EXHIBIT 99.1
ASSETS PURCHASE AGREEMENT
by and among
ARTRA GROUP INCORPORATED,
BCA HOLDINGS, INC.,
BAGCRAFT CORPORATION OF AMERICA,
THE PRINCIPAL SHAREHOLDERS NAMED HEREIN
and
PACKAGING DYNAMICS, L.L.C.
and
BAGCRAFT ACQUISITION, L.L.C
Dated: As of August 26, 1998
Table of Contents
Headings Page No.
-------- --------
1. Sale of Assets......................................................1
2. Assumption of Liabilities...........................................4
3. Purchase Price..................................................... 8
4. Closing; Closing Date..............................................12
5. Representations and Warranties With
Respect to Artra, BCA and Seller.................................12
6. Representations and Warranties of Buyer............................39
7. Covenants and Agreements...........................................41
8. Employment and Employee Benefit Arrangements.......................51
9. Condition precedent to the Obligation of Buyer.....................54
10. Condition Precedent to the Obligation of Seller....................56
11. Survival of Representations and Warranties.........................57
12. General Indemnification............................................58
13. Termination........................................................64
14. Miscellaneous......................................................67
SCHEDULES
Schedule 2.1(c) Assumed Contracts
Schedule 3.3 Working Capital Schedule
Schedule 5.2 Subsidiaries and other Affiliates
Schedule 5.3 Qualification
Schedule 5.5 Consents and Approvals
Schedule 5.6 No Breach
Schedule 5.7(a) Audited Financial Statements
Schedule 5.7(b) Unaudited Financial Statements
Schedule 5.7(c) Liabilities
Schedule 5.9(a) Compliance with Laws
Schedule 5.9(b) Permits
Schedule 5.10 Actions and Proceedings
Schedule 5.11 Contracts
Schedule 5.12(a)(1) Owned Real Property
Schedule 5.12(b) Real Property Leases
Schedule 5.12(c) Real Property
Schedule 5.13(a) Tangible Property
Schedule 5.13(b) Title to Tangible Property
Schedule 5.14(a) Intangible Property
Schedule 5.14(b) Title to Intangible Property
Schedule 5.15 Benefit Plans and Related Matters
Schedule 5.16 Employee Relations Matters
Schedule 5.17 Insurance
Schedule 5.18 Officers, Directors and Key Employees
Schedule 5.19 Operations of Seller
Schedule 5.20 Potential Conflicts of Interest
Schedule 5.21 Banks and Powers of Attorney
Schedule 5.22(a) Suppliers
Schedule 5.22(b) Customers
Schedule 5.25 Tax Matters
Schedule 5.26 Environmental Matters
Schedule 7.1(i) Seller's Capital Expenditure Budget
Schedule 9.6 Equity and Debt Financing Commitments
Letters
Schedule 10.5 Nonoperating Lease Spread
Exhibits
Exhibit A Trademark Assignment
Exhibit B Form of Subordinated Promissory Note
ASSETS PURCHASE AGREEMENT
ASSETS PURCHASE AGREEMENT, dated as of August 26, 1998, by and
among ARTRA GROUP INCORPORATED, a Pennsylvania corporation ("Artra"), BCA
HOLDINGS, INC., a Delaware corporation and a wholly-owned subsidiary of Artra
("BCA"), BAGCRAFT CORPORATION OF AMERICA, a Delaware corporation and a
wholly-owned subsidiary of BCA ("Seller"), PACKAGING DYNAMICS, L.L.C., a
Delaware limited liability corporation (the "Company"), BAGCRAFT ACQUISITION,
L.L.C. ("Buyer"), a Delaware limited liability corporation and a wholly-owned
subsidiary of the Company, and solely for the purposes of Section 7.16 hereof,
the Principal Shareholders.
Seller wishes to sell, and Buyer wishes to purchase,
substantially all of Seller's assets and properties used by or in the business
conducted by Seller (the "Business"), all upon the terms and subject to the
conditions hereinafter set forth.
Accordingly, the parties hereto each intending to be
contractually bound, hereby agree as follows:
1. Sale of Assets.
1.1 Assets to Be Sold. Except as otherwise provided in Section 1.2, at
the closing provided for in Section 4 (the "Closing"), Seller shall sell,
assign, transfer, convey and deliver to Buyer all of Seller's interest in all
assets and properties owned by Seller, or in which Seller has any rights
whatsoever, as of the Closing Date, of every type and description, real,
personal or mixed, and wherever located, tangible and intangible, ▇▇▇▇▇▇ or
inchoate, known or unknown, fixed or unfixed, accrued, absolute, contingent or
otherwise, and whether or not reflected on the books and records of Seller or
specifically referred to in this Agreement, including, without limitation,
(a) those assets reflected on the unaudited balance sheet of Seller as
of July 4, 1998 referred to in Section 5.5 (the "Balance Sheet") (subject to
transactions and adjustments in the ordinary course of the Business after July
4, 1998);
(b) all of the goodwill relating to the Business as a going concern;
(c) all of Seller's rights to any customer and inquiry lists;
(d) all of Seller's right to use the name "Bagcraft Corporation of
America", "Bagcraft" or any derivative or similar name (subject to the
provisions of Section 7.9);
(e) all of Seller's rights to its patents, trademarks, trade names,
copyrights, service marks (including all registrations, applications for
registration thereof and all goodwill associated therewith) and other
intellectual property of any type whatsoever;
(f) all of Seller's rights to its processes, software, inventions,
know-how, formulas and trade secrets;
(g) all of Seller's real property, plant and equipment, including, all
buildings and improvements thereon, all water rights, easements, rights of way
and other rights appurtenant to the real property;
(h) all of Seller's right, title and interest under all of the
Business' contracts, agreements, licenses, leases and other similar documents;
(i) all of Seller's accounts and notes receivable;
(j) all of Seller's insurance policies; and
(k) all of the Seller's inventories, raw materials, work-in-process,
supplies, books and records, information files, records and other data relating
to the Business;
(l) all of Seller's tooling, equipment, machinery, spare parts, stores,
dies, molds, vehicles, furniture, fixtures, leasehold and building improvements
and other tangible property;
(m) all guaranties, warranties, indemnities and similar rights in favor
of the Business;
(n) all permits, licenses, authorizations and other similar rights
relating to the Business;
(o) all advertising, sales and promotional materials, catalogues, price
lists, mailing lists, lists of customers, lists of suppliers, distribution
lists, and production data of Seller; and
(p) all computerized records and other computerized storage media and
all software and user manuals and documentation relating thereto.
(All of the foregoing interests of Seller in such assets or properties to be
sold, assigned, transferred, conveyed and delivered to Buyer hereunder are
hereinafter sometimes collectively referred to as the "Assets"), and Buyer shall
purchase the Assets for the consideration set forth in Section 3.1.
1.2 Excluded Assets. Anything in Section 1.1 to the contrary
notwithstanding, there shall be excluded from the Assets as of the Closing Date
to be sold, assigned, transferred and conveyed to Buyer hereunder and not
included within the meaning of the term Assets (such excluded assets being
referred to as the "Retained Assets")
(a) all rights of Seller under this Agreement;
(b) all rights to refunds, rebates or credits of any Taxes (as
hereinafter defined) for all periods prior to the Closing;
(c) all amounts due or payable to the Business from Artra, BCA or any
of their affiliates;
(d) the corporate minute books of Seller;
(e) the receivable of approximately $850,000 payable to Seller under
Seller's health insurance policy;
(f) the stock of Rescuers, Inc.; and
(g) the leases, the leasehold interests and the subleases relating to
the property leased by Seller in Edison, New Jersey, Hialeah, Florida and
Medley, Florida (collectively, the "Nonoperating Leases").
1.3 Instruments of Conveyance. In order to effectuate the sale,
assignment, transfer and conveyance contemplated by Section 1.1, Seller shall
execute and deliver at the Closing, (a) a ▇▇▇▇ of sale, in a form mutually
acceptable to the parties, (b) deeds, in the appropriate form, conveying the
Owned Real Property (as hereinafter defined), (c) assignment(s) of Assumed
Contracts, in a form mutually acceptable to the parties, (d) a trademark and
service ▇▇▇▇ assignment, substantially in the form of Exhibit A attached hereto
and (e) other documents or instruments of assignment, transfer or conveyance, as
Buyer shall reasonably deem necessary or appropriate to vest in or confirm to
Buyer title to all of the Assets to the extent provided for herein.
2. Assumption of Liabilities
2.1 Liabilities of Seller Assumed by Buyer. Buyer agrees, upon the
terms and subject to the conditions set forth herein, to assume, at the Closing,
and to perform or satisfy thereafter only the following liabilities:
(a) all liabilities and obligations of the Business that are fully
reserved for on the Balance Sheet to the extent the same shall exist on the
Closing Date (other than the Retained Liabilities (as defined in Section 2.2));
(b) all liabilities and obligations of the Business incurred after the
Balance Sheet Date (as defined in Section 5.7) in the ordinary and usual course
of business relating to the Business and that are of a type consistent with
those accrued for on the Balance Sheet that are fully reserved for on the
Closing Balance Sheet (other than the Retained Liabilities);
(c) all liabilities and obligations of Seller under all of the
Business' agreements, leases, commitments, purchase orders and other contracts
listed on Schedule 2.1(c) hereto or entered into in the ordinary and usual
course of Seller's business after the date hereof and on or prior to the
Closing, in each case, to the extent that such liabilities and obligations first
arise after the Closing and do not result from a breach or default by Seller
thereunder on or prior to the Closing (other than the Retained Liabilities)
("Assumed Contracts");
(d) all liabilities of the Business for accrued and unused vacation
existing as of the Closing Date to the extent of the applicable reserves on the
Closing Balance Sheet and, to the extent of the Closing Bonus Escrow Accrual (as
hereinafter defined), unpaid bonuses for any Continued Employee (as hereinafter
defined);
(e) all liabilities of the Business for short-term disability payments
required to be made on or after the Closing Date to the Continued Employees and
the Severed Employees (as hereinafter defined) with respect to events occurring
prior to the Closing Date but only to the extent of the coverage contained in
Seller's short-term disability insurance plan which will be transferred to and
assumed by Buyer hereunder; and
(f) all liabilities and obligations (other than the Retained
Liabilities) under Environmental Laws (as hereinafter defined in Section 5.26)
which arise as a result of Buyer's ownership, use or operation on or after the
Closing Date of the Real Property (as hereinafter defined in Section 5.12(c)
hereof) or events or circumstances on the Real Property which first occur on or
after the Closing Date (the liabilities assumed by Buyer under this clause (e)
are hereinafter collectively referred to as "Assumed On-Site Environmental
Liabilities").
All of the foregoing liabilities and obligations of Seller to be assumed by
Buyer hereunder are hereinafter collectively referred to as the "Assumed
Liabilities."
2.2 Liabilities Not Assumed by Buyer. Notwithstanding anything to the
contrary set forth in Section 2.1, Buyer shall not assume, or in any way be
liable or responsible for any other liability or obligation of Seller or the
Business, including without limitation, the following:
(a) any liability or obligation of Seller or the Business for foreign,
federal, state, local and other taxes relating to, or otherwise with respect to
the Seller or Seller's or the Business' income, profits, estimated, excise,
sales, use, franchise, ad valorem, capital, transfer, payroll related and
property taxes and governmental charges including, any deficiencies, interest,
or penalties relating thereto (collectively "Taxes");
(b) any liability of the Seller or the Business to Artra, BCA or any of
the Seller's other direct or indirect stockholders or affiliates or to any third
party on behalf of any such entities;
(c) any liability or obligation of Seller or the Business based upon or
arising under this Agreement;
(d) all liabilities, obligations, claims, costs, damages, costs and
expenses with respect to employees of Seller (whether arising before, on or
after the Closing Date) relating to, arising out of, or in connection with their
employment with Seller at any time on or before the Closing Date, including,
without limitation, any claims to rights or benefits under any contract,
document, policy or understanding with any such employees, or under any stock,
option, phantom stock, incentive, pension, death benefit, retirement, medical,
retiree, insurance, vacation or workers' compensation plan or other Benefit
Plans (as hereinafter defined) (except for (x) the accrued and unpaid vacation
obligation and the unpaid bonus obligation set forth in Section 2.1(d), (y) the
short-term disability obligation set forth in Section 2.1(e), and (z) the
obligations and liabilities first required to be performed after the Closing
Date under the Assumed Contracts);
(e) all claims for severance or other moneys or damages (whether
arising before, on or after the Closing Date), including, without limitation,
claims under the Worker Adjustment and Retraining Notification Act of 1988, from
any of the Employees of Seller who are employed by Seller at any time on or
prior to the Closing Date (other than with respect to the Continued Employees
and the Severed Employees), or from any federal, state or local governmental
agency or authority on behalf of such employees or relating to such claims,
involving an alleged employment loss or termination on or prior to the Closing
Date, including without limitation, those which are based upon or arise out of
the execution and delivery of this Agreement or any of the transactions
contemplated hereby;
(f) all indebtedness for money borrowed and all interest, penalties,
fees and other amounts payable with respect thereto;
(g) all liabilities, obligations, claims, damages, costs and expenses
(whether arising before, on or after the Closing Date) with respect to any
litigation, claim, action or other proceeding of any type whatsoever relating
to, arising out of, or in connection with the Seller or the operation of the
Business on or prior to the Closing Date (including, without limitation those
claims identified on Schedules 5.16(b) and 5.17);
(h) all liabilities, obligations, claims, damages, costs and expenses
relating to, arising out of, or in connection with any contracts or agreements
of Seller or of the Business (other than the obligations and liabilities first
required to be performed after the Closing Date under the Assumed Contracts);
(i) all liabilities, obligations, claims, damages, costs and expenses
arising (whether arising before, on or after the Closing Date) under any
warranty that covered any of the products manufactured or sold by Seller on or
prior to the Closing Date;
(j) all liabilities, obligations, claims, damages, costs and expenses
with respect to any product liability claim (whether arising before, on or after
the Closing Date) relating to products manufactured or sold by Seller on or
prior to the Closing Date;
(k) all liabilities, obligations, claims, damages, costs and expenses
(whether arising before, on or after the Closing Date) with respect to any claim
relating to, arising out of, or in connection with Seller's or the Business'
ownership, use or operation of any Seller Property (as defined in Section
14.1(vii)) or the property leased by Seller in Edison, New Jersey, Hialeah,
Florida and Medley, Florida;
(l) all liabilities, obligations, claims, damages, costs, fines,
penalties, expenses and capital expenditures (whether arising before, on or
after the Closing Date) under any Environmental Laws or in connection with any
Remedial Action as (such terms are hereinafter defined in Section 5.26) or in
connection with any claim, action, proceeding, citation or fine by any
governmental or regulatory body or by any third party that, in any case, arises
with respect to, as a result of, or in connection with Seller's ownership, use
or operation on or prior to the Closing Date of all or any part of the Real
Property or the Business or events that have occurred on or prior to the Closing
Date, or are in respect of or as a result of the existence of circumstances on
or prior to the Closing Date, including, without limitation, any Release (as
hereinafter defined in Section 5.26(a)) occurring on or prior to the Closing
Date, on, about, above all or under any Real Property, regardless of whether or
not such Release migrates to the Environment beyond the boundaries of any Real
Property (all liabilities retained by Seller under this clause (l) are
hereinafter collectively referred to as "Retained On-Site Environmental
Liabilities");
(m) all liabilities, obligations, claims, damages, costs, expenses and
capital expenditures (whether arising before, on or after the Closing Date)
under any Environmental Laws or in connection with any Remedial Action or in
connection with any claim, action, proceeding, citation or fine by any
governmental or regulatory body or by any third party that, in any case, arises
with respect to, as a result of, or in connection with, the removal or disposal,
on or prior to the Closing Date, of any waste, special waste or Hazardous
Substance (as hereinafter defined in Section 5.26) from any Real Property or any
Company Property to any off-site waste disposal or treatment site, off-site
waste storage site or any other off-site facility or location (all liabilities
retained by Seller under this clause (m) are hereinafter collectively referred
to as, "Off-Site Environmental Liabilities");
(n) any liability or obligation of the Business or Seller to Artra, BCA
or any of Artra's direct or indirect stockholders or affiliates; and
(o) all other liabilities and obligations of the Business which are not
fully and accurately reserved for in the Balance Sheet, or which were not
incurred after the Balance Sheet Date in the ordinary and usual course of
business of a type consistent with past practice and fully and accurately
reserved for on the Closing Balance Sheet.
All of the foregoing liabilities and obligations of Seller which are not being
assumed by Buyer hereunder are hereinafter sometimes collectively referred to as
the "Retained Liabilities." The Seller shall completely and fully perform and
discharge all of the Retained Liabilities.
2.3 Instruments of Assumption In order to effectuate the assumption of
liabilities contemplated by this Section 2, Buyer shall execute and deliver at
the Closing, dated as of the Closing Date (a) an instrument of assumption, in a
form mutually acceptable to the parties, and (b) such other documents as Seller
shall reasonably deem necessary or appropriate to confirm Buyer's assumption of
the Assumed Liabilities to the extent provided for herein.
3. Purchase Price, Allocation and Adjustments
3.1 Purchase Price (a) Buyer shall pay to Seller the amount of
Ninety-One Million Five Hundred Thousand Dollars ($91,500,000.00) in
consideration of the Assets (such sum is hereinafter called the "Purchase
Price"). At the Closing, Buyer shall deliver to Seller (i) in cash by wire
transfer of immediately available funds an amount equal to the excess of (x)
Eighty-Nine Million Dollars ($89,000,000) over (y) the sum of (A) the amount of
Seller's overdraft balance on the business day immediately preceding the Closing
Date (the "Closing Overdraft Escrow Balance")as certified by the chief financial
officer of Seller and (B) the amount of Seller's bonus accrual as of the Closing
Date (the "Closing Bonus Escrow Accrual") as certified by the chief financial
officer of Seller, and (ii) a non-transferable, non-negotiable subordinated
promissory note of Packaging Holdings, L.L.C. (the sole member of the Company)
in the aggregate principal amount of Two Million Five Hundred Thousand Dollars
($2,500,000), payable in full on the third anniversary of the Closing Date,
bearing interest at 10.0% per annum, payable quarterly in arrears, substantially
in the form attached hereto as Exhibit B (the "Subordinated Promissory Note"),
and Buyer shall deliver to LaSalle National Bank or to such other escrow agent
that is mutually acceptable to Buyer and Seller (the "Escrow Agent") in
accordance with the terms of escrow agreement(s) that are mutually acceptable to
Buyer and Seller (the "Escrow Agreement") an amount equal to the sum of the
Closing Overdraft Escrow Balance and the Closing Bonus Escrow Accrual
(collectively, the "Escrow Account").
(b) The parties hereto agree that in the event that Buyer assumes
Seller's indebtedness to the City of ▇▇▇▇▇▇ Springs, Kansas (the "Kansas
Indebtedness"), (i) the cash portion of the Purchase Price shall be reduced in
an amount equal to the outstanding aggregate obligation, as of the Closing Date,
that is assumed by Buyer, (ii) the agreements evidencing the Kansas Indebtedness
shall be Assumed Contracts for purposes of Schedule 2.1(c), (iii) Seller's
repayment obligations under Section 9.9 hereof shall exclude the obligation to
repay the Kansas Indebtedness and to release the liens relating thereto, and
(iv) the Kansas Indebtedness shall be excluded from Section 2.2(f) hereof and
shall be deemed to be an Assumed Liability for purposes of this Agreement.
3.2 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets (including the Assumed Liabilities) in the manner required by
Treasury Regulations 1.1060-1T and shall be reasonably agreed to in writing by
the parties on or before the Closing Date. Buyer and Seller agree that, except
as otherwise required by law (i) the allocations to be agreed to as herein
described shall be binding on Seller and Buyer for all federal, state and local
tax purposes and (ii) Buyer and Seller shall file with their respective federal
income tax returns consistent IRS Forms 8594-Asset Acquisition Statements Under
Section 1060, including any required amendments thereto which shall reflect the
allocations set forth in their written agreement.
3.3 Purchase Price Adjustment
(a) The Purchase Price shall be adjusted after the Closing as follows:
If the "Closing Working Capital" (as hereinafter
defined) is:
(A) greater than $21,000,000, the Purchase
Price shall be increased by an amount equal to the difference obtained by
subtracting $21,000,000 from the Closing Working Capital; or
(B) less than $19,500,000, the Purchase
Price shall be reduced by an amount equal to the difference obtained by
subtracting the Closing Working Capital from $19,500,000.
(This adjustment is hereinafter referred to as the "Working Capital
Adjustment").
Buyer shall pay to Seller an amount in cash equal to any increase in
Purchase Price resulting from the Working Capital Adjustment within five (5)
days after the finalization of the Closing Balance Sheet (as hereinafter
defined) or Seller shall pay to Buyer an amount in cash equal to any decrease in
Purchase Price resulting from the Working Capital Adjustment within five (5)
days after the finalization of the Closing Balance Sheet (as hereinafter
defined), as the case may be, in either case by wire transfer of immediately
available funds.
(b) As soon as practicable following the Closing Date, Buyer shall, at
Buyer's expense, cause to be prepared an unaudited balance sheet of Seller as of
the close of business on the Closing Date (the "Draft Closing Balance Sheet")
containing the working capital items listed on Schedule 3.3 hereto (the "Working
Capital Schedule"). The Draft Closing Balance Sheet will fairly present the
financial position, assets and liabilities of Seller as of the Closing Date and
shall be prepared in accordance with generally accepted accounting principles
and practices applied on a basis consistent with that of the Audited Financials
(as defined in Section 5.7), the Financial Statements (as defined in Section
5.7) and the Working Capital Schedule. Buyer and Seller shall use their best
efforts to complete a physical count of the inventory on or before the close of
business on the Closing Date. Buyer's independent certified public accountants
("Buyer's Accountants") and Seller's independent certified public accountants
("Seller's Accountants") shall be entitled to participate in, observe and review
such audit of the inventory. The Draft Closing Balance Sheet (together with any
work papers or other such items as Seller's Accountants shall reasonably
request) shall be delivered in written form to Seller and Seller's Accountants
and shall become final and binding upon the parties unless Seller gives written
notice of its disagreement (a "Notice of Disagreement") to Buyer within thirty
(30) days following Seller's receipt of the Draft Closing Balance Sheet,
specifying Seller's and Seller's Accountants disagreement with the Draft Closing
Balance Sheet. If a Notice of Disagreement is received by Buyer in a timely
manner, then the Draft Closing Balance Sheet shall become final and binding upon
the parties on the earlier of (x) the date the parties hereto resolve in writing
any differences they may have with respect to any matter specified in the Notice
of Disagreement and (y) the date any Disputed Matters (as hereinafter defined)
are finally resolved in writing by the Arbitrator (as hereinafter defined). Any
such Notice of Disagreement shall state in reasonable detail the nature of any
disagreement so asserted. During a period of fifteen (15) days following the
expiration of the aforesaid thirty (30) day period, Buyer and Seller shall
attempt to resolve in writing any differences that they may have with respect to
any matter specified in the Notice of Disagreement. If at the end of such
fifteen (15) day period, Buyer and Seller have failed to reach written agreement
with respect to all of such matters, then all such matters as specified in the
Notice of Disagreement as to which such written agreement has not been reached
(the "Disputed Matters") shall be submitted to and reviewed by an arbitrator
(the "Arbitrator"), which shall be one of the "Big-Five" accounting firms and
having no significant relationship with any party hereto during the past two (2)
years. The identity of the Arbitrator shall be determined mutually by Seller's
Accountants and Buyer's Accountants, and if such accountants cannot agree as to
the identity of the Arbitrator, then each accounting firm shall select one
nominee and the Arbitrator shall be chosen by lot. The Arbitrator shall consider
only the Disputed Matters and shall be instructed to act promptly to resolve all
Disputed Matters, and its decision with respect to all Disputed Matters shall be
final and binding upon Buyer and Seller. The fees and expenses of the Arbitrator
with respect to the settlement of all Disputed Matters shall be borne equally by
Buyer and Seller.
(c) As used herein, "Closing Balance Sheet" shall refer to the Draft
Closing Balance Sheet in the form in which it becomes final in accordance with
the foregoing procedures. Further, as used herein, the term "Closing Working
Capital" shall mean the sum of (x) "Net Accounts Receivable" of Seller reflected
on the Closing Balance Sheet (except for the receivable from Seller's insurance
carrier referred to in Section 1.2(e) hereof and the receivables classified as
"Other Receivables") less an adequate reserve for doubtful accounts and (y) "Net
Inventories" (valued on a first-in-first-out basis and net an adequate reserve
for obsolete inventory in the ordinary course of business consistent with past
practices) of Seller reflected on the Closing Balance Sheet, minus (z) the
amount of Seller's "Accounts Payable", "Accrued Employee Compensation"
(excluding Seller's accrual for bonuses in an amount not to exceed the Closing
Bonus Escrow Accrual and Seller's accrual classified as "Accrued Payroll"),
"Accrued Other Expenses" (excluding Seller's accrual classified as workers'
compensation, healthcare insurance claims, 401K deductions, in each case, in an
amount not to exceed the amount of such accruals on the date hereof) and
"Accrued Other Taxes" reflected on the Closing Balance Sheet, which components
of the "Closing Working Capital" definition the parties hereto have attempted to
further describe on Schedule 3.3 hereto.
4. Closing; Closing Date. Subject to the satisfaction of the conditions
contained in Sections 9 and 10 hereof, the Closing of the sale and purchase of
the Assets and the transactions contemplated hereby shall take place at the
offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ at 10:00 a.m. Chicago time, on
the first (1st) business day following the approval of Artra' shareholders
described in Section 5.31 hereof or such other time, date or place as Buyer and
Seller agree in writing; provided, however that in no event shall the Closing
take place after November 16, 1998 (or December 18, 1998 in the event that
Artra's Proxy Statement (as hereinafter defined) is reviewed by the Securities
and Exchange Commission). The time and date upon which the Closing occurs is
herein called the "Closing Date."
5. Representations and Warranties with Respect to Artra, BCA and Seller. Artra,
BCA and Seller, jointly and severally, represent and warrant to Buyer as
follows:
5.1 Due Incorporation and Authority. Each of Artra, BCA and Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has all requisite corporate power and
lawful authority to own, lease and operate its assets, properties and business
and to carry on its business as now being and heretofore conducted.
5.2 Subsidiaries and Other Affiliates. Except as set forth on Schedule
5.2, Seller does not own directly or indirectly any debt or equity interest in
any other corporation, joint-venture or person.
5.3 Qualification. Each of Artra, BCA and Seller is duly qualified,
licensed or otherwise authorized as a foreign corporation to transact business
and is in good standing under the laws of each state where its ownership or
lease of property or the conduct of its business requires it to be qualified to
do business as are set forth on Schedule 5.3 hereto.
5.4 Authority to Execute and Perform Agreement. Each of Artra, BCA and
Seller has, subject to obtaining the approval of Artra's shareholders described
in Section 5.31 hereof, the full corporate power and authority required to enter
into, execute and deliver this Agreement and, to the extent a party thereto, the
deeds, the ▇▇▇▇ of sale and the other documents and certificates to be entered
into in connection with the transactions contemplated hereby (collectively, the
"Transaction Documents"), and to perform fully their respective obligations
hereunder and thereunder. This Agreement has been and the other Transaction
Documents to be delivered at the Closing will be, duly authorized, executed and
delivered by Artra, BCA and Seller, to the extent a party thereto, and (assuming
the due authorization, execution and delivery hereof or thereof by Buyer) each
is, or upon execution by Artra, BCA and Seller, to the extent a party thereto,
will be, the valid and binding obligation of Artra, BCA or Seller, as the case
may be, enforceable in accordance with its respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally or general principles of equity.
5.5 Consents and Approvals. Except for the approval of Artra's
shareholders described in Section 5.31 hereof and the expiration of the
applicable waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrusts Improvement Act
(the "HSR Act") and except as set forth on Schedule 5.5 (collectively, the
"Required Consents"), the execution and delivery by Artra, BCA and Seller of
this Agreement and the other Transaction Documents and the performance by Artra,
BCA and Seller of their respective obligations hereunder and thereunder do not
require Artra, BCA or Seller to obtain any consent, approval or action of, or
make any filing with or give any notice to, any court, governmental or
regulatory body or other third party whether governmental or private.
5.6 No Breach. Except for Seller's contracts which require third party
consents prior to the assignment thereof as set forth on Schedule 5.6, the
execution, delivery and performance of this Agreement and the other Transaction
Documents to be entered into in connection herewith by, to the extent a party
thereto, Artra, BCA and Seller and the consummation of the transactions
contemplated hereby and thereby, will not (i) violate, conflict with or result
in the breach of any provision of the Certificate of Incorporation or By-laws of
Artra, BCA or the Seller; (ii) except as set forth on Schedule 5.6, violate,
result in the breach of, or default (or an event which, with notice or lapse of
time or both, would constitute a default) under, any of the terms of any
contract, lease, agreement, Permit or other instrument to which Artra, BCA, the
Seller or the Business is a party or to which Seller, the Business or any of the
Assets may be bound or subject, (iii) result in the creation or imposition of
any lien, security interest or other encumbrance upon the Assets or the
Business; (iv) violate any order, writ, judgment, injunction, award or decree of
any court, arbitrator or governmental or regulatory body against, or binding
upon, Artra, BCA, the Seller, the Business or the Assets; or (v) violate any
statute, law or regulation applicable to Artra, BCA, the Seller or the Business.
5.7 Financial Statements. (a) The audited balance sheets of Seller as
of December 31, 1995, 1996 and 1997 and the related audited statements of income
and retained earnings and cash flow for the years then ended, including the
footnotes thereto, with the opinion thereon of Coopers and ▇▇▇▇▇▇▇, copies of
which are attached as Schedule 5.7(a), fairly present the financial position of
Seller as at such dates and the results of operations of Seller for such
periods, in each case in accordance with generally accepted accounting
principles consistently applied for the periods covered thereby. (The foregoing
audited Financial Statements of Seller as of December 31, 1997 and for the year
then ended, are sometimes herein called the "Audited Financials".)
(b) The unaudited balance sheet of Seller as of July 4, 1998 and the
related unaudited statements of income and retained earnings and cash flow for
the six-month period then ended as certified by the President and Chief
Financial officer of Seller, copies of which are attached as Schedule 5.7(b),
fairly present the financial condition, assets and liabilities of Seller as of
July 4, 1998 and the results of operations of the Business for the six-month
period then ended in accordance with generally accepted accounting principles
consistently applied consistent with past practices, except for normal and
customary year end adjustments and except for the absence of notes thereto. (The
foregoing unaudited financial statements of Seller as of July 4, 1998 and for
the six-months then ended, are sometimes herein called the "Financial
Statements.") The balance sheet included in the Financial Statements is
sometimes herein called the "Balance Sheet" and July 4, 1998 is sometimes herein
called the "Balance Sheet Date."
(c) As of the date of the Financial Statements, except as set forth in
Schedule 5.7(c), Seller does not have any material liabilities or obligations of
any kind, whether accrued, absolute, contingent or otherwise, which are not
disclosed on the Financial Statements or disclosed in the notes thereto. Except
as set forth on the Financial Statements and as set forth on Schedule 5.7(c)
hereto, Seller does not have outstanding any material indebtedness, obligation
or liability of any type whatsoever. Except for liabilities incurred since the
date of the Financial Statements in the ordinary course of business consistent
with past practices (none of which such liabilities is a liability for tort,
breach of contract, warranty, infringement or violation of law), Seller has not
incurred any such liabilities since the Balance Sheet Date, and except as set
forth on Schedule 5.7(c), there is no basis for the assertion of any material
claim or liability of any nature against Seller in any amount not fully
reflected or reserved against on the Financial Statements or disclosed in the
notes thereto.
5.8 No Material Adverse Change. Since the Balance Sheet Date, there has
been no material adverse change in the "condition of the Business" (as such term
is defined in Section 14.1(ii)) nor has there been any condemnation, damage,
destruction or loss to any of Seller's assets since such date that could have or
has had a material adverse effect on the condition of the Business, whether or
not covered by insurance, and to Seller's knowledge, no such change is
threatened.
5.9 Compliance with Laws; Permits. Except as set forth on Schedule
5.9(a), there are no material violations by Seller or the Real Property of any
applicable federal, state, local or foreign law, ordinance, regulation, order,
judgment, injunction, award, decree or other requirement of any governmental or
regulatory body, court or arbitrator, including any zoning laws or building
codes. Except as set forth on Schedule 5.9(b), Seller possesses all licenses,
permits, orders or approvals of any applicable federal, state or local
governmental or regulatory body that are necessary to conduct the Business
(collectively, "Permits") and each such permit is identified on Schedule 5.9(b).
Except as set forth on Schedule 5.9(b),
(i) all such Permits are in full force and effect,
(ii) no violations are, or have been within the last twelve
months, recorded or observed in respect of such Permit,
(iii) there are no proceedings pending or, to Seller's
knowledge, threatened, which would result in the revocation, cancellation,
limitation or suspension thereof,
(iv) none of the rights of the Business under any such Permit
will be subject to termination or modification as a result of the consummation
of the transactions contemplated by this Agreement, and
(v) no consent or approval of any person is required under any
material Permit in connection with the consummation of the transactions
contemplated hereby.
5.10 Actions and Proceedings. Except as set forth on Schedule 5.10
hereof, there are no (i) outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against
Seller, the Business or the Assets, or to Seller's knowledge, against any person
whom the Seller has agreed to indemnify or any current or former officer or
director of Seller relating to the Business or the Assets, and (ii) actions,
litigations, suits or claims or legal, administrative or arbitral proceedings of
any type whatsoever pending, or to the Seller's knowledge, threatened, against
or involving Seller, the Business, the Assets, or to Seller's knowledge, against
any person whom the Seller has agreed to indemnify or any current or former
officer or director of Seller relating to the Business or the Assets.
5.11 Certain Contracts. Except for the Real Property Leases (if any)
listed on Schedule 5.12, the Benefit Plans and Benefit Arrangements listed on
Schedule 5.15 and the contracts listed on Schedule 5.20, Schedule 5.11 sets
forth the following contracts (whether oral or written) to which Seller or the
Business is a party or by or to which any of the Assets may be bound or subject:
(i) contracts with any current or former officer, director, employee or
consultant of Seller;
(ii) contracts with any labor union or association representing any
employee of Seller;
(iii) contracts for the sale, transfer or lease of any of Seller's
assets other than in the ordinary course of business or pursuant to which Seller
sold or transferred, during the last five (5) years, any assets other than in
the ordinary course of business;
(iv) contracts under which Seller agrees to indemnify any party or to
share any tax or environmental liability of any party;
(v) contracts under which Seller purchases or sells goods or services
in excess of $100,000 per year (except for invoices or purchase orders in the
ordinary course of business);
(vi) lease agreements for equipment and other personal property with
rental costs in excess of $100,000 per year;
(vii) contracts containing covenants of Seller not to compete in any
line of business or with any person in any geographical area or covenants of any
other person not to compete with Seller in any line of business or in any
geographical area or covenants of Seller to hold certain information
confidential;
(viii) contracts relating to the borrowing or lending of money
(including guaranties);
(ix) material contracts with customers, distributors, brokers, vendors
or suppliers;
(x) contracts relating to the acquisition by Seller of any operating
businesses or the capital stock of any other person at any time during the last
five (5) years;
(xi) contracts requiring the payment to any person of an override,
rebate or similar commission or fee except for those contracts of Seller which,
in the ordinary course of business, require commissions, rebates or fees to be
paid;
(xii) options for the purchase of any property for an aggregate
purchase price in excess of $100,000 (except for purchase orders in the ordinary
course of business);
(xiii) management contracts, consulting contracts and other similar
agreements with any person;
(xiv) joint-venture, partnership or other similar agreements;
(xv) contracts with BCA, Artra or any other affiliate or officer or
director of Seller, BCA or Artra;
(xvi) any other contracts pursuant to the terms of which there is
either a current or future obligation or right of Seller to make payments in
excess of $50,000 or receive payments in excess of $50,000;
(xvii) contracts with any governmental or regulatory body;
(xviii) contracts which can be canceled only upon sixty (60) days' or
more notice or only upon the payment of a fee or penalty;
(xix) contracts with respect to any intellectual property owned or
licensed by the Company; and
(xx) any other contract that is material to the Business.
Except as set forth on Schedule 5.11, (i) all of such contracts are in full
force and effect, are binding upon Seller, and after the Closing Date, will be
enforceable by Buyer, in accordance with their terms without the consent of any
other party, (ii) all liabilities and obligations thereunder requiring
performance by Seller on or prior to the Closing Date have been fully satisfied
in all respects, (iii) neither Seller nor, to Seller's knowledge, any other
party is in breach or default (whether, with notice or lapse of time or both)
under any such contract which breach or default, individually or in the
aggregate, could have a material adverse effect on the condition of the
Business, (iv) no written claim of any such breach or default has been received
by Seller, and (v) none of Seller's rights under any such Contracts will be
subject to termination or modification as a result of the consummation of the
transactions contemplated by this Agreement. True and correct copies of each of
the documents identified on Schedule 5.11 have previously been delivered to
Buyer or Buyer's representatives.
5.12 Real Estate.
(a) Owned Real Property. Schedule 5.12(a)(1) contains an accurate and
complete list of all fee interests in real property and buildings and structures
currently owned by the Seller (the "Owned Real Property"), including a
description reasonably sufficient to identify each such parcel, the record
titleholder of such property and a summary of any leases or other instruments
which pertain to the possession or use of such Owned Real Property. The Seller
has good and marketable title in fee to all of the Owned Real Property and
buildings and structures thereon, free and clear of all liens and encumbrances
of any type whatsoever except (i) for the security interests of the Seller's
lenders that will be released simultaneously with the Closing; (ii) as disclosed
by the title commitments to be obtained by Sellers within forty-five (45) days
after the date hereof (the "Title Commitments") to issue the title insurance
policies with respect to the Owned Real Property to be delivered at Closing;
(iii) liens for current taxes and assessments not yet due and payable; (iv) any
liens or other encumbrances that do not, individually or in the aggregate,
materially detract from the value of or materially impair the current use of the
Owned Real Property; and (v) such liens and encumbrances disclosed in the
surveys of the Owned Real Property certified within six (6) months prior to
Closing prepared by a surveyor licensed by the state in which the Real Property
is located (the "Surveys") obtained by Seller in contemplation of the Closing
hereunder (collectively, the "Permitted Owned Real Property Exceptions").
(b) Leased Real Property. Schedule 5.12(b) attached hereto is a true
and complete list of all leases, subleases, licenses and other agreements
(collectively, the "Real Property Leases") under which Seller currently uses or
occupies or has the right to use or occupy, now or in the future, any real
property and all amendments and modifications thereto (the land, buildings, and
other improvements covered by the Real Property Leases being herein called the
"Leased Real Property"). Seller owns all leasehold estates and other rights
purported to be granted by the Real Property Leases and has such leasehold
estates as is required for the conduct of its business. Seller has heretofore
delivered to Buyer or Buyer's representatives true, correct and complete copies
of all of the Real Property Leases.
Except as set forth on Schedule 5.12(b), (i) Seller is not in
default under any Real Property Lease and no written claim of any default
thereunder has been received by Seller which has not been cured and, to Seller's
knowledge, each landlord named in any of the Real Property Leases is not in
default thereunder and no defaults by any such landlord (whether or not
subsequently cured) by such landlord have been alleged by Seller thereunder,
(ii) there exists no event which with the passage of time will become an event
of default under any of the Real Property Leases, (iii) all rent and other sums
and charges payable by Seller under any of the Real Property Leases are current,
(iv) the Real Property Leases are assignable to Buyer without the consent or
approval of the landlord thereof or any other third party, (v) the Real Property
Leases are in full force and effect, (vi) there are no agreements, written or
oral, between Seller and any third parties claiming an interest in Seller's
interest in the Real Property Leases or otherwise relating to Seller's use and
occupancy thereof, (vii) Seller has not waived any obligation or right in any of
the Real Property Leases which would materially affect its interest as tenant
under any of the Real Property Leases, and (viii) there are no mechanic's liens
affecting the Leased Real Property caused by acts of Seller and all services or
materials which have been furnished to the Seller at the Leased Real Property
within the past twelve months have been fully paid for.
Seller shall assign and deliver to Buyer on or before the
Closing, any service contracts, warranties or guaranties covering the roof or
any building systems which Seller has the power to assign.
(c) Entire Premises. The Leased Real Property and the Owned Real
Property are sometimes hereinafter collectively referred to as the "Real
Property." All of the land, buildings, structures and other improvements used by
Seller are included in the Real Property. Except as set forth on Schedule
5.12(c), all of the buildings and structures to the extent owned or leased by
Seller are in good condition, ordinary wear and tear excepted, and are suitable
for the purposes for which they are being used and each has adequate rights of
ingress and egress for the operation of the business of Seller in the ordinary
course of business. No building or structure to the extent owned or leased by
Seller, or any appurtenance thereto or equipment therein, or the operation or
maintenance thereof, violates any restrictive covenants or any provisions of any
federal, state, local or foreign law, ordinance or zoning regulation or
encroaches on any property owned by others, which violation or encroachment
materially interferes with the use or adversely affects the value of such
building, structure or appurtenance. No condemnation proceeding is pending or,
to the knowledge of Seller, threatened with respect to any of the Real Property
or of any sale or other disposition of the Real Property or any part thereof in
lieu of condemnation. Upon consummation of the transactions contemplated by this
Agreement, Buyer will be entitled to continue to use or possess all Real
Property currently owned or leased by Seller and used in the Business.
(d) Space Leases and Options. Except as disclosed in Schedule 5.12(d),
there are no leases, subleases, licenses and other agreements (collectively, the
"Space Leases") granting to any person any right to the possession, use,
occupancy or enjoyment of the Real Property. Seller does not own or hold, and is
not obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell or dispose of any real property.
5.13 Title to Tangible Property. Schedule 5.13(a) hereto contains an
accurate and complete list of all items of tangible personal property owned or
used by Seller and having a net book value of more than $100,000. Except as set
forth on Schedule 5.13(b),
(a) Seller has good and marketable title to all of Seller's tangible
assets, including without limitation, the tangible personal property listed on
Schedule 5.13(a) (collectively, the "Tangible Property") free and clear of any
lien or other encumbrance except for (i) liens or other encumbrances securing
taxes, assessments, governmental charges or levies, or the claims of
materialmen, carriers, landlords and like persons, all of which are not yet due
and payable; (ii) assets held or used pursuant to any lease, or (iii) assets
sold or otherwise disposed of in the ordinary course of business;
(b) all of the items of tangible personal property not owned by Seller
but used in the Business are in such condition that upon the return of such
property to their owners in the current condition of such property, normal wear
and tear excepted, at the end of the relevant lease terms or as otherwise
contemplated by the applicable agreements with the owners thereof, the
obligations of Seller to such owners will be discharged without further action;
and
(c) the Assets include all property, plant, equipment, intangible
assets and other rights (other than the Retained Assets) used to conduct the
Business by Seller and necessary for Buyer to conduct the Business in
substantially the same manner as heretofore conducted by Seller. Rescuers, Inc.
(the "Subsidiary") does not own any property, plant, equipment or other assets
used to conduct the Business or any other asset of any type whatsoever.
5.14 Intangible Property. Schedule 5.14(a) sets forth an accurate and
complete list of all of Seller's patents, patent applications, registered and
unregistered trademarks, copyrights, service marks and trade names, all
registrations and applications for any of the foregoing and all permits, grants
and licenses running to or from Seller relating to any of the foregoing, that in
each case, are utilized in or incident to the conduct of the Business
(collectively, the "Intangible Assets"). Except as set forth on Schedule
5.14(b), Seller has the right to use, free and clear of any rights of others,
and has good and marketable title to, all Intangible Assets and to all trade
secrets, know-how, inventions, formulae, processes and technology utilized in or
incident to the conduct of the Business as presently conducted (collectively,
"Trade Secrets"). Except as set forth on Schedule 5.14(b), Seller has no
knowledge and has not received written notice of (i) any adversely held patent,
invention, trademark, copyright, service ▇▇▇▇, trade name or other right of any
other person, or of any claim of any other person, relating to any of the
Intangible Assets or the Trade Secrets, or (ii) any infringement by others of
any Intangible Assets, Trade Secrets or other intellectual property rights of
Seller. Except as set forth on Schedule 5.14(b), Seller (i) has not asserted
during the past two (2) years any claim of infringement, misappropriation or
misuse with respect to any of the Intangible Assets or the Trade Secrets and
(ii) is not in breach or default under any permit, grant or license running to
or from Seller relating to any of the foregoing.
5.15 Employee Benefit Plans.
5.15.1 Schedule 5.15 sets forth a true and complete list of
all "Benefit Plans" (as such terms are defined in Article 8). None of the
Benefit Plans is a multi-employer plan as defined in Section 3(37) of ERISA or
is a plan which covers any employees of any trade or business (other than
Seller's Business) under common control with Seller and which, together with
Seller, are treated as a single employer within the meaning of Sections
414(b),(c),(m) or (o) of the Code.
5.15.2 Seller has delivered or made available to Buyer true
and complete copies of: (i) all plan texts and agreements relating to each
Benefit Plan; (ii) annual reports (Forms 5500) and periodic reports, if any,
with respect to each Benefit Plan for the last year; (iii) the most recent
actuarial valuation report and financial statement for the last year and the
most recent determination letter received from the Internal Revenue Service with
respect to each Benefit Plan that is a "pension plan," as defined under Section
3(2) of ERISA or is intended to be qualified under Section 403(a) of the Code;
(iv) the most recent summary plan description, each summary of material
modifications, the most recent employee handbooks and other material
communications to its employees; (v) any forms 5310 filed by Seller in the last
three (3) years; (vi) the most recent PBGC Form 1 for each Benefit Plan that is
a pension plan; and (vii) the form of notice under Section 4980B of the Code and
a list of the employees who were eligible to receive such notice during the
18-month period prior to the Closing Date.
5.15.3 Except as noted on Schedule 5.15, with respect to each
Benefit Plan: (i) Seller has timely made all required payments and contributions
due from it to date, and all amounts required to be accrued to date (under the
terms of such Benefit Plans and in accordance with law) as liabilities of Seller
which have not been paid have been properly recorded on the books of Seller if
required by generally accepted accounting principles, including, any required
accruals under any Benefit Plan that is a pension plan for any period up to and
including the Closing Date; (ii) Seller and the administrators, trustees and
other fiduciaries have complied with, and each such Benefit Plan materially
conforms to, in form and operations, all applicable laws and regulations,
including, without limitation, ERISA, the Consolidated Omnibus Budget
Reconciliation Act of 1986 and the Code (as such term is defined in Article 8)
and each such plan or arrangement that is intended to be "qualified" within the
meaning of Section 401(a) or 403(a) of the Code has been determined by the
Internal Revenue Service to be qualified (or the time for making application to
the Internal Revenue Service for such determination and making any retroactive
amendment required for the issuance thereof has not expired); (iii) there are no
actions, suits or claims or proceedings pending (other than routine claims for
benefits) before any court or governmental or regulatory body or, to Seller's
knowledge, threatened, with respect to any Benefit Plan, against the assets of
any such plan or arrangement or against the plan sponsors, administrators or
fiduciaries; (iv) Seller has not incurred, and does not reasonably expect to
incur, any liability with respect to any Benefit Plan that is or was subject to
Title IV of ERISA, whether to the Pension Benefit Guaranty Corporation or
otherwise; and (v) there has been no act or omission of Seller which would
constitute a "prohibited transaction" under Section 406 of ERISA or section 4975
of the Code that would subject Seller or the Benefit Plans to an excise tax or
civil penalty under section 4975 of the Code or Section 502(i) of ERISA.
5.15.4 Except as set forth in Schedule 5.15, no Benefit Plan
that is a "pension plan" (as defined in Section 3(2) of ERISA) that is or was
subject to Title IV of ERISA has been terminated or merged; no proceeding has
been initiated to terminate any such plan; no "reportable event" within the
meaning of Section 4043(b) of ERISA has occurred or is expected to occur (other
than as a result of this transaction); and Seller has not incurred any
liability, whether to the Pension Benefit Guaranty Corporation or otherwise,
except for required premium payments, which payments have been made when due. To
Seller's knowledge, no event has occurred, and there exists no condition or set
of circumstances which presents a material risk of the partial termination of
any such plan.
5.15.5 No such plan has incurred an "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived. For each Benefit Plan subject to either section 412 of
the Code or section 302 of ERISA, (i) such plan is fully funded in accordance
with the actuarial assumptions used by the PBGC to determine the level of
funding required in the event of termination of such Benefit Plan and such plan
uses a funding method permissible under ERISA and the actuarial assumptions used
in connection therewith are individually and in the aggregate reasonable, (ii)
other than any fluctuation in market value of readily tradeable securities, to
the knowledge of Seller, there is no reason to believe that as of the Closing,
the relationship between the assets and liabilities of any such Benefit Plan
will have materially worsened since the date of its most recent actuarial
valuation report, and (iii) each such valuation report was based on census and
trust data furnished by the Seller, which was substantially complete and
accurate.
5.15.6 With respect to each Benefit Plan which is a "welfare
plan" (as described in section 3(1) of ERISA): (i) except as set forth on
Schedule 5.15, no such plan provides medical or death benefits with respect to
current or former employees of Seller beyond their termination of employment
other than coverage mandated by law, and (ii) each such plan has been
administered in compliance with COBRA, Part 6 of Subtitle B of Title I of ERISA
and 4980B(f) of the Code.
5.15.7 The consummation of the transactions contemplated by
this Agreement by itself and without consideration of subsequent events will not
(i) entitle any current or former employee of Seller to severance pay,
unemployment compensation or any similar payment, or (ii) accelerate the time of
payment or vesting, or increase the amount of any compensation or benefits due
to any such employee or former employee.
5.15.8 No Benefit Plan is a "multiple employer plan," within
the meaning of the Code or ERISA or the regulations promulgated thereunder, or a
"multi-employer plan" as defined in section 4001(a)(3) or ERISA, and Seller has
never made any contributions to or participated in any "multiple employer plan"
or "multi-employer plan" (as defined above). Neither Seller nor any ERISA
affiliate has withdrawn a complete or partial withdrawal from any multi-employer
plan, nor has any of them incurred any liability due to the termination or
reorganization of a multi-employer plan or otherwise which have not been
completely satisfied. Seller will not have any withdrawal liability under
Section 4201 of ERISA or other liability due to any such multi-employer plan
which it would not have had the transactions not occurred in accordance with the
terms of this Agreement.
5.16 Employee Relations.
(a) Except as set forth on Schedule 5.16, Seller is not a party to nor
in any way bound by any union or collective bargaining contract relating to it's
employees. Seller has not during the last three (3) years had, nor to Seller's
knowledge, is there now or has there been threatened, any union organizing
efforts, strikes, pickets, work stoppages, work slowdowns, lockouts, material
arbitrations, material charges of unfair labor practice or grievances or other
material labor disputes against Seller.
(b) Except as set forth in Schedule 5.16, there are no written charges
or written complaints of discrimination pending or, to Seller's knowledge,
threatened before any court or the Equal Employment Opportunity Commission or
any state or local agency, and to Seller's knowledge, no basis for any such
claim exists. There are no unfair labor practice charges, grievances or
complaints pending or threatened in writing by or on behalf of any employee or
group of employees of the Business which if resolved against Seller could result
in a material liability. Except as set forth in Section 5.16, there are no
pending complaints, charges or claims made against Seller, or to the Seller's
knowledge, no such claims threatened by any public or governmental authority,
arbitrator or court based on, arising out of, in connection with, or otherwise
relating to the employment or termination of employment by Seller of any
individual. Except as set forth in Schedule 5.16, there has been no mass layoff
or "plant closing" as defined by Workers Adjustment and Retraining Notification
Act of 1988 with respect to Seller within the six (6) months prior to Closing.
(c) To Seller's knowledge, Seller does not presently employ, and at no
time during the past year did Seller employ, any illegal alien.
(d) Except as set forth on Schedule 5.16, no unions or other collective
bargaining units have been or are required to be certified or recognized by
Seller as representing any of its employees and to Seller's knowledge there are
no existing union organizing efforts with respect to any of it's employees.
(e) Seller has complied with all applicable laws (including the
Immigration Reform and Control Act of 1986) respecting employment, hours and
wages, social security, withholding and payment of taxes, discrimination, safety
and health with respect to employees and employment practices, terms and
conditions except for immaterial non-compliance.
(f) Schedule 5.16 sets forth the name, job title or position and total
compensation paid by Seller to each employee of as of the date set forth in such
schedule.
5.17 Insurance. Schedule 5.17 sets forth a complete and accurate list
(specifying the insurer, describing each pending claim thereunder of more than
$100,000 and setting forth the aggregate amounts paid out under each such policy
through the date hereof) of all policies of property, life, fire, theft,
business interruption, employee fidelity, health, casualty, liability, workers'
compensation, products liability, vehicular and other forms of insurance owned
or held by or beneficially for Seller. All premiums that have become due with
respect to such policies with respect to the period ending on the Closing Date
have been paid or will be paid prior to Closing. With respect to the Business:
(a) all insurance listed on Schedule 5.17 has been issued under valid and
enforceable policies or binders for the benefit of Seller, (b) all such policies
or binders are in full force and effect and no notice of cancellation or
termination or non-renewal has been received with respect to any such policy,
and insure against all risks of a character and in amounts as are customarily
insured against by enterprises in operations similar to the Business, (c) there
are no pending or asserted material claims against such insurance by Seller to
which the insurers have denied liability, (d) none of the rights of Seller under
any of such insurance policies or binders will be subject to termination or
modification as a result of the consummation of the transactions contemplated by
this Agreement, and (e) such policies are in amounts customary for the industry
in which Seller operates.
5.18 Officers, Directors and Key Employees. Schedule 5.18 sets forth
the name of each person who is now (i) an officer or director of BCA or Seller
and (ii) an employee, consultant, agent or other representative of Seller whose
annual rate of compensation (including bonuses and commissions) exceeds or
exceeded $150,000 (and the amount of such compensation of such employee). Except
as set forth on Schedule 5.18, Seller is not a party to any commitment or
agreement to increase the compensation or to modify the conditions or terms of
employment of any person. None of the persons referred to in clause (ii) of the
first sentence of this Section 5.18 currently holding such a position has
indicated that he or she is unwilling to continue employment under terms and
conditions substantially similar to those under which such employee is currently
employed or that he or she will cancel or otherwise terminate such person's
relationship upon the sale of the Business.
5.19 Operations of Seller. Except as set forth on Schedule 5.19, since
December 31, 1997, Seller has operated the Business in the ordinary course,
managed it's working capital consistent with it's historical practices of the
past three (3) years, made substantially all planned capital expenditures
required to support the existing operations of the Business, and since December
31, 1997, neither the Seller nor the Business has
(i) waived any material right under any contract or other agreement;
(ii) made any change in its accounting methods or practices or made any
change in depreciation, amortization or reserve policies or rates;
(iii) changed any of its material business policies or practices
(including, without limitation, credit, advertising, marketing, inventory and
stocking, pricing, sales, capital or strategic policies and practices);
(iv) made any wage or salary increase, or any payment or commitment to
pay any severance or benefits to any of its officers, directors or employees
other than in the ordinary course of business, nor entered into any employment,
severance or consulting contract with any director, officer or employee, nor
made any change in the terms of any Benefit Plan;
(v) received notice from any customer as to such customer's intention
not to conduct business with Seller, the results of which loss of business,
individually or in the aggregate, were, or may reasonably be expected to be,
material; or lost or canceled any customer or customers to which Seller either
sold goods in excess of $100,000 or to which, together with all other lost or
canceled customers it sold goods in excess of an aggregate of $500,000 during
the last fiscal year; or
(vi) incurred or assumed any debt, obligation, trade payable or
liability for which Seller is liable (whether absolute or contingent and whether
or not currently due and payable) except for normal trade or business
obligations consistent with past practices or obligations under Assumed
Contracts;
(vii) except for inventory or equipment acquired in the ordinary course
of business and as consistent with past practices, made any acquisition of all
or any part of the assets, properties, capital stock or business of any other
person;
(viii) paid, directly or indirectly, any of Seller's liabilities before
the same became due in accordance with their terms or, other than in the
ordinary course of business, deferred the payment of any liabilities or changed
its payable levels;
(ix) accelerated the collection, directly or indirectly, of any of its
accounts receivable other than in the ordinary course of business or deferred
the collection of any such accounts other than in the ordinary course of
business;
(x) deferred or delayed the purchase of any raw materials or inventory
other than in the ordinary course of business or changed its inventory levels;
(xi) made any payments from Seller to or for the benefit of, or enter
into any transactions with, Artra, BCA, the Subsidiary or any affiliate of
Seller or declared any dividend or made any other payment or other distribution
in respect of Seller's capital stock;
(xii) purchased, redeemed, issued, sold or otherwise acquired or
disposed of any shares of Seller's capital stock or granted any options,
warrants or other rights to purchase or convert any obligations into shares of
capital stock, warrants or options;
(xiii) transferred any assets, properties or rights of Seller to Artra,
BCA, the Subsidiary or any of their respective stockholders, employees or
affiliates;
(xiv) other than in the ordinary course of business consistent with
past practices, permitted or allowed any of Seller's property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of any kind,
except for liens permitted under Sections 5.12 and 5.13;
(xv) other than in the ordinary course of business and consistent with
past practices, written down the value of any inventory (including write-downs
by reason of shrinkage or ▇▇▇▇-down) or written off as uncollectible any notes
or accounts receivable;
(xvi) other than in the ordinary course of business, canceled any debts
or waived any claims or rights of substantial value;
(xvii) other than in the ordinary course of business at prices, on
terms and in quantities consistent with past practices, sold, transferred, or
otherwise disposed of any of its properties or assets (real, personal or mixed,
tangible or intangible);
(xviii) other than in the ordinary course of business, disposed of any
rights to the use of any Intangible Asset or Trade Secret, or disposed of, or
disclosed to any person (other than representatives of Buyer), any Trade Secret
not theretofore a matter of public knowledge;
(xix) made any loan or advance to Artra, BCA, the Subsidiary or any of
their respective officers, directors, employees, consultants or stockholders
(other than travel advances made in the ordinary course of business) or made any
other loan or advance otherwise than in the ordinary course of business;
(xx) deferred or delayed any maintenance on any of the Assets or any
planned capital expenditures;
(xxi) failed to maintain its insurance in full force and effect other
than in the ordinary course of business, entered into any material contract or
other agreement or other material transaction;
(xxii) engaged in any other transaction other than in the ordinary
course of business; or
(xxiii) agreed to do any of the foregoing.
5.20 Potential Conflicts of Interest. Except as described on Schedule
5.20, neither Artra, BCA, the Seller nor any of their respective affiliates nor
any of their respective officers, directors, employees, nor to the knowledge of
Seller, any of the family members of any such person or any entity in which any
such person has any equity interest (i) owns, directly or indirectly, in whole
or in part, any tangible or intangible property or any of the assets, properties
or rights or real property that Seller uses in the conduct of its business, or
(ii) has an interest in any contract, agreement or arrangement pertaining to
Seller or the Business, or (iii) owes any money to Seller or the Business or has
any cause of action against Seller or the Business, or (iv) to Seller's
knowledge, owns, directly or indirectly, any person which is, or is engaged in
business as, a competitor, lessor, lessee, customer or supplier of Seller, or
(v) has purchased products or services from Seller or provided products or
services to Seller.
5.21 Banks, Powers of Attorney. Schedule 5.21 sets forth (i) the name
of each bank, trust company or other financial institution with which Seller has
an account, credit line or safe deposit box or vault; and (ii) the name of each
person authorized by Seller to draw thereon or to have access to any safe
deposit box or vault. At the Closing, Seller shall deliver to Buyer copies of
all records, including signature or authorization cards, pertaining to such bank
accounts. Except as set forth on Schedule 5.21, Seller has not given any power
of attorney which is currently in effect, whether limited or general, to any
person, firm, corporation or otherwise.
5.22 Suppliers and Customers.
(a) Schedule 5.22(a) sets forth a true, complete and accurate list of
the ten (10) largest suppliers of Seller in terms of purchases during the twelve
(12) month period ended June 30, 1998 showing the approximate total purchases by
Seller from each such supplier during such period. Except to the extent set
forth in Schedule 5.22(a), during such twelve-month period, there has not been
any significant change in the business relationship of Seller with any supplier
named in Schedule 5.22(a) and Seller is not engaged in any dispute with any of
such suppliers. Seller has no indication, and has no reason to believe, that any
of its suppliers will modify or terminate their relationship as a result of the
consummation of the transactions contemplated hereby.
(b) Schedule 5.22(b) sets forth a true, complete and accurate list of
the twenty (20) largest customers of Seller in terms of purchases during the
twelve (12) month period ended June 30, 1998, showing the approximate total
sales by Seller to each such customer during such period. Except to the extent
set forth in Schedule 5.22(b), during such twelve-month period there has not
been any significant change in the business relationship of Seller with any
customer named in Schedule 5.22(b) and Seller is not engaged in any dispute with
any such customers. Seller has no indication, and has no reason to believe, that
any of its customers will materially modify or terminate their relationship with
Seller as of result of the consummation of the transactions contemplated hereby.
5.23 Assets and Inventory.
(a) The assets and properties owned, operated or leased by Seller and
used in its businesses are, in the aggregate, in a good state of repair and
operating condition, and are fit for their intended purposes and constitute all
of the assets and properties necessary to operate the business.
(b) Net of the reserve applicable to inventory, as set forth on the
Financial Statements, the inventory of Seller is in good and marketable
condition, and is salable in the ordinary course of business consistent with
past practices.
(c) Seller has no reason to believe that any of the inventory of
Seller, net of the reserve applicable thereto, as set forth on the Financial
Statements, will not be salable or returnable by Seller in the ordinary course
of business in accordance with past practices.
(d) The quantities of all lines of inventory and supplies of Seller are
reasonable and warranted in the present set of circumstances.
5.24 Accounts Receivable and Accounts Payable.
(a) The accounts and notes receivable of Seller, reflected on the
Financial Statements or arising after the date thereof arose from the sale of
inventory, assets, or other services, in each case in the ordinary course of
business of Seller, are not subject to any counterclaim or set-off and reflect
extensions of credit consistent with past practices of Seller. The reserves for
accounts and notes receivable of Seller set forth in the Financial Statements
are adequate to reserve for all such existing receivables of Seller that are or
become uncollectible in the ordinary course of business, and such reserves were
calculated in a manner consistent with past practices and in accordance with
generally accepted accounting principles, consistently applied. The current
average age of all such accounts and notes receivable is not materially greater
than the average age of those receivables reflected on the Financial Statements.
(b) The accounts payable of Seller reflected on the Financial
Statements or arising after the date thereof are the result of bona fide
transactions in the ordinary course of business, and were paid or are not yet
due and payable, or will be paid in the ordinary course of business. The current
average age of all such payables is not materially greater than the average age
of those payables reflected on the Financial Statements.
5.25 Taxes. (a) Except as set forth on Schedule 5.25, Seller has duly
and timely filed, and Seller will duly and timely file prior to the Closing, all
Tax Returns required to be filed on or prior to the date hereof or the Closing
Date, respectively, which Tax Returns are or will be true, correct and complete
in all material respects. Seller has duly and timely paid, and Seller will duly
and timely pay, all Taxes due and payable by Seller in respect of all periods up
to and including the date of this Agreement and the Closing Date, respectively
(whether or not shown on any tax return). Seller has properly accrued on
Seller's books and records, including the Audited Financials and the Financial
Statements, all Taxes payable by Seller but not yet due in respect of all
periods up to and including the date of this Agreement and will properly accrue
all Taxes payable by Seller but not yet due for all periods up to and including
the Closing Date. The reserves for Taxes (not including any reserve for deferred
Taxes established to reflect timing differences between book and tax income)
reflected on Seller's books and records, including the Audited Financials and
the Financial Statements, are sufficient for the payment of all Taxes incurred
or that may be incurred through the date thereof and, as adjusted for the
passage of time, through the Closing Date in accordance with the past custom and
practice of Seller in filing its Tax Returns. Except as set forth on Schedule
5.25, no claim has ever been made by any Taxing Authority in a jurisdiction
where Seller does not file Tax Returns that Seller is or may be subject to Tax
by that jurisdiction. There are no security interests on any of the assets of
Seller that arise in connection with any failure (or alleged failure) to pay any
Tax.
(b) Except as set forth in Schedule 5.25, (i) no Taxing
Authority has asserted in writing any adjustment that could result in an
additional Tax for which Seller is or may be liable, (ii) there is no pending
proceeding relating to any Tax for which Seller is or may be liable and no
written notification has been received that a proceeding is threatened or
contemplated by any Taxing Authority, (iii) no statute of limitations with
respect to any Tax for which Seller is or may be liable has been waived or
extended, (iv) there is no outstanding power of attorney authorizing anyone to
act on behalf of Seller in connection with any Tax, Tax Return or proceeding
relating to any Tax, (v) there is no outstanding closing agreement, written
ruling request, written request for consent to change a method of accounting,
subpoena or written request for information with or by any Taxing Authority with
respect to Seller, its income, assets or business or any Tax for which Seller is
or may be liable, (vi) Seller is not a party to any Tax sharing or Tax
allocation agreement, arrangement or understanding, (vii) since December 31,
1997, Seller has not changed any method of accounting or accounting practice or
procedure, (viii) Seller is not the beneficiary of any extension of time within
which to file any Tax Return, (ix) neither the Seller nor any director or
officer (or employee responsible for Tax Matters) of Seller expects any Taxing
Authority to assess any additional Taxes for any period for which Tax Returns
have been filed, and (x) there is no dispute or claim concerning any Tax
Liability of Seller as to which Seller has knowledge based upon personal contact
with any agent of such Taxing Authority.
(c) Schedule 5.25 sets forth the status of federal income tax
audits of the returns for Seller for each fiscal year for which the statute of
limitations has not expired. Each return filed by Seller for which the federal
income tax audit has not been completed accurately reflects the amount of its
tax liability for such period. Seller has made available to Buyer correct and
complete copies of all examination reports and statements of deficiencies
assessed against or agreed to by Seller since December 31, 1996.
(d) Schedule 5.25 sets forth the status of state and local tax
audits of the returns for Seller for each fiscal year for which the statute of
limitations has not expired. Each return filed by Seller for which the state and
local tax audit has not been completed accurately reflects the amount of its tax
liability for such period.
(e) Schedule 5.25 sets forth all federal tax elections under
the Code that are in effect with respect to Seller for the fiscal years ended
December 31, 1996 and December 31, 1997.
(f) Seller has properly withheld and timely paid all
withholding and employment taxes which it was required to withhold and pay
relating to salaries, compensation and other amounts heretofore paid to its
employees and other persons. All Forms W-2 and 1099 required to be filed by
Seller have been timely and properly filed.
(g) Seller is and has always been taxable as a corporation for
Tax purposes.
(h) Seller has not filed a consent under Code ss.341(f)
concerning collapsible corporations. Seller has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code ss.280G. Seller has not been a United States real property
holding company within the meaning of Code ss.897(c)(2) during the applicable
period specified in Code ss.897(c)(1)(A)(ii). Seller has disclosed on its
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
ss.6662. Seller (A) has not been a member of an affiliated group filing a
consolidated federal income Tax Return and (B) has no liability for the Taxes of
any person (other than Seller) 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.
5.26 Certain Environmental Conditions.
(a) For the purposes of this Agreement, the following terms shall have
the meanings hereinafter specified:
"Environment" includes, without limitation, navigable waters,
waters of the contiguous zone, ocean waters, natural resources, surface waters,
ground water, drinking water supply, land surface, subsurface strata, ambient
air, plant life and animal life of the earth;
"Environmental Laws" means federal, state and local laws, and
the rules, regulations, codes, orders, decrees, judgments, injunctions, licenses
and permits issued, promulgated, approved or entered thereunder relating to
pollution or protection of the Environment, including, but not limited to, the
1990 Clean Air Act Amendments, common law (including, without limitation, the
common law relating to nuisance and strict liability), laws relating to the
Release or threatened Release of Hazardous Substances into the Environment or
otherwise relating to the presence, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances;
"Hazardous Substance" means any pollutant or contaminant,
hazardous or toxic substance, hazardous or toxic waste, or hazardous or toxic
constituent, including, without limitation, petroleum or petroleum-derived
substance or waste, asbestos, urea formaldehyde and polychlorinated biphenyls,
or any constituent of any such substance or waste;
"Release" means any release, spill, emission, leaking,
pumping, injection, deposit, discharge, dispersal, leaching or migration into
the indoor or outdoor Environment or into or out of any property, including the
movement of Hazardous Substances through or in the air, soil, surface water,
ground water or property; and
"Remedial Action" means all actions necessary to (a) clean up,
remove, treat or in any other way adjust Hazardous Substances in the indoor or
outdoor Environment, (b) prevent the Release of Hazardous Substances so that
they do not migrate or endanger or threaten to endanger public health or welfare
or the indoor or outdoor Environment, or (c) perform pre-remedial studies and
investigations and post-remedial monitoring with respect to the matters
described in clause (a) and (b).
(b) Except as set forth on Schedule 5.26 hereto:
(i) There are no waste disposal sites located on the
Real Property and there are no underground storage tanks currently or previously
located on the Real Property and there are no polychlorinated biphenyls ("PCBs")
or asbestos-containing materials ("ACMs") present at the Real Property except
for those PCBs which are contained in transformers that comply with applicable
Environmental Laws and except for those ACMs that have been properly
encapsulated or otherwise remediated in compliance with applicable Environmental
Laws;
(ii) There have been no Releases of Hazardous
Substances occurring on or from the Real Property; and
(iii) There are no off-site waste disposal or
treatment sites which are or have been used by Seller.
(c) Seller and the Real Property are in compliance with all applicable
Environmental Laws and Seller has not received any written communication from
any governmental or regulatory body or third party that alleges that Seller or
the Real Property is not in compliance with applicable Environmental Laws.
(d) Seller has obtained and is in compliance with all environmental,
health and safety permits, approvals, certificates and authorizations required
for its operations (collectively, the "Environmental Permits") and all of
Seller's Environmental Permits are in good standing and full force and effect
and Seller is in compliance with all terms and conditions of the Environmental
Permits and no proceeding for the suspension or cancellation of any of them is
pending, or to the knowledge of Seller, threatened.
(e) No notice, citation, summons or order has been issued, no complaint
has been filed, no penalty has been assessed and no investigation or review is
pending, or to the knowledge of Seller, threatened, by any federal, state or
local governmental or regulatory agency or authority (i) with respect to any
alleged violation by Seller of any Environmental Law or any alleged violation
relating to any Real Property; or (ii) with respect to any alleged failure by
Seller to have or comply with any Environmental Permit; or (iii) with respect to
any use, possession, generation, treatment, storage, recycling, transportation
or arrangement for transportation or disposal (collectively, "Management") of
any Hazardous Substances by or on behalf of Seller.
(f) Seller has not received any request for information, notice of
claim, complaint, demand or notification that it is or may be responsible or
potentially responsible or liable with respect to any threatened or actual
Release of any Hazardous Substance. To Seller's knowledge, no Hazardous
Substance Managed by Seller is located at any site which is listed or proposed
for listing under the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601 et seq., as amended ("CERCLA"), on the
Comprehensive Environmental Response Compensation and Liability Information
System ("CERCLIS") or on any similar state list, or which is the subject of
federal, state or local enforcement actions or other assertion that remediation
may be required. No written notification of a Release or threat of Release of a
Hazardous Substance has been filed by or on behalf of Seller or in relation to
any real property included in the Real Property.
(g) No Hazardous Substances have been Managed on any Real Property in a
manner which is in violation of any Environmental Law.
(h) There are no environmental liens on any properties owned or leased
by Seller and no actions by any federal, state or local governmental or
regulatory agency or authority have been taken or are in process or pending that
could subject any of such properties to such liens.
(i) Seller has delivered to Buyer true, complete and correct copies (i)
of all reports, studies, site assessments, audits, analyses, tests or monitoring
possessed by Seller pertaining to Hazardous Substances in, on, beneath or
adjacent to any Real Property conducted since January 1, 1993 pertaining to or
regarding the compliance of Seller or any Real Property with applicable
Environmental Laws, and (ii) of all known material correspondence from any
governmental or regulatory body or any other third party relating to
environmental matters since January 1, 1993.
5.27 Certain Business Practices. To Seller's knowledge, no officer,
director, employee or stockholder of Seller has, directly or indirectly, within
the past five (5) years, given or agreed to give (other than in the ordinary
course of business and not in violation of law) any gift or similar benefit to
any customer, supplier or governmental employee.
5.28 Minute Books. All material corporate actions which has heretofore
been taken by the shareholders of Seller or the board of directors of Seller or
by any committee of any such board, is properly and accurately recorded in the
corporate minutes of Seller. Complete and accurate records with respect to the
issuance, transfer, redemption and cancellation of shares of capital stock of
Seller are contained in the stock record books of Seller. Such minute books and
stock records books have been made available to Seller and its counsel for
review and copying.
5.29 Conduct of Business. The only business or activities presently
conducted by Seller is the paper sheet and paper bag converting operations
conducted primarily out of the Seller's Chicago, Illinois and ▇▇▇▇▇▇ Springs,
Kansas manufacturing facilities.
5.30 Full Disclosure. To the knowledge of Seller, all documents,
contracts, instruments, certificates, notices, consents, statements, schedules
(including Schedules to this Agreement), exhibits (including Exhibits to this
Agreement) and any other papers whatsoever (collectively, "Documents") delivered
by or on behalf of Seller in connection with this Agreement and the transactions
contemplated hereby are true, complete and authentic. To the knowledge of the
Seller, no statement, representation or warranty of the Seller contained in this
Agreement and no Document furnished by or on behalf of the Seller to Buyer
pursuant to this Agreement or in connection with the transactions contemplated
hereby or thereby, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements made, in the context in which made, not materially false or
misleading.
5.31 Vote Required. The affirmative vote of the holders of at least a majority
of the votes cast by all shareholders of Artra entitled to vote thereon is the
only vote of the holders of any class or series of capital stock or other
securities of Artra, BCA or Seller necessary to approve this Agreement and the
transactions contemplated by this Agreement.
5.32 Content of Proxy Statement and Other Filings
(a) Neither the Proxy Statement (as hereinafter defined in
Section 7.14) nor any amendments thereof or supplements thereto will, on the
date the same is first mailed to the Shareholders and at the time the Artra
Special Meeting (as hereinafter defined in Section 7.14) is convened, contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) None of the information with respect to Artra, BCA, Seller
or any of their affiliates that has been supplied by Artra, BCA, Seller or any
of their affiliates or any of their accountants, counsel or other authorized
representatives in writing specifically for use in any other filing with the
Securities and Exchange Commission (the "SEC") that may be required in
connection with this Agreement will, at the time of such filing, contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) The Proxy Statement shall comply in all material respects
with the applicable requirements of the Securities Exchange Act of 1934, as
amended.
5.33 Ownership of Stock. On the date of this Agreement, the Principal
Shareholders (as hereinafter defined) own beneficially and are the record owners
of, and are entitled to vote in accordance with applicable provisions of the
Certificate of Incorporation of Artra, 831,380 shares of Artra's common stock.
The Principal Shareholders have not pledged or otherwise encumbered or
transferred any shares of Artra's common stock owned by them in a manner that
would prevent them from satisfying their obligations under this Agreement.
6. Representations and Warranties of Buyer. Buyer represents and warrants to
Seller as follows:
6.1 Due Formation and Authority. Buyer is a limited liability company
duly formed, validly existing and in good standing under the laws of the State
of Delaware, and has all requisite limited liability company power and authority
to own, lease and operate its assets, properties and business and to carry on
its business as now being and as heretofore conducted.
6.2 Authority to Execute and Perform Agreement. Buyer has the full
limited liability company power and authority required to enter into, execute
and deliver this Agreement and the other Transaction Documents to be entered
into in connection with the Closing of the transactions contemplated hereby, and
to perform fully its obligations hereunder and thereunder. This Agreement has
and the other Transaction Documents to be delivered at the Closing will be, duly
authorized, executed and delivered by Buyer and (assuming the due authorization,
execution and delivery hereof by Seller, BCA, Artra and the Principal
Shareholders) each is, or upon execution by Buyer will be, the valid and binding
obligation of Buyer enforceable in accordance with its respective terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally or general principles of equity.
6.3 No Breach. The execution, delivery and performance of this
Agreement by Buyer and the performance of its obligations hereunder will not (i)
violate, conflict with or result in the breach of any provision of the operating
agreement or other organization documents; (ii) violate, result in the breach
of, or default (or an event which, with notice or lapse of time or both, would
constitute a default) under, any of the terms of any material contract (written
or oral) or other material agreement to which Buyer is a party or to which it or
any of its assets or properties may be bound or subject; (iii) result in the
creation or imposition of any lien, security interest or other encumbrance upon
the assets or the properties of Buyer (other than pursuant to the terms of any
credit agreement or any collateral document relating to the financing of the
Purchase Price (the "Financing Documents")); (iv) violate any order, writ,
judgment, injunction, award or decree of any court, arbitrator or governmental
or regulatory body against, or binding upon, Buyer or upon the assets of Buyer;
or (v) violate any statute, law or regulation of any jurisdiction, which
violation could have a material adverse effect on the condition of Buyer.
6.4 Approval of Transaction. Except for the expiration of the waiting
period under the HSR Act, no other approval, authorization, license, permit or
other action by, or filing with, any federal, state, municipal or other
governmental or regulatory body is required, which has not been obtained, in
connection with the execution and delivery of this Agreement by Buyer.
7. Covenants and Agreements. The parties covenant and agree as follows:
7.1 Conduct of Business Prior to the Closing. From the date hereof
through the Closing Date, Artra, BCA and Seller, jointly and severally agree,
that Seller shall:
(a) operate its business only in the usual, regular and ordinary manner
consistent with past practices and, to the extent consistent with such
operation, use its best efforts to preserve its present business operations,
organization and goodwill intact, keep available the services of its present
officers and employees and preserve its present relationships with Persons
having business dealing(s) with it;
(b) maintain all of its assets and properties in their current
condition and maintain insurance upon all of such assets and properties and with
respect to the conduct of its business in such amounts and of such kinds
comparable to that in effect on the date hereof on such properties and with
respect to such business;
(c) maintain all of its licenses and Permits in full force and effect;
(d) maintain its books, accounts and records in the usual, regular and
ordinary manner, on a basis consistent with prior year; comply with all laws and
contractual obligations applicable to it and to the conduct of its business; and
perform all of its obligations without default;
(e) not amend its Restated Certificate of Incorporation or by-laws; not
enter or agree to enter into any merger or consolidation with, or sale of all or
a substantial part of its assets to, any corporation or other entity; and not
change the character of its business in any manner;
(f) not make any change in the number of shares of its capital stock
authorized, issued or outstanding; and not grant or issue any option, warrant or
other right to purchase, or to convert any obligation into, shares of its
capital stock;
(g) not declare, pay or make any dividend, whether payable in cash,
stock or property, and not make any other distribution or payment in respect of
shares of its capital stock; and not purchase or redeem any of such shares or
dispose of any evidence of indebtedness or other security of Seller;
(h) (i) not increase in any manner the compensation of any of its
directors, officers or other employees, except increases under existing union
contracts and except as otherwise in the ordinary course of business and
consistent with past practices, (ii) not pay or agree to pay any pension,
retirement allowance or other employee benefit not required or contemplated by
any existing Benefit Plan, any agreement or arrangement to any such director,
officer or employee, whether past or present, (iii) not grant any severance or
termination pay to, or enter into any employment or severance agreement with any
director, officer or other employee of Seller and except as otherwise in the
ordinary course of business and consistent with past practices, or (iv) except
as may be required to comply with applicable law, not become obligated under any
new pension plan, welfare plan, multi-employer plan, employee benefit plan,
benefit arrangement, or similar plan or arrangement, which was not in existence
on the date hereof, including any bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance, severance
pay, retirement or other benefit plan, agreement or arrangement, or to any
employment or consulting agreement with or for the benefit of any person, and
not to amend any of such plans or any of such agreements in existence on the
date hereof;
(i) (i) not incur, assume, or acquire any obligation or liability
(contingent or otherwise) except normal trade or business obligations incurred
in the ordinary course of Seller's business and consistent with its past
practices, (ii) not discharge or satisfy any lien or other encumbrance, or pay
any obligation or liability (fixed or contingent), except in the ordinary course
of business, (iii) not mortgage, pledge or subject to any lien or other
encumbrance, any of its assets (whether tangible or intangible), (iv) not sell,
assign, transfer, convey, lease or otherwise dispose of or agree to sell,
assign, transfer, convey, lease or otherwise dispose of any of its assets
properties (other than its products pursuant to routine invoices in the ordinary
course of business) or any other material right, without the prior written
consent of Buyer, (v) not cancel or compromise any debt or claim, or waive or
release any right, without the prior written consent of Buyer, (vi) not transfer
or grant any right under any of its concessions, leases, licenses, agreements,
patents, inventions, trade names, trademarks, servicemarks, brandmarks,
copyrights or the like, or with respect to any know-how, (vii) not modify,
change or terminate any existing license, lease, contract or other document
referred to in Schedule 5.11, 5.12 and 5.14, (viii) not make any capital
expenditures, except as provided in Seller's capital budget attached hereto as
Schedule 7.1(i) or except in the ordinary course of business consistent with
past practices, aggregating in excess of $250,000, or enter into any commitment
therefore, (ix) not enter into any collective bargaining agreement or, through
negotiation (the status of which will be regularly communicated to Buyer) or
otherwise, make any commitment or incur any liability to any labor organization
without the prior written consent of Buyer, (x) not make any charitable
contribution, (xi) not introduce any material change with respect to the
operation of the Business, including its method of accounting (either for
financial or tax reporting), and (xii) not enter into any transaction or make
any contract or commitment which by reason of its size or otherwise is not in
the ordinary course of business;
(j) not make any change in the banking and safe deposit arrangements
reflected in Schedule 5.21 without prior written notice to Buyer, giving the
details of such change;
(k) conduct the Business on a basis consistent with the ordinary course
of business and not inconsistent with the past practices;
(l) not make any renovation of property involving any substantial
obligation on the part of Seller;
(m) not take any of the actions described in Section 5.19 without the
Buyer's prior written consent; and
(n) not agree to take any of the actions specified in clauses
(e),(f),(g),(h),(i),(j) or (l) above.
7.2 No Breach of Warranties. From the date hereof through the Closing
Date, each of the parties hereto agrees that it shall not enter into any
transaction, and shall use all reasonable efforts not to permit any event to
occur which would result in any of the representations and warranties of such
party contained in this Agreement not being true and correct in any material
respect at and as of the time immediately after the occurrence of such
transaction or event.
7.3 Updating of Information. From the date hereof through the Closing
Date, each of the parties hereto shall promptly deliver to the other parties any
information concerning events subsequent to the date of this Agreement which is
necessary to supplement the information contained in or make a part of the
representations and warranties contained herein, including the Schedules hereto,
in order that the information herein be complete and accurate in all material
respects, it being understood and agreed that the delivery of such information
shall not in any manner be deemed to cure or constitute a waiver of (or affect
the right of any party with respect to) any breach of any representation,
warranty or covenant contained in this Agreement or have any effect for purposes
of determining satisfaction of the conditions precedent hereto.
In addition, until the Closing, Seller will promptly notify Buyer of
any lawsuits, claims, proceedings or investigations, which are threatened or
commenced against Seller, or against any officer or director, which may relate
to, or affect, the Business or this Agreement or the transactions contemplated
hereby.
In addition, until the Closing, Seller shall promptly notify Buyer of
any event, occurrence, condition or circumstance occurring from the date hereof
through the Closing Date that would constitute a material adverse change in the
condition of the Business.
7.4 Acquisition Proposal.
(a) Prior to the Closing Date, Artra, BCA and Seller agree that none of
them, nor any of their respective subsidiaries or affiliates, nor any of the
respective directors, officers, employees, agents or representatives of the
foregoing, will, directly or indirectly, (i) solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing non-public information)
any inquiries or the making of any proposal with respect to any merger,
consolidation or other business combination involving Artra, BCA or Seller or
the sale or other disposition of all or any significant part of the assets or
capital stock of Artra, BCA or Sellers (an "Acquisition Transaction") (except
that Artra and BCA may engage in discussions relating to (x) Artra's or BCA's
acquisition of the assets, business or capital stock of a third-party or (y)
sale of any of Artra's or BCA's assets which are unrelated to the Seller or the
Business, provided that such transactions do not in any way delay or interfere
with the approval of Artra's shareholders described in Section 5.31 hereof or
with the closing of the transactions contemplated by this Agreement
(collectively, a "Permitted Transaction")), or (ii) except in connection with
Permitted Transactions, negotiate, explore or otherwise engage in discussions
with any person (other than Buyer and its representatives) with respect to any
Acquisition Transaction, or which may reasonably be expected to lead to a
proposal for an Acquisition Transaction or enter into any agreement, arrangement
or understanding with respect to any such Acquisition Transaction or which would
require it to abandon, terminate or fail to consummate the transaction
contemplated by this Agreement; provided, however, that Artra, BCA and Seller
may, in response to an unsolicited written proposal from a third party regarding
a Superior Proposal (as hereinafter defined), furnish information to and engage
in discussions and negotiations with such third party, but only if the Board of
Directors of Artra determines in good faith, after consultation with its
financial advisors and based upon the written advice of independent Delaware
counsel, that failing to take such action would result in a breach of the
fiduciary duties of such Board of Directors under applicable law. It is
understood and agreed, without limitation of Artra's, BCA's and Seller's
obligations, that any violation of this Section 7.4 by any director, officer,
attorney or other advisor or representative of Artra, BCA or Seller, whether or
not such person is purporting to act on behalf of Artra, BCA or Seller, or
otherwise, shall be deemed to be a breach of this Section 7.4.
(b) From and after the date hereof, Artra, BCA and Seller agree that
each of them, their subsidiaries and affiliates, and the representatives of the
foregoing, shall immediately cease and cause to be terminated any existing
activities, discussion or negotiations with any person (other than the Buyer and
its representatives) conducted heretofore with respect to any Acquisition
Transaction. Artra agrees to promptly advise Buyer in writing of the existence
of (x) any inquiries or proposals (or desire to make a proposal) received by (or
indicated to), any such information requested from, or any negotiations or
discussions sought to be initiated or continued with, Artra, BCA, Seller, their
subsidiaries or affiliates or any of the respective directors, officers,
employees, agents or representatives of the foregoing, in each case from a
person (other than Buyer and its representatives) with respect to an Acquisition
Transaction, and (y) the terms thereof, including the identity of such third
party and the terms of any financing arrangement or commitment in connection
with such Acquisition Transaction, and to update on an ongoing basis or upon the
Buyer's reasonable request, the status thereof. As used herein, "Superior
Proposal" means a bona fide, written and unsolicited proposal or offer made by a
person (or group) (other than Buyer or any of its subsidiaries) with respect to
an Acquisition Transaction on terms which, as determined by the Board of
Directors of Artra in good faith and in the exercise of reasonable judgment
(based on the advice of independent financial advisors and independent Delaware
counsel), would be more favorable to Artra and its shareholders than the
transactions contemplated hereby.
7.5 Further Actions. Each of the parties hereto agrees to (a) execute
and deliver such instruments and take such other actions as may reasonably be
required to carry out the purposes and intent of this Agreement, and (b) use its
reasonable best efforts, so that the conditions precedent to the obligations of
the other parties hereto set forth in this Agreement are satisfied. In addition,
each of the parties hereto shall use its reasonable best efforts to obtain
consents of all third parties and governmental bodies (including under the HSR
Act)necessary for the consummation of the transactions contemplated by this
Agreement. Seller agrees to (i) provide Buyer with a copy of the Title
Commitments within forty-five (45) days after the date hereof and (ii) repay the
indebtedness and release the liens described in Section 9.9 hereof immediately
prior to Closing.
7.6 Due Diligence.
(a) Prior to the Closing Date, Seller shall (i) give to Buyer and to
Buyer's counsel, accountants and other representatives (including financing
sources), during normal business hours or otherwise as mutually agreed to by the
parties, and subject to the supervision of Seller, all reasonable access to all
of the properties, personnel, books, contracts, commitments, records and files
of or relating to the Business, and (ii) furnish to Buyer and such
representatives, subject to the supervision of Seller, all such additional
documents and financial and other information concerning Seller as Buyer may
from time to time reasonably request (collectively, the "Information"). Seller
and Buyer agree to cooperate with each other in connection with the due
diligence process in order to minimize unnecessary interruption to the Business.
As a condition to the furnishing of the Information to Buyer, Buyer agrees to
use all reasonable efforts to treat the Information in confidence and to limit
the dissemination of the Information to the officers and employees of the Buyer
who need to know such Information for the purpose of evaluating it and to its
consultants, lawyers, lenders and other advisors who are assisting the Buyer in
evaluating this transaction.
(b) Prior to the Closing, Buyer, and Buyer's agents and consultants,
shall have the right to enter upon the Real Property and the buildings thereon
to take photographs, make topographic and boundary surveys, determine the
location of utilities, inspect the structural components of such buildings and
all building systems, including plumbing, electrical, heating, ventilating, air
conditioning and other systems and to conduct an environmental audit of the Real
Property and the area surrounding the Real Property. All inspections shall be at
Buyer's expense and at reasonable times as mutually agreed to by the parties.
(c) If this Agreement terminates, (i) Buyer and its affiliates shall
keep confidential and shall not use in any manner for a period of three (3)
years after the date of termination any Information obtained from Seller
(whether before or after the date hereof) concerning its assets, business and
operations, unless such information is (A) ascertainable from published, public
or industry information, (B) known by Buyer independently of any investigation
of Seller or hereafter obtained by Buyer independent of any investigation of
Seller, or (C) becomes public through no fault of Buyer or Buyer's affiliates,
and (ii) any documents or copies of documents obtained from Seller or Seller's
representatives shall be returned to Seller or destroyed by Buyer.
7.7 Expenses. The parties to this Agreement shall bear their respective
expenses incurred in connection with the preparation, execution and performance
of this Agreement, including, without limitation, all fees and expenses of
agents, representatives, counsel and accountants, and Seller and Buyer shall
share 50%/50% the costs and expenses associated with obtaining the surveys and
title insurance (if any) referred to in Section 9.4, any sales or use tax
payable by either party as a result of the transactions contemplated hereby and
the fees associated with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Notification and Report Form.
7.8 Indemnification of Brokerage. Seller represents and warrants to
Buyer that no broker, finder, agent or similar intermediary has acted on behalf
of Seller in connection with this Agreement and that, there are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
herewith. Seller agrees to indemnify and save Buyer harmless from any claim or
demand for commission or other compensation by any broker, finder, agent or
similar intermediary claiming to have been employed by or on behalf of Seller,
and to bear the cost of legal expenses incurred in defending against any such
claim. Buyer represents and warrants to Seller that no broker, finder, agent or
similar intermediary other than ▇▇. ▇. ▇▇▇▇▇ (the "Buyer's Broker") has acted on
behalf of Buyer in connection with this Agreement and that, other than a fee to
Buyer's Broker that Buyer will pay in full, there are no brokerage commissions,
finders' fees or similar fees or commissions payable in connection herewith.
Buyer agrees to indemnify and save Seller harmless from any claim or demand for
commission or other compensation by any broker, finder, agent or similar
intermediary claiming to have been employed by or on behalf of Buyer and to bear
the cost of legal expenses incurred in defending against any such claim.
7.9 Power of Attorney. Seller agrees, at the Closing, to execute and
deliver to Buyer a limited power of attorney solely to collect accounts
receivable, enforce claims under Assumed Contracts and to exercise its rights
with respect to any other assets conveyed to Buyer hereunder in a form
reasonably acceptable to Seller.
7.10 Access to Records. After the Closing, Buyer and Seller shall
afford to each other and their respective representatives the opportunity, upon
reasonable request, to examine and make copies of the books and records of the
Business sold to Buyer or of the books and records retained by Seller, as the
case may be, and to consult with their respective officers, employees,
directors, accountants and other representatives, in connection with any bona
fide business purposes, including, without limitation, the preparation of tax
and financial reporting matters and the conducting of any audits with respect
thereto, the preparation or review of the Closing Balance Sheet and the review
of any materials, books, records or circumstances relating to either party's
ongoing obligations under this Agreement. Buyer and Seller shall each maintain
all such books and records for a period of three (3) years and shall not destroy
or dispose of any such books and records during such period without the written
consent of the other.
7.11 Use of Name. After the Closing, neither Artra, BCA or Seller nor
any of their affiliates shall use the name "Bagcraft Corporation of America",
"Bagcraft" or any derivative or variation thereof except in connection with
ordinary course reporting or filing obligations nor authorize, license or
otherwise permit any other person or entity to use any of these names.
7.12 No Liquidation or Dissolution of Seller. After the Closing,
neither Artra, BCA or Seller shall liquidate, dissolve or otherwise directly or
indirectly terminate its legal existence until the later to occur of (x) the
Survival Termination Date (as hereinafter defined in Section 11), or (y) the
date that any dispute concerning any breach of any representation, warranty,
covenant or agreement is fully and finally resolved; provided, however, that
prior to such time, the Seller may make distributions to its stockholders to the
extent that such distributions are properly authorized by the Board of Directors
of Seller, do not violate any applicable law and do not result in the de facto
dissolution or liquidation of Seller or leave Seller with insufficient funds to
satisfy any of its liabilities or obligations hereunder.
7.13 Bulk Sales. Seller and Buyer waive compliance with the provisions
of the "Bulk Sales Law" or similar provision of law of any state ("Bulk Sales
Laws") insofar as it may be applicable to the transactions contemplated by this
Agreement.
7.14 Special Meeting of Shareholders of Artra
(a) Artra agrees to promptly take all steps necessary to cause
a special meeting of the shareholders of Artra (the "Artra Special Meeting") to
be duly called, noticed, convened and held as soon as practicable for the
purpose of voting to approve this Agreement. In connection with the Artra
Special Meeting, the Board of Directors of Artra shall, subject to Section
13.1(viii) hereof, unanimously recommend to the Shareholders that the
Shareholders vote in favor of the approval of this Agreement.
(b) In connection with the Artra Special Meeting, Artra agrees
to promptly prepare and cause to be filed with the SEC and mailed to the
Shareholders a notice of the Artra Special Meeting and a definitive proxy
statement (the "Proxy Statement") as soon as practicable and in any event, shall
cause such notice to be mailed no later than the time required by applicable law
and the certificate of incorporation and bylaws of Artra.
7.15 Public Announcements. Any public announcement made by or on behalf
of either the Buyer, Artra, BCA or Seller prior to the termination of this
Agreement concerning this Agreement, the transactions described herein or any
other aspect of the dealings heretofore had or hereafter to be had between such
parties must first be approved by the other party (any such approval not to be
unreasonably withheld), subject to either party's obligations under applicable
law as a public company (but such party shall use its best efforts to consult
with the other party as to all such public announcements).
7.16 Principal Shareholders Proxy. Messrs. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (collectively, the "Principal Shareholders") hereby agree
that during the period commencing on the date hereof and continuing until the
termination of this Agreement in accordance with its terms, at any meeting
(whether annual or special and whether or not an adjourned or postponed meeting)
of the holders of the Artra common stock (the "Artra Stock"), however called, or
in connection with any written consent of the holders of Artra Stock, the
Principal Shareholders shall vote (or cause to be voted) the shares of Artra
Stock held of record or beneficially owned by them or their affiliates (i) in
favor of the execution and delivery of this Agreement and the approval and
adoption of the terms thereof and each of the other actions provided for in this
Agreement and any actions required in furtherance thereof and hereof; (ii)
against any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
Artra, BCA or Seller under this Agreement; and (iii) except as otherwise agreed
to in writing in advance by the Buyer, against the following actions: (A) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving Artra, BCA, Seller or their subsidiaries (other
than a Permitted Transaction); (B) any sale, lease or transfer of a material
amount of assets of Artra, BCA, Seller or their subsidiaries, or a
reorganization, restructuring, recapitalization, special dividend, dissolution
or liquidation of Artra, BCA, Seller or their subsidiaries (other than a
Permitted Transaction); or (C) (1) any change in a majority of who constitute
the board of directors of Artra, BCA or Seller; (2) any change in the present
capitalization of Artra, BCA or Seller (including without limitation, any
proposal to sell a substantial equity interest in Artra, BCA, Seller or their
subsidiaries); (3) any amendment of Artra's, BCA's or Seller's certificate of
incorporation or by-laws; (4) any other change in Artra's, BCA's or Seller's
corporate structure or business; or (5) any other action which, in the case of
each of the matters referred to in clauses (C) (1), (2), (3) or (4) is intended,
or could reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the transactions contemplated by this Agreement. The
Principal Sharehholders shall not enter into any agreement or understanding with
any Person the effect of which would be inconsistent or violative of the
provisions and agreements contained in this Section 7.16.
7.17 Implementation of Escrows. The parties hereto agree that (i) on or
before the thirtieth (30th) day after the Closing Date, Buyer shall be entitled
to utilize the Closing Overdraft Escrow Balance to pay any checks of Seller
issued prior to Closing which have not been paid by Seller's bank
(notwithstanding the foregoing, in the event that any checks paid pursuant to
the Closing Overdraft Escrow involve items for which Buyer receives a credit or
a set-off for other amounts due, on or before February 15, 1999, Seller shall be
reimbursed by Buyer for such set-offs or credits) and (ii) on or before February
15, 1999, Buyer shall be entitled to utilize the Closing Bonus Escrow Accrual to
pay bonuses to the Continued Employees, to the extent such bonuses are
reasonably required to be paid under Seller's applicable bonus plans. The
parties hereto agree that the unused balances of the Escrow Accounts shall be
returned to Seller as promptly as possible after the resolution of these issues.
8. Employment and Employee Benefits Arrangements.
8.1 Definitions. (a) The term "Employees" shall mean all full-time
permanent employees (including those on lay-off, workers' compensation leave or
leave of absence, whether paid or unpaid, but excluding seasonal and/or
part-time employees, all employees on disability leave and all former employees
and retired employees of Seller) and the term "Employee" shall mean any of the
Employees.
(b) The term "Benefit Plans" shall mean (i) all "employee benefit
plans" as defined in section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), currently or at any time during the past five
years maintained or contributed to by Seller or any other organization which is
a member of a controlled group of organizations (within the meaning of Section
414(b), (c) and (m) of the Code) of which Seller is a member (the "Controlled
Group") and covering Employees including (i) any such plans that are "employee
welfare benefit plans" as defined in section 3(1) of ERISA and (ii) any such
plans that are "employee pension benefit plans" as defined in section 3(2) of
ERISA, and (ii) all life and health insurance, hospitalization, savings, bonus,
deferred compensation, incentive compensation, holiday, vacation, severance pay,
stock option, stock purchase, performance, sick pay, sick leave, disability,
retiree, tuition refund, service award, company car, scholarship, relocation,
patent award, fringe benefit or other employee benefit plans, contracts,
policies, practices or arrangements of the Seller providing employee or
executive compensation or benefits to Employees, other than the Benefit Plans.
8.2 Employee Matters.
(a) On the Closing Date, Seller shall terminate the employment of all
the Employees employed by Seller, and Buyer shall either (i) offer employment,
on an at-will basis, to all of such Employees of Seller on such terms and
conditions as Buyer may determine or (ii) offer severance to any of such
Employees who are not offered employment with Buyer. The Employees who accept
such offer of employment from Buyer are referred to herein as "Continued
Employees" and the Employees who are offered severance from the Buyer are
referred to herein as the "Severed Employees".
(b) Assuming Seller complies with the provisions of the Workers
Adjustment and Retraining Notification Act, Buyer shall reimburse and indemnify
and hold harmless Seller for all liabilities and obligations which Seller may
incur relating to Seller's termination of the Employees as provided in paragraph
(a) above, and Buyer's employment of or failure to employ the Continued
Employees or Buyer's failure to offer employment to the Severed Employees.
Otherwise, Artra, BCA and Seller, jointly and severally, agree that Seller shall
remain liable for all wages and salaries earned by Employees prior to the
Closing Date, as well as all benefits earned by such Employees (specifically
excluding the severance benefits referred to above) or to which such Employees
are entitled under the Benefit Plans prior to the Closing Date (other than for
the accrued and unused vacation and the unpaid bonuses assumed by Buyer under
Section 2.1(d) hereof and other than for short-term disability payments assumed
by Buyer under Section 2.1(e) hereof). In addition, Artra, BCA and Seller,
jointly and severally, agree that Seller shall remain liable for all liabilities
to former and retired employees of the Business whose employment with the
Business terminated prior to the Closing Date.
(c) Artra, BCA and Seller, jointly and severally, agree that Seller
will be responsible for and will pay all long-term disability and workers'
compensation benefits with respect to claims (i) that have been asserted by any
Employee prior to the Closing Date or (ii) that are asserted by any Employee on
or after the Closing Date but only to the extent that they arise from events
occurring prior to the Closing Date. Buyer will be responsible for and will pay
(i) all long-term disability and workers' compensation benefits with respect to
claims that are asserted by any Continuing Employee after the Closing Date but
only to the extent that they arise from events occurring on or after the Closing
Date, and (ii) all short-term disability claims arising from events prior to the
Closing Date to the extent set forth in Section 2.1(e).
(d) Immediately following the Closing Date, Buyer shall make (i) a
group medical and life insurance plan available to each Continued Employee who
was covered under Seller's group medical and life insurance plans at the Closing
(it being Buyer's intention to assume Seller's group life insurance plan), which
plans shall not, to the extent possible, subject any Continued Employee to a
pre-existing condition limitation, (ii) a defined contribution 401(k) plan
available to each Continued Employee who was covered under Seller's 401(k) plan
at the Closing, and (iii) such other Benefit Plans available to the Continued
Employees as Buyer shall determine.
(e) For purposes of determining eligibility and vesting (but not
benefits) under Buyer's 401(k) plan, group medical plan, group life insurance
plan, vacation and sick pay policies, such policies shall recognize the
Continued Employee's employment with the Business as employment with Buyer.
(f) On the Closing Date, Seller shall freeze the participation by the
Continued Employees in Seller's 401(k) plan, and use all reasonable efforts to
provide assistance to the Continued Employees to enable them to roll-over their
plan assets from Seller's 401(k) plan to Buyer's 401(k) plan.
8.3 Seller's Benefit Plans. Without limiting the generality of the
provisions of Section 2.2 hereof, Artra, BCA and Seller, jointly and severally,
agree that Seller shall retain all liabilities and obligations of Seller and its
affiliates under all Benefit Plans (other than such liabilities that are assumed
by Buyer under Sections 2.1(c) and 2.1(d) hereof and Sections 8.2(a) and 8.2(b)
hereof) with respect to the Continued Employees and their dependents, including,
but not limited to, (i) liabilities and obligations for benefits, compensation,
contributions, insurance premiums and administrative expenses, whether incurred
or accrued before, on or after the Closing Date and whether or not reported as
of the Closing Date, (ii) liabilities and obligations arising under the
continuation coverage requirements of Section 4980B of the Code and Part 6 of
Title I of ERISA with respect to all Employees (or any beneficiary or dependent
of any Employee) who, as of the Closing Date, have exercised or are eligible to
exercise their right to such continuation coverage and (iii) liabilities and
obligations to provide post-retirement health and life insurance benefits to
Employees (whether or not currently retired), and Seller shall indemnify Buyer
and its affiliates and hold each of them harmless for any loss which any of them
may incur in respect of any of the foregoing.
9. Conditions Precedent to the Obligation of Buyer to Close.
The obligation of Buyer to enter into and complete the Closing is
subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by it:
9.1 Representations, Warranties and Covenants.
(a) The representations and warranties of Artra, BCA and Seller
contained in this Agreement shall be true and complete in all material respects
when made and on and as of the Closing Date.
(b) Artra, BCA, Seller and the Principal Shareholders shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by Artra,
BCA, Seller and the Principal Shareholders on or prior to the Closing Date
(including, without limitation, Seller's execution and delivery of the deeds,
the bills of sale, assignments and other Transaction Documents).
(c) Artra, BCA and Seller shall have delivered to Buyer an officer's
certificate, dated the date of the Closing, to the foregoing effect and
certifying that the conditions precedent to the obligation of Buyer to close
have been fulfilled on or prior to the Closing Date.
9.2 Consents and Approvals. (a) All Required Consents, shall have been
obtained and be in full force and effect.
(b) This Agreement and the transaction contemplated hereby shall have
received the requisite vote and approval of the shareholders of Artra.
9.3 Opinion of Counsel to Seller. Buyer shall have received the
opinions of ▇▇▇▇▇▇ & ▇▇▇▇▇, Ltd., counsel to Seller, dated the date of the
Closing, addressed to Buyer, in form and substance reasonably acceptable to
Buyer.
9.4 Real Estate.
(a) Leasehold Mortgages. Buyer shall have received from the landlord of
the Leased Real Property such certificates, lease extensions, estoppel letters,
non-disturbance agreements or other consents as shall be reasonably required by
the Buyer.
(b) Title Insurance. Buyer shall have received an owner and mortgagee
title insurance policy on each of the parcels of Owned Real Property in form and
substance reasonably satisfactory to Buyer and its senior lender containing such
endorsements as shall be reasonably required by Buyer and its senior lender.
(c) Updated Surveys. Buyer shall have received an updated ALTA survey
on each of the parcels of Real Property reasonably satisfactory to Buyer showing
all improvements, rights of way, easements, servitudes and encroachments, the
contiguity of all parcels of land constituting the Real Property, that all
buildings and structures are located within the property lines and that the
acreage of the Real Property is as set forth therein, which survey shall be
sufficient to cause the title insurance company to omit the standard survey
exception, taking only such specific survey exceptions as shall constitute
Permitted Owned Real Property Exceptions.
9.5 Material Adverse Change. Between the date hereof and the Closing
Date, there shall have been no material adverse change in the condition of the
Business.
9.6 Financing. On or before the Closing, the equity and debt financing
described in the commitment letters attached hereto as Schedule 9.6 shall be
available to Buyer on terms and conditions reasonably satisfactory to Buyer and
in an amount which shall be sufficient to pay the Purchase Price to Seller and
to provide Buyer with a line of credit for working capital purposes.
9.7 Buyer's Environmental Audit. On or before the later to occur of (x)
September 30, 1998 or (y) the date that Artra mails the Proxy Statement to
Artra's Shareholders, Buyer shall have completed its environmental due diligence
of the Business and received an environmental audit reasonably acceptable to
Buyer in its discretion (the "Environmental Audit").
9.8 Secretary's Certificate. Seller shall have delivered to Buyer a
certificate from Artra, BCA and Seller, in form and substance reasonably
satisfactory to Buyer, signed by the respective secretaries of Artra, BCA and
Seller, dated the date of the Closing, certifying the truth, accuracy and
completeness of the following documents to be delivered therewith: (i) their
respective Certificates of Incorporation and By-laws as in effect on the date
hereof and the Closing Date; (ii) resolutions duly adopted by the board of
directors and shareholders of Artra, BCA and Seller authorizing and approving
the transactions contemplated hereby; and (iii) the incumbency and signatures of
the officers of Artra, BCA and Seller.
9.9 Repayment of Indebtedness for Borrowed Money. Simultaneously with
the Closing, Seller shall have repaid in full the principal of, accrued interest
on, and any other penalties, fees or other amounts payable with respect to, all
of Seller's indebtedness for borrowed money and the lenders thereto shall have
delivered to the Buyer releases and other similar documents (including without
limitation, UCC-3 termination statements in applicable form for filing) in a
form reasonably acceptable to Buyer and its lenders.
9.10 No Claims. No Claims shall be pending, or to the knowledge of the
Buyer, the Seller, Artra or BCA, threatened, before any court, arbitrator or
governmental or regulatory body to restrain or prohibit, or to obtain damages or
a discovery order in respect of, this Agreement or the consummation of the
transactions contemplated by this Agreement or which has had or may have, in the
reasonable judgment of the Buyer, a materially adverse effect on the condition
of the Business.
10.Conditions Precedent to the Obligation of Seller to Close.
The obligation of Seller to enter into and complete the Closing is
subject to the fulfillment of the following conditions, any one or more of which
may be waived by Seller:
10.1 Representations and Covenants.
(a) The representations and warranties of Buyer contained in this
Agreement shall be true and complete in all material respects when made and on
and as of the Closing Date;
(b) Buyer shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be performed or
complied with by it on or prior to the Closing Date, including, without
limitation, the delivery of the Purchase Price; and
(c) Buyer shall have delivered to Seller a certificate, dated the date
of the Closing and signed by an officer of Buyer, to the foregoing effect.
10.2 Opinion of Counsel to Buyer. Seller shall have received the
opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇, counsel to Buyer, dated the
date of the Closing, addressed to Seller, in form reasonably acceptable to
Seller.
10.3 Consents and Approvals. All Required Consents shall have been
obtained and be in full force and effect.
10.4 Secretary's Certificate. Buyer shall have delivered to Seller a
certificate from Buyer, in form and substance reasonably satisfactory to Seller,
signed by the secretary of Buyer, dated the date of the Closing, certifying the
truth, accuracy and completeness of the following documents to be delivered
therewith: (i) Buyer's Certificate of Incorporation and By-laws as in effect on
the date hereof and the Closing Date; (ii) resolutions duly adopted by the board
of directors of Buyer authorizing and approving the transactions contemplated
hereby; and (iii) the incumbency of the officers of Buyer.
10.5 Reimbursement for Negative Spread on Nonoperating Leases. On or
before the Closing, Buyer shall reimburse Seller for the difference between
Seller's monthly rental payments and Seller's monthly sublease payments under
the Nonoperating Leases, to the extent set forth on Schedule 10.5 hereof, for
any of three Nonoperating Leases that are still in effect on the Closing Date.
11. Survival of Representations and Warranties.
Notwithstanding the right of Buyer fully to investigate the affairs of
Seller and the Business and notwithstanding any knowledge of facts determined or
determinable by Buyer pursuant to such investigation, Buyer has the right to
rely fully upon the representations, warranties, covenants and agreements of
Artra, BCA and Seller contained in this Agreement or in any Transaction
Documents. All representations, warranties, covenants and agreements contained
herein shall survive the execution and delivery of this Agreement and the
Closing hereunder, and except as otherwise specifically provided in this
Agreement, the representations and warranties contained herein shall thereafter
terminate and expire at the close of business on September 30, 2001 (the
"Survival Termination Date") with respect to any claim based upon, arising out
of or otherwise in respect of any fact, circumstance, action or proceeding of
which the party asserting such claim shall not have given notice on or prior to
the Survival Termination Date to the party against which such claim is asserted
(in which case, each representation and warranty shall survive until such claim
is finally resolved and all obligations with respect thereto are fully
satisfied).
12. General Indemnification.
12.1 Obligation of Artra, BCA and Seller to Indemnify. Artra, BCA and
Seller, jointly and severally, agree to indemnify, defend and hold harmless
Buyer (and its directors, officers, employees, affiliates, successors and
assigns) from and against all losses, liabilities, damages, deficiencies, costs
or expenses (including without limitation interest, penalties and reasonable
attorneys' fees and disbursements and all compliance and remediation obligations
under Environmental Laws and all costs and expenses of enforcing the indemnity
obligations in this Section 12.1) (collectively, "Losses") incurred by any of
them based upon, arising out of or otherwise in respect of:
(a) subject to the limitations contained in Article 11 and Section
12.4(a), any inaccuracy in or any breach of any representation or warranty of
Artra, BCA or Seller contained in this Agreement, the Schedules hereto or any of
the other documents or closing certificates delivered in connection herewith,
and
(b) Artra's, BCA's or Seller's breach of the covenants or agreements
contained in this Agreement, or
(c) any Retained Liability.
For purposes of indemnification under Section 12.1, a breach or
inaccuracy of a representation or warranty contained in this Agreement or in any
other document delivered in connection herewith shall be deemed to occur or
exist either if such representation or warranty is actually inaccurate or
breached (including, without limitation, due to any misrepresentation in or
omission of any item required to be disclosed on any schedule hereto or on any
certificate, schedule or other agreement, instrument or document required to be
delivered pursuant to the terms of this Agreement) or if such representation or
warranty would have been so breached orinaccurate if such representation or
warranty had not contained any limitation or qualification as to materiality,
material adverse effect, material adverse change or knowledge, it being the
intention of the parties hereto that, subject to the provisions of Section 12.3,
the parties and their officers, directors, employees, agents and affiliates,
shall be indemnified and held harmless from and against any and all Losses
resulting from, arising out of, relating to or imposed upon or incurred by the
failure of any such representation, warranty, certificate, schedule, exhibit or
other agreement, instrument or document to be true, correct and complete in any
respect, determined in each case without regard to materiality, material adverse
effect, material adverse change, knowledge, or the failure by the other party to
duly and punctually perform any of its covenants, agreements or undertakings
contained in this Agreement or any other document delivered in connection
herewith.
12.2 Obligation of Buyer to Indemnify. Buyer agrees to indemnify,
defend and hold harmless Artra, BCA and Seller (and their directors, officers,
employees, affiliates, successors and assigns) from and against any Losses
actually incurred by any of them based upon, arising out of or otherwise in
respect of:
(a) subject to the limitations contained in Article 11 and Section
12.4(b), any inaccuracy in or any breach of any representation or warranty of
Buyer contained in this Agreement, the Schedules hereto or any of the closing
certificates delivered in connection herewith,
(b) Buyer's breach of the covenants or agreements contained in this
Agreement, or
(c) any Assumed Liability.
12.3 Notice and Opportunity to Defend.
12.3.1 Notice of Asserted Liability. Promptly after receipt by
any party hereto (the "Indemnitee") of notice of any demand, claim or
circumstances which would give rise to a claim or the commencement (or
threatened commencement) of any action, proceeding or investigation (an
"Asserted Liability") that may result in a Loss, the Indemnitee shall give
notice thereof (the "Claims Notice") to any other party (or parties) obligated
to provide indemnification or payment pursuant to Section 12.1 or 12.2 (the
"Indemnifying Party"), subject to the procedures contained in Section 12.3.3.
The Claims Notice shall describe the Asserted Liability in reasonable detail and
shall indicate the amount (estimated, if necessary and to the extent feasible)
of the Loss that has been or may be suffered by the Indemnitee. In no event
shall the Indemnitee's failure to give a Claims Notice to the Indemnifying Party
relieve the Indemnifying Party of any liability under this Section 12 except to
the extent the Indemnifying Party can establish that the Indemnitee's failure to
give such Claims Notice materially prejudiced the Indemnifying Party's ability
to adequately defend such claim.
12.3.2 Opportunity to Defend. Subject to Section 12.3.3, the
Indemnifying Party may, upon acknowledging its obligation to indemnify in
writing, elect to compromise or defend at its own expense (and with counsel
reasonably satisfactory to the Indemnitee) any Asserted Liability asserted by a
third party, and if the Indemnifying Party so elects to compromise or defend,
the Indemnifying Party shall have the right (except as hereafter provided) to
control the defense of such Asserted Liability. If the Indemnifying Party elects
to compromise or defend such Asserted Liability, it shall within 15 days (or
sooner, if the nature of the Asserted Liability so requires) notify in writing
the Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at
the expense of the Indemnifying Party, in the compromise of, or defense against,
such Asserted Liability.
If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability and the
Indemnitee shall have the right to control the defense of such Asserted
Liability and recover the entire cost and expense thereof (including without
limitation, reasonable attorneys' fees and all compliance and remediation
obligations under Environmental Laws), subject to the limitations on liability
contained in Section 12.4, from the Indemnifying Party. In the event the
Indemnifying Party and the Indemnitee are named parties in or are subject to
such Asserted Liability and either such party determines with the advice of
counsel that there may be one or more legal defenses available to it that are
different from or additional to those available to the other party or that a
material conflict of interest between such parties may exist in respect of such
action, the Indemnifying Party may decline to assume the defense on behalf of
the Indemnitee or the Indemnitee may retain the defense on its own behalf and in
either such case the Indemnifying Party shall be required to pay any legal or
other expenses, including without limitation reasonable attorneys' fees and
disbursements, incurred by the Indemnitee in such defense (subject in all cases
to the limitations of liability contained in Section 12.4 hereof).
Notwithstanding the foregoing, neither the Indemnifying Party nor the
Indemnitee may settle or compromise any Asserted Liability over the objection of
the other party, unless such settlement includes as an unconditional term
thereof, the giving by the claimant or plaintiff to such objecting party of a
full and complete release from all liability in respect of such Asserted
Liability.
In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense of any Asserted Liability.
Notwithstanding anything to the contrary set forth in this Agreement,
from and after the time when the aggregate amount of Losses paid or payable by
an Indemnifying Party under this Agreement which are subject to the
indemnification limits set forth in Section 12.4 hereof, exceed, or are
reasonably likely to exceed, the indemnification limits set forth in Section
12.4 hereof, the Indemnitee shall have the right, at its own cost and expense,
to assume the control, defense and settlement of any remaining indemnification
claims the liability for which could potentially result in the aggregate claims
exceeding the indemnification limits set forth in Section 12.4 hereof.
12.3.3 Management Procedures for On-Site Environmental Liabilities.
(a) Buyer shall have the right to manage and control all Retained
On-Site Environmental Liabilities (as defined in Section 2.2(l)) with respect to
the Real Property, including without limitation, the right to retain consultants
and counsel, to control all investigations, clean-up, response, remediation and
associated activities, and the right to negotiate, litigate, otherwise contest
or settle any claim relating thereto.
(b) Until the amount of Losses paid or payable by Artra, BCA and Seller
exceed the indemnification limits set forth in Section 12.4 hereof, Buyer agrees
to provide to Seller such information as may be reasonably requested in writing
by Seller regarding all Retained On-Site Environmental Liabilities with respect
to the Real Property, including without limitation, providing the other with
access to and the right to copy (at the Seller's expense), all relevant data,
records, studies, reports or other documents.
12.4 Limitations on Indemnification. (a) The indemnification provided
for in Section 12.1 shall be subject to the following limitations:
(i) Artra, BCA and Seller shall not be obligated to pay any
amounts for indemnification under Section 12.1(a) (except those based upon,
arising out of or otherwise in respect of Sections 3.3, 5.4, 5.13, 5.15.5, 5.19,
5.20, and 5.25,(collectively, the "Basket Exclusions")) until the aggregate
Losses incurred by Buyer thereunder equals $200,000 (the "Basket Amount"),
whereupon Artra, BCA and Seller shall be jointly and severally obligated to pay
all amounts of Losses incurred by Buyer in excess of the Basket Amount under
Section 12.1(a) in full up to the limit set forth in clause (ii) below.
(ii) Artra, BCA and Seller shall not be obligated to pay any
amount for indemnification under Section 12.1(a) in excess of the Purchase
Price, other than for breaches of Artra's, BCA's, Seller's representations and
warranties of which Artra, BCA or Seller had knowledge at Closing.
(iii) Artra, BCA and Seller shall be obligated to pay any and
all amounts for indemnification with respect to the Basket Exclusions and under
Sections 12.1(b) and 12.1(c) in full without regard to the Basket Amount. In
addition, the limitation set forth in the immediately preceding paragraph (ii)
and the time limitation set forth in Section 11 shall in no event be applicable
to Artra's, BCA's and Seller's obligation to indemnify pursuant to Sections
12.1(b) and 12.1(c) and any amounts paid by Artra, BCA or Seller to Buyer
pursuant to Section 12.1(b) and 12.1(c) shall not be applied against the
limitation set forth in the immediately preceding paragraph (ii).
(b) The indemnification provided for in Section 12.2 shall be subject
to the following limitations:
(i) Buyer shall not be obligated to pay any amounts for
indemnification under Section 12.2(a) until the aggregate Losses incurred by
Artra, BCA or Seller thereunder equals $200,000 (the "Buyer Basket"), whereupon
Buyer shall be obligated to pay all amounts of Losses incurred by Seller in
excess of the Buyer Basket under Section 12.2(a) in full up to the limit set
forth in clause (ii) below.
(ii) Buyer shall not be obligated to pay any amount for
indemnification under Section 12.2(a) in excess of the Purchase Price other than
for breaches of which Buyer had knowledge at Closing.
(iii) Buyer shall be obligated to pay any and all amounts for
indemnification under Sections 12.2(b) and (c) in full without regard to the
Buyer Basket. The limitation set forth in the immediately preceding paragraph
(ii) shall in no event be applicable to Buyer's obligation to indemnify pursuant
to Sections 12.2(b) and (c).
12.5 Set-Off Rights. Artra, BCA, Seller and Buyer hereby agree that
Buyer shall have the right, but not the obligation, to set-off against its
payment obligations under the Subordinated Promissory Note, the full amount of
any Losses required to be paid pursuant to Section 12.1 after delivering to
Seller the "Claims Notice" required under Section 12.3.1 hereof and allowing
Seller the opportunity to defend as provided for in Section 12.3.2 hereof. If
Buyer elects to exercise its set-off rights hereunder against the Subordinated
Promissory Note, Buyer will, in the Claims Notice, give Seller written notice of
such election and specify the amount to be set-off, and after complying with the
provisions of Sections 12.3.1 and 12.3.2, the amount of obligations under any
such Subordinated Promissory Note shall automatically be reduced by the amount
set forth in such notice. In the event there is a "final determination" by a
court of competent jurisdiction that Buyer was not entitled to indemnification
under Section 12 with respect to the set-off amount, Buyer shall promptly
thereafter repay to Seller the amount which is determined to have been
wrongfully set-off. For purposes of this Section 12.5, a determination shall be
"final" if any and all appeals therefrom shall have been resolved or if thirty
(30) days shall have passed from the rendering of such determination (or of any
determination on appeal therefrom) and no party shall have commenced any such
appeal therefrom.
13. Termination of Agreement.
13.1 Termination. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time prior to the Closing
(whether before or after the approval of this Agreement by the shareholders of
Artra), as follows:
(i) by mutual written agreement of the Buyer and Seller;
(ii) by the Buyer if any one or more of the conditions to the
obligation of the Buyer to close set forth in Article 9 of this Agreement shall
not have been fulfilled by November 16, 1998 (or by the latter of the dates set
forth in Section 9.7 with respect to Section 9.7) or by December 18, 1998 if the
SEC shall have reviewed Artra's Proxy Statement (except that the Buyer shall not
have the right to terminate this Agreement pursuant to this Section 13.1(ii) if
the basis therefor is attributable to a breach by the Buyer of any of its
obligations hereunder);
(iii) by Seller if any one or more of its conditions to close
set forth in Article 10 of this Agreement shall not have been fulfilled by
December 18, 1998 (except that Seller shall not have the right to terminate this
Agreement pursuant to this Section 13.1(iii) if the basis therefor is
attributable to a breach by Artra, BCA, Seller or their affiliates of any of
their obligations hereunder);
(iv) by the Buyer or Seller if this Agreement shall not have
received the requisite approval and authorization of the shareholders of Artra
by November 16, 1998, or by December 18, 1998 if the SEC shall have reviewed
Artra's Proxy Statement;
(v) at the election of the Buyer or Seller, if any legal
proceeding is commenced or threatened by any governmental or regulatory body
directed against the consummation of the Closing or any transaction contemplated
by this Agreement and either the Buyer or Seller, as the case may be, reasonably
and in good ▇▇▇▇▇ ▇▇▇▇▇ it impractical or inadvisable to proceed in view of such
legal proceeding or threat thereof;
(vi) by the Buyer if (A) the Board of Directors of Artra, BCA
or Seller (or the shareholders of Seller or BCA) shall have withdrawn, or
modified or changed in a manner adverse to the Buyer their approval or
recommendation of this Agreement or shall have recommended another transaction
or other business combination, or Artra, BCA or Seller shall have entered into
an agreement in principle (or similar agreement) or definitive agreement
providing for a transaction with a person other than the Buyer (or the Board of
Directors of Artra, BCA or Seller resolves to do any of the foregoing); or (B)
it shall have been publicly disclosed or the Buyer shall have learned that any
person or "group" (as that term is defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended ("Exchange Act") (an "Acquiring Person"), other
than the Buyer, after receiving the approval of the Board of Directors of Artra
contemplated by Section 203 of the GCL, shall have acquired beneficial ownership
(determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of more
than 14.9% of any class or series of capital stock of Artra, through the
acquisition of stock, the formation of a group or otherwise, or shall have been
granted any option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 14.9% of any class or series of capital stock
of Artra;
(vii) by the Buyer upon the failure of the Principal
Shareholders to perform their obligations under Section 7.16 hereof;
(viii) by Artra, BCA and Seller if the Board of Directors of
Artra shall have (A) withdrawn, or modified or changed in a manner adverse to
the Buyer its approval or recommendation of this Agreement in order to approve
and permit Artra, BCA or Seller to execute a definitive agreement relating to an
Acquisition Transaction, and (B) determined, after having received the written
advice of independent Delaware counsel, that the failure to take such action as
set forth in the preceding clause (A) would result in a breach of the Board of
Directors' fiduciary duties under applicable law; provided, however, that Artra
shall have given the Buyer at least thirty-six hours advance actual notice of
any termination pursuant to this Section 13.1(viii) and shall make concurrently
with such termination the $5,000,000 payment referred to in Section 13.3 hereof;
or
(ix) by the Seller, pursuant to a written notice delivered to
the Buyer on or before September 11, 1998, if Buyer shall not have delivered to
Seller a fully executed copy of the Assets Purchase Agreement by and among the
Company, IPMC Acquisition, L.L.C., IPC, Inc. and IPMC, Inc. on or before
September 4, 1998.
. In the event of termination and abandonment of this Agreement by any party
pursuant to Section 13.1, written notice thereof shall forthwith be given to the
other parties and this Agreement shall terminate and the other transactions
contemplated hereby shall be abandoned, without further action by any of the
parties hereto. If this Agreement is terminated and the transactions
contemplated hereby are not consummated pursuant to Section 13.1 of this
Agreement, this Agreement shall become void and of no further force and effect,
except for the provisions of Sections 13.1 and 13.3 relating to the obligations
to make certain payments to the Buyer.
13.3 Termination Fee Payable to the Buyer. Notwithstanding any
provision to the contrary contained herein, Artra, BCA and Seller shall be
jointly and severally liable to immediately pay to Buyer the amount of
$5,000,000 in cash if
(A) this Agreement is terminated by Buyer pursuant
to:
(a) Section 13.1(ii) for failure of any of the conditions set forth in
Section 9.8 or 9.9;
(b) Section 13.1(ii) for failure of any of the conditions set forth (1)
in Section 9.1(b), 9.2(a), 9.2(b), 9.3 or 9.4 as a result of Artra, BCA or
Seller doing any act or omitting to take any act that would result in the
failure to perform or comply with their obligations under this Agreement or (2)
in Section 9.1(a) as a result of Artra, BCA or Seller doing, either
intentionally, wrongfully or in bad faith, any act or omitting to take any act
that would result in the representations and warranties made in this Agreement
being not true and correct on and as of the Closing Date;
(c) Section 13.1(iv);
(d) Section 13.1(vi);
(e) Section 13.1(vii), or
(B) if this Agreement is terminated by Artra pursuant
to Section 13.1(viii) above with the $5,000,000 to be paid concurrently with the
occurrence of the event referred to in clauses (A) or (B) above. In addition, in
the event that Buyer terminates this Agreement pursuant to Section 13.1(ii) (for
failure of the condition set forth in Section 9.2(b)), then Artra, BCA and
Seller jointly and severally will immediately pay to Buyer all out-of-pocket
expenses reasonably incurred by the Company and Buyer in connection with this
Agreement unless Buyer is entitled to receive the $5,000,000 termination fee
hereunder. Upon receipt of such payments, Buyer shall not be entitled to and
shall waive the right to seek damages or other amounts or remedies from Artra,
BCA or Seller for breach of, or otherwise in connection with, this Agreement.
13.4 Other Remedies. Notwithstanding any provision to the contrary
contained herein, if this Agreement is terminated pursuant to Section 13.1 or
otherwise by Artra, BCA or Seller, on the one hand, or the Buyer, on the other
hand, and non-terminating party is not entitled to receive the payments under
Section 13.3, then the non-terminating party shall be entitled to pursue any
available legal rights to recover actual damages, including, without limitation,
its reasonable costs and expenses incurred in pursuing such recovery (including,
without limitation, reasonable attorneys' fees) resulting from the other party's
willful or wrongful breach hereof.
14. Miscellaneous.
14.1 Certain Definitions. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:
(i) "affiliate" means with respect to any person, (i) any other person
controlling, controlled by or under common control with, such person, or (ii)
any stockholder of such person holding directly, or indirectly through trusts,
partnerships or otherwise, beneficial ownership of more than 5.0% of the common
equity of such person.
(ii) "condition of the Business" means the assets, liabilities,
properties, business, results of operations, financial condition or prospects of
the Business.
(iii) "governmental or regulatory body" means any government or
political subdivision thereof, whether federal, state, local or foreign, or any
agency or instrumentality of any such government or political subdivision.
(iv) "knowledge" with respect to Artra, BCA or Seller means the
knowledge of any of the officers, directors, vice presidents or general managers
of Artra, BCA or Seller or the Business after due inquiry.
(v) "lien or other encumbrance" means any lien, pledge, mortgage,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever.
(vi) "person" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, governmental or regulatory body or other entity.
(vii) "Seller Property" shall mean all real property previously or
heretofore owned, leased or used by or on behalf of Seller (including, without
limitation, the real properties previously owned, leased or operated in Forest
Park, Georgia, Carteret, New Jersey, Joplin, Missouri and Hialeah, Florida). For
purposes of this definition, the term "Seller" shall mean and include the Seller
and any of its predecessors or any person whose liability for any Environmental
claim the Seller or any of its predecessors has retained or assumed either
contractually or by operation of law.
(viii) "Tax Return" means any return, amended return, declaration,
report, estimate, information return, claim for refund or credit or statement
regarding Taxes including any schedule or attachment thereto and any amendment
thereof, which is filed or required to be filed under applicable Law whether on
a consolidated, combined, unitary or separate basis or otherwise.
(ix) "Taxing Authority" means the Internal Revenue Service and any
other domestic or foreign Governmental Authority responsible for the
administration of any Tax.
14.2 Publicity. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without advance
approval thereof by Seller and Buyer, except as required by law, in which case
the party issuing the release will endeavor to get the other party's consent.
14.3 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified return-receipt
requested, registered or express mail, postage prepaid. Any such notice shall be
deemed given when so delivered personally, telegraphed, telexed or sent by
facsimile transmission or, if mailed, five (5) days after the date of deposit in
the United States mails, or if express mailed, one (1) business day after
delivery to a reputable over-night express mail courier, as follows:
(i) If to Artra, BCA or Seller, to:
c/o Artra Group Incorporated
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇, Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to Buyer, to:
Packaging Dynamics, L.L.C.
c/o Ivex Packaging Corporation
▇▇▇ ▇▇▇-▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Packaging Dynamics, L.L.C.
c/o Ivex Packaging Corporation
▇▇▇ ▇▇▇-▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
14.4 Entire Agreement. This Agreement (including the Exhibits and
Schedules) and the collateral agreements executed in connection with the
consummation of the transactions contemplated hereby contain the entire
agreement among the parties with respect to the purchase of the Business and
supersedes all prior agreements, written or oral, with respect thereto.
14.5 Waivers and Amendments; Non-Contractual Remedies; Preservation of
Remedies. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by Buyer and Seller or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof. Nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
14.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Illinois applicable to agreements made
and to be performed entirely within such State.
14.7 Consent to Jurisdiction and Service of Process. Any legal action,
suit or proceeding arising out of or relating to this Agreement, each and every
agreement and instrument contemplated hereby or the transactions contemplated by
this Agreement may be instituted in any Federal court of the Northern District
of Illinois or any state court located in ▇▇▇▇ County, State of Illinois, and
each party agrees not to assert, by way of motion, as a defense or otherwise, in
any such action, suit or proceeding, any claim that it is not subject personally
to the jurisdiction of such court, that the action, suit or proceeding is
brought in an inconvenient forum, that the venue of the action, suit or
proceeding is improper or that this Agreement, or each such other agreement and
instrument or the subject matter hereof or thereof may not be enforced in or by
such court. Each party further irrevocably submits to the jurisdiction of such
court in any such action, suit or proceeding. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against any party if given personally or by registered or certified mail, return
receipt requested, or by any other means of mail that requires a signed receipt,
postage prepaid, mailed to such party as herein provided. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any manner permitted by law or to commence legal proceedings or otherwise
proceed against any other party in any other jurisdiction.
14.8 Binding Effect; No Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
legal representatives. This Agreement is not assignable except by operation of
law. Notwithstanding the foregoing, Buyer may assign its rights hereunder to any
direct or indirect wholly-owned subsidiary of Buyer or to any subsequent
transferee of the Business or to the banks providing financing to the Buyer.
14.9 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
14.10 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
14.11 Schedules. The Schedules are a part of this Agreement as if fully
set forth herein. All references herein to Sections and Schedules shall be
deemed references to such parts Of this Agreement, unless the context shall
otherwise require.
14.12 Headings. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.
14.13 Severability of Provisions. If any provision or any portion of
any provision of this Agreement, or the application of any such provision or any
portion thereof to any person or circumstance, shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement, and the application of such provision or portion
of such provision as is held invalid or unenforceable to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
BAGCRAFT ACQUISITION, L.L.C.
By:___________________________________
Title:
PACKAGING DYNAMICS, L.L.C.
By: __________________________________
Title:
ARTRA GROUP INCORPORATED
By:___________________________________
Title:
BAGCRAFT HOLDINGS, INC.
By:___________________________________
Title:
BAGCRAFT CORPORATION OF AMERICA
By:___________________________________
Title:
The undersigned have signed this Agreement only with respect to their
obligations under Section 7.16 hereof
SIGNATURES OF PRINCIPAL SHAREHOLDERS
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▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. Louis
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Exhibit A
TRADE ▇▇▇▇ AND SERVICE ▇▇▇▇ ASSIGNMENT
WHEREAS, , a _________ corporation having a principal place of business
at (the "Seller"), owns and has used the following ▇▇▇▇ (the "▇▇▇▇"):
Serial No. Servicemark Filing Date
______________ ______________ ___ __, 19__
AND WHEREAS, _______________________, a Delaware corporation having a
principal place of business at _______________________________ wishes to buy
from Seller certain assets, including without limitation the ▇▇▇▇;
NOW THEREFORE, for One Dollar and other good valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Seller hereby
sells, assigns, transfers and conveys to Buyer, its successors, assigns and
legal representatives, Seller's entire right, title and interest in and to the
▇▇▇▇, together with any appurtenant goodwill of the Seller's business symbolized
by the ▇▇▇▇. This grant specifically includes, without limitation, all common
law rights that may have been acquired by Seller with respect to the ▇▇▇▇, all
applications and registrations therefore that it may have, as well as any right
of Seller to recover for any third party infringement thereof, regardless of
whether such infringement occurred before or occurs after the date of this
Assignment.
IN WITNESS WHEREOF, an authorized officer or agent of
Seller hereby executes this Servicemark Assignment this ___
day of ___________, 1995.
BAGCRAFT CORPORATION OF AMERICA
By:____________________________
STATE OF ______________)
) ss:
COUNTY OF ____________ )
On this ____ day of _______________, 1998, appeared _________________________,
to me personally known, and on behalf of , being authorized to do so,
acknowledged said instrument to be the free act and deed of said corporation.
-----------------------------------
Notary Public, State of
(Seal)
My Commission:_____________________