration
proceeding relating to any APP Company or (c) Governmental Entity inquiry
pending, involving or affecting, or to the Actual Knowledge of the Schedule 1.03
Sellers threatened, against any APP Company, and, to the Best Knowledge of the
Schedule 1.03 Sellers, there is no basis for any of the foregoing which could
reasonably be expected to have a Material Adverse Effect. Except as set forth on
SCHEDULE 2.14, no APP Company nor any Schedule 1.03 Seller has received any
opinion or memorandum or advice from legal counsel to the effect that it is
exposed, from a legal standpoint, to any liability which could have a Material
Adverse Effect. Except as set forth on Schedule 2.14, there are no outstanding
orders, writs, judgments, injunctions or decrees of any court, arbitration
tribunal, or other Governmental Entity against, involving or affecting any APP
Company. No APP Company is in default with respect to any order, writ,
injunction or decree from any court or of any Governmental Entity. Except as set
forth on SCHEDULE 2.14, there is no action or suit by any APP Company pending or
threatened against others.
SECTION 2.15 CERTAIN PRACTICES. Except as set forth on Schedule 2.15, to
the Best Knowledge of the Schedule 1.03 Sellers, no APP Company nor any of its
directors, officers or employees has, directly or indirectly, given or agreed to
give any significant rebate, gift or similar benefit to any supplier, customer,
governmental employee or other person who was, is or may be in a position to
help or hinder such APP Company (or assist in connection with any actual or
proposed transaction) which could reasonably be expected to have a Material
Adverse Effect.
19
24
SECTION 2.16 COMPLIANCE WITH LAW. No APP Company is subject to any
judgment, order, writ, injunction, or decree that could reasonably be expected
to have a Material Adverse Effect or that could adversely affect the ability of
the APP Companies to consummate the transactions contemplated hereby. Each APP
Company is, and has at all times been, in compliance with all, and is not and
has not been in violation of any, federal, state, local, municipal, foreign or
other law, statute, ordinance, code, permit, rule, regulation, order, common law
principle or other legal requirement applicable to it, its operations,
properties, assets, products and services ("Legal Requirement") except for any
failure to comply or violation which could not reasonably be expected to have a
Material Adverse Effect and that could not adversely affect the ability of the
APP Companies to consummate the transactions contemplated hereby. Except as set
forth in SCHEDULE 2.16, none of the APP Companies nor any Seller have ever
received any written notice or, to the Actual Knowledge of any Schedule 1.03
Seller, any other communication from any Governmental Entity regarding any
actual or possible violation of, or actual or alleged failure to comply with,
any Legal Requirement by the Company or any of its employees, officers,
directors, agents or consultants, except for those which have been cured and to
which there is no remaining liability. There is no existing Legal Requirement,
and, to the Actual Knowledge of the Schedule 1.03 Sellers, there is no proposed
Legal Requirement, which would prohibit any APP Company, or otherwise materially
adversely affect any APP Company in, conducting the business of any APP Company
in any jurisdiction in which such business is now conducted or proposed to be
conducted (whether before or after the consummation of the transaction
contemplated hereby).
SECTION 2.17 LICENSES AND PERMITS. SCHEDULE 2.17 lists all material
licenses, permits, franchises, registrations, pending applications, consents,
approvals and authorizations of or from any Governmental Entity, used in or
otherwise necessary in the business of each APP Company as currently conducted
or currently proposed to be conducted by the Company (collectively, the
"Permits"), each of which is and will remain in full force and effect following
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. To the Actual Knowledge of the Schedule 1.03
Sellers, there is no reason that an application for renewal or extension of any
such permits, if submitted, will not be granted. Each APP Company is and has
been in compliance with all conditions and requirements imposed by the Permits
and no APP Company or any Seller has received any notice that any Governmental
Entity or other issuer of a Permit intends to cancel or terminate any of the
Permits. To the Best Knowledge of the Schedule 1.03 Sellers, no valid grounds
for the cancellation or termination of any Permit exist. To the Best Knowledge
of the Schedule 1.03 Sellers, no other material permits, licenses or
authorizations are necessary to operate the business of any APP Company as
currently operated. The APP Companies own or have the right to use the Permits
in accordance with the terms thereof without any conflict or alleged conflict or
infringement with the rights of others and subject to no Encumbrance except to
secure Indebtedness (as defined in Section 2.35), and each Permit is valid and
in full force and effect, and will not be terminated or adversely affected by
the transactions contemplated hereby.
SECTION 2.18 LABOR AND EMPLOYEE RELATIONS. No APP Company is a party to
or bound by any collective bargaining agreement with any labor organization,
group or association covering any of its employees, and no Schedule 1.03 Seller
has Actual Knowledge of any attempt to organize any of the employees of any APP
Company by any person, unit or group seeking to act
20
25
as their bargaining agent. There are no pending or, to the Actual Knowledge of
the Schedule 1.03 Sellers, threatened charges (by employees, their
representatives or Governmental Entities) of unfair labor practices or of
employment discrimination or of any other wrongful action with respect to any
aspect of employment of any person employed or formerly employed by any APP
Company. No union representation elections relating to employees of any APP
Company have been scheduled by any Governmental Entity, no organizational effort
is being made with respect to any of such employees, and there is no
investigation of any APP Company's employment policies or practices by any
Governmental Entity pending or threatened. No APP Company is currently, or
within the last three years has been, involved in labor negotiations with any
unit or group seeking to become the bargaining unit for any of the employees of
any APP Company. No APP Company has experienced any employee or union initiated
work stoppage during the last three years and, to the Best Knowledge of the
Schedule 1.03 Sellers no employee or union initiated work stoppage is planned.
SECTION 2.19 CERTAIN EMPLOYEES. Set forth in SCHEDULE 2.19 is a list of
the names of all of the employees, consultants and independent sales
representatives of the APP Companies, together with the title or job
classification of each such person and the base annual and the total
compensation paid to each such person in fiscal year 1996 and anticipated to be
paid in fiscal year 1997. Except as specifically described on SCHEDULE 2.19 or
in the Company's severance policies described on SCHEDULE 2.20 or pursuant to
the Management Employment Agreements, none of such persons has an employment
agreement or understanding, whether oral or written, with any APP Company which
is not immediately terminable on notice by such APP Company without cost or
other liability to such APP Company. No person listed on SCHEDULE 2.19 (except
any hourly or temporary employee) has advised any Schedule 1.03 Seller that he
or she intends to terminate his or her employment with any APP Company or seek a
material change in his or her duties or status.
SECTION 2.20 EMPLOYEE BENEFITS. Set forth on Schedule 2.20 is a complete
list of all pension, profit sharing, retirement, 401(k), deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, golden
parachute, disability, hospitalization, medical insurance, life insurance,
dental insurance, fringe benefit, educational assistance, cafeteria, welfare and
other employee benefit plans, programs, policies, practices or arrangements
(oral or written) to which employees, former employees or retired employees,
directors, former directors, officers, former officers, contractors or
consultants of any APP Company (or any of their family members) may be entitled,
including any such plan, program, policy, practice or arrangement which
heretofore has expired or been terminated and for which the any APP Company may
have any ongoing obligations or liabilities. Each such plan, program, policy,
practice or arrangement listed or required to be listed on Schedule 2.20 is
referred to herein as an "Employee Plan".
(a) EMPLOYEE PLANS. APP has provided the Buyer with complete and correct
copies of all plan documents and amendments thereto which comprise each Employee
Plan, and, as and if applicable for any such Employee Plan: (i) the summary plan
description and all modifications thereto or insurance policy, (ii) the last
three (3) annual reports filed with the Internal Revenue Service ("IRS"), (iii)
the latest summary annual report, (iv) any summary of material modifications,
(v) the most recent IRS determination letter, (vi) any trust agreements and any
21
26
amendments made thereto, (vii) any service provider agreements (including
investment advisors and custodian agreements), (viii) the most recent actuarial
reports for each Welfare Plan (as defined in Section 2.20(c)) covering retired
employees or their spouses and dependents, and (ix) the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA") continuation coverage notices and
HIPAA Certificates provided to employees. Each Employee Plan conforms in all
material respects to, and is in material compliance with, all Legal Requirements
including, (with respect to each Employee Plan which is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and/or the Code,
ERISA, the Code and all other Legal Requirements, including all funding,
reporting, disclosure, fiduciary, non-discrimination, group health plan
continuation coverage and Tax qualification requirements. There has been no
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code
and no breach(es) of any fiduciary duties or obligations under Section 404 of
the Code with respect to any Employee Plan. There are no actions, suits or
claims pending (other than routine claims for benefits) or threatened against
any Employee Plan, Employee Plan fiduciary, or the assets of any Employee Plan.
(b) PENSION PLANS. No Employee Plan is or has been at any time or is or
was intended to be an "employee pension benefit plan" (as defined in Section
3(2) of ERISA). No APP Company contributes or has contributed to a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or "multiple
employer plan" (as defined in Section 413 of the Code).
(c) WELFARE PLANS. Schedule 2.20 identifies each Employee Plan which is
an employee welfare benefit plan (as defined in Section 3(1) of ERISA) ("Welfare
Plan") and identifies which, if any, of such plans involve benefits to retired
employees. Each Welfare Plan subject to the requirements of COBRA and the Health
Insurance Portability and Accountability Act ("HIPAA") has complied with all
applicable Legal Requirements of COBRA and HIPAA including all notice
requirements, under its group Welfare Plans.
(d) ADMINISTRATION. Each Employee Plan has been administered in
accordance with its terms and in full compliance with all applicable Legal
Requirements. No Employee Plan is, or at any time in the past three years has
been, the subject of an audit or examination by a government agency, and no
Employee Plan is, or at any time in the past three years has been, the subject
of an application or filing under a government sponsored voluntary compliance,
amnesty or similar program.
(e) ACCELERATION OF BENEFITS. Except as set forth on Schedule 2.20(e),
the consummation of the transactions contemplated hereby will not cause to
commence, entitle, or otherwise convey a right to receive upon any officer,
former officer, director, former director, employee or former or retired
employee, or any other person, a golden parachute or other form of accelerated
benefit payment.
SECTION 2.21 TANGIBLE PROPERTIES. SCHEDULE 2.21 contains a true and
complete list of all tangible personal property owned by or leased to any APP
Company as of the date hereof, which is either material to an APP Company or its
business or which has a value in excess of $100,000 (the "Tangible Personal
Property"). Except as shown on SCHEDULE 2.21, each APP
22
27
Company has good and marketable title, free and clear of all Encumbrances, to
the Tangible Personal Property listed on such schedule as owned by it. With
respect to Tangible Personal Property leased by such APP Company as lessee, all
leases, conditional sale contracts, franchises or licenses pursuant to which
such APP Company may hold or use (or permit others to hold or use) such Tangible
Personal Property are valid and in full force and effect, there is not under any
of such instruments any existing default by any APP Company or event of default
by any APP Company or event which with notice or lapse of time or both would
constitute such a default by an APP Company, and, to the Actual Knowledge of the
Schedule 1.03 Sellers, except as set forth on Schedule 2.21, there is not under
any of such instruments any existing default by any other party thereto or event
of default by any other party thereto or event which with notice or lapse of
time or both would constitute such a default by any other party thereto except
defaults which individually or in the aggregate would not reasonably be expected
to result in a Material Adverse Effect. Such APP Company's possession and use of
such property has not been disturbed and no claim has been asserted against such
APP Company adverse to its rights in such leasehold interests. All Tangible
Personal Property is adequate and usable for the purposes for which it is
currently used and is generally in good operating condition compared to assets
of like age and quality and subject to reasonable maintenance and repairs.
During the past three (3) years, there has not been any interruption of the
operations of any APP Company's business due to the condition of any of the
Tangible Personal Property other than interruptions (i) in the ordinary course
of business, or (ii) which have not had and could not reasonably be expected to
have a Material Adverse Effect.
SECTION 2.22 OWNED PREMISES. No APP Company owns any real property or
any interest in real property, except for the real property leases identified on
SCHEDULE 2.23.
SECTION 2.23 LEASED PREMISES. SCHEDULE 2.23 sets forth a true and
complete list and description of each parcel of real property leased by each APP
Company (the "Leased Parcels") and identifies the leases related to such Leased
Parcels. Each lease covering a Leased Parcel is in full force and effect (there
existing no material default under any such lease or event which, with the lapse
of time or notice or otherwise, would constitute a default), conveys the leased
real estate purported to be conveyed thereunder, and is enforceable by such APP
Company in accordance with its terms. Each APP Company has the right to use the
Leased Parcels in accordance with the terms of such leases free and clear of all
Encumbrances or other interests or rights of third parties, except Permitted
Liens. The possession of such property by such APP Company has not been
disturbed and, to the Actual Knowledge of the Schedule 1.03 Sellers, no claim
has been asserted against any APP Company adverse to its rights in such
leasehold interests. To the Actual Knowledge of the Schedule 1.03 Sellers, each
structure located on each Leased Parcel is structurally sound, adequately
maintained and is in good condition and repair consistent with the uses to which
it is presently being put or intended to be put and other properties of like
construction and age except as could not reasonably be expected to have a
Material Adverse Effect. All structures, improvements and fixtures on the Leased
Parcels and the current uses of the Leased Parcels conform and comply in all
material respects to any and all Legal Requirements. No notice from any
Governmental Entity or other person has been served upon, or received by, any
APP Company or any Schedule 1.03 Seller claiming any violation of any such Legal
Requirement, or requiring any work, repairs, reclamation, construction,
alterations or installation
23
28
on or in connection with any Leased Parcel or any structure, improvement or
fixture thereon which has not been complied with in all material respect or that
any right of access or other right enjoyed by any APP Company is being modified
or terminated. There is no violation of any written covenant or restriction
affecting title or use of any Leased Parcel, which could reasonably be expected
to have a Material Adverse Effect. There are no pending or, to the Actual
Knowledge of the Schedule 1.03 Sellers, threatened condemnation or similar
proceedings or assessments affecting any of the Leased Parcels.
SECTION 2.24 ENVIRONMENTAL MATTERS.
Except as set forth on Schedule 2.24:
(a) COMPLIANCE. Each APP Company has at all times operated in material
compliance with all applicable Legal Requirements.
(b) ENVIRONMENTAL SUBSTANCE LIABILITY. No APP Company has handled,
stored, transported, disposed or released any substances in a manner that has
given or will give rise to liability on the part of any APP Company for any
losses, liabilities, damages (whether consequential or otherwise), settlements,
penalties, interest, expenses and costs of response (including any such
liability on account of the right of any Governmental Entity or private entity
or person), and including closure expenses, costs of assessment, containment,
removal or response arising under any Legal Requirement.
(c) ENVIRONMENTAL PERMITS. Each APP Company has obtained and holds all
material registrations, permits, licenses, and approvals issued by or on behalf
of any federal, state or local government body or agency ("Environmental
Permits"), that are required in connection with such APP Company's operation of
its facilities or plants. Such Environmental Permits, all of which are listed
and described in SCHEDULE 2.24, are currently effective and sufficient for the
ownership and operation of the plants and facilities and the operation of each
APP Company as currently conducted and intended to be conducted.
As used in this Section 2.24, the term "Substances" shall mean any
pollutant, contaminant, hazardous substance, hazardous material, hazardous waste
or toxic waste, as defined in any current or, to the Actual Knowledge of the
Schedule 1.03 sellers, currently proposed federal, state or local statute or any
regulation promulgated pursuant thereto.
SECTION 2.25 INSURANCE. Each APP Company is, and will be through the
Closing, adequately insured in respect of its properties, assets and businesses
against risks normally insured against by companies in similar lines of business
under similar circumstances. SCHEDULE 2.25 accurately describes (by type,
carrier, policy number, limits, premium, and expiration date) the insurance
coverage carried by the APP Companies or any of them, which insurance is and
will remain in full force and effect with respect to all events occurring prior
to the Closing. No APP Company has failed to give any notice or present any
material claim under any such policy or binder in due and timely fashion, has
received notice of cancellation or non-renewal of any such policy or binder, is
aware of any threatened or proposed cancellation or non-renewal of any such
24
29
policy or binder, or has received written notice of any insurance premiums which
will be materially increased in the future. There are no outstanding claims
under any such policy which have gone unpaid for more than 45 days, or as to
which the insurer has disclaimed liability.
SECTION 2.26 OUTSTANDING COMMITMENTS. SCHEDULE 2.26 lists each existing
contract, agreement, understanding, commitment, license and franchise, whether
written or oral, which is material to any APP Company or its business or assets,
or which involves amounts in excess of $50,000 (each, a "Material Agreement,"
and collectively, the "Material Agreements"). The APP Companies have delivered
or made available to the Buyer true, correct and complete copies of all of the
Material Agreements specified on SCHEDULE 2.26 which are in writing, and
SCHEDULE 2.26 contains an accurate and complete description of all material
terms of each Material Agreements which is not in writing. The APP Companies
have paid in full all amounts due and required to be paid as of the date hereof
under each Material Agreement identified in SCHEDULE 2.26 and will have
satisfied in full all of their respective liabilities and obligations thereunder
due and required to be paid prior to the Closing. All of the Material Agreements
listed in SCHEDULE 2.26 are in full force and effect, except such Material
Agreements to be terminated at Closing pursuant to this Agreement. Each APP
Company and, to the Actual Knowledge of the Schedule 1.03 Sellers, each other
party thereto have performed all of the obligations required to be performed by
them to date, have received no notice of default and are not in default (with
due notice or lapse of time or both) under any Material Agreement except where
such failures to perform and defaults could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. No APP
Company has a present expectation or intention of not fully performing all of
its obligations under each Material Agreement, and no Schedule 1.03 Seller has
Actual Knowledge of any breach or anticipated breach by the other party to any
contract or commitment to which any APP Company is a party. There exists no
actual or, to the Actual Knowledge of the Schedule 1.03 Sellers, threatened
termination, cancellation or limitation of the business relationship of any APP
Company with any party to any such Material Agreement.
SECTION 2.27 INTELLECTUAL PROPERTY. As used herein, "Intellectual
Property Rights" shall refer to recipes, patents, inventions, know-how,
show-how, designs, trade secrets, copyrights, maskrights, trademarks,
tradenames, servicemarks, manufacturing processes, formulae, trade secrets,
technology or the like, and all applications for and rights associated with
(including any rights under any license or contract) any of the foregoing. All
Intellectual Property Rights owned, controlled or used by any of the APP
Companies are referred to collectively as "Company Intellectual Property
Rights". Schedule 2.27 sets forth a list of all material (i) license agreements
pertaining to Intellectual Property Rights that are currently in force and to
which any of the APP Companies is a party; (ii) patents, trademarks and
copyrights registered in the name of or owned by any APP Company; (iii) pending
applications for the foregoing, owned or used by any APP Company and (iv)
unregistered trademarks.
All patents, copyrights and trademarks included in Company Intellectual
Property Rights are (except as described on Schedule 2.27) valid and in full
force and all applications listed therein as pending have been prosecuted in
good faith as required by law and are in good standing. The Company has
delivered or made available to the Buyer true and complete copies of all of such
Company Intellectual Property Rights to the extent embodied in any writing,
including all
25
30
applications, licenses, commitments and other agreements, including all
amendments and supplements thereto and modifications thereof, and SCHEDULE 2.27
includes a description of each material Company Intellectual Property Right that
is not in writing. Except as described on Schedule 2.27, there has been no
infringement nor has their been any assertion of any infringement, by any APP
Company or its affiliates with respect to any Intellectual Property Rights of
others, other than infringements which individually or in the aggregate could
reasonably be expected to result in a Material Adverse Effect. The Company owns
or possesses adequate licenses or other rights to use all Company Intellectual
Property Rights in the conduct its business as currently conducted and as
currently proposed to be conducted by the Company. The Company Intellectual
Property Rights constitute all of the Intellectual Property Rights necessary for
the Company to conduct its business as currently conducted and as proposed to be
conducted by the Company. Except as set forth on Schedule 2.27, none of the
Company Intellectual Property Rights is involved in any interference or
reexamination or cancellation or opposition proceeding, and, no APP Company has
been notified or alerted (in writing or otherwise) that any such proceeding will
hereafter be commenced. Each APP Company except as described on Schedule 2.27
have used all reasonable efforts to protect the Company Intellectual Property
Rights against infringement by others and to preserve their trade secrets and
confidential or proprietary information. Except as set forth on Schedule 2.27,
to the Best Knowledge of the Schedule 1.03 Sellers, no APP Company has any basis
for provoking or initiating an interference or opposition proceeding with
respect to any Intellectual Property Right held or used by others, and does not
have any basis for believing that any of the Company Intellectual Property
Rights are being infringed by others. All of the rights held by the APP
Companies associated with the Company Intellectual Property Rights are legally
valid and binding and in full force and effect. No APP Company is in default
under any such license, contract or other agreement and there are no defaults by
any other party to any such license, contract or other agreement that could
reasonably be expected to have a Material Adverse Effect. Except as described in
SCHEDULE 2.27, no APP Company has granted any person or entity any right to use
any of the Company Intellectual Property Rights for any purpose.
SECTION 2.28 PROPRIETARY INFORMATION OF THIRD PARTIES. Except as set
forth on Schedule 2.28, no third party has claimed or, to the Best Knowledge of
any Schedule 1.03 Seller, has reason to claim that any person employed by or
affiliated with any APP Company has (a) violated or may be violating any of the
terms or conditions of such person's employment, non-competition or
non-disclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party, or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees.
To the Best Knowledge of the Schedule 1.03 Sellers, no person employed
by or affiliated with any APP Company has employed or, to the Actual Knowledge
of the Schedule 1.03 Sellers, proposes to employ any trade secret or any
information or documentation proprietary to any former employer, and no person
employed by or affiliated with any APP Company has violated any confidential
relationship which such person may have had with any third party, in connection
with the development, manufacture or sale of any product or proposed product or
the development or sale of any service or proposed service of such APP Company,
and the Sellers
26
31
have no reason to believe there will be any such employment or violation. To the
Actual Knowledge of the Schedule 1.03 Sellers, none of the execution or delivery
of this Agreement, or the carrying on of the business of the APP Companies as
officers, employees or agents by any officer, director, employee or consultant
of any APP Company, or the conduct or proposed conduct of the business of the
APP Companies, will conflict with or result in a breach of the terms, conditions
or provisions of or constitute a default under any contract, covenant or
instrument under which any such person is obligated.
SECTION 2.29 SIGNIFICANT CUSTOMERS AND SUPPLIERS. Set forth on SCHEDULE
2.29 is a list of the ten largest customers and ten largest suppliers of each
APP Company (i) for the twelve-month period ended December 31, 1996 and (ii) for
the nine-month period ended September 30, 1997, together with the amount of
sales or purchases attributable to such customers or suppliers expressed in
dollars and as a percentage of total sales or purchases, as the case may be for
such periods. Except as set forth on SCHEDULE 2.29, no customer who purchased
from or supplier who supplied to any APP Company more than $100,000 worth of
products, supplies or services during either of the past two years (a
"Significant Customer" and a "Significant Supplier", respectively) has
terminated, materially reduced or to the Actual Knowledge of the Schedule 1.03
Sellers threatened to terminate or materially reduce its purchases from or
provision of products or services to any APP Company, as the case may be. To the
Actual Knowledge of the Schedule 1.03 Sellers, no Significant Customer or
Significant Supplier will or is likely to terminate or materially reduce its
purchases from or provision of products or services to any APP Company, as the
case may be. Copies of the standard forms of purchase or supply contracts of
each APP Company and sales contracts are set forth in SCHEDULE 2.29.
SECTION 2.30 BANKS, BROKERS AND PROXIES. SCHEDULE 2.30 sets
forth:
(a) the name of each bank, investment manager, trust company and stock
or other broker with which each APP Company maintains an account or from which
it borrows money;
(b) the names of all persons authorized by any APP Company to effect
transactions therewith, or to have access to any safe deposit box or vault; and
(c) all proxies, powers of attorney, agency agreements or other like
instruments to act on behalf of any APP Company or the Sellers in matters
concerning the business or affairs of any APP Company.
SECTION 2.31 ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
PERSONS. Except pursuant to the Specified Outstanding Indebtedness, no APP
Company has assumed, guaranteed, endorsed or otherwise become directly or
contingently liable on any indebtedness of any other person (including liability
by way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor, or otherwise to
assure the creditor against loss), except for guaranties by endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business.
27
32
SECTION 2.32 TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 2.32, no director, officer or employee (except for hourly or temporary
employees) of any APP Company, or member of the family of any such person, or
any corporation, partnership, trust or other entity in which any such person, or
any member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of any equity interest exceeding
five percent, is a party to any transaction with any APP Company (other than
employment), including any contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments or involving other obligations to
any such person or firm.
SECTION 2.33 RECORDS. The minute books, stock certificate books and
stock transfer ledgers of each APP Company are complete and correct in all
material respects with respect to the matters set forth therein.
SECTION 2.34 DISCLOSURE. To the Best Knowledge of the Schedule 1.03
Sellers, neither this Agreement, nor any schedule or exhibit to this Agreement
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which made, not misleading.
SECTION 2.35 INDEBTEDNESS. A listing and description of all Indebtedness
(as hereinafter defined) pursuant to which any APP Company is obligated or any
Seller is obligated on behalf of any APP Company is set forth on SCHEDULE 2.35.
Except as set forth on SCHEDULE 2.35, none of the APP Companies has outstanding
on the date hereof any Indebtedness. The Sellers have delivered to the Buyer
true, correct and complete copies of each instrument which evidences, or will
evidence on the Closing Date, Indebtedness and each instrument by which such
Indebtedness is or may be secured. "Indebtedness" shall mean, with respect to
any person, (i) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind (other than deposits, advances or
excess payments accepted in connection with the sale by such person of products
or services in the ordinary course of business and other than Permitted Liens),
(ii) all obligations of such person evidenced by bonds, debentures, notes or
similar instruments, (iii) all obligations of such person upon which interest
charges are customarily paid (other than obligations accepted in connection with
the purchase by such person of products or services in the ordinary course of
business), (iv) all obligations of such person under conditional sale or other
title retention agreements relating to property purchased by such person, (v)
all obligations of such person issued or assumed as the deferred purchase price
of property or services (other than accounts payable to suppliers incurred in
the ordinary course of business and paid when due), (vi) all obligations secured
by (or for which the holder of such obligations has an existing right,
contingent or otherwise, to be secured by) any lien or security interest on
property owned or acquired by any APP Company whether or not the obligations
secured thereby have been assumed, (vii) all obligations of such person under
leases required to be accounted for as capital leases under generally accepted
accounting principles, and (viii) all Guarantees of such person. "Guarantee"
shall mean any obligation, contingent or otherwise, of any person guaranteeing
or having the economic effect of guaranteeing any Indebtedness of any other
person in any manner, whether directly or indirectly, and including any
obligation of such person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness
28
33
or to purchase (or to advance or supply funds for the purchase of) any security
for the payment of such Indebtedness, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness, or (iii) to maintain working capital, equity
capital or other financial statement condition of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; PROVIDED, HOWEVER, that the
term "Guarantee" shall not include endorsements for collection or deposit, in
either case, in the ordinary course of business.
SECTION 2.36 NO BROKER OR FINDER. No broker, finder, investment banker
or other financial advisor or consultant has acted on its behalf in connection
with this Agreement or the transactions contemplated hereby in such a way as to
create any liability on the Buyer or any of the APP Companies.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Sellers as follows:
SECTION 3.01 INVESTMENT INTENT. The Buyer is acquiring the Shares for
its own account, for investment purposes only and not with a view toward
distribution thereof. The Buyer acknowledges that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and that the Securities may not be resold absent such registration or unless an
exemption therefrom is available. The Buyer qualifies as an "accredited
investor", as such term is defined in Rule 501(a) promulgated pursuant to the
Securities Act.
SECTION 3.02 ORGANIZATION. Buyer is duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
SECTION 3.03 BUYER POWER AND AUTHORITY. Buyer has the corporate power
and authority to execute, deliver and perform this Agreement and the other
documents and instruments contemplated hereby. Subject to the conditions set
forth in Section 6.01, the execution, delivery and performance of this Agreement
and the documents contemplated hereby and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and approved by Buyer.
This Agreement does, and each of the other agreements, documents and instruments
to be executed and delivered by Buyer when so duly executed and delivered, shall
constitute the valid and binding obligation of Buyer enforceable against Buyer
in accordance with their terms.
SECTION 3.04 VALIDITY, ETC. Neither the execution and delivery of this
Agreement and the other documents and instruments contemplated hereby, the
consummation of the transactions contemplated hereby or thereby, nor the
performance of this Agreement and such other agreements in compliance with the
terms and conditions hereof and thereof will (i) conflict with or result in any
breach of any certificate of incorporation, bylaw, judgment, decree, order,
statute or regulation applicable to Buyer (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except for the requirements of the H-S-R Act, applicable federal and
state securities laws, and the rules of the New York Stock Exchange,
29
34
(iii) result in a breach of or default (or give rise to any right of
termination, cancellation or acceleration) under any Legal Requirement, permit,
license or order or any of the terms, conditions or provisions of any mortgage,
indenture, note, license, agreement or other instrument to which Buyer is a
party or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Buyer which, in the case of any of (i) - (iv),
would materially impair the Buyer's ability to consummate the transactions
contemplated hereby.
SECTION 3.05 BROKERS. No agent, broker, investment banker, or other
entity or natural person acting on behalf of the Buyer or under the authority of
the Buyer is or will be entitled to any fee or commission directly or indirectly
from the Sellers (or the Company in the event the transactions contemplated
hereby do not occur) in connection with any of the transactions contemplated
hereby.
SECTION 3.06 FINANCING. On the Closing Date, the Buyer will have all the
funds necessary in order to pay the Cash Consideration, the Accrued Yield Amount
and the Outstanding Indebtedness Amount and to consummate the transactions
contemplated hereby. Such funds shall be immediately available at the Closing
and subject to no Encumbrances.
ARTICLE IV COVENANTS OF THE SELLERS
The Sellers (or certain of them, as applicable) covenant and agree with
the Buyer that at all times prior to the Closing or termination of this
Agreement except as specifically provided in Section 4.02(b) and 4.02(c):
SECTION 4.01 COOPERATION. The Schedule 1.03 Sellers shall use all
commercially reasonable efforts in good faith to perform and fulfill and to
cause the APP Companies to perform and fulfill, all conditions and obligations
to be fulfilled or performed by them hereunder, to the end that the transactions
contemplated hereby will be fully and timely consummated. The Class B Sellers
shall not take any action that is intended or could reasonably be expected to
cause any APP Company or any Seller to fail to perform and fulfill all
conditions and obligations to be fulfilled or performed by the APP Companies or
any Seller hereunder, or that is intended or could reasonably be expected to
cause the transactions contemplated hereby not to be fully and timely
consummated. Each Class B Seller shall (severally and not jointly) use all
commercially reasonable efforts in good faith to satisfy, perform and fulfill
all conditions and obligations to be fulfilled or performed by them hereunder,
to the end that the transactions contemplated hereby will be fully and timely
consummated. Each Seller (severally and not jointly) agrees to vote and shall
vote in favor of or consent to any and all actions required to be approved by
them in order to consummate the transactions contemplated hereby.
SECTION 4.02 ACCESS. (a) Until the Closing, the Schedule 1.03 Sellers
shall: (i) give and shall cause each APP Company to give, the Buyer, its
attorneys, accountants and other authorized representatives complete access,
upon reasonable notice and at reasonable times, to each APP Company's offices,
properties, customers, suppliers, employees, products, technology, business and
financial records, contracts, business plans, budgets and projections,
agreements, commitments and other documents and information concerning the APP
Companies and persons
30
35
employed by or doing business with the APP Companies; (ii) furnish and cause
each APP Company to furnish the Buyer and its representatives during such period
with all such information as such representatives may reasonably request; (iii)
reasonably cooperate and cause the officers, employees, consultants, agents,
accountants and attorneys of the APP Companies to reasonably cooperate fully
with the representatives of the Buyer in connection with such review and
examination subject to Buyer executing customary disclosure agreements with such
advisors if requested by the Section 1.03 Sellers or such advisors; and (iv)
promptly make full disclosure to the Buyer of all material facts, affecting the
financial condition, business operations, properties and prospects of each of
the APP Companies that could reasonably be expected to have a Material Adverse
Effect; provided, however, that the Buyer will, through the Closing Date (and
thereafter if the Closing does not occur), hold the documents and information
concerning the APP Companies confidential in accordance with Section 10.17
hereof and the Confidentiality Agreement between the Company and the Buyer dated
December 3, 1996.
(b) At or promptly following the Closing, if requested by the Buyer, the
Schedule 1.03 Sellers shall deliver or shall cause to be delivered to the Buyer
all records relating to the APP Companies which are in their possession or in
the possession of their accountants, attorneys and other third parties.
(c) Following the Closing, if requested by the Company, to the extent
not delivered at the Closing, the Schedule 1.03 Sellers shall deliver or shall
cause to be delivered to the Company all records relating to the APP Companies
which remain in their possession or in the possession of their accountants,
attorneys and other third parties.
SECTION 4.03 INSURANCE. The Schedule 1.03 Sellers shall cause each APP
Company to maintain with their current insurers or with other financially sound
insurers, insurance against such casualties and contingencies and of such types
and in such amounts as is customary for companies similarly situated.
SECTION 4.04 COMPLIANCE WITH LAWS. The Schedule 1.03 Sellers
shall cause each APP Company to conduct its business in compliance, in all
material respects, with all Legal Requirements.
31
36
SECTION 4.05 KEEPING OF BOOKS AND RECORDS. The Schedule 1.03 Sellers
shall cause each APP Company to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting, in all material respects, all financial transactions and in
which all proper reserves for depreciation, depletion, obsolescence,
amortization, Taxes, bad debts and other purposes in connection with its
business shall be made.
SECTION 4.06 ACTIONS PRIOR TO CLOSING. Except as consented to in writing
by the Buyer, which consent shall not be unreasonably withheld, the Schedule
1.03 Sellers shall cause each APP Company to conduct its Business pending the
Closing only in the ordinary and usual course of business consistent with past
practice.
Except as expressly contemplated by this Agreement or as consented to in
writing by the Buyer, during the period from the date of this Agreement to the
Closing Date, (a) no Seller shall nor shall the Warrantholder sell transfer or
pledge, or authorize or propose the, sale, transfer or pledge of any Shares, the
Class C Warrant or Other Equity Interests relating to the Shares or the Class C
Warrant or consent to the Shares or the Class C Warrant becoming subject to any
Encumbrance, and (b) the Schedule 1.03 Sellers shall cause each APP Company not
to take any action to cause, and shall not permit any APP Company to:
(i) issue, sell transfer or pledge, or authorize or propose the
issuance, sale transfer or pledge of (A) shares of capital stock of any
class (including the Shares), or other securities or Other Equity
Interests relating to the capital stock or other securities of any such
APP Company, or grant or accelerate any right to convert or exchange any
securities of the Company for shares of capital stock of any APP
Company, or (B) any other securities in respect of, in lieu of or in
substitution for shares outstanding on the date thereof;
(ii) redeem, repurchase or otherwise reacquire, any of its
outstanding securities (including the Shares);
(iii) declare, accrue, set aside, make or pay any dividend or
distribution (whether in cash, stock or property) on or in respect of
any share of capital stock or other securities of any APP Company other
than as set forth on SCHEDULE 2.03(a);
(iv) except pursuant to agreements or arrangements in effect on the
date hereof each of which are listed on SCHEDULE 4.06, or in the
ordinary course of the APP Companies' business consistent with past
practice, (A) make any acquisition of assets or securities, any
disposition of assets or securities or any change in its capitalization,
or (B) enter into any material contract or release or relinquish any
material contract or other rights;
(v) incur any Indebtedness, other than Indebtedness under the
Working Capital Note included in that certain Credit Agreement dated as
of September 27, 1995 among the Subsidiary, APP, the lenders party
thereto and NationsCredit Commercial Corporation as agent, as amended
through the date hereof, and the Continuing Letter of Credit Agreement,
dated as of July 1, 1997 between the Subsidiary and ▇▇▇▇▇ Fargo and
letters of credit issued pursuant thereto, incurred in the ordinary
course of business and not to
32
37
exceed in the aggregate $5,500,000, (whether long-term or short-term
debt for borrowed money or otherwise) or permit any of the APP
Companies' assets to become subject to any Encumbrance other than
Permitted Liens;
(vi) propose or adopt any amendments or restatements to the
Certificate of Incorporation or bylaws of any APP Company;
(vii) enter into, consummate or become party to any transaction for
the merger or consolidation of or by any APP Company with any other
corporation or entity, or any acquisition by it of all or any part of
the stock or the business or assets, other than inventory or equipment
in the ordinary course of business consistent with past practice, of any
other natural person, firm, association, corporation or other entity or
business organization;
(viii) enter into, consummate or become party to any recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(ix) create or take any action relating to the creation of, any
subsidiary or purchase or take any action relating to the purchase of,
any equity interest in any other entity;
(x) except as set forth on Schedule 4.06(x), enter into, consummate
or become party to any material transaction (which shall mean any
transaction or series of transactions totaling $100,000 or more), except
in the ordinary course of business consistent with past practice;
(xi) execute, amend or modify in any material respect any material
contract, agreement, franchise, permit, or license except in the
ordinary course of business;
(xii) waive any right or rights of any APP Company (alleged,
contingent or otherwise), or of any payment, direct or indirect, of any
liability of any APP Company in excess of $100,000 in the aggregate,
except in the ordinary course of business consistent with past practice;
(xiii) enter into any new employment agreements with or adopt any new
employee benefit plans with respect to any officers, directors or
employees;
(xiv) loan or advance in excess of $15,000 to, or enter into an
agreement, arrangement or transaction with any of the officers,
directors, consultants, or employees (or to or with any member of their
families) of any APP Company or its affiliates, or any business or
entity in which any APP Company, its affiliates, or any of their
officers, directors, consultants, agents or employees (or any member of
their families) has any direct or indirect interest in excess of 5%,
except for compensation at rates not exceeding the rates of compensation
in effect as of September 30, 1997 and advances made to officers,
directors, consultants, agents or employees of such APP Company for
ordinary and customary business expenses in reasonable amount and
increases in compensation in the
33
38
ordinary course of business consistent with past practice not in excess
of 10% per annum for any individual;
(xv) except as required by law or GAAP after notification to and
consultation with the Buyer, change any of its accounting methods,
principles or practices or change any depreciation or amortization
policies or rates;
(xvi) except as required by law after notification to and consultation
with the Buyer, make any Tax election;
(xvii) make or incur any charitable contributions or any non-business
expense in excess of $5,000; or
(xviii) agree in writing or orally to take any of the foregoing actions
or any other action which would cause any representation or warranty in
this Agreement to be untrue.
SECTION 4.07 NOTICE OF CHANGES; UPDATES. (a) Until the Closing, the
Schedule 1.03 Sellers shall notify the Buyer in writing of any change in the
business of any APP Company that could have a Material Adverse Effect as soon as
it becomes apparent to the Schedule 1.03 Sellers that any such change has
occurred or could reasonably be expected to occur.
(b) If any Seller becomes aware of any event, condition, fact or
circumstance (i) that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in or a material
breach of any representation or warranty made by any Seller under Article II.C
of this Agreement and which was unknown to such Seller on the date of this
Agreement, or (ii) that occurs or arises or exists after the date of this
Agreement and that causes a material inaccuracy in or a material breach of any
representation or warranty made by any Seller in this Agreement, then the
Sellers may prepare and deliver (at least two business days prior to the
Closing) to the Buyer in accordance with Section 10.01, a certificate, clearly
identified as a "Disclosure Certificate" executed by the President of the
Company, describing with specificity the specific event, condition, fact or
circumstance giving rise to such inaccuracy or breach (a "Disclosure
Certificate"); provided, however, that a Disclosure Certificate may not disclose
any breaches or potential breaches that result from, or are caused by, fraud or
willful misconduct of any Seller, and to the extent that any such matters are
disclosed or are later found to have been disclosed, any such Disclosure
Certificate shall be invalid and of no effect for all purposes hereunder. All
information disclosed on a valid Disclosure Certificate shall be identified as
and deemed (i) a representation and warranty under Article II.C, and (ii) an
amendment to the specific representation and warranty referenced in the
Disclosure Certificate of each Seller. Notwithstanding the foregoing, the
representations and warranties and indemnification obligations of any Seller who
committed fraud or willful misconduct or who intentionally concealed such event,
condition, fact or circumstance with intent to defraud, shall be unaffected by
any such Disclosure Certificate.
SECTION 4.08 PRESERVATION OF BUSINESS. Until the Closing, the Company
will, and the Schedule 1.03 Sellers will cause each APP Company to, use all
commercially reasonable efforts to
34
39
preserve its business organization intact, and to preserve its goodwill. Without
limiting the generality of the foregoing or any other covenant contained herein,
each APP Company will, and the Schedule 1.03 Sellers will cause the Company and
the APP Subsidiary to, timely perform in all material respects all obligations
required of such APP Company or the Schedule 1.03 Sellers under the contracts
and permits listed or required to be listed on the schedules to this Agreement.
SECTION 4.09 LITIGATION. The Schedule 1.03 Sellers will promptly notify
the Buyer in writing of any lawsuits, claims, proceedings or investigations
which are threatened or commenced against or by any APP Company or against any
employee, consultant or director of any APP Company or against the Sellers or
their affiliates in connection with their ownership of the Shares or the
transactions contemplated hereby. Each Class B Seller and the Warrantholder will
promptly notify the Buyer in writing of any lawsuits, claims, proceedings or
investigations which are commenced or threatened against such party in
connection with the ownership of the Shares or the Class C Warrant or the
transactions contemplated hereby.
SECTION 4.10 CONTINUED EFFECTIVENESS OF REPRESENTATIONS AND WARRANTIES.
From the date hereof up to and including the Closing Date or the termination of
this Agreement, (i) each Schedule 1.03 Seller shall cause each APP Company to
conduct its business in a manner such that the representations and warranties
contained herein shall continue to be true and correct on and as of the Closing
Date as if made on and as of the Closing Date, except for changes and the
consequences of events arising in the ordinary and usual course of business
consistent with past practice after the date hereof or which are permitted or
contemplated in this Article IV and none of which could reasonably be expected
to have a Material Adverse Effect; (ii) the Schedule 1.03 Sellers will advise
the Buyer promptly in writing of any condition or circumstance occurring from
the date hereof up to and including the Closing Date which could cause any
representation or warranty of the Sellers to become untrue in any material
respect; and (iii) each Class B Seller and the Warrantholder will advise the
Buyer promptly in writing of any condition or circumstance occurring from the
date hereof up to and including the Closing Date which could cause any
representation or warranty of such Class B Seller or Warrantholder, as the case
may be, to become untrue in any material respect.
SECTION 4.11 OBLIGATIONS OF AFFILIATES. Except as specifically set forth
in this Agreement or pursuant to any employment agreement set forth on SCHEDULE
2.19 or SCHEDULE 4.15 on or before the Closing Date, each Schedule 1.03 Seller
shall cause each APP Company to, and each Seller (severally and jointly) will
and will cause its affiliates to, (i) cause all debts owed by any Seller or of
its affiliates to any APP Company, to be paid or discharged in full and (ii)
terminate any ongoing agreements (except indemnification obligations of the APP
Companies to their officers and directors pursuant to their respective charter
documents and bylaws) between the Company on the one hand and such Sellers and
its affiliates on the other, all without any expense to any APP Company (or any
reduction in the gross assets reflected on the Balance Sheet or acquired since
the date thereof) and so that following the Closing Date no APP Company shall
have obligations of any kind or nature to the Sellers or their affiliates except
for those specified in this Agreement.
35
40
SECTION 4.12 NO NEGOTIATIONS. Until the termination of this Agreement in
accordance with its terms, (i) the Schedule 1.03 Sellers shall not (and the
Schedule 1.03 Sellers shall not permit either APP nor any of their respective
affiliates, advisors or agents to) and (ii) the Class B Sellers shall not
(severally and not jointly) (and the Class B Sellers shall not permit any of
their respective affiliates (for purposes of this sentence, affiliates of the
Class B Sellers shall not include the APP Companies), advisors or agents to),
directly or indirectly, initiate discussions with, engage in negotiations with,
or provide any information to any corporation, partnership, person or other
entity or group involving the possible sale, directly or indirectly, transfer or
joint venture of any APP Company, its business or assets, or the capital stock
of any APP Company to any person or entity other than the Buyer.
SECTION 4.13 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ FILINGS. The Schedule 1.03 Sellers shall
cause APP to promptly file with the Federal Trade Commission and the Department
of Justice any notification and report required pursuant to the H-S-R Act and,
in the event that any such filings are required, shall promptly file any
supplemental information which is reasonably requested in connection therewith,
in each case provided the disclosure of such information does not violate an
attorney-client privilege.
SECTION 4.14 RESIGNATIONS. FCP Southeast Investors IV will cause P.
▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to resign as directors and officers of each APP
Company. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ will cause ▇▇. ▇▇▇▇▇▇ to resign as director from each
APP Company. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ will cause ▇▇. ▇▇▇▇▇ to resign as a director from
each APP Company. Benjamax Profit Sharing Plan will cause ▇▇▇▇▇ ▇ . ▇▇▇▇▇▇ to
resign as a director of each APP Company.
SECTION 4.15 CERTAIN EMPLOYMENT AGREEMENTS. The Schedule 1.03 Sellers
shall cause neither the Company nor any of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to terminate, amend, alter or waive
any rights under the employment agreements which, as of the date hereof, exists
between the Company and such individuals and are listed on Schedule 4.15 (the
"Management Employment Agreements").
SECTION 4.16 ENCUMBRANCES. Each of the Sellers, the Warrantholder and
the Company shall take all actions that may be necessary or that may be
requested by the Buyer in order to terminate, discharge and remove the
Encumbrances on such parties' securities being transferred hereunder which are
listed or required to be listed on SCHEDULE 2.03.
SECTION 4.17 CONSENTS. The Company shall use all commercially reasonable
efforts to obtain the consents to the transactions contemplated by this
Agreement as required by the agreements listed or required to be listed on
Schedule 2.07.
36
41
ARTICLE V COVENANTS OF THE BUYER; OTHER COVENANTS
SECTION 5.01 COOPERATION. The Buyer shall use all reasonable efforts in
good faith to perform and fulfill all conditions and obligations to be fulfilled
or performed by it hereunder to the end that the transactions contemplated
hereby will be fully and timely consummated.
SECTION 5.02 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ FILINGS. Buyer shall promptly file with
the Federal Trade Commission and the Department of Justice any notification and
report required pursuant to the H-S-R and, in the event that any such filings
are required, shall promptly file any supplemental information which is
reasonably requested in connection therewith, in each case provided the
disclosure of such information does not violate an attorney-client privilege.
SECTION 5.03 TAX MATTERS. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by Buyer when
due, and Buyer will, at its own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and, if required by applicable
law, each Seller will, and will cause its affiliates to, join in the execution
of any such Tax Returns and other documentation.
ARTICLE VI CONDITIONS TO THE BUYER'S OBLIGATIONS
The obligation of the Buyer to pay the Cash Consideration, the Accrued
Yield Amount and the Outstanding Indebtedness Amount on the Closing Date and to
consummate the other transactions contemplated hereby is subject to the
satisfaction, on or before the Closing Date, of the following conditions each of
which may be waived in writing by the Buyer in its sole discretion:
SECTION 6.01 CONSENTS. All requisite governmental approvals and consents
of third parties listed or required to be listed on SCHEDULE 2.07 shall have
been obtained, except where any such failure or failures to obtain such consents
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
SECTION 6.02 REPRESENTATIONS AND WARRANTIES TRUE. (a) The
representations and warranties of the Sellers contained in this Agreement or in
any schedules or other documents attached hereto or referred to herein or
delivered pursuant hereto or in connection with the transactions contemplated
hereby which are qualified by Material Adverse Effect or otherwise as to
materiality, and the representations and warranties set forth in Sections 2.01,
2.02 and 2.03 shall be true, correct and complete in all respects and those that
are not so qualified other than those set forth in Sections 2.01, 2.02 and 2.03
shall be true, correct and complete in all material respects, on and as of the
date hereof and on and as of the Closing Date, as if made on and as of the
Closing Date, except to the extent that such representations and warranties are
expressly restricted to a specific earlier date (in which case such
representations and warranties that are qualified by Material Adverse Effect or
otherwise as to materiality shall be true, correct and
37
42
complete in all respects and those that are not so qualified shall be true,
correct and complete in all material respects on and as of such earlier date).
On the Closing Date, each Schedule 1.03 Seller shall have executed and delivered
to the Buyer a certificate, in form and substance satisfactory to the Buyer and
its counsel, to such effect (provided that such certificate shall state that the
representations and warranties set forth in Section 2.01 and 2.02 as they relate
to the Schedule 1.03 Sellers and the Shares being sold by the Schedule 1.03
Sellers and the representation and warranties set forth in Section 2.03 are true
and correct in all respects).
(b) Each Class B Seller listed on SCHEDULE 6.02 hereto and the
Warrantholder (collectively the "Schedule 6.02 Sellers") shall have executed and
delivered to the Buyer a certificate, in form and substance satisfactory to the
Buyer and its counsel, to the effect that (i) the representations and warranties
set forth in Sections 2.01 and 2.02 of this Agreement (as they relate to such
Schedule 6.02 Seller and the securities being sold by such Schedule 6.02 Seller)
are true, correct and complete in all respects as of the Closing Date, as if
made on and as of the Closing Date and, with respect to the Class B Sellers only
(ii) to their Actual Knowledge (and without giving effect to limitations set
forth in any of such representations and warranties with respect to (i) any such
representation's or warranty's being applicable solely to the Schedule 1.03
Sellers and (ii) the Actual Knowledge, Best Knowledge or similar knowledge or
awareness qualifications of the Schedule 1.03 Sellers), all representations and
warranties contained in Article II.C which are qualified by Material Adverse
Effect or otherwise as to materiality, are true, correct and complete in all
respects and those that are not so qualified are true, correct and complete in
all material respects, as of the Closing Date, as if made on and as of the
Closing Date, except to the extent that such representations and warranties are
expressly restricted to a specific earlier date (in which case such
representations and warranties that are qualified by Material Adverse Effect or
otherwise as to materiality are true, correct and complete in all respects and
those that are not so qualified are true, correct and complete in all material
respects on and as of such earlier date).
SECTION 6.03 PERFORMANCE. Each Seller shall have performed and complied
with in all material respects all covenants and agreements contained herein
required to be performed or complied with by it prior to or at the Closing Date.
Each Schedule 6.02 Seller shall have executed and delivered to the Buyer a
certificate, in form and substance satisfactory to the Buyer and its counsel, in
writing to the effect that such Seller has performed and complied with in all
material respects all covenants and agreements contained herein required to be
performed or complied with by it prior to or at the Closing Date. Each Schedule
1.03 Seller shall have executed and delivered to the Buyer a certificate, in
form and substance satisfactory to the Buyer and its counsel, in writing to such
effect and to the further effect that all of the conditions set forth in this
Article VI (other than Sections 6.09 and 6.14) have been satisfied.
SECTION 6.04 NO MATERIAL ADVERSE CHANGE. Nothing shall have occurred or
be threatened that could reasonably be expected to have a Material Adverse
Effect.
SECTION 6.05 OPINION OF COUNSEL. The Buyer shall have received (a) the
opinion of ▇'▇▇▇▇▇▇▇▇, Graev & Karabell, LLP, in substantially the form attached
hereto as Exhibit
38
43
6.05(a), (b) the opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, in substantially the form
attached hereto as Exhibit 6.05(b) and (c) the opinion of counsel to Benjamax
Profit Sharing Plan in substantially the form attached hereto as Exhibit
6.05(c).
SECTION 6.06 OBLIGATIONS OF THE SELLERS. Except as contemplated by this
Agreement or pursuant to any employment agreement set forth on SCHEDULE 2.19 or
SCHEDULE 4.15, all debts by the Sellers, their affiliates (or any business
entity owned or controlled by the Sellers or their affiliates) to any APP
Company shall have been paid or discharged in full on or before the Closing
Date. Except as set forth on SCHEDULE 6.06(a), all agreements between any APP
Company and any Seller or any affiliate thereof (except indemnification
obligations of the APP Companies to their officers and directors pursuant to
their respective charter documents and bylaws) shall have terminated on or
before the Closing Date at no cost (except accrued and unpaid fees and expenses
under such agreements which amounts are set forth on Schedule 6.06(a)) to the
APP Companies.
SECTION 6.07 RESIGNATIONS. The APP Companies shall have delivered to the
Buyer all the written resignations required under Section 4.14, and written
resignations from the trustees of the Company's pension and retirement plans as
the Buyer shall have requested.
SECTION 6.08 NO ACTIONS, SUITS OR PROCEEDINGS. As of the Closing Date,
no action, suit, investigation or proceeding brought by any person, corporation,
Governmental Entity or other entity shall be pending or, to the knowledge of the
parties to this Agreement, threatened, before any court or other Governmental
Entity (a) to restrain, prohibit, restrict or delay, or to obtain damages or a
discovery order in respect of this Agreement or the consummation of the
transactions contemplated hereby, or (b) which has had or could reasonably be
expected to have a Material Adverse Effect. No order, decree or judgment of any
court or other Governmental Entity shall have been issued restraining,
prohibiting, restricting or delaying, the consummation of the transactions
contemplated by this Agreement. No insolvency proceeding of any character
including bankruptcy, receivership, reorganization, dissolution or arrangement
with creditors, voluntary or involuntary, affecting the APP Companies or any
Sellers ability to consummate the transaction contemplated hereby shall be
pending, and neither the APP Companies nor any Seller shall have taken any
action in contemplation of, or which would constitute the basis for, the
institution of any such proceedings.
SECTION 6.09 INVESTIGATION SATISFACTORY. The Buyer shall have had the
opportunity to interview each Significant Customer and each Significant Supplier
and shall be satisfied in all respects with the results of such interviews;
PROVIDED, HOWEVER, that this condition expires on December 30, 1997.
SECTION 6.10 EMPLOYMENT AGREEMENTS. Neither the Company nor any of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ shall have terminated, amended, altered or waived any rights under the
Management Employment Agreements.
SECTION 6.11 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ WAITING PERIOD. The waiting periods for
all filings under the H-S-R Act in connection with this Agreement and the
transactions contemplated hereby shall have been passed without objection, or
any such objections shall have been resolved.
39
44
SECTION 6.12 PAY-OFF LETTERS. Each Pay-Off Letter shall have been
executed and delivered by the Creditors.
SECTION 6.13 DELIVERY OF SHARES; OTHER CLOSING DOCUMENTS. The Sellers
shall have delivered the Certificates representing the Shares, duly endorsed to
the Buyer, and all of the resolutions, certificates, documents and instruments
required by this Agreement.
SECTION 6.14 APPROVAL OF THE BUYER AND ITS COUNSEL. All actions,
proceedings, consents, instruments and documents required to be delivered by, or
at the behest or direction of, the Sellers hereunder or incident to its
performance hereunder, and all other related matters, shall be reasonably
satisfactory as to form and substance to the Buyer and its counsel.
ARTICLE VII CONDITIONS TO THE SELLERS' OBLIGATIONS
The obligation of the Sellers to sell the Shares to Buyer and to
consummate the other transactions contemplated hereby is subject to the
satisfaction, on or before the Closing Date, of the following conditions, each
of which may be waived by the Sellers in their sole discretion:
SECTION 7.01 REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article IV shall be true, complete
and correct in all material respects, on and as of the Closing Date, as if made
on and as of such date, and the Buyer shall have delivered to the Sellers a
certificate, in form and substance satisfactory to the Sellers and their
counsel, to such effect.
SECTION 7.02 PERFORMANCE. The Buyer shall have performed and complied
with all agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date, and the Buyer shall have delivered a
certificate to the Sellers, in form and substance satisfactory to the Sellers
and its counsel to such effect.
SECTION 7.03 OPINION OF THE BUYER'S COUNSEL. The Sellers shall have
received from Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., an opinion
dated the Closing Date, in substantially the form attached hereto as Exhibit
7.03.
SECTION 7.04 NO ACTIONS, SUITS OR PROCEEDINGS. As of the Closing Date,
no action, suit, investigation or proceeding brought by any person, corporation,
Governmental Entity or other entity shall be pending or, to the knowledge of the
parties to this Agreement, threatened, before any court or other Governmental
Entity to restrain, prohibit, restrict or delay, or to obtain damages or a
discovery order in respect of this Agreement or the consummation of the
transactions contemplated hereby. No order, decree or judgment of any court or
other Governmental Entity shall have been issued restraining, prohibiting,
restricting or delaying, the consummation of the transactions contemplated by
this Agreement. No insolvency proceeding of any character including bankruptcy,
receivership, reorganization, dissolution or arrangement with creditors,
voluntary or involuntary, affecting the Buyer shall be pending, and the Buyer
shall not have taken any action in contemplation of, or which would constitute
the basis for, the institution of any such proceedings.
40
45
SECTION 7.05 CLOSING DOCUMENTS. The Buyer shall have delivered the Cash
Consideration, the Accrued Yield Amount and the Outstanding Indebtedness Amount
and all of the resolutions, certificates, documents and instruments required by
this Agreement.
SECTION 7.06 APPROVAL OF THE SELLERS AND THEIR COUNSEL. All actions,
proceedings, consents, instruments and documents required to be delivered by, or
at the behest or direction of, the Buyer hereunder or incident to its
performance hereunder, and all other related matters, shall be reasonably
satisfactory as to form and substance to the Sellers and their counsel.
SECTION 7.07 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ APPROVAL. The condition set forth in
Section 6.11 is also a condition to the Sellers' obligation to consummate the
transactions contemplated hereby.
ARTICLE VIII INDEMNIFICATION
SECTION 8.01 SURVIVAL. All representations and warranties in this
Agreement and breaches of pre-closing covenants in the Agreement or in any
certificate furnished expressly pursuant to this Agreement (collectively, the
"Pre-Closing Obligations") (x) shall be unaffected by any investigation made by
or on behalf of any party or any information furnished to any party or its
representatives at any time (whether prior to the execution of this Agreement,
prior to the Closing or after the Closing) other than as provided in ss.4.07(b)
and (y) shall survive the Closing and shall expire (except as set forth in the
following sentence) on April 30, 1999. All Pre-Closing Obligations shall expire
on the April 30, 1999, except that (a) claims, if any, asserted in accordance
with the terms of Section 10.01 hereof prior to the Expiration Date (as defined
in the last sentence of this paragraph) identified as a claim for
indemnification pursuant to this Article VIII shall survive until finally
resolved and satisfied in full, and (b) claims, if any, which result from or are
caused by fraud, or which relate to or result from title to the Shares shall
survive for the full period of the applicable statute of limitations, and until
finally resolved and satisfied in full if asserted on or prior to such date, and
(c) claims, if any, which involve the representations set forth in Section 2.13
or are otherwise related to or arise out of any Tax matter may be asserted at
any time prior to 60 days after the expiration of the applicable Tax statute of
limitations with respect to the relevant taxable period (including all
extensions obtained, whether automatic or permissive), and (d) claims, if any,
which involve the representations set forth in Section 2.24 or otherwise involve
environmental matters shall survive until December 31, 2000. Without limiting
the survival periods as set forth herein, all covenants and agreements to be
performed after Closing contained herein shall survive until each has been fully
performed in accordance with its terms. The expiration of each of the survival
periods set forth above in this paragraph shall be referred to as the
"Expiration Date."
41
46
SECTION 8.02 INDEMNIFICATION BY THE SELLERS.
(a) INDEMNIFICATION BY SCHEDULE 6.02 SELLERS. Subject to Section
8.02(c), each Schedule 6.02 Seller (and in the case of clause (ii) below, each
Class B Seller) shall severally, but not jointly, indemnify, defend, and hold
harmless the Buyer, the Buyer's Affiliates (as such term is defined under Rule
405 of the Rules and Regulations of the Securities Act of 1933, as amended), the
Company and the respective officers, directors, employees and stockholders
(other than any Seller, the Warrantholder or any affiliates of any Seller or the
Warrantholder or any officer or director of any APP Company prior to the Closing
Date) of the foregoing, and their successors and assigns (the "Indemnitees")
from, against and with respect to any claim, settlement, fine, penalty,
liability, Tax, obligation, loss, damage, assessment, judgment, cost, fee and
expense (including reasonable attorneys' and accountants' fees and costs and
expenses reasonably incurred in investigating, preparing, defending against or
prosecuting any litigation or claim, action, suit, proceeding or demand) of any
kind or character ("Damages"), resulting from or caused by:
(i) Any inaccuracy in or breach of the representations and
warranties set forth in Sections 2.01 and 2.02 of this Agreement as they
relate to such Schedule 6.02 Seller or the securities being sold by such
Schedule 6.02 Seller (the "Specified Representations and Warranties") or
in any certificate executed by such Schedule 6.02 Seller to the extent
it relates to the Specified Representations and Warranties;
(ii) Any material inaccuracy in or breach of the
representations or warranties (other than the Specified Representations
and Warranties) contained in this Agreement which are not already
qualified by Material Adverse Effect or otherwise as to materiality or
any inaccuracy in or breach of the representations or warranties
contained in this Agreement which are already qualified by Material
Adverse Effect or otherwise as to materiality of which such Class B
Seller has Actual Knowledge (and without giving effect to limitations
set forth in any of such representations and warranties with respect to
(i) any such representation's or warranty's being applicable solely to
the Schedule 1.03 Sellers and (ii) the Actual Knowledge, Best Knowledge
or similar knowledge or awareness qualifications of the Schedule 1.03
Sellers), as of the date hereof, but only if such Class B Seller failed
to disclose such inaccuracy or breach with the actual intent to defraud
the Buyer or which such Class B Seller acquires Actual Knowledge of
prior to the Closing and fails to expressly and unambiguously notify the
Buyer in writing of in accordance with the terms of Section 10.01 hereof
prior to the Closing but only if such failure to notify is done with the
actual intent to defraud the Buyer;
(iii) Any failure by such Schedule 6.02 Seller to perform,
satisfy or observe, or to have performed, satisfied or observed, in
full, the agreements and covenants under Sections 1.04, 1.05 and 8.02 or
any willful failure or breach by such Schedule 6.02 Seller to perform,
satisfy or observe or to have performed, satisfied or observed in full
any other agreement or covenant required to be performed, satisfied or
observed by such Schedule 6.02 Seller hereunder; and
42
47
(iv) Any legal proceeding relating to any actual inaccuracy,
breach, failure, or liability referred to in clauses "(i)" through
"(iii)" above.
(b) INDEMNIFICATION BY SCHEDULE 1.03 SELLERS. Subject to Section
8.02(c), the Schedule 1.03 Sellers, jointly and severally, shall indemnify,
defend, and hold harmless the Indemnitees from, against and with respect to any
Damages resulting from or caused by:
(i) Any inaccuracy in or breach of the representations and
warranties of any Schedule 1.03 Seller contained in this Agreement or in
any certificate executed by any Schedule 1.03 Seller expressly pursuant
to this Agreement;
(ii) Any inaccuracy in or breach of this Agreement or in any
certificate executed by any Schedule 6.02 Seller expressly pursuant to
this Agreement of which any Schedule 1.03 Seller had Actual Knowledge as
of the date hereof or of which any Schedule 1.03 Seller acquires Actual
Knowledge prior to the Closing and fails to expressly and unambiguously
notify the Buyer in writing of in accordance with the terms of Section
10.01 hereof prior to the Closing;
(iii) Any failure by any of the Schedule 1.03 Sellers to
perform, satisfy or observe or cause the Company to perform, satisfy or
observe, or to have performed, satisfied or observed or to have caused
the Company to perform, satisfy or observe, in full, any covenant, or
agreement to be performed, satisfied or observed by any Schedule 1.03
Seller or the Company under this Agreement; and
(iv) Any legal proceeding relating to any actual inaccuracy,
breach, failure or liability referred to in clauses "(i)" through
"(iii)" above.
(c) SURVIVAL; THRESHOLD AND DEDUCTIBLE; CEILING; SETOFF, ETC.
(i) Subject to section 8.02(c)(v), any claim for
indemnification hereunder must be asserted prior to the Expiration Date.
(ii) Subject to section 8.02(c)(v), the Schedule 1.03 Sellers
shall not be required to make any indemnification payment pursuant to
this Section 8.02 unless and to the extent that the total amount of
Damages which are recoverable pursuant to Section 8.02(b) (the
"Recoverable Damages") exceeds $400,000 in the aggregate (the
"Deductible Amount") (if the total amount of Recoverable Damages
exceeds, in the aggregate, the Deductible Amount, then the Indemnitees
shall only be entitled to be indemnified to the extent that such
Recoverable Damages exceed the Deductible Amount).
(iii) The determination of Damages and Recoverable Damages and
indemnification pursuant to Section 8.02(b) shall be without regard to
any materiality qualifications or other qualifications in any provision
of this Agreement or in any certificates or other documents or
agreements executed by the Company or any Seller in connection with this
Agreement;
43
48
(iv) Subject to Section 8.02(c)(v), the maximum liability of
any Seller shall be equal to the aggregate amount of Cash Consideration,
Earnout Payments and Accrued Dividends to which such Seller receives or
becomes entitled to receive as a result of Section 1.03.
(v) The limitations set forth in Sections 8.02(c)(i),
8.02(c)(ii) and 8.02(c)(iv) shall not apply (A) with respect to any
Schedule 6.02 Seller, in connection with a breach of the Specified
Representations and Warranties, (B) with respect to the Schedule 1.03
Sellers, in connection with a breach of the representations and
warranties contained in Sections 2.01, 2.02 and 2.03 (other than the
Specified Representations and Warranties), (C) with respect to any
Seller, in connection with any inaccuracy or breach of which such Seller
has Actual Knowledge as of the Closing (and in the case of the Schedule
6.02 Sellers, failed to disclose with the actual intent to defraud), (D)
with respect to any Seller, in connection with the willful failure to
perform or satisfy any of its covenants or agreements hereunder, or (E)
with respect to the Sellers, with respect to any failure of the Sellers
to pay any amounts required to be paid by the Sellers in accordance with
Section 10.13.
(vi) In addition to any rights of setoff or other rights that
Buyer or any of the other Indemnitees may have at common law or
otherwise, the Schedule 1.03 Sellers acknowledge and expressly agree
that the Buyer may withhold payment with respect to and setoff or reduce
any sum or payment that may be or become owed to the Schedule 1.03
Sellers (whenever due and payable), including Earnout Payments, to the
extent of any Damages the Buyer reasonably believes may be Recoverable
Damages it may have with respect to the Schedule 1.03 Sellers pursuant
to this Article VIII. In the event that the Buyer withholds any Earnout
Payments pursuant to this Section 8.02(c)(vi), (a) the Buyer and the
Schedule 1.03 Sellers shall enter into a customary escrow agreement
among themselves and an independent, third-party escrow agent reasonably
satisfactory to the Buyer and the Schedule 1.03 Sellers for the
establishment of an escrow account, which escrow agreement shall provide
that any amounts deposited in the escrow account shall be distributed
first to the Buyer to the extent that such Damages are finally
determined to be damages actually owed to Buyer and to the Schedule 1.03
Sellers to the extent that such Damages are determined not to be
Recoverable Damages, and (b) the Buyer shall promptly deposit the
withheld Earnout Payments into the Escrow Account.
SECTION 8.03 INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold
harmless the Sellers against any and all Damages resulting from or caused by any
breach of any representation, warranty, covenant, or agreement of Buyer
contained in this Agreement. Notwithstanding the foregoing, the provisions of
Section 1.03(e) shall be the sole and exclusive remedy of the Schedule 1.03
Sellers with respect to disagreements and disputes or challenges under Section
1.03.
SECTION 8.04 CLAIMS FOR INDEMNIFICATION; DEFENSE OF THIRD PARTY CLAIMS.
(a) In the event of the occurrence of any event which the any party hereto
asserts is an indemnifiable event
44
49
pursuant to this Article VIII, the party claiming indemnification (the
"Indemnified Party") shall provide prompt written notice in accordance with
Section 10.01 to the party from whom indemnification is sought (the
"Indemnifying Party"), specifying in detail the facts and circumstances with
respect to such claim and the basis for which indemnification is available
hereunder.
(b) In the event that any claim hereunder involves the claim of any
third party the Indemnified Party shall have the right, at its election, to
proceed with and control the defense or settlement of such claim on its own and
with counsel of its own choosing. If the Indemnified Party so proceeds with the
defense of any such claim:
(i) all reasonable costs, fees (including reasonable
attorney's fees and reasonable fees of accountants and other
professionals required or useful in connection with any such defense)
and expenses relating to the defense of such claim shall be borne and
paid exclusively by the Indemnifying Party;
(ii) the Indemnifying Party shall make available to
Indemnified Party any documents and materials in his her or its
possession or control that may be necessary or useful to the defense of
such claim;
(iii) the Indemnifying Party may (at its sole expense) retain
counsel which counsel shall be permitted to be present at all material
proceedings relating to such claim and ask questions of the Indemnified
Party's counsel relating to such claim (it being understood, however,
that the Indemnified Party shall have exclusive control over the defense
of such claim); and
(iv) the Indemnified Party shall obtain the prior written
approval of the Indemnifying Party (which approval shall not be
unreasonably withheld or delayed) before entering into any settlement,
adjustment or compromise of such claim.
(c) If the Indemnified Party elects not to assume the defense of any
such claim hereunder, the Indemnifying Party may proceed with and control the
defense or settlement of such claim on its own and with counsel of its own
choosing. If the Indemnifying Party so proceeds with the defense of any such
claim:
(i) all costs, fees (including reasonable attorney's fees
and reasonable fees of accountants and other professionals required or
useful in connection with any such defense) and expenses relating to the
defense of such claim shall be borne and paid exclusively by the
Indemnifying Party;
(ii) the Indemnified Party shall make available to
Indemnifying Party any documents and materials in his her or its
possession or control that may be necessary or useful to the defense of
such claim;
45
50
(iii) the Indemnified Party may (at its sole expense) retain
counsel which counsel shall be permitted to be present at all material
proceedings relating to such claim and ask questions of the Indemnifying
Party's counsel relating to such claim (it being understood, however,
that the Indemnifying Party shall have exclusive control over the
defense of such claim); and
(iv) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party (which approval shall not be
unreasonably withheld or delayed) before entering into any settlement,
adjustment or compromise of such claim.
In the event that the Indemnifying Party shall be obligated to indemnify
the Indemnified Party pursuant to this Article VIII, the Indemnifying Party
shall, upon payment of such indemnity in full, be subrogated to all rights of
the Indemnified Party with respect to the claim to which such indemnification
relates.
SECTION 8.05 NO CONTRIBUTION. Each Seller waives, and acknowledges and
agrees that he, she, it and they will not have and will not exercise or assert
(or attempt to exercise or assert), any right of contribution, right of
subrogation, right of indemnity or other similar right or remedy against any APP
Company, with respect to any action or failure to act by any APP Company
occurring on or prior to the Closing or in connection with any actual or alleged
breach of any representation, warranty, covenant or other obligation or
agreement set forth in this Agreement or any certificate delivered in connection
with this Agreement.
SECTION 8.06 INSURANCE PROCEEDS. Except in the case of indemnity
payments made relating to fraud, willful misconduct, intentional
misrepresentation or title-related matters: (a) in the event that a Seller (an
"Indemnifying Seller") has previously indemnified the Buyer for any amounts
hereunder, which amounts are recovered or recoverable from insurance proceeds of
any APP Company, then: (i) the Buyer and the Company hereby covenant for the
benefit of the Sellers that, unless they reasonably determine in good faith that
it would not be in their best interest to do so in which case they will permit
the Indemnifying Seller to do so, they will use reasonable diligence for the
purpose of recovering such insurance proceeds; and (ii) if the Buyer or the
Company so recovers any such insurance proceeds, the amount of such recovery
shall be applied: (A) FIRST, to the Company or the Buyer to recover (1) the
amount, if any, by which the Recoverable Damages related to such indemnified
claim exceed the maximum liability of the Indemnifying Seller as provided in
Section 8.02(iv), (2) any Damages suffered by the Company which are not
Recoverable Damages but which are recoverable from such insurance proceeds in
connection with such indemnified claim, (3) any costs, expenses and fees which
have been or will be incurred by the Company and the Buyer in connection with
such claim, including any attorney's fees, accountant's fees, deductibles
related to the applicable insurance policies and the net present value of any
increase in insurance premiums, whether on existing insurance, replacement
coverage, or both; (B) SECOND, to the Sellers to refund any indemnification
payments which have been made by a Seller; and (C) THIRD, any excess to the
Company and the Buyer. The sum of the amounts referred to under clause "(A)" is
referred to herein as the "Buyer's Priority". If the Buyer fails or elects not
to pursue any such insurance policies or collateral sources with reasonable
diligence, then the Indemnifying Sellers shall have the right of subrogation to
pursue
46
51
such insurance policies or collateral sources and may take any reasonable
actions necessary to pursue such rights of subrogation in their name or the name
of the party or parties from whom subrogation is obtained. The Buyer and the
Company shall reasonably cooperate with the Sellers to pursue a subrogation
claim. Any recovery obtained by the Sellers shall be applied FIRST, to reimburse
the Sellers for their out-of-pocket expenses (including reasonable attorney's
fees) expended in pursuing such recovery, SECOND, to refund any payments made by
a Seller, pursuant to Section 8.02 hereof with respect to the Damages for which
the collateral source was also responsible, and THIRD, any excess to the Company
or the Buyer, as applicable.
(b) In the event that the Company or the Buyer has previously recovered
amounts from insurance proceeds for Recoverable Damages and thereafter become
entitled to indemnification from any Seller for such Recoverable Damages, the
amount of Recoverable Damages recoverable by the Company and the Buyer from such
Seller shall be reduced by the amount received from insurance proceeds with
respect to such Recoverable Damages less the Buyer's Priority.
SECTION 8.07 EXCLUSIVE REMEDIES. (a) Notwithstanding anything to the
contrary contained herein, but subject to Section 9.02, except in the case of
fraud, or willful misconduct, the indemnity provisions of this Article VIII
shall be the sole and exclusive remedy against the Sellers for any breach of the
representations, warranties, agreements and covenants contained herein.
(b) Notwithstanding anything to the contrary contained herein, but
subject to Section 9.02, except in the case of fraud, willful misconduct or
knowing or intentional misrepresentation, the indemnity provisions of this
Article VIII shall be the sole and exclusive remedy against the Buyer for any
breach of the representations, warranties, agreements and covenants contained
herein.
ARTICLE IX TERMINATION
SECTION 9.01 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual written consent duly authorized by the Boards of
Directors of the Buyer and the Company;
(b) By the Buyer, the Sellers or the Company if:
(i) any court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree or ruling, or
taken any other action restraining, enjoining or otherwise prohibiting
the transactions contemplated hereby, provided that this Agreement shall
not be terminated pursuant to this paragraph unless the party
terminating this Agreement has utilized all reasonable efforts to oppose
the issuance of such order, decree or ruling or the taking of such
action;
47
52
(ii) the Closing shall not have occurred on or prior to
January 30, 1998 for any reason other than an intentional breach of any
provision of this Agreement by the party terminating this Agreement; or
(iii) the Closing shall not have occurred for any reason by
February 12, 1998.
(c) By the Buyer if:
(i) Any of the conditions set forth in Article VI hereof has
not been satisfied on or before January 30, 1998 or shall have become
incapable of fulfillment and shall not have been waived by the Buyer,
for any reason other than an intentional breach by the Buyer of any of
its representations, warranties or agreements hereunder;
(ii) There is any inaccuracy in any representations or breach
of any warranty of any Seller contained in this Agreement or in any
certificate or other instrument delivered in connection herewith, or any
failure by any Seller or any APP Company to perform any commitment,
covenant or condition contained in this Agreement, or there exists any
error, misstatement or omission with regard to any of the exhibits,
schedules or other documents referred to herein, which inaccuracy or
breach could result in a Material Adverse Effect; or
(iii) The Schedule 1.03 Sellers deliver a Disclosure
Certificate and the Buyer elects to terminate this Agreement within 10
days after the receipt thereof.
(d) By the Sellers if any of the conditions set forth in Article VII
hereof has not been satisfied on or before January 30, 1998 or shall have become
incapable of fulfillment and shall not have been waived by the Sellers, for any
reason other than an intentional breach by any Seller of any of their
representations, warranties or agreements hereunder;
Upon the occurrence of any of the events specified in this Section 9.01 (other
than paragraph (a) hereof), written notice of such event shall forthwith be
given to the other parties to this Agreement, whereupon this Agreement shall
terminate.
SECTION 9.02 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 9.01, this Agreement, except
for the provisions of Articles VIII, IX and X, shall forthwith become void and
be of no effect, without any liability on the part of any party or its
directors, officers or shareholders. Nothing in this Section 9.02 shall relieve
any party to this Agreement of liability for breach of this Agreement, PROVIDED
THAT notwithstanding anything to the contrary contained herein, in the event
that the Closing does not occur for any reason, (i) the APP Companies shall have
no liability to the Buyer or any Seller, (ii) no Seller shall have any liability
to the Buyer or to any APP Company or any of the other Sellers other than for
fraud and willful misconduct by such Seller or the Company, and (iii) the Buyer
shall have no liability to any APP Company or any Seller other than for fraud
and willful misconduct.
48
53
SECTION 9.03 SPECIFIC PERFORMANCE; EQUITABLE RELIEF. Each of the parties
hereto acknowledges and agrees that the rights acquired by each party hereunder
are unique and that irreparable damage would occur in the event that any of the
provisions of this Agreement to be performed by the other party were not
performed in accordance with their specific terms or were otherwise breached.
Accordingly, in addition to any other remedy to which the parties hereto are
entitled at law or in equity, each party hereto shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement by the other
party and to enforce specifically the terms and provisions hereof in any federal
or state court to which the parties have agreed hereunder to submit to
jurisdiction.
ARTICLE X MISCELLANEOUS
SECTION 10.01 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) made by telex, telecopier or facsimile transmission, (iii) sent by
recognized overnight courier, or (iv) sent by registered or certified mail,
return receipt requested, postage prepaid.
If to the Buyer (or to the Company after the Closing), to:
EKCO GROUP, INC.
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: President
with a copy to:
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: General Counsel
If to the Class B Sellers, to:
Florida Capital Partners
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: P. ▇▇▇▇▇▇▇ ▇▇▇▇
with a copy to:
▇'▇▇▇▇▇▇▇▇, Graev & Karabell, LLP
49
54
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
If to the Schedule 1.03 Sellers, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇'▇▇▇▇▇▇▇▇, Graev & Karabell, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
And to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Warrantholders, to:
NationsCredit Commercial Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
50
55
If to Benjamax Profit Sharing Plan, to:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Company prior to the Closing, to:
APP HOLDING CORPORATION
▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: President
with a copy to:
▇'▇▇▇▇▇▇▇▇, Graev & Karabell, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
And to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
All notices, requests, consents and other communications hereunder shall be
deemed to have been made, delivered, sent, provided or received, as the context
may require (i) if by hand, at the time of the delivery thereof to the receiving
party at the address of such party set forth above, (ii) if made by telex,
telecopier or facsimile transmission, at the time that receipt thereof has been
acknowledged by electronic confirmation or otherwise, (iii) if sent by overnight
courier, on the next business day following the day such notice is delivered to
the courier service, or (iv) if sent by registered or certified mail, on the 5th
business day following the day such mailing is made.
SECTION 10.02 ENTIRE AGREEMENT. This Agreement together with the
exhibits and schedules hereto and the other documents executed in connection
herewith (together, the "Documents") (i) embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and (ii) supersedes all prior oral or written agreements and
understandings relating to the subject matter hereof (including that certain
letter agreement, by and among the Buyer, the Company and Sellers dated June
1997) except for the
51
56
Confidentiality Agreement dated December 3, 1996 which shall remain in effect in
accordance with its terms. No statement, representation, warranty, covenant or
agreement of any kind not expressly set forth in the Documents shall affect, or
be used to interpret, change or restrict, the express terms and provisions of
this Agreement.
SECTION 10.03 MODIFICATIONS AND AMENDMENTS. The terms and provisions of
this Agreement may be modified or amended only by written agreement executed by
all parties affected by such amendment.
SECTION 10.04 WAIVERS AND CONSENTS. No failure or delay by a party
hereto in exercising any right, power or remedy under this Agreement, and no
course of dealing between the parties hereto, shall operate as a waiver of any
such right, power or remedy of the party. No single or partial exercise of any
right, power or remedy under this Agreement by a party hereto, nor any
abandonment or discontinuance of steps to enforce any such right, power or
remedy, shall preclude such party from any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. Subject to the
limitations set forth herein, the election of any remedy by a party hereto shall
not constitute a waiver of the right of such party to pursue other available
remedies. No notice to or demand on a party not expressly required under this
Agreement shall entitle the party receiving such notice or demand to any other
or further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the party giving such notice or demand to any other or
further action in any circumstances without such notice or demand. The terms and
provisions of this Agreement may be waived, or consent for the departure
therefrom granted, only by written document executed by the party entitled to
the benefits of such terms or provisions. No such waiver or consent shall be
deemed to be or shall constitute a waiver or consent with respect to any other
terms or provisions of this Agreement, whether or not similar. Each such waiver
or consent shall be effective only in the specific instance and for the purpose
for which it was given, and shall not constitute a continuing waiver or consent.
SECTION 10.05 ASSIGNMENT. Neither this Agreement, nor any right
hereunder, may be assigned by any of the parties hereto without the prior
written consent of the other parties, except that the Buyer may assign all or
part of its rights and obligations under this Agreement to one or more direct or
indirect subsidiaries or affiliates or to any person or entity who acquires all
or substantially all of the assets or capital stock of the Buyer or the Company,
whether through merger, direct purchase or otherwise, (in which event,
representations and warranties relating to the Buyer and the opinion of counsel
to be delivered by the Buyer shall be appropriately modified) but the Buyer
shall not be released. Any such assignee of Buyer shall fully assume the
obligations of the Buyer hereunder.
SECTION 10.06 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and their permitted
assigns, and nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement. Nothing in this Agreement shall be
construed to create any rights or obligations except among the parties hereto,
and no person or entity shall be regarded as a third-party beneficiary of this
Agreement.
52
57
SECTION 10.07 GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
governed by the internal laws of the State of Delaware, without giving effect to
the conflict of law principles thereof.
SECTION 10.08 JURISDICTION AND SERVICE OF PROCESS. Other than disputes
relating to Section 1.03 hereof, any legal action or proceeding with respect to
this Agreement may be brought in the courts of the Commonwealth of Massachusetts
or of the United States of America for the District of Massachusetts. By
execution and delivery of this Agreement, each of the parties hereto accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The parties hereby irrevocably waive any
objection or defense that they may now or hereafter have to the assertion of
personal jurisdiction by any such court in any such action or to the laying of
the venue of any such action in any such court, and hereby waive, to the extent
not prohibited by law, and agree not to assert, by way of motion, as a defense,
or otherwise, in any such proceeding, any claim that it is not subject to the
jurisdiction of the above-named courts for such proceedings. Each of the parties
hereto irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered mail, postage prepaid, to the party at its address set
forth in Section 10.01 hereof and irrevocably waive any objection or defense
that it may now or hereafter have to the sufficiency of any such service of
process in any such action. Each of the parties hereto irrevocably waives any
right to a jury trial. Nothing in this Section 10.08 shall affect the rights of
the parties to commence any such action in any other forum or to serve process
in any such action in any other manner permitted by law.
SECTION 10.09 SEVERABILITY. In the event that any court of competent
jurisdiction shall finally determine that any provision, or any portion thereof,
contained in this Agreement shall be void or unenforceable in any respect, then
such provision shall be deemed limited to the extent that such court determines
it enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall determine any such provision, or portion thereof,
wholly unenforceable, the remaining provisions of this Agreement shall
nevertheless remain in full force and effect.
SECTION 10.10 INTERPRETATION. The parties hereto acknowledge and agree
that: (a) each party and its counsel reviewed and negotiated the terms and
provisions of this Agreement except with respect to the disclosure schedules
which are the sole responsibility of the Sellers (or certain of them) and have
contributed to its revision; (b) the rule of construction to the effect that any
ambiguities are resolved against the drafting party shall not be employed in the
interpretation of this Agreement; and (c) the terms and provisions of this
Agreement shall be construed fairly as to all parties hereto and not in favor of
or against any party, regardless of which party was generally responsible for
the preparation of this Agreement.
SECTION 10.11 HEADINGS AND CAPTIONS. The headings and captions of the
various subdivisions of this Agreement are for convenience of reference only and
shall in no way modify, or affect, or be considered in construing or
interpreting the meaning or construction of any of the terms or provisions
hereof.
53
58
SECTION 10.12 RELIANCE. The parties hereto agree that, notwithstanding
any right of any party to this Agreement to investigate the affairs of any other
party to this Agreement, the party having such right to investigate shall have
the right, subject to Section 4.07 hereof, to rely fully upon the
representations and warranties of the other party expressly contained in this
Agreement and the certificates expressly delivered hereby.
SECTION 10.13 EXPENSES. Each of the parties hereto shall pay its own
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby whether or not the transactions contemplated
hereby are consummated; provided, however, that such fees and expenses billed to
or incurred by any APP Company in connection with this Agreement and the
transactions contemplated hereby shall be borne by the Sellers and not the
Company to the extent that such fees and expenses exceed $250,000. To the extent
that such fees and expenses exceed $250,000, the Buyer shall be entitled to
deduct and withhold a portion of the Cash Consideration from each Seller (pro
rata in accordance with their interests set forth on SCHEDULE 1.02) in
satisfaction thereof. To the extent that such fees and expenses exceed $250,000
and are not deducted from the Cash Consideration, the Sellers agree to pay and
shall promptly pay such amounts.
SECTION 10.14 PUBLICITY. No party shall issue any press release or
otherwise make any public statement with respect to the execution of, or the
transactions contemplated by, this Agreement without the prior written consent
of the other party, except as may be required by law or The New York Stock
Exchange.
SECTION 10.15 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by different parties hereto on separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
SECTION 10.16 MISCELLANEOUS DEFINITIONS. As used in this Agreement, the
following terms shall have the meaning set forth in this Section 10.16:
(a) "Actual Knowledge" shall mean the actual, conscious awareness of
facts or other information of the Applicable Person (as hereinafter defined).
"Applicable Person" shall mean with respect to each Seller who is an individual,
such individual; and with respect to (i) FCP Southeast Investors IV, L.P., shall
mean ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and P. ▇▇▇▇▇▇▇ ▇▇▇▇; and (ii) with respect to Benjamax
Profit Sharing Trust, shall mean ▇▇▇▇▇ ▇▇▇▇▇▇.
(b) "Best Knowledge" shall mean actual knowledge or knowledge which
could be obtained if the party whose knowledge is being referred to has made
such investigation as would be reasonably likely to reveal the substance of the
facts, circumstances or event referred to in the representation, warranty,
covenant or agreement which is qualified by the term "Best Knowledge."
(c) "including" means, when following any general statement, term or
matter, "including but not limited to," "including, without limitation," or
words of similar import and shall
54
59
not be construed to limit such statement, term or matter to the specific terms
or matters as provided immediately following the word "including" or to similar
items or matters, whether or not non-limiting language is used with reference to
the word "including" or similar items or matters, but rather shall be deemed to
refer to all other items or matters that could reasonably fall within the
broadest possible scope of the general statement, term or matter.
(d) Except as otherwise indicated, references to any "Section,"
"Article," "Exhibit" or "Schedule" are intended to refer to Sections, Articles,
Exhibits or Schedules to this Agreement.
SECTION 10.17 APPOINTMENT. Each Section 1.03 Seller does hereby
irrevocably appoint ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and, if ▇▇. ▇▇▇▇▇▇ shall ever become
unable or unwilling to serve in such position, then ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the
"Sellers' Representative") as its true and lawful attorney-in-fact and agent,
with full power of substitution or resubstitution, to act solely and exclusively
on behalf of such Section 1.03 Seller after the Closing with respect to any
matters relating to this Article X, Article VIII, and Section 1.03 and Section
9.01 of this Agreement, and any other provision to the extent it involves a
matter pertaining to this Article X, Article VIII, and Section 1.03 and Section
9.01 of this Agreement. All action required to be taken by the Schedule 1.03
Sellers under this Article X, Article VIII, and Section 1.03 and Section 9.01 of
this Agreement, and any other provision to the extent it involves a matter
pertaining to this Article X, Article VIII, and Section 1.03 and Section 9.01 of
this Agreement, including, without limitation, the giving and receiving of all
notices, consents and waivers and the execution and delivery of any documents,
including any amendments to the Agreement, and the execution and delivery of any
agreements and releases in connection with the settlement of any dispute or
claim under Article VIII hereof, shall be taken by the Schedule 1.03 Sellers'
Representative and the Buyer shall be entitled to rely on all actions taken or
authorized by the Sellers' Representative as being binding acts of the Schedule
1.03 Sellers or any of them. With respect to actions to be taken after the
Closing that relate to the Indemnification of the Schedule 1.03 Sellers, the
Sellers' Representative shall have the authority to take actions contemplated to
be taken by it in Section VIII of this Agreement. With respect to actions to be
taken after the Closing that relate to the Earnout Payments, the Sellers'
Representative shall have the authority to take actions contemplated to be taken
by it in Section 1.03 of this Agreement. The Sellers' Representative shall not
have any duties or responsibilities except those expressly set forth in this
Agreement, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or shall otherwise
exist against the Sellers' Representative.
SECTION 10.18 PREPARATION OF SCHEDULES. The Schedules in this Agreement
shall be arranged in separate parts corresponding to the numbered and lettered
sections. Any disclosure made in any Schedule to this Agreement which should,
based on the substance of such disclosure, be applicable to another Schedule to
this Agreement shall be deemed to be made with respect to such other Schedule
regardless of whether or not a specific reference is made thereto, PROVIDED,
that the description of such item on a Schedule is such that the Buyer could
reasonably be expected to ascertain that such disclosure would relate to such
other provision of this Agreement. Information and disclosures set forth on any
Schedule hereto shall be deemed a representation and warranty applicable to the
Section to which such Schedule corresponds.
55
60
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
56
61
IN WITNESS WHEREOF, the Buyer, the Company, the Sellers and the
Warrantholder have executed this Agreement as of the day and year first above
written.
THE BUYER: THE COMPANY:
EKCO GROUP, INC. APP HOLDING CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ By: /s/ P. ▇▇▇▇▇▇▇ ▇▇▇▇
------------------------------------ -----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Name: P. ▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------------- ---------------------------------
Title: Executive Vice President Title: President
--------------------------------- --------------------------------
THE SELLERS:
BENJAMAX PROFIT SHARING PLAN /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Sole Trustee
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
NATIONSCREDIT COMMERCIAL ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
CORPORATION, AS WARRANTHOLDER
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------ --------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Title: President, Corporate Finance /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------- --------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
FCP SOUTHEAST INVESTORS IV, L.P.
By: FCP Partners IV, L.P.,
as General Partner
By: KL Investors Corporation,
as General Partner
By: /s/ P. ▇▇▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: P. ▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------
Title: President
--------------------------
57