Exhibit 10.26
AGREEMENT FOR PURCHASE AND SALE
OF
ASSETS
OF
PARK HEATING AND AIR CONDITIONING SUPPLY CO., INC.
by and among
PAMECO CORPORATION
PARK HEATING AND AIR CONDITIONING SUPPLY CO., INC.
and
GB HOLDINGS, INC.
Dated June 26, 1998
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
OF PARK HEATING AND AIR CONDITIONING SUPPLY CO., INC.
THIS AGREEMENT is made and entered into on this 26th
day of June, 1998, by and among PAMECO CORPORATION, a Georgia
corporation ("PURCHASER"), PARK HEATING AND AIR CONDITIONING
SUPPLY CO., INC., an Illinois corporation ("Seller"), and GB
HOLDINGS, INC., an Illinois corporation ("PARENT").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of wholesale
distribution of heating, ventilating, air conditioning and
refrigeration systems and equipment at the seven business
locations identified in EXHIBIT A attached hereto (the "SELLER'S
BUSINESS"); and
WHEREAS, Parent owns all of the issued and outstanding
shares of capital stock of Seller and is joining in the
representations, warranties, covenants, agreements and
indemnities contained herein as a material and essential
inducement to Purchaser entering into this Agreement; and
WHEREAS, upon the terms and subject to the conditions
contained in this Agreement, Seller desires to sell, convey,
transfer and assign to Purchaser, and Purchaser desires to
purchase and acquire from Seller, substantially all of the assets
which are used by Seller in the conduct and operation of the
Seller's Business;
NOW, THEREFORE, for and in consideration of the
premises and the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. PURCHASE AND SALE
1.1. PURCHASE AND SALE OF ASSETS. Subject to the terms
and conditions contained herein, Seller hereby sells, assigns,
transfers and conveys to Purchaser, and in reliance on and
subject to the representations, warranties, covenants and
agreements contained herein, Purchaser hereby purchases and
acquires from Seller, all right, title and interest in and to all
of the assets and properties of Seller (all of such assets and
properties are referred to collectively as the "TRANSFERRED
ASSETS"), free and clear of all Liens (such term and certain
other capitalized terms being defined in ARTICLE 11). The
Transferred Assets shall include without limitation (except as
expressly provided in SECTION 1.2) the following:
(a) all of Seller's machinery, equipment,
computers, vehicles, furniture, office equipment and other
tangible personal property used in the operation of the Seller's
Business, including without limitation each of the items
identified on SCHEDULE 1.1(a) (collectively, the "TANGIBLE
ASSETS");
(b) all of Seller's inventories used or useful in
the operation of the Seller's Business, including without
limitation those described and identified in SCHEDULE 1.1(b)
(collectively, the "INVENTORIES");
(c) all of Seller's trade accounts receivable
arising from the operation of the Seller's Business, including
without limitation those identified in SCHEDULE 1.1(c)
(collectively, the "RECEIVABLES");
(d) all of Seller's right, title and interest
under the material contracts and agreements identified in
SCHEDULE 1.1(d) (the "ASSIGNED CONTRACTS");
(e) all of the trade names under which each
location of the Seller's Business has been operated in the last
twelve months as set forth in EXHIBIT A;
(f) all prepaid expenses, advances, deposits,
promotional discounts, rebates, refunds and all similar rights
and claims constituting or relating to the operation of the
Seller's Business;
(g) to the extent transferable, all franchises,
certificates, licenses, permits, orders, approvals and other
authorizations from any Government (as defined in ARTICLE 11) or
self-regulatory organizations relating to the operation of the
Seller's Business or to any Transferred Assets; and
(h) all of Seller's right, title and interest in
and to all other operating assets of the Seller's Business,
including (i) all of Seller's business, proprietary or
confidential information related to the Seller's Business; (ii)
all of Seller's telephone and facsimile numbers; (iii) all rights
in and to insurance and indemnity claims relating to the other
Transferred Assets; (iv) all rights, choses in action and claims
(known or unknown, matured or unmatured, accrued or contingent)
against third Persons (as defined in ARTICLE 11) arising out of
or related to the other Transferred Assets; and (v) all goodwill
and going concern rights associated with the Seller's Business.
1.2. EXCLUDED ASSETS. Notwithstanding anything in this
Agreement to the contrary, the Transferred Assets shall not
include the following assets and properties (the "EXCLUDED
ASSETS"): (a) all cash and cash equivalents; (b) all right,
title and interest of Seller under or related to this Agreement
and the agreements, instruments and documents executed in
connection herewith; and (c) the items listed on SCHEDULE 1.2.
1.3. ASSUMPTION OF CERTAIN LIABILITIES. Purchaser
hereby assumes and agrees to pay or perform, in accordance with
their terms, (a) all of the trade accounts payable arising from
the Seller's Business which have been incurred in the ordinary
course of business through the Closing Date which are reflected
on the Closing Date Balance Sheet (as defined in SECTION 1.10),
(b) all expenses incurred by Seller in the ordinary course of
business and consistent with past practices through the Closing
Date which are reflected on the Closing Date Balance Sheet, (c)
all executory obligations under the Assigned Contracts arising
2
after the Closing Date, and (d) the specific Liabilities
identified on SCHEDULE 1.3, but only up to the amount specified
with respect thereto on such Schedule (collectively, the "ASSUMED
LIABILITIES"). Purchaser's assumption of the Assumed Liabilities
shall in no way expand the rights or remedies of third parties
against Purchaser as compared to the rights and remedies which
such parties would have had against Seller had the transactions
contemplated by this Agreement not been consummated.
1.4. OBLIGATIONS NOT ASSUMED. Except for the Assumed
Liabilities (which shall not include any obligation or Liability
(as defined in ARTICLE 11) arising from any default, breach,
misfeasance, malfeasance or nonfeasance by Seller), Purchaser
shall not assume any Liability of Seller of any kind, and Seller
shall pay, satisfy and perform all of its Liabilities (other than
the Assumed Liabilities), which may affect in any way the
Transferred Assets or the operation of the Seller's Business
(collectively, the "EXCLUDED LIABILITIES"). Without limiting the
generality of the foregoing, the Excluded Liabilities shall
include, and under no circumstances shall Purchaser be deemed to
assume any Liability of Seller arising out of or relating to:
(a) any actual or alleged tortuous conduct of Seller or any of
its employees or agents; (b) any Liabilities pertaining to
products sold by Seller prior to the Closing Date, including
without limitation product liability claims and returns; (c) any
claim for breach of warranty or contract by Seller pertaining to
products sold by Seller prior to the Closing Date; (d) any claim
based on events, acts or omissions existing on or occurring prior
to the Closing Date predicated on strict liability or any similar
legal theory; (e) any actual or alleged violation of any Law (as
defined in ARTICLE 11) in effect prior to the Closing (as defined
in Section 1.8), including any Environmental Law (as defined in
ARTICLE 11); (f) any business or business activities of Seller
which are not part of the operation of the Seller's Business; (g)
any Liability for Taxes (as defined in ARTICLE 11) of any kind or
character from the operation of the Seller's Business prior to
the Closing; (h) any Liability relating to an Excluded Asset; (i)
except for accrued vacation expenses reflected on the Closing
Date Balance Sheet, any Liability of Seller in connection with
employee compensation expenses with respect to periods prior to
the Closing, including without limitation payroll, benefits,
severance, commissions, withholding Taxes and any Liabilities
under any ERISA Plan (as defined in SECTION 3.18), including
without limitation any Liability of Seller under ERISA; (j) any
Liability of Seller incurred in connection with the transactions
contemplated by this Agreement, or (k) any other Liabilities
which otherwise arise or are asserted by reason of the conduct of
the Seller's Business prior to the Closing Date or events, acts
(or failures to act) or transactions occurring or conditions
existing on or before the Closing Date. Notwithstanding any
other provision of this Agreement, the obligations of Seller with
respect to all Liabilities other than the Assumed Liabilities
shall survive the Closing and the transactions contemplated by
this Agreement.
1.5. GENERAL TAXES. Except for sales taxes assumed
pursuant to SECTION 1.3, Seller shall be responsible for the
payment of all sales, use, excise, transfer, value added and
similar taxes imposed by any Government in any jurisdiction in
connection with the transactions contemplated by this Agreement.
1.6. PRORATION. There shall be prorated between
Purchaser and Seller as of the close of business on the Closing
3
Date, the following accrued or prepaid items relating to the
Seller's Business: rents, utilities and other payments due under
the Assigned Contracts. Such proration shall be determined by
the parties within sixty (60) days after the Closing Date.
1.7. ALLOCATION. The Purchase Price shall be allocated
among the Transferred Assets as set forth in Schedule 1.7 in
conformity with SECTION 1060(b) of the Internal Revenue Code of
1986, as amended (the "CODE"), and the regulations promulgated
thereunder on the basis mutually agreed therein by Purchaser and
Seller. After the Closing Date, the parties shall mutually make
any adjustments required to such allocations, and the parties
agree to: (i) cooperate in filing all information required by
SECTION 1060(b) of the Code and the regulations thereunder; (ii)
to take no position on or with respect to any income tax return,
report or filing (including, without limitation, amendments
thereto) inconsistent with such allocation; (iii) to promptly
notify the other party if the Internal Revenue Service questions
or challenges the allocations; and (iv) to cooperate with one
another to sustain the allocations.
1.8. CLOSING. (a) Unless this Agreement is earlier
terminated pursuant to ARTICLE 9, and subject to the satisfaction
or waiver (by the party entitled to the benefit thereof) of each
of the closing conditions set forth in ARTICLES 6 and 7,
consummation of the transactions contemplated in this Agreement
(the "CLOSING") shall take place on or before June 26, 1998 or
such later date as the parties may mutually agree in writing (the
"CLOSING DATE").
(b) At the Closing:
(i) Seller shall convey to Purchaser all of the
Transferred Assets, free and clear of any and all
Liens, and in furtherance thereof shall deliver to
Purchaser (x) an Assignment and ▇▇▇▇ of Sale in the
form of EXHIBIT B attached hereto, (y) an incumbency
certificate, dated the Closing Date, with respect to
the officers of Seller and Parent, and (z) a copy of
the resolutions of the boards of directors of Seller
and Parent, duly certified by their respective
Secretaries or Assistant Secretaries as of the Closing
Date, authorizing the execution and delivery of this
Agreement and the consummation of the transactions
contemplated herein, together with such other deeds,
bills of sale, assignments, certificates of title,
documents and other instruments of transfer and
conveyance as Purchaser and its legal counsel shall
reasonably request.
(ii) Upon such delivery by Seller, Purchaser
shall pay the cash portion of the Preliminary Purchase
Price (as defined in SECTION 1.9), less the sum of (A)
$22,500 plus (B) the amount of the Escrow Fund (as
defined in SECTION 1.8(b)(iii)) in accordance with
SECTION 1.9 by wire transfer of immediately available
funds to a U.S. bank account specified in writing by
Seller, and Purchaser shall assume the Assumed
Liabilities by delivering to Seller an Assumption
Agreement in the form of EXHIBIT C attached hereto.
Purchaser shall also deliver to Seller and Parent (x)
an incumbency certificate, dated the Closing Date, with
4
respect to the officers of Purchaser and (y) a copy of
the resolutions of Purchaser's board of directors, duly
certified by the Secretary or Assistant Secretary of
Purchaser as of the Closing Date, authorizing the
execution and delivery of this Agreement and the
consummation of the transactions contemplated herein.
(iii) Purchaser shall deposit $1,000,000 (the
"INITIAL DEPOSIT") with the First Union National Bank
("ESCROW AGENT") to be invested, held and distributed
in accordance with that certain Escrow Agreement
mutually acceptable to the parties and dated the
Closing Date, among Purchaser, Seller and Escrow Agent,
in the form of EXHIBIT D attached hereto (such sum,
together with all interest thereon and other accretions
thereto, the "ESCROW FUND").
(c) All deliveries, payments and other transactions
and documents relating to the Closing shall be interdependent and
none shall be effective unless and until all are effective
(except to the extent that the party entitled to the benefit
thereof has waived satisfaction or performance thereof as a
condition precedent to the Closing).
1.9. PRELIMINARY PURCHASE PRICE.
(a) The parties agree that, based upon the Reference
Date Balance Sheet (as defined in SECTION 3.6), the "PRELIMINARY
PURCHASE PRICE" shall be $22,500,000 ("INITIAL CASH PORTION")
plus the assumption of the Assumed Liabilities.
(b) Prior to Closing the parties will mutually agree
upon a balance sheet reflecting the assets and liabilities of the
Seller's Business as of the Closing Date (the "ESTIMATED CLOSING
DATE BALANCE SHEET"). The Initial Cash Portion shall be
adjusted dollar for dollar as follows: (i) with respect to the
value of the Transferred Assets (A) upward to the extent the
value of the Transferred Assets as reflected on the Estimated
Closing Date Balance Sheet ("INTERIM TRANSFERRED ASSETS VALUE")
exceeds the value of the Transferred Assets as reflected on the
Reference Date Balance Sheet ("INITIAL TRANSFERRED ASSETS
VALUE"), or (B) downward to the extent the Interim Transferred
Assets Value is less than the Initial Transferred Assets Value;
and (ii) with respect to the amount of the Assumed Liabilities
(A) downward to the extent the amount of the Assumed Liabilities
as reflected on the Estimated Closing Date Balance Sheet
("INTERIM ASSUMED LIABILITIES VALUE") exceeds the amount of the
Assumed Liabilities as reflected on the Reference Date Balance
Sheet ("INITIAL ASSUMED LIABILITIES VALUE"), or (B) upward to the
extent the Interim Assumed Liabilities Value is less than the
Initial Assumed Liabilities Value. Such resulting adjusted value
shall be referred to herein as the "INTERIM CASH PORTION".
(c) Except as expressly provided in this SECTION
1.9(c), the Estimated Closing Date Balance Sheet shall be
prepared in accordance with GAAP (as defined in ARTICLE 11),
consistently applied. The amount of equipment and other tangible
personal property reflected on the Estimated Closing Date Balance
Sheet shall be based on a physical count conducted immediately
prior to the Closing. The amount of inventory reflected on the
Estimated Closing Date Balance Sheet shall be based on the
perpetual records of Seller, provided, that the amount of
5
inventory reflected on the Closing Date Balance Sheet shall be
based on a "large cycle count" or, at Purchaser's request, a
physical count conducted within 30 days following the Closing and
such inventory shall be valued at the lower of Seller's cost or
its fair market value on the date of Closing (with risk of loss
or damage from the Closing Date through the later of the large
cycle count or the physical count, if any, being borne by
Seller), and tangible fixed assets shall be included on the
Estimated Closing Date Balance Sheet only if they are
identifiable, and those which are identifiable shall be reflected
at their book value (net of depreciation).
1.10. PREPARATION OF CLOSING DATE BALANCE SHEET;
DETERMINATION OF PURCHASE PRICE. (a) Within 60 days after the
Closing Date, Seller will prepare and deliver to Purchaser a
balance sheet with respect to the Seller's Business (the "DRAFT
BALANCE SHEET") as of the start of business on the Closing Date,
and a written calculation of the value of the Transferred Assets
("FINAL TRANSFERRED ASSETS VALUE") and Assumed Liabilities
("FINAL ASSUMED LIABILITIES VALUE") each as reflected on the
Draft Balance Sheet (the "CALCULATION"). Seller will prepare the
Draft Balance Sheet in accordance with GAAP, consistently
applied, with the exceptions noted in SECTION 1.9(c).
(b) Purchaser shall have 15 days after receiving the
Draft Balance Sheet and the Calculation in which to deliver
written notice of objection thereto to Seller. Failure to object
in writing within such 15 day period shall constitute Purchaser's
final and binding acceptance of the Draft Balance Sheet and the
Calculation. If Purchaser and Seller cannot agree upon the Draft
Balance Sheet and the Calculation within 15 days after Seller
receives Purchaser's written notice of objection, if any, then an
independent accounting firm mutually acceptable to Purchaser and
Seller (the "ARBITRATING ACCOUNTANTS") shall be employed as
arbitrator hereunder to resolve such dispute as soon as
practicable. In connection with the resolution of any dispute,
the Arbitrating Accountants shall have reasonable access to all
documents relating to the dispute and the facilities at which
such documents are located in order to perform its functions as
arbitrator. The fees and expenses of the Arbitrating Accountants
shall be shared equally by Purchaser and Seller.
(c) The determination of the Arbitrating Accountants
will be conclusive and binding upon the parties and shall be
reflected in a final balance sheet with respect to the Seller's
Business approved or prepared by such Arbitrating Accountants in
accordance with the principles set forth in SECTION 1.9(c). The
balance sheet setting forth the final determination of the
Calculation pursuant to this SECTION 1.10, whether the Draft
Balance Sheet (if Purchaser and the Seller reach an agreement),
any other balance sheet mutually agreed to by the parties, or the
balance sheet approved or prepared by the Arbitrating
Accountants, as the case may be, shall be referred to herein as
the "CLOSING DATE BALANCE SHEET."
(d) The parties shall then determine the adjustment to
the Interim Cash Portion of the Preliminary Purchase Price dollar
for dollar as follows: (i) with respect to the value of the
Transferred Assets (A) upward to the extent the value of the
Transferred Assets as reflected on the Closing Date Balance Sheet
("FINAL TRANSFERRED ASSETS VALUE") exceeds the Interim
Transferred Assets Value, or (B) downward to the extent the Final
Transferred Assets Value is less than the Interim Transferred
6
Assets Value; and (ii) with respect to the amount of the Assumed
Liabilities (A) downward to the extent the amount of the Assumed
Liabilities as reflected on the Closing Date Balance Sheet
("FINAL ASSUMED LIABILITIES VALUE") exceeds the amount of the
Interim Assumed Liabilities Value, or (B) upward to the extent
the Final Assumed Liabilities Value is less than the Interim
Assumed Liabilities Value. Such final cash portion shall be
referred to herein as the "FINAL CASH PORTION", which, together
with the Assumed Liabilities (as adjusted on the Closing Date
Balance Sheet) and the Contingent Purchase Price Payment (as
defined in SECTION 1.12) shall be the "PURCHASE PRICE".
(e) Within three business days of the final
determination of the Calculation, (i) Purchaser shall pay to
Seller an amount equal to the amount by which the Final Cash
Portion exceeds the Interim Cash Portion, by wire transfer of
immediately available funds to a U.S. bank account specified in
writing by Seller, or (ii) Seller shall pay to Purchaser the
amount by which the Final Cash Portion is less than the Interim
Cash Portion; provided that such payment shall be made first from
the Escrow Fund, to the extent thereof, and thereafter by Seller,
by wire transfer of immediately available funds to a U.S. bank
account specified in writing by Purchaser.
1.11. COLLECTION OF RECEIVABLES. ( SEQ lvl6 \*
alphabetic \* ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ \▇ \▇▇ ▇) Prior to the
Closing, Seller shall provide Purchaser an interim schedule
describing in reasonable detail each of the accounts receivable
existing as of 5 days prior to the Closing. Seller shall provide
an update to such schedule within 5 days after Closing,
describing in reasonable detail each of the Receivables purchased
hereby. During the 90-day period immediately following the
Closing (the "COLLECTION PERIOD"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇")
shall, on behalf of Purchaser and subject to supervision by
Purchaser, manage the process of collection of the payments from
the account debtors of the purchased accounts receivable. Seller
and Parent shall, jointly and severally, indemnify Purchaser and
its Affiliates from and against any and all claims, demands,
actions, damages, losses, liabilities and expenses (including
reasonable attorneys' fees and amounts paid in settlement)
suffered by Purchaser or its Affiliates by reason of or arising
out of any defense, setoff, counterclaim, recoupment, or
reduction of liability whatsoever of any account debtors under
the purchased accounts receivable.
(b) During the Collection Period, ▇▇▇▇▇▇▇▇▇ shall, on
behalf of Purchaser and subject to supervision by Purchaser, have
the exclusive right to manage the process of collection of the
purchased Receivables; provided, however that ▇▇▇▇▇▇▇▇▇ shall not
engage an outside collection firm or attorneys to collect any
such Receivables without Purchaser's prior written consent, which
consent may not be unreasonably withheld so long as the use of
such collection firm is consistent with the Seller's past
practice. Any fees or expenses paid, directly or indirectly, to
any collection firm or attorneys in connection with the
collection of the Receivables will be applied against the bad
debt reserve with respect to the Receivables, or if such fees
exceed such reserve, against the amount collected with respect to
the Receivables. Seller shall not, directly or indirectly,
engage in any collection efforts with respect to the purchased
Receivables other than with respect to receivables the collection
7
of which has been relinquished by Purchaser to Seller.
Notwithstanding anything to the contrary contained herein, all
payments from the account debtors of the purchased Receivables
shall be applied strictly in the manner directed by such account
debtors. If the payments received from any account debtor do not
contain instructions as to the application of such payments,
▇▇▇▇▇▇▇▇▇ shall contact each such account debtor and obtain
written instructions as to the manner of application of such
payments.
(c) Any Receivables which are not collected by Purchaser
within the Collection Period may be deemed uncollectible (the
"UNCOLLECTIBLE RECEIVABLES"), and Purchaser may, at its sole
discretion and upon written notice to Seller given within 120
days after the Closing, assign such Uncollectible Receivables to
Seller. The assignment of the Uncollectible Receivables shall
occur on such day as the parties may mutually agree, but no later
than 135 days after the Closing. Purchaser shall execute and
deliver to Seller any instruments of assignment reasonably
requested by Seller to effect such assignment. Upon such
assignment, Seller shall be entitled to all subsequent
collections with respect to such Uncollectible Receivables for
Seller's own account and to retain any amounts received.
Following such assignment, neither Purchaser nor the Division
shall pay or incur any costs or expenses in connection with the
collection of such Uncollectible Receivables, and Seller shall
not use any individual employed by Purchaser or Seller or any of
Seller's Affiliate who provides management services under the
Management Services Agreement (as defined in SECTION 2.15) to
collect such Uncollectible Receivables if the use of any such
individual would be contrary to the allocation of time and
resources under the Management Services Agreement.
(d) If Purchaser assigns any Uncollectible Receivables
to Seller, Seller shall pay to Purchaser, immediately upon such
assignment, in cash, an amount equal to the book value of such
assigned Uncollectible Receivables as reflected on the Closing
Date Balance Sheet. Such payment shall be made first from the
Escrow Fund, to the extent thereof, and thereafter by Seller.
(e) If Purchaser collects an amount equal to the
Receivables and any amount reserved on the books and records of
Seller, then, to the extent that such amounts previously reserved
are collected ("EXCESS RECEIVABLES"), Seller shall be entitled to
a cash payment equal to such Excess Receivables.
1.12. CONTINGENT PURCHASE PRICE PAYMENTS.
For the two years immediately following the Closing (each,
an "EARNOUT YEAR"), Purchaser shall maintain directly or pursuant
to the Management Services Agreement an accounting system capable
of recording and generating reports of the revenues and expenses
of the seven business locations identified in Exhibit A and
acquired pursuant to this Agreement and such additional
locations, if any, as may be mutually agreed upon hereafter by
the parties (such locations, collectively, being referred to
herein as the "DIVISION"); provided, however, that for purposes
of this SECTION 1.12, the Division shall not include any location
added to the Division pursuant to SECTION 1.13. If during either
of such two Earnout Years, the Division's Operating Income (as
defined below) equals or exceeds $3,600,000, then on and subject
to the terms and conditions of this SECTION 1.12, Purchaser shall
pay to Seller, as additional consideration, an amount equal to
8
fifty percent (50%) of the Division's Operating Income for the
Earnout Year in which such target is equaled or exceeded
("EARNOUT PAYMENT"). For purposes of this SECTION 1.12,
"DIVISION'S OPERATING INCOME" shall mean (i) the net operating
income of the Division as determined in accordance with GAAP,
with the same adjustments to GAAP made to reflect the calculation
of net income reflected on the Reference Date Income Statement
(as defined in SECTION 3.6) previously submitted to Purchaser and
attached hereto as part of Schedule 3.6 (such calculation to be
made without regard to (x) any amortization or depreciation based
on any write-up of the book value of the Transferred Assets by
Purchaser based on the transactions contemplated by this
Agreement and (y) the fees and expenses incurred by Purchaser in
connection with the consummation of the transactions contemplated
herein) plus (ii) depreciation and amortization up to a maximum
aggregate of $100,000 in either of the two Earnout Years. Such
Division Operating Income shall be further adjusted as follows:
(i) upward to the extent (A) any charges or expenses that are
imposed on the Division by Purchaser without the consent of
▇▇▇▇▇▇▇▇▇ (the "IMPOSED CHARGES") exceed (on a per unit or
employee basis, as the case may be) the actual charges or
expenses of Seller's Business for such goods or services
reflected on the Reference Date Income Statement, or (B) there is
an increase in workmen's compensation insurance resulting
directly from a change in the workers' compensation rating
arising out of the transactions contemplated by this Agreement,
or (ii) downward to the extent (A) the Imposed Charges are less
(on a per unit or employee basis, as the case may be) than the
actual charges or expenses of the Seller's Business for such
goods or services reflected on the Reference Date Income
Statement, or (B) there is a decrease in workmen's compensation
insurance resulting directly from a change in the workers'
compensation rating arising out of the transactions contemplated
by this Agreement; provided, however, that the amount of any
downward adjustment shall be used for the purpose of offsetting
the amount of any upward adjustment. To the extent the reserve
for excess, idle and obsolete inventory, determined in accordance
with GAAP, at the end of either Earnout Year exceeds $184,000 or
such other number as determined by Purchaser upon finalization of
the Closing Date Balance Sheet, such excess amount will be booked
as a loss in determining the Division's Operating Income for such
Earnout Year.
1.13. ACQUISITION BONUS. (a) Seller shall be
entitled to an "ACQUISITION BONUS" if at any time during the term
of ▇▇▇▇▇▇▇▇▇'▇ employment agreement with Purchaser (the "BONUS
PERIOD") ▇▇▇▇▇▇▇▇▇ agrees, in accordance with the provisions of
this SECTION 1.13, to manage a location acquired by Purchaser
(each such location being referred to herein as a "MANAGED
LOCATION"), and does in fact manage such location.
(b) If at any time during the term of ▇▇▇▇▇▇▇▇▇'▇
employment agreement with Purchaser, Purchaser acquires the stock
or the assets of any Person which has a location engaged in the
wholesale distribution of heating, ventilating, air conditioning
and refrigeration systems and equipment within the Acquisition
Bonus Territory (as defined below), then Purchaser shall offer in
writing, disclosing reasonable financial information as to
performance, profits and cost of acquisition, prior to or
immediately following the closing of such acquisition, to allow
▇▇▇▇▇▇▇▇▇ to manage those locations within the Acquisition Bonus
Territory. ▇▇▇▇▇▇▇▇▇ shall have a period of eight business days
after such notice in which to accept such offer, and any failure
9
to respond within such eight business day period will be deemed a
rejection of the offer. If ▇▇▇▇▇▇▇▇▇ rejects the offer to manage
a location within the Acquisition Bonus Territory, Pameco agrees
(during the Earnout Years) not to take any action with respect to
such location with the intent of disturbing the market for the
Business within the Acquisition Bonus Territory with the intent
of adversely affecting the Division. In addition, at any time
during the term of ▇▇▇▇▇▇▇▇▇'▇ Employment Agreement (as defined
in SECTION 2.5), Purchaser may request, in writing, disclosing
reasonable financial information as to performance, profits and
cost of acquisition, that ▇▇▇▇▇▇▇▇▇ manage a location engaged in
the business of wholesale distribution of heating, ventilating,
air conditioning and refrigeration systems and equipment outside
the Acquisition Bonus Territory, and ▇▇▇▇▇▇▇▇▇ shall have a
period of eight business days in which to accept such offer, and
any failure to respond within such eight business day period will
be deemed a rejection thereof. For purposes of this Agreement,
the "ACQUISITION BONUS TERRITORY" means the following five
counties in the State of Illinois: ▇▇▇▇, DuPage, Will, Lake and
▇▇▇▇▇▇▇.
(c) Each Acquisition Bonus shall be determined in
accordance with the following formula: (i) for the twelve month
period immediately following such acquisition (each, an
"ACQUISITION BONUS YEAR"), Purchaser shall maintain an accounting
system capable of recording and generating reports of the
revenues and direct and indirect expenses of the Managed
Location(s); and (ii) Purchaser shall pay to Seller, as
additional consideration, an amount equal to fifty percent (50%)
of the difference between (A) EBITDA (as defined in ARTICLE 11)
for such Managed Location(s) during the Acquisition Bonus Year,
and (B) the product of (x) 13.5% (the cost of capital) and (y)
the purchase price paid for the Managed Location(s).
(d) Notwithstanding anything to the contrary contained
herein, the Seller shall be entitled to an additional bonus if
during the one year period immediately following the termination
of the Employment Agreement, Purchaser completes an acquisition
of the stock or the assets of any Person which has a location,
within the Acquisition Bonus Territory engaged in the wholesale
distribution of heating, ventilating, air-conditioning and
refrigeration systems and equipment (each such location being
referred to herein as an "ACQUIRED LOCATION"), and (i) such
Person was identified to Purchaser by ▇▇▇▇▇▇▇▇▇ prior to the
second anniversary of the date hereof, (ii) ▇▇▇▇▇▇▇▇▇ actively
participated on behalf of Purchaser in negotiations relating to
the acquisition of such Person, and (iii) Purchaser had not
previously engaged in substantive conversations with such Person
regarding a similar transaction. The bonus to be paid pursuant
to this SECTION 1.13(d) shall be determined in accordance with
the following formula: (x) for the twelve month period
immediately following such acquisition (the "ADDITIONAL BONUS
YEAR"), Purchaser shall maintain an accounting system capable of
recording and generating reports of the revenues and direct and
indirect expenses of the Acquired Location(s); and (y) Purchaser
shall pay to Seller, as additional consideration, an amount equal
to fifty percent (50%) of the difference between (A) EBITDA for
such Acquired Location(s) during the Additional Bonus Year, and
(B) the product of (x) 13.5% (the cost of capital) and (y) the
purchase price paid for the Acquired Location(s).
1.14. RESOLUTION OF CERTAIN DISPUTES. (a) Within
60 days after the end of each Earnout Year or Acquisition Bonus
10
Year, as applicable, Purchaser will prepare and deliver to Seller
a written calculation of the Division's Operating Income or
Acquisition Bonus Formula, as applicable, for such year (the
"BONUS CALCULATION"). Seller shall have 15 days after receiving
the Bonus Calculation in which to deliver written notice of
objection thereto to Purchaser. Failure to object in writing
within such 15-day period shall constitute Seller's final and
binding acceptance of the Bonus Calculation. The parties shall
cooperate in good faith and use their best efforts to resolve any
issues in connection with the Bonus Calculation in an amicable
manner. If Purchaser and Seller cannot agree upon the Bonus
Calculation within 15 days after Purchaser receives Seller's
written notice of objection, if any, then an independent
accounting firm mutually acceptable to Purchaser and Seller (the
"EARNOUT ARBITRATING ACCOUNTANTS") shall be employed as
arbitrator hereunder to resolve such dispute as soon as
practicable. In connection with the resolution of any dispute,
the Earnout Arbitrating Accountants shall have reasonable access
to all documents relating to the dispute and the facilities at
which such documents are located in order to perform its
functions as arbitrator. The Earnout Arbitrating Accountants'
determination with respect to any dispute shall be final and
binding upon the parties hereto. The parties shall use their best
efforts to cause such firm to resolve such issues within 30 days
after its retention. Seller and Purchaser shall each pay 50% of
such accounting firm's fees and expenses.
(b) The determination of the Earnout Arbitrating
Accountants will be conclusive and binding upon the parties, and
the Earnout Payments and Acquisition Bonus, as applicable, shall
be due and payable in cash or by wire transfer of immediately
available funds to a U.S. bank account specified in writing by
Seller within five (5) days after the final determination of the
Bonus Calculation.
(c) During the Earnout Years, ▇▇▇▇▇▇▇▇▇ shall operate
the Division in the ordinary course of business, consistent with
past practice.
2. ADDITIONAL AGREEMENTS
2.1. EXPENSES. All expenses incurred by Purchaser in
connection with the negotiations among the parties, and the
authorization, preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including,
without limitation, all fees and expenses of agents, counsel and
accountants for Purchaser, shall be paid by Purchaser. All
expenses incurred by Seller and Parent in connection with the
negotiations among the parties, and the authorization,
preparation, execution and performance of this Agreement and the
transactions contemplated hereby, including, without limitation,
all fees and expenses of agents, counsel and accountants for
Seller or Parent shall be paid by Parent.
2.2. BROKERS. Seller hereby acknowledges and agrees
that ▇▇▇▇▇▇▇ Partners LLC acted as a broker on behalf of Seller
and Seller will pay the commissions or other compensation claimed
by ▇▇▇▇▇▇▇ Partners LLC in connection with this Agreement or the
transactions contemplated herein. Purchaser hereby represents
and warrants that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated
herein.
11
2.3. COVENANT AGAINST COMPETITION. (a) In order to
induce Purchaser to enter into and perform this Agreement,
Seller, Parent and ▇▇▇▇▇▇▇▇▇ each covenant and agree that, for a
period of five years beginning on the Closing Date and ending on
the fifth anniversary of the Closing Date, neither Seller, Parent
nor ▇▇▇▇▇▇▇▇▇ will, without the prior written consent of
Purchaser, for Seller's, Parent's or ▇▇▇▇▇▇▇▇▇'▇ own account or
jointly with another, directly or indirectly, for or on behalf of
any Person, as principal, agent, shareholder, participant,
partner, promoter, manager, consultant, sales representative or
otherwise, except on behalf of Purchaser:
(i) engage or invest in, consult with, or own,
control, manage, assist or otherwise participate in the
ownership, control or management of, or render services
or advise to, or lend its name to, any business engaged
in the purchase for resale, sale or distribution within
the Territory (as defined in ARTICLE 11) (which is the
territorial extent of the Seller's Business on the date
hereof) of heating, ventilating, air conditioning and
refrigeration systems and equipment ("PRODUCTS");
(ii) solicit or assist in the solicitation of any
Person having an office or place of business within the
Territory and to whom Seller sold or provided any
Products on, or during the two year period prior to,
the date of the Closing Date, for the purpose of
obtaining the patronage of such Person for the purchase
of any Products;
(iii) solicit or induce, or in any manner
assist in the solicitation or inducement of, any Person
employed by Purchaser after the Closing (as an
employee, independent contractor or otherwise) to leave
such employment, whether or not such employment is
pursuant to a contract and whether or not such
employment is at will; provided, however, that it shall
not be a violation of this clause (iii) for Seller,
Parent or ▇▇▇▇▇▇▇▇▇ to solicit any individual formerly
employed by the Seller and who has been terminated by
Purchaser after the Closing; or
(iv) use, disclose or reveal to any Person, any
Confidential Information of the Seller's Business;
provided, however, that for purposes of this SECTION
2.3, Confidential Information shall not include
confidential business information that does not
constitute a trade secret under applicable Law upon the
expiration of the fifth anniversary of the Closing
Date; provided, further that such obligation shall
continue indefinitely with respect to confidential
business information that constitutes a trade secret
under applicable Law.
(b) Notwithstanding anything to the contrary contained
herein, it shall not be a breach of the covenants contained in
SECTION 2.3(a) (i) for Seller or Parent to own up to two percent
(2%) of any class of publicly traded securities of any Person,
(ii) for ▇▇▇▇▇▇▇▇▇ to continue to be a shareholder and a
director of Parent, or (iii) for Parent to own and operate,
consistent with past practice, LDR Industries, Inc. and G&S
Supply Company, Inc., so long as (A) LDR Industries, Inc. limits
its business activities that would otherwise violate this SECTION
12
2.3 to the sale of heating registers and related products to the
retail distribution market, and for so long as such business
activity represents no more than 5% of the total revenues of LDR
Industries, Inc. on an annual basis, (B) G&S Supply Company, Inc.
limits its business activities that would otherwise violate this
SECTION 2.3 to the sale of heating, ventilating, air conditioning
and refrigeration systems and equipment to nonlicensed
contractors, (C) in each case, the business is conducted
consistent with past practice, and (D) neither LDR Industries,
Inc. (but only for so long as substantially all of the business
assets or stock of LDR Industries, Inc. is owned by Parent or its
Affiliates) nor G&S Supply Company, Inc. (through acquisition or
internal growth beyond normal historical internal growth
patterns) shall expand the business that would otherwise violate
this SECTION 2.3.
(c) For purposes of this Agreement, "CONFIDENTIAL
INFORMATION" means any and all technical, business and other
information relating to the Seller's Business or the business of
the Purchaser (including, without limitation, information
acquired by Purchaser under this Agreement) which derives
economic value, actual or potential, from not being generally
known to the public, including, without limitation, technical or
nontechnical data, compositions, devices, methods, techniques,
drawings, inventions, processes, financial data, financial plans,
product plans, lists or information concerning actual or
potential customers or suppliers, information regarding business
plans and operations, methods and plans of operation, marketing
strategies, sales and distribution plans or strategies, cost
information, pricing strategies, and acquisition and investment
plans. Notwithstanding any other provision herein, Confidential
Information shall not include information (i) which is
independently developed by Seller without the use of any of the
Confidential Information; (ii) which was in the public domain
prior to the disclosure thereof; (iii) which comes into the
public domain through no fault of Seller; (iv) which is disclosed
without restriction to Seller by a third Person having the legal
right to make such disclosure; (v) which is developed by Seller's
employees or agents without access to the Confidential
Information, or (vi) which is required to be disclosed by Law or
by Order (as defined in ARTICLE 11) of any Tribunal provided that
Seller promptly notifies Purchaser and cooperates reasonably with
Purchaser's efforts to contest or limit the scope of such order
or subpoena or other order, but Seller shall not be obliged to
give such notice where to do so would be unlawful.
(d) Although the parties have, in good faith, used
their best efforts to make the provisions of this SECTION 2.3
reasonable in both geographic area and in duration in light of
the financial aspects of the transaction, and it is not
anticipated, nor is it intended, by any party hereto that a
Tribunal (as defined in ARTICLE 11) of competent jurisdiction
would find it necessary to reform the provisions hereof to make
it reasonable in both geographic area or in duration, the parties
understand and agree that if a Tribunal of competent jurisdiction
determines it necessary to reform the scope of this SECTION 2.3
in order to make it reasonable in either geographic area or
duration, or otherwise, then damages, if any, for a breach
hereof, as so reformed, would be deemed to accrue to Purchaser as
of and from the date of such a breach only in so far as the
damages for such breach relate to an action which occurred within
the scope of the geographic area or duration as so reformed.
13
2.4. GOVERNMENT FILINGS. The parties shall make, or
cause to be made, all filings and submissions required to be made
to any Government in connection with the transactions
contemplated by this Agreement (including all filings under the
HSR Act (as defined in ARTICLE 11)). Each party shall furnish to
the other party such necessary information and reasonable
assistance as such other party may reasonably request in
connection with its preparation of necessary filings or
submissions to any Government and the parties shall cooperate in
good faith with each other with respect to all such filings.
Seller and Purchaser shall each pay 50% of any filing fees
incurred in connection with all filings under the HSR Act.
2.5. EMPLOYMENT AGREEMENT. At the Closing, Purchaser
and ▇▇▇▇▇▇▇▇▇ shall execute and deliver an employment agreement
(the "EMPLOYMENT AGREEMENT") reasonably acceptable to the parties
and in the form attached hereto as Exhibit E.
2.6. NON-COMPETE AGREEMENT. At the Closing, Purchaser,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall execute and
deliver a non-compete agreement (the "NON-COMPETE AGREEMENT")
reasonably acceptable to the parties and in the form attached
hereto as Exhibit F.
2.7. BENEFIT PLANS. The parties agree that Purchaser
is not adopting or continuing any ERISA Plan (as defined in
SECTION 3.18). All ERISA Plans and any obligation or claim in
connection therewith shall be deemed to be a part of the Excluded
Assets. Seller agrees to use its best efforts to comply with the
notice and coverage certification requirements of SECTION 701 of
ERISA and SECTION 9801 of the Code under all group health plans
with respect to all employees of Seller, their dependents and
beneficiaries.
2.8. PUBLICITY. All press releases and other public
announcements with respect to the subject matter hereof shall be
made only with the mutual written consent of the parties hereto,
which consent will not be unreasonably withheld; provided,
however, that either party hereto may make any disclosure
required to be made under applicable Law or stock exchange rule
if such party has determined in good faith that it is necessary
to do so.
2.9. FURTHER ASSURANCES. (a) From time to time and at
any time, at Purchaser's request, whether on or after the Closing,
and without further consideration, Seller shall, at its own
expense, execute and deliver such further documents and
instruments of conveyance, assignment, and transfer and shall
take such further reasonable actions as may be necessary or
desirable, in the reasonable opinion of Purchaser, to transfer
and convey to Purchaser all right, title and interest in and to
the Transferred Assets, free and clear of all Liens or as may
otherwise be necessary or desirable to carry out the intent of
this Agreement.
(b) From time to time and at any time, at Seller's
request, whether on or after the Closing, and without further
consideration, Purchaser shall, at its own expense, execute and
deliver such further documents and instruments of assumption and
shall take such further reasonable actions as may be necessary or
desirable, in the reasonable opinion of Seller, to evidence the
assumption of the Assumed Liabilities as contemplated hereby, or
as may otherwise be necessary or desirable to consummate the
14
transactions contemplated hereunder at the Closing or to carry
out the intent of this Agreement.
2.10. NO DISCUSSIONS WITH OTHERS. (a) From the date
hereof until the Closing, neither Parent, Seller nor any of their
respective officers, directors, management employees, Affiliates,
related Persons or entities and agents shall, (i) negotiate or
discuss with any Person other than Purchaser any transaction
involving the sale of the Seller's Business or any of the
Transferred Assets (except for sales of inventory in the ordinary
course of business or other fixed assets with a book value, in
the aggregate, of $5,000 or less), or any other business
combination involving the Seller's Business, (ii) reveal the
terms of this Agreement to any Person except as required by Law
or for the purpose of carrying out the transactions contemplated
herein, or (iii) solicit, encourage, discuss or accept any offer,
bid or proposal from any other Person respecting any transaction
involving the Seller's Business or any of the Transferred Assets,
or the sale of any of the Transferred Assets (except for sales of
inventory or other transactions in the ordinary course of
Seller's Business consistent with prior practices), or any other
business combination involving the Seller's Business or any of
the Transferred Assets. If Parent, Seller or any of their
respective employees or agents receives or becomes aware of the
existence of a proposal of the kind described in the preceding
clause (iii) prior to the Closing, then Parent or Seller shall
immediately notify Purchaser of the receipt of such proposal and
shall promptly provide Purchaser with a copy of such proposal (or
if such proposal is not in writing, a written summary of its
terms).
2.11. COOPERATION. The parties shall cooperate
fully with each other and with their respective counsel and
accountants in connection with any steps required to be taken as
part of their respective obligations hereunder, and all parties
shall use commercially reasonable efforts to consummate the
transactions contemplated herein and to fulfill their obligations
hereunder, including, without limitation, causing to be fulfilled
at the earliest practical date the conditions precedent to the
obligations of the parties to consummate the transactions
contemplated hereby.
2.12. Waiver of Bulk Sales Law Compliance. Compliance with
the bulk sales laws of the State of Illinois and in any other
jurisdiction where the Seller conducts the Seller's Business is
hereby waived by Purchaser.
2.13. Access and Inspection. Upon reasonable
notice, Seller and Parent shall provide Purchaser and its
authorized representatives full access during normal business
hours from and after the date hereof until the Closing to the
books, records, properties and personnel of Seller for the
purpose of making such investigation as they may reasonably
desire, and Seller and Parent shall furnish such information
concerning Seller as Purchaser may reasonably request. Seller and
Parent shall assist Purchaser in making such investigation and
15
shall cause their counsel, accountants, consultants and other
non-employee representatives to be reasonably available for such
purposes. No investigation made heretofore or hereafter by
Purchaser shall limit or affect the representations, warranties,
covenants and agreements of Seller or Parent hereunder.
2.14. ASSIGNMENT OF CONTRACTS. Anything herein to
the contrary notwithstanding, to the extent that any Assigned
Contract assigned or transferred to Purchaser hereunder shall
require the consent of any other party (a "SPECIAL ITEM"), Seller
shall not be deemed to have assigned or transferred any Special
Item, and Purchaser shall not be deemed to have assumed or
received such Special Item, unless and until such consent shall
have been obtained. Seller shall use its best reasonable efforts
to obtain the necessary consents to the assignment or transfer of
all Special Items, and Purchaser shall cooperate in those efforts
but shall not be required to assume any burdens or obligations
other than those presently provided under such Special Item.
Until any necessary consent to the assignment or transfer of a
Special Item is obtained, Seller and Purchaser shall each
cooperate with the other in any reasonable arrangement which
provides Purchaser the benefits under such Special Item,
including enforcement by Seller of any and all rights of Seller
arising out of any breach or cancellation by the other party
thereto. If Seller shall obtain any necessary consent to the
assignment or transfer of a Special Item after the Closing,
Purchaser shall assume, and Seller shall be deemed to have
assigned to Purchaser, the Special Item as of the Closing Date.
All ordinary costs of performance after the Closing Date under
any Special Item as to which the necessary consent has not been
obtained, but the benefits of which have been accepted by
Purchaser, shall be for the account of Purchaser, and Seller
shall be promptly reimbursed by Purchaser for any such costs
which the Seller may be required to pay thereunder.
2.15. SHARED MANAGEMENT. The parties agree that the
management information services, human resources, accounting and
credit departments of the Division shall be managed by employees
of an Affiliate of the Parent pursuant to a management agreement
(the "MANAGEMENT SERVICES AGREEMENT") in the form of Exhibit G
attached hereto.
2.16. NO TRANSFERS. No employee of the Division
shall be transferred to or employed by any unit of the Purchaser
or any Affiliate of Purchaser without the prior written consent
of ▇▇▇▇▇▇▇▇▇.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
To induce Purchaser to enter into and perform this
Agreement, Seller and Parent, jointly and severally, represent,
warrant and covenant to Purchaser as set forth below. All
representations and warranties of Seller and Parent set forth in
this Agreement shall be deemed made on the date hereof and again
on the Closing Date:
3.1. ORGANIZATION, AUTHORITY AND QUALIFICATION. Seller
is a corporation duly organized and validly existing under the
Laws of Illinois. Seller has full corporate power and authority
and is entitled to own or lease its properties and to carry on
its business as and in all places where such business is
16
conducted and such properties are owned or leased. Except as set
forth in Schedule 3.1, Seller is not required to be qualified as
a foreign corporation in any jurisdiction. Seller has previously
furnished to Purchaser true, correct and complete copies of its
articles of incorporation and bylaws. There are no outstanding
contracts, demands, commitments or other agreements or
arrangements under which Seller or Parent is obliged to sell,
transfer or assign any of the Transferred Assets (other than
items of inventory in the ordinary course of the Seller's
Business).
3.2. AUTHORITY; INCONSISTENT OBLIGATIONS. (a) Each of
Seller and Parent has the full corporate power and authority to
execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly and validly executed and
delivered by each of Seller and Parent and constitutes the valid
and legally binding obligation of Seller and Parent, subject to
general equity principles, enforceable in accordance with its
terms, except as the same may be limited by bankruptcy,
insolvency or similar Laws affecting the rights of creditors
generally.
(b) The execution, delivery and performance of this
Agreement will not (i) result in a violation of Seller's or
Parent's articles of incorporation or bylaws or any Law or (ii)
result in a breach of, conflict with or default under any term or
provision of any material indenture, note, mortgage, bond,
security agreement, loan agreement, guaranty, pledge, or other
instrument, contract, agreement or commitment, or any Order, to
which Seller or Parent is a party or by which Seller or Parent or
any of their respective assets and properties, including, without
limitation, the Transferred Assets, is subject or bound; nor will
such actions result in (w) the creation of any Lien on any of the
Transferred Assets, (x) the acceleration or creation of any
Liability or obligation of Seller, or (y) the forfeiture of any
right or privilege of Seller or Parent which might affect its or
his ability to perform under this Agreement.
(c) The total authorized capital stock of Seller
consists of 100,000 shares of common stock, no par value, of
which 1,000 shares are currently issued and outstanding.
3.3. CONSENTS. Except as set forth on Schedule 3.3,
the execution, delivery and performance by Seller and Parent of
this Agreement, and the consummation of the transactions
contemplated herein does not (a) require the consent, approval or
action of, or any filing with or notice to, any Government or
other Person, or (b) impose any other term, condition or
restriction on Parent or Seller pursuant to any business
combination or takeover Law under the Illinois Business
Corporation Act.
3.4. LEGAL COMPLIANCE. Seller is not in default under
or in violation of (a) its articles of incorporation or bylaws or
(b) any Order. The operations of the Seller's Business and its
predecessors have been conducted in all material respects in
compliance with all applicable Laws. (For purposes of this
SECTION, any violation of applicable Law that could result in
imposition of a fine or other monetary penalty upon Seller shall
be deemed to be a material non-compliance.) Neither Seller nor
Parent has received any notification of any asserted past or
present failure by Seller to comply with any applicable Law in
connection with the operation of the Seller's Business.
17
3.5. POSSESSION OF LICENSES. Seller possesses all
franchises, certificates, licenses, permits and other
authorizations from Governments and other Persons, free from
burdensome restrictions, that are necessary for the ownership,
maintenance and operation of its properties and assets and the
conduct of the Seller's Business, except where failure to so
possess would not have a material adverse effect on Seller or the
Seller's Business, and Seller is not in material violation
thereof.
3.6. FINANCIAL STATEMENTS. Prior to the date hereof,
Seller has delivered to Purchaser copies of the financial
statements and related documents of Seller identified in Schedule
3.6 (collectively, the "FINANCIAL STATEMENTS"). The Financial
Statements include a Balance Sheet and an Income Statement for
the Seller's Business (the "REFERENCE DATE BALANCE SHEET" and
"REFERENCE DATE INCOME STATEMENT") as of December 31, 1997 (the
"REFERENCE DATE"), which is the most recent audited balance sheet
and income statement with respect to the Seller's Business. The
Financial Statements are true and correct in all material
respects, have been prepared in accordance with GAAP,
consistently applied, present fairly the financial condition of
Seller as at the respective dates thereof and the results of
Seller's operations and cash flows for the periods then ended,
and are consistent with the books and records of Seller. The
books and records of Seller are currently maintained in
accordance with GAAP and are true, correct and complete in all
material respects.
3.7. LIABILITIES. Seller has no Liability relating to
any Transferred Asset or the operation of the Seller's Business,
except (i) those reflected on the Reference Date Balance Sheet,
(ii) Liabilities incurred in the ordinary course of business
since the Reference Date consistent with Seller's past experience
during the periods covered by the Financial Statements (none of
which results from, arises out of, relates to, is in the nature
of, or was caused by any breach of contract, breach of
representation or warranty, tort, product liability, infringement
or violation of any Law or Order), and (iii) as may be set forth
on Schedule 3.7.
3.8. TITLE TO PROPERTIES. Seller has good, valid and
complete title to all of the Transferred Assets (other than
Leased Real Property and other leased tangible personal
property), free and clear of all Liens. The Transferred Assets
constitute all of the assets necessary to conduct the Seller's
Business as conducted by Seller during the periods covered by the
Financial Statements and as conducted immediately prior to the
date hereof.
3.9. RECEIVABLES. All accounts and notes receivable
included in the Transferred Assets are valid and collectible
obligations and were not and are not subject to any offset or
counterclaim, except for amounts reserved against such
receivables which are reflected on the Reference Date Balance
Sheet and with respect to accounts receivable reflected on the
Estimated Closing Date Balance Sheet, except for amounts reserved
against such receivables on such balance sheet.
3.10. MATERIAL INVENTORIES. (a) The Inventories
are merchantable and conform in all respects to all orders,
contracts or commitments for such goods and customary trade
18
standards for merchantable goods. None of the items included in
the Inventories is below standard quality. Each item included in
the Inventories reflected on the Reference Date Balance Sheet and
the books and records of Seller has been valued at the lower of
cost or market in accordance with GAAP, consistently applied.
(b) All products held by Seller for sale to its
customers in connection with the Seller's Business meet the
standards of (i) all applicable Laws and (ii) all contractual
commitments and warranties of Seller to its customers. Seller has
no Liability, and to the knowledge of Seller and Parent there is
no basis for any Action (as defined in ARTICLE 11), for repair or
replacement of any products sold by Seller or other damages in
connection therewith, except for Liabilities and Actions fully
covered by manufacturers' warranties.
(c) No customer of Seller has any right to return any
goods for credit or refund pursuant to any oral or written
agreement, understanding or practice which individually or in the
aggregate is material, and Seller does not presently have any
goods in the possession of any customer on consignment or a
similar basis.
3.11. PERSONAL PROPERTY. (a) All machinery,
equipment, vehicles, and other items of tangible personal
property included in the Transferred Assets which are owned or
leased by Seller are in good condition and repair, subject to
normal wear and tear, suited for the use intended and are and
have been operated in substantial compliance with all applicable
Laws.
(b) All lessors of machinery, equipment and other
tangible personal property included in the Transferred Assets
leased by Seller have performed and satisfied their respective
duties and obligations under such leases in all material
respects. Seller has not brought or threatened any Action
against any such lessor for failure to perform and satisfy its
duties and obligations thereunder.
(c) None of the Transferred Assets, including, without
limitation, software programs and applications, hardware and
process control systems used by Seller in the Seller's Business,
will fail to perform in accordance with their respective
documentation, nor suffer any deterioration in their levels of
performance (including, without limitation, processing speed and
response times), nor will they be adversely affected, due to (i)
use of such software programs and applications, hardware and
process control systems on dates occurring on or after January 1,
2000, or (ii) use of data having dates falling on or after
January 1, 2000. This representation and warranty specifically
includes, without limitation, any Transferred Asset the
functionality of which is dependent, in whole or in part, on
computer chips which may be date dependent.
3.12. REAL PROPERTY. (a) Seller does not own and
has never owned any parcel of real property in connection with
the Seller's Business. Each parcel or tract of real property
used in connection with the Seller's Business is subject to a
written lease or sublease to which Seller is a party as lessee or
sublessee (individually a "REAL PROPERTY LEASE"). All such Real
Property Leases are valid and in full force and effect in
accordance with their terms. Seller has previously furnished
19
Purchaser with true, correct and complete copies of all Real
Property Leases. There is not, with respect to any Real Property
Lease (i) any material default by Seller, or any event of default
or event which with notice or lapse of time, or both, would
constitute a default by Seller or (ii) to the knowledge of Seller
and Parent, any existing default by any other party to any Real
Property Lease, or event of default or event which with notice or
lapse of time, or both, would constitute a default by any other
party to any Real Property Lease.
(b) The present use, occupancy and operation of the
Leased Real Property (as defined in ARTICLE 11), and all
Improvements (as defined in ARTICLE 11) to the Leased Real
Property, by Seller are in substantial compliance with all Laws
and private restrictive covenants, and to Seller's and Parent's
knowledge there has not been any proposed change thereto that
would affect any of the Leased Real Property or its use,
occupancy or operation. There exists no conflict or dispute
involving Seller (or to the knowledge of Seller and Parent, any
other Person) with any Government or other Person relating to any
Leased Real Property or the activities thereon. No portion of
the Leased Real Property is subject to any classification,
designation or preliminary determination of any Government or
pursuant to any Law which would materially restrict its use,
development, occupancy or operation in connection with the
Seller's Business.
(c) Neither Seller nor, to the knowledge of Seller and
Parent, any other Person, has caused any work or improvements to
be performed upon or made to any of the Leased Real Property for
which there remains outstanding any payment obligation that would
or might serve as the basis for any Lien in favor of the Person
who performed the work.
(d) All requisite certificates of occupancy and other
permits and approvals required of Seller with respect to the
Leased Real Property or the Improvements and the use, occupancy
and operation thereof by Seller have been obtained and paid for
and are currently in effect and free of restrictions.
3.13. CONTRACTS. (a) All of the Assigned
Contracts have been entered into in the ordinary course of the
Seller's Business on commercially reasonable terms, are valid and
enforceable in all material respects in accordance with their
terms, are in full force and effect, and will continue to be
valid and enforceable and in full force and effect on identical
terms following the execution and delivery of this Agreement and
the Closing. Seller and Parent have delivered to Purchaser a
true, correct and complete copy of each of the written Assigned
Contracts and a complete and accurate summary of the material
terms of each oral Assigned Contract.
(b) Seller has performed all obligations to be
performed by it as of the date of this Agreement under all
Assigned Contracts. There are no existing material defaults,
events of default or events which, with the giving of notice or
lapse of time or both, would constitute a material default by
Seller under any Assigned Contract. No event has occurred which
may hereafter give rise to any right of termination,
acceleration, damages or any other remedy under any Assigned
Contract.
20
(c) To the knowledge of Seller and Parent, neither the
execution and delivery of this Agreement, the Closing nor the
relationship between Seller and Purchaser has caused or is likely
to cause the termination or nonrenewal of any Assigned Contract.
3.14. CUSTOMERS AND SUPPLIERS. Schedule 3.14 sets
forth the names of Seller's top twenty-five customers
("SIGNIFICANT CUSTOMERS") and the top ten suppliers of goods
("SIGNIFICANT SUPPLIERS") for Seller's last fiscal year. Neither
Seller nor Parent is aware, except as disclosed in Schedule 3.14,
that any Significant Customer or Significant Supplier intends to
discontinue or substantially diminish or change its relationship
with Seller or the terms thereof.
3.15. LITIGATION; CONTINGENCIES. Except as set
forth on Schedule 3.15, no Action is pending or to the knowledge
of Seller or Parent threatened against, by or affecting Seller or
the Transferred Assets. There are no unsatisfied judgments or
Orders against Seller, or any of its predecessors that constitute
a Lien on any Transferred Asset.
3.16. TAXES. Seller has duly and timely filed all
federal, state, municipal, local and foreign, Tax returns and
reports (including returns for estimated tax), and all reports
and returns of all other Governments having jurisdiction
(collectively, "RETURNS") with respect to all Taxes other than
Taxes on Seller's income, all such Returns show the correct and
proper amount due; and the Taxes shown on all such Returns and
all Tax assessments received by Seller have been paid to the
extent that such Taxes or estimates are due. All Taxes imposed on
Seller by any Government (including all deposits in connection
therewith required by applicable Law, and all interest and
penalties thereon) which have become due and payable by Seller
for all periods through the date hereof have been paid in full,
and adequate reserves for all other Taxes, whether or not due and
payable, and whether or not disputed, have been set up on the
books of Seller, and such reserves will be adequate to pay all
Taxes of Seller for all periods through Closing. Except as
disclosed on Schedule 3.16, there is not now any proposed
assessment against Seller of any Taxes of any kind. Seller is
not a party to any Tax sharing or Tax allocation agreement,
understanding, arrangement or commitment other than with Parent.
There is no dispute or Action concerning any Tax Liability of
Seller raised by a Government in writing to either Seller of
Parent.
3.17. EMPLOYMENT AND LABOR MATTERS. (a) To
Seller's and Parent's knowledge, no employee, agent, consultant
or independent contractor who performs services on a regular
basis for Seller in connection with the Seller's Business plans
to discontinue such relationship with the Seller's Business after
the execution and delivery of this Agreement or the Closing.
(b) Seller is not a party to any agreement of any kind
which deals with wages, conditions of employment, benefits or
other matters affecting the employer/employee relationship with
any union, labor organization or employee group. There are no
controversies pending, or to Seller's and Parent's knowledge,
threatened, between Seller and any union, labor organization or
employee group representing, or seeking to represent, any of its
employees, and there has been no attempt by any union, labor
21
organization or employee group to organize any of Seller's
employees at any time in the past five years. Seller has
substantially complied with all applicable Laws relating to
wages, hours, health and safety, payment of social security,
withholding and other taxes, maintenance of workers' compensation
insurance, labor and employment relations and employment
discrimination.
(c) Schedule 3.17 lists all contracts, agreements or
arrangements (written or oral) concerning the employment of any
individual employed by Seller in the Seller's Business.
3.18. EMPLOYEE BENEFIT MATTERS. (a) Schedule
3.18(a) lists all practices, commitments, arrangements and
agreements pursuant to which Seller provides, directly or
indirectly, any benefits for its employees, including pension,
bonus, medical, insurance, profit sharing or any other employee
benefits, under any agreements or Laws. Except as set forth in
Schedule 3.18(a), Seller does not now, and did not at any time in
the past, sponsor, maintain or contribute to any employee pension
benefit plan, within the meaning of SECTION 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
Seller is not required to contribute, and has never been required
to contribute, to any multi-employer plan within the meaning of
SECTION 3(37)(A) of ERISA.
(b) Schedule 3.18(b) lists separately all employee
welfare benefit plans within the meaning of SECTION 3(1) of ERISA
maintained by Seller or to which Seller contributes or is
required to contribute (collectively, "ERISA Plans") for the
benefit of any of Seller's employees. True, correct and complete
copies of all ERISA Plans, together with related trusts,
insurance contracts, and summary plan descriptions, annual
reports and Form 5500 filings for the past three years, have been
delivered to Purchaser.
(c) Each ERISA Plan has been operated and administered
in all material respects in accordance with all applicable Laws,
including, without limitation, ERISA and the Code. Except as set
forth on Schedule 3.18(c), neither Seller nor any of its
directors, officers, employees or agents, nor to Seller's and
Parent's knowledge, any "party in interest" or "disqualified
person" (as such terms are defined in SECTION 3(14) of ERISA and
SECTION 4975 of the Code) has been engaged in or been a party to
any "prohibited transaction" (as such term is defined in SECTION
406 of ERISA or SECTION 4975 of the Code). Each ERISA Plan that
is a group health plan within the meaning of SECTION 607(1) of
ERISA and SECTION 4980B of the Code is in compliance with the
continuation coverage requirements of SECTION 601 of ERISA and
SECTION 4980B of the Code. There are no pending claims or, to
Seller's and Parent's knowledge, threatened claims by or on
behalf of any ERISA Plan, by any employee or beneficiary covered
under such ERISA Plan or by any Government or otherwise involving
such ERISA Plan or any of its fiduciaries (other than for routine
claims for benefits).
(d) Seller is not bound to provide, and does not
provide, benefits, including, without limitation, death, health
or medical benefits (whether or not insured), with respect to
current or former employees of Seller beyond their retirement or
other termination of service with Seller other than (i) coverage
22
mandated by applicable Law, (ii) deferred compensation benefits
accrued as Liabilities, or (iii) benefits, the full cost of which
is borne by the current or former employee or his beneficiary.
3.19. ENVIRONMENTAL MATTERS. Seller holds all
Environmental Permits (as defined in ARTICLE 11) necessary for
conducting its business and operations and has conducted, and is
presently conducting, its operations in substantial compliance
with all applicable Environmental Laws (as defined in ARTICLE 11)
and Environmental Permits, including without limitation all
record keeping and filing requirements. Neither Seller nor
Parent is aware of any existing or pending Environmental Law with
a future compliance date that will require operational changes,
business practice modifications or capital expenditures at any
Leased Real Property (or any other property in connection with
the Seller's Business which is presently or formerly owned,
operated or controlled by Seller or as to which Seller may bear
responsibility or Liability), or any Improvements thereon. No
past or present disposal, discharge, spill or other release of,
or treatment, transportation or other handling of Hazardous
Materials by Seller on, in, under or off-site from any Leased
Real Property, or to Seller's and Parent's knowledge, adjacent
property, will subject Seller or any subsequent owner, occupant
or operator of such Leased Real Property to corrective or
compliance action or any other Liability. There are no presently
pending, or to Seller's and Parent's knowledge, threatened
Actions or Orders against or involving Seller (including any
other Person for whose acts or omissions Seller is responsible)
relating to any alleged past or ongoing violation of any
Environmental Laws or Environmental Permits, nor is Seller
subject to any Liability for any such past or ongoing violation.
3.20. ABSENCE OF CHANGES. Except as expressly
provided for in this Agreement, or as set forth in Schedule 3.20
since the Reference Date:
(a) there has been no change in the business, assets,
properties, Liabilities, affairs, results of operations,
condition (financial or otherwise) or cash flows of the Seller or
in its respective relationships with suppliers, customers,
employees, lessors or others, other than changes in the ordinary
course of business, none of which have had or will have a
material adverse effect on the Seller's Business, in the
aggregate;
(b) there has been no damage, destruction or loss to
the assets, properties, or business of Seller, whether or not
covered by insurance, which would have had or will have a
material adverse effect on the Seller's Business;
(c) the Seller's Business has been operated in the
ordinary course and consistent with its prior practices;
(d) the books, accounts and records of the Seller have
been maintained in the usual, regular and ordinary manner on a
basis consistent with prior years and in accordance with GAAP;
23
(e) no Liability of the Seller has been discharged or
satisfied, other than in the ordinary course of business and
consistent with prior practice;
(f) the Seller has not discontinued or determined to
discontinue selling any products previously sold by the Seller,
the sales of which have been material to the Seller's Business;
(g) there has been no Lien (other than Liens for
current Taxes which are not yet due and payable) created on or in
the Transferred Assets;
(h) there has been no sale, transfer, lease or other
disposition of any asset of the Seller to any Related Party (as
defined in ARTICLE 11) or, except in the ordinary course of the
Seller's Business, to any other Person, and no material debt to,
or material claim or right of, the Seller has been canceled,
compromised, waived or released;
(i) there has been no amendment, termination or waiver
of, or any notice of any amendment, termination or waiver of, any
right of the Seller under any Assigned Contract or under any
franchise, certificate, license, permit or authorization from any
Government, which has had or will have a material adverse effect
on the Seller's Business;
(j) the Seller has not entered into any agreement,
contract, lease or license outside the ordinary course of
business;
(k) the Seller has not delayed or postponed the
payment of any accounts payable or other Liabilities outside the
ordinary course of business; nor has it accelerated the
collection of accounts receivable or engaged in special
collection practices outside the ordinary course of business;
(l) except for the standard salary adjustments
established for employees of Seller in June of each year, the
Seller has not paid or committed to pay any bonus, profit-share
or other extraordinary compensation payment or other arrangement
(except in the ordinary course of business and consistent with
past practices), nor has the Seller entered into any agreement,
contract or commitment with any Related Party or amended the
terms of any existing agreement, contract or commitment with any
Related Party.
3.21. FULL DISCLOSURE. No representation or
warranty of Seller or Parent contained in this Agreement or any
instrument, certificate, agreement or other writing delivered by
or on behalf of Seller or Parent pursuant to this Agreement, or
in connection with the transactions contemplated herein contains
any untrue or incomplete statement of a material fact or omits to
state a material fact necessary to make the statements contained
herein not misleading. To the knowledge of Seller and Parent,
there is no fact which adversely affects, or in the future may
adversely affect, the business, assets, properties, liabilities,
affairs, actual or anticipated results of operations, condition
(financial or otherwise), cash flows or prospects of Seller which
has not been or is not disclosed in this Agreement or in the
24
other instruments, certificates, agreements and writings
furnished to Purchaser by or on behalf of Seller or Parent
pursuant to this Agreement or in connection with the transactions
contemplated herein.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller and Parent to enter into and
perform this Agreement, Purchaser hereby represents, warrants and
covenants to Seller and Parent as set forth below. All
representations and warranties of Purchaser set forth in this
Agreement shall be deemed made on the date hereof and again on
the Closing Date:
4.1. ORGANIZATION. Purchaser is a corporation duly
organized and validly existing under the Laws of the State of
Georgia.
4.2. AUTHORIZATION; NO INCONSISTENT AGREEMENTS.
Purchaser has full corporate power and authority to execute,
deliver and perform this Agreement. This Agreement has been duly
and validly executed and delivered by Purchaser and constitutes
its valid and legally binding obligation, subject to general
equity principles, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors
generally.
4.3. INCONSISTENT OBLIGATIONS. The execution, delivery
and performance of this Agreement, and the consummation of the
transactions contemplated herein will not result in a violation
of Purchaser's articles of incorporation or bylaws or any Law, or
in a breach of, conflict with or default under any indenture,
note, mortgage, bond, security agreement, loan agreement,
guaranty, pledge, or other instrument, contract, agreement or
commitment, or any Order, to which Purchaser is a party or by
which any of Purchaser's assets or properties are subject or
bound; nor will such actions result in the creation of any Lien
on any of Purchaser's assets or properties, or the acceleration
or creation of any debt of Purchaser.
4.4. FULL DISCLOSURE. No representation or warranty of
Purchaser contained in this Agreement, or in any schedule,
instrument, certificate, agreement or other writing delivered by
Purchaser pursuant to this Agreement or in connection with the
transactions contemplated herein, contains any untrue statement
of a material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading.
5. CONDUCT OF THE SELLER'S BUSINESS PENDING CLOSING.
Parent and Seller covenant and agree that, except as
may otherwise be provided herein, without the prior written
consent of Purchaser, between the date hereof and the Closing
Date:
5.1 BUSINESS IN THE ORDINARY COURSE. The Seller's
Business shall be conducted only in the ordinary and usual course
and consistent with prior practices. Without limiting the
generality of the foregoing:
25
(a) Seller shall not enter into any contract,
agreement or other arrangement in connection with the Seller's
Business or affecting the Transferred Assets, other than those
(i) entered into in the ordinary course of the Seller's Business
at prices and on terms consistent with prior operating practices
of the Seller's Business, or (ii) which do not obligate the
Seller's Business to provide goods or services to any customer or
third Person for a period in excess of twelve (12) months (unless
terminable upon thirty (30) days notice or less) or do not
involve the payment of an amount in excess of $25,000 (or in the
case of purchases of inventory which do not involve the payment
of an amount in excess of $100,000);
(b) except for the disposal of used furniture,
fixtures and equipment, the utilization of miscellaneous office
supplies and the sale of inventory to customers, all in the
ordinary course of the Seller's Business in accordance with past
practices, Seller shall not sell, assign, transfer, convey,
pledge, mortgage, encumber or otherwise dispose of, or cause the
sale, assignment, transfer, conveyance, pledge, mortgage,
encumbrance or other disposition of, any of the Transferred
Assets, and in no event shall any of the assets or properties of
the Seller's Business be disposed of to Related Parties without
Purchaser's prior written consent;
(c) all efforts to collect accounts receivable
included in the Transferred Assets shall be undertaken in the
ordinary course in accordance with past practices, and no
rebates, discounts or concessions shall be granted by the
Seller's Business after the date of this Agreement other than in
the ordinary course in accordance with past practices;
(d) Seller shall maintain, preserve and protect all of
the Transferred Assets in good condition and repair, except for
ordinary wear and tear, and Seller shall maintain in full force
and effect all insurance policies in effect on the date hereof;
(e) the books, records and accounts of Seller with
respect to the Seller's Business shall be maintained in the
ordinary course of business and in accordance with GAAP applied
on a basis consistent with prior practices;
(f) Seller shall use commercially reasonable efforts
to preserve the Seller's Business, to preserve the goodwill of
Seller's suppliers and customers and others having business
relations with Seller which relate to the Seller's Business, and
to assist Purchaser in retaining the services of the employees
and agents of Seller engaged in the Seller's Business, to the
extent desired by Purchaser;
(g) Seller shall not take, or agree to take, any
action which would make any of its representations or warranties
contained herein untrue, incorrect or misleading in any material
respect as of the date when made or at any time through the
Closing; and
(h) Except for normal increases in compensation for
employees of Seller determined in June 1998 and to become
effective July 1, 1998, no increase in the compensation or rate
of compensation or commissions payable or to become payable with
respect to any employee or agent of Seller engaged in the
26
Seller's Business shall be given to any employee or agent, and no
payment of or commitment to pay any bonus, profit-share or other
extraordinary compensation payment or other arrangement (whether
current or deferred) shall be made to or with any such employee
or agent.
5.2. UPDATE OF INFORMATION. At all times prior to and
including the Closing Date, Parent and Seller shall promptly
provide Purchaser and its representatives with written
notification of any material fact, event, occurrence or other
information of any kind whatsoever which (i) materially affects,
or may materially affect, the truthfulness, correctness or
completeness of any of representation, warranty, covenant or
agreement made in this Agreement or any document, agreement,
instrument, certificate or writing furnished to Purchaser
pursuant to or in connection with this Agreement, or which
affects or may affect the continued truthfulness, correctness or
completeness of any thereof through the date of the Closing, or
(ii) has caused or is reasonably likely to cause a material
adverse change in the business, assets, properties, Liabilities,
affairs, results of operations, condition (financial or
otherwise), cash flows or prospects of the Seller's Business.
Each written notification shall specifically identify all
representations, warranties, covenants and agreements affected by
the fact, event, occurrence or information that necessitate the
giving of such notice. In addition, prior to Closing, Seller and
Parent shall prepare and deliver to Purchaser updates to the
Schedules, in form reasonably satisfactory to Purchaser. No such
written notification or update to the Schedules shall have any
effect for the purpose of determining whether the conditions set
forth in SECTIONs 6.1, 6.2 and 6.3 have been satisfied.
6. CONDITIONS TO OBLIGATIONS OF PURCHASER
All obligations of Purchaser hereunder to consummate
the transactions contemplated herein at the Closing are subject
to the fulfillment and satisfaction of each of the following
conditions on or prior to the Closing, any or all of which may be
waived in whole or in part by Purchaser provided that no such
waiver shall be effective unless it is set forth in a writing
executed by Purchaser:
6.1. REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Parent and Seller contained in
this Agreement and any Schedule hereto shall have been true and
correct as of the date when made and shall be deemed to be made
again at and as of the Closing Date and shall be true and correct
in all material respects at and as of such time.
6.2. COMPLIANCE WITH AGREEMENTS AND CONDITIONS. Parent
and Seller shall have performed and complied in all material
respects with all covenants, agreements and conditions required
by this Agreement to be performed or complied with by them prior
to or on the Closing Date.
27
6.3. NO MATERIAL ADVERSE CHANGE. There shall have
occurred no material adverse change in the business, assets,
properties, Liabilities, affairs, results of operations,
condition or cash flows of the Seller's Business between the date
hereof and the Closing.
6.4. CERTIFICATES OF PARENT AND SELLER. Parent and
Seller shall have delivered to Purchaser a certificate executed
by their respective Presidents or Vice Presidents, dated the
Closing Date, certifying in such detail as Purchaser may
reasonably request as to the fulfillment and satisfaction of the
conditions specified in SECTIONs 6.1, 6.2 and 6.3.
6.5. EMPLOYMENT AGREEMENT. Seller and ▇▇▇▇▇▇▇▇▇ shall
have executed and delivered to Purchaser the Employment Agreement
between Purchaser and ▇▇▇▇▇▇▇▇▇ in the form attached hereto as
Exhibit E.
6.6. NON-COMPETE AGREEMENT. Seller, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall have executed and delivered to
Purchaser the Non-Compete Agreement among Purchaser, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in the form attached hereto as
Exhibit F.
6.7. RESOLUTIONS. Seller and Parent shall have
delivered to Purchaser duly adopted resolutions of the respective
boards of directors of Seller and Parent, certified by their
respective Secretaries or Assistant Secretaries as of the date of
the Closing, authorizing and approving the execution of this
Agreement and the taking of all other actions necessary to enable
Seller and Parent to comply with the terms hereof and to
consummate the transactions contemplated hereby.
6.8. GOVERNMENT CONSENTS AND FILINGS. Seller shall
have made, and shall have cooperated with Purchaser in making,
all filings required to be made to any Government in connection
with the consummation of the transactions contemplated by this
Agreement (including all filings under the HSR Act) and shall
have received all authorizations, consents and approvals of any
Government necessary or desirable for the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby, all such authorizations, consents and approvals shall be
in full force and effect, and all notices required to be given to
any Government shall have been given and all applicable waiting
periods shall have expired.
6.9. CONSENTS. Parent and Seller shall have delivered
to Purchaser as soon as practical on or before the Closing Date,
all authorizations, consents, and approvals of the suppliers or
lessors, and none of such authorizations, consents or approvals
shall be subject to any restrictions or conditions given that
require any payment to the consenting or approving party by
Purchaser or that adversely affect the Seller's Business or its
assets, properties, Liabilities, affairs, results of operations,
condition (financial or otherwise), cash flows or prospects.
28
6.10. OPINION OF COUNSEL. Seller and Parent shall
have delivered to Purchaser an opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Ltd.
counsel for such parties, in the form attached hereto as Exhibit
H.
6.11. NO INCONSISTENT REQUIREMENTS. No Action
shall have been instituted by any Government or other Person
against a party hereto to restrain or prohibit the consummation
of the transactions contemplated herein.
7. CONDITIONS TO OBLIGATIONS OF PARENT AND SELLER
All obligations of Parent and Seller hereunder to
consummate the transactions contemplated herein at the Closing
are subject to the fulfillment and satisfaction of each of the
following conditions on or prior to the Closing, any or all of
which may be waived in whole or in part by Parent and Seller,
provided that no such waiver shall be effective unless it is set
forth in a writing executed by the party waiving same:
7.1. REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Purchaser contained in this
Agreement shall have been true and correct on and as of the date
when made and shall be deemed to be made again at and as of the
Closing Date and shall be true and correct in all material
respects at and as of such time.
7.2. COMPLIANCE WITH AGREEMENTS AND CONDITIONS.
Purchaser shall have performed and complied in all material
respects with all covenants, agreements and conditions required
by this Agreement to be performed or complied with by Purchaser
prior to or on the Closing Date.
7.3. CERTIFICATE OF PURCHASER. Purchaser shall have
delivered to Seller a certificate executed by its Chief Executive
Officer or a Vice President, dated the Closing Date, certifying
in such detail as Seller may reasonably request as to the
fulfillment and satisfaction of the conditions specified in
SECTIONs 7.1 and 7.2.
7.4. EMPLOYMENT AGREEMENT. Purchaser shall have
executed and delivered to Seller the Employment Agreement between
Purchaser and ▇▇▇▇▇▇▇▇▇ in the form attached hereto as Exhibit E.
7.5. GOVERNMENT CONSENTS AND FILINGS. Purchaser shall
have made, and shall have cooperated with Seller in making, all
filings required to be made to any Government in connection with
the consummation of the transactions contemplated by this
Agreement (including all filings under the HSR Act; provided,
however, that this Agreement will not require Purchaser to
dispose of or make any change in any portion of its business or
to incur any other burden in connection with any filing under the
HSR Act), and Seller shall have received all authorizations,
consents and approvals of any Government necessary or desirable
for the execution, delivery and performance of this Agreement and
29
the transactions contemplated hereby, all such authorizations,
consents and approvals shall be in full force and effect, and all
notices required to be given to any Government shall have been
given and all applicable waiting periods shall have expired.
7.6. NO INCONSISTENT REQUIREMENTS. No Action shall
have been instituted by any Government or other Person against a
party hereto to restrain or prohibit the consummation of the
transactions contemplated herein.
7.7. OFFERS OF EMPLOYMENT. Purchaser shall have made
offers of employment to all employees of the Seller's Business as
of the close of business on the day immediately preceding the
Closing Date. Each employment offer made to an employee pursuant
to this SECTION 7.7 will include salary or wages that are not
less than such employee's salary from the Seller in effect as of
the Closing Date and which shall include the annual increase for
each applicable employee as determined by the Seller in June
1998.
7.8. EMPLOYEE BENEFITS. (a) With respect to the
participation of the Seller's employees in any of the plans
maintained by Purchaser that are health, accident, sickness,
salary continuation, or short-term or long-term disability plans
or programs (collectively, the "PURCHASER'S H&A PLAN"), Purchaser
will (i) waive all waiting periods for participation or coverage
under Purchaser's H&A Plan to the extent that the combined months
of service of Seller's employees with Seller and Purchaser meet
the applicable waiting periods under Purchaser's H&A Plan;
(ii) waive all restrictions and limitations for preexisting
conditions under Purchaser's H&A Plan only to the extent that the
underlying benefits provided for such preexisting conditions are
currently covered by Seller's benefit plans; and (iii) credit the
employees with their respective years of service with the Seller
for purposes of determining their eligibility for, and duration
and amount of, benefits under Purchaser's H&A Plan.
(b) For purposes of crediting periods of service for
eligibility and vesting under any of Purchaser's employee pension
benefit plans, as defined under SECTION 3(2) of ERISA, all
employees shall be given credit with Purchaser for all prior
years of continuous service with the Seller.
(c) Any earned but unused vacation pay to which any
employee is entitled under the terms of the Seller's vacation pay
policy and which is reserved for on the Closing Date Balance
Sheet shall be credited as vacation days to which the employee is
to be entitled under the vacation pay policy maintained by the
Purchaser.
7.10 OPINION OF COUNSEL. Purchaser shall have
delivered to Seller and Parent an opinion of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, counsel for such party, in the form attached hereto as
Exhibit I.
7.11. RESOLUTIONS. Purchaser shall have delivered
to Seller and Parent duly adopted resolutions of its board of
directors, certified by its Secretary or Assistant Secretary as
of the date of the Closing, authorizing and approving the
30
execution of this Agreement and the taking of all other actions
necessary to enable Purchaser to comply with the terms hereof and
to consummate the transactions contemplated hereby.
8. INDEMNITIES
8.1. INDEMNIFICATION OF PURCHASER. (a) In accordance
with and subject to the provisions of this ARTICLE 8, Seller and
Parent (the "INDEMNITORS") shall, jointly and severally indemnify
and hold harmless Purchaser, its Affiliates and their respective
officers, directors, agents and employees (collectively,
"INDEMNITEES") from and against and in respect of any loss,
damage, Liability, cost and expense, including reasonable
attorneys' fees and amounts paid in settlement (collectively,
"INDEMNIFIED LOSSES"), suffered or incurred by any Indemnitee by
reason of, or arising out of:
(i) any misrepresentation or breach of representation
or warranty contained in this Agreement, or in any instrument,
certificate, agreement or other writing delivered by or on behalf
of Seller or Parent pursuant to this Agreement or in connection
with the transactions contemplated herein, or the breach of any
covenant or agreement of Seller or Parent contained in this
Agreement, or in any instrument, certificate, agreement or other
writing delivered to Purchaser by or on behalf of Seller or
Parent pursuant to this Agreement, or in connection with the
transactions contemplated herein (provided, however, that with
respect to any claims for Indemnified Losses made with respect to
SECTION 3.11(c), Seller's liability under this ARTICLE 8 shall be
limited to the cost of repairing any system which fails to comply
with SECTION 3.11(c));
(ii) all obligations and Liabilities of Seller other
than the Assumed Liabilities;
(iii) any claims, Liabilities, obligations,
damages, costs, and expenses, known or unknown, fixed or
contingent, claimed or demanded by third Persons arising out of
or resulting from Seller's ownership or operation of the Seller's
Business or the Transferred Assets prior to and including the
Closing Date;
(iv) any and all losses, Liabilities or damages
resulting from or arising out of any failure to comply with any
"bulk sales" laws applicable to the transactions contemplated by
this Agreement; and
(v) all Actions, Orders, assessments, fees and
expenses incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnification.
(b) Indemnitees shall not be entitled to indemnification
(i) for a breach of any representation or warranty pursuant
to SECTION 8(a)(i) above or (ii) for any obligations pursuant
to SECTION 8(a)(v) with respect to claims made under SECTION
8(a)(i), unless the aggregate amount of the Indemnitors
indemnification obligations to the Indemnitees pursuant to
31
SECTIONS 8(a)(i) and 8(a)(v) (with respect to claims made
under SECTION 8(a)(i)) exceeds $100,000, but in such event,
the Indemnitees shall be entitled to indemnification in full for
all Indemnified Losses, including all prior and all future
Indemnified Losses.
8.2. PAYMENT. The Indemnitors shall, subject to
the provisions of this SECTION 8.2, reimburse the Indemnitees
entitled to recover Indemnified Losses within 10 days of written
demand on the Indemnitors therefor. If the Indemnitors object
to any claim made by an Indemnitee hereunder and the Indemnitee
initiates legal action with respect thereto, the Indemnitee
agrees to join all affected parties in such action so that
the rights and liabilities of the parties under this Agreement
with respect to such claim may be resolved in one action.
If any claim for Indemnified Losses that does not relate
to a claim or Action by a third party arises after the date
hereof, the Indemnitee Agent (as defined in SECTION 8.3) shall
provide written notice thereof to the Indemnitors. The amount
and liability for such claim shall be deemed final unless the
Indemnitors notify the Indemnitee Agent in writing within 45 days
of their receipt of such written notice that they dispute such
claim. The Indemnitors shall pay or reimburse the Indemnitees
for any such Indemnified Loss within 30 days after such loss is
deemed final; provided, that such payment shall be made first
from the Escrow Fund, to the extent thereof, and thereafter, by
the Indemnitors, jointly and severally.
8.3. DEFENSE OF CLAIMS. (a) If any claim or Action by
a third party arises after the date hereof for which the
Indemnitors may be liable under the terms of this Agreement, then
Purchaser, as the agent for the Indemnitees (the "INDEMNITEE
AGENT"), shall notify the Indemnitors within a reasonable time
after such claim or Action arises and is known to Purchaser, and
shall give the Indemnitors a reasonable opportunity: (i) to
conduct any proceedings or negotiations in connection therewith
and necessary or appropriate to defend the Indemnitee; (ii) to
take all other required steps or proceedings to settle or defend
any such claim or Action; and (iii) to employ counsel to contest
any such claim or Action in the name of the Indemnitee or
otherwise.
(b) The expenses of all proceedings, contests or
lawsuits with respect to such claims or Actions shall be borne by
the Indemnitors. If the Indemnitors wish to assume the defense
of such claim or Action, then they shall give written notice to
the Indemnitee Agent within 30 days after notice from the
Indemnitee Agent of such claim or Action (unless the claim or
action reasonably requires a response in less than 30 days after
the notice is given to the Indemnitors, in which event the
Indemnitors shall notify the Indemnitee Agent at least 10 days
prior to such reasonably required response date), and the
Indemnitors shall thereafter assume the defense of any such claim
or liability, through counsel reasonably satisfactory to the
Indemnitee; provided that the Indemnitee may participate in such
defense at its own expense. The Indemnitees shall have the right
to control the defense of the claim or Action unless and until
the Indemnitors shall (i) assume the defense of such claim or
Action, and (ii) acknowledge in writing to the Indemnitee Agent
that the Indemnitors shall be obligated under the terms of their
indemnity hereunder to the Indemnitees in connection with such
claim or Action; provided, however, that the Indemnitors may not
32
settle such claim or Action without the Indemnitees' prior
written consent, which shall not be unreasonably withheld.
(c) If the Indemnitors do not assume the defense
of, or if after so assuming the Indemnitors fail to defend,
any such claim or Action, then the Indemnitees may defend
against such claim or Action in such manner as the Indemnitees
may deem appropriate (provided that the Indemnitors may
participate in such defense at their own expense), and the
Indemnitors shall promptly reimburse the Indemnitees for the
amount of all expenses, legal and otherwise, reasonably and
necessarily incurred by the Indemnitees in connection with the
defense against and settlement of such claim or Action. If no
settlement of such claim or Action is made, the Indemnitors shall
satisfy any judgment rendered with respect to such claim or in
such Action, before the Indemnitees are required to do so, and
pay all expenses, legal or otherwise, reasonably and necessarily
incurred by the Indemnitee in the defense of such claim or
Action.
(d) If an Order is rendered against the Indemnitees in
any Action covered by the indemnification hereunder, or any Lien
in respect of such Order attaches to any of the assets of the
Indemnitees, the Indemnitors shall immediately upon such entry or
attachment pay any amount required by such Order in full, or
discharge such Lien unless, at the expense and request of the
Indemnitors, an appeal is taken under which the execution of the
Order or satisfaction of the Lien is stayed. If and when a final
Order is rendered in any such Action, the Indemnitors shall
forthwith pay any amount required by such Order or discharge such
Lien before the Indemnitee is compelled to do so.
8.4. SURVIVAL. (a) No investigation made heretofore
by Purchaser shall limit or affect the representations,
warranties, covenants and indemnities of Seller and Parent
hereunder, each of which shall survive any such investigation.
For purposes of the indemnification provided in this ARTICLE 8,
the representations and warranties of Seller and Parent contained
in this Agreement, and all certificates, instruments, agreements
or other writings delivered by or on behalf of Seller and Parent
pursuant to this Agreement or in connection with the transactions
contemplated herein shall survive any investigation heretofore or
hereafter made by Purchaser and the Closing, and shall continue
in full force and effect for the periods specified below (the
"SURVIVAL PERIOD"):
(i) the representations and warranties relating
to the reporting, payment or liability for Taxes or
environmental matters shall survive until the
expiration of the longest applicable statute or period
of limitations, and any extensions thereof; and
(ii) all other representations and warranties of
Seller and Parent (other than those contained in
SECTIONs 3.1, 3.2 and 3.3, which shall survive
indefinitely) shall be of no further force and effect
upon the second anniversary of the Closing.
(b) Anything herein to the contrary notwithstanding,
the Survival Period shall be extended automatically to include
any time period necessary to resolve a claim for indemnification
which was made prior to the expiration of the Survival Period but
not resolved prior to its expiration, but any such extension
33
shall apply only as to the claims asserted and not so resolved
within the Survival Period. Liability for any such item shall
continue until such claim shall have been finally settled,
decided or adjudicated.
8.5. INDEMNIFICATION BY PURCHASER. Purchaser shall
indemnify and hold harmless Seller and Parent from, against and
in respect of any and all claims, demands, Actions, assessments,
judgments, losses, damages, Liabilities, costs and expenses,
including reasonable attorneys' fees and amounts paid in
settlement, suffered or incurred by Seller and Parent by reason
of or arising out of (a) Purchaser's failure to pay or perform
any of the Assumed Liabilities, (b) any Liability that arises
after the Closing Date from Purchaser's operation of the Seller's
Business; (c) breach of any representation or warranty contained
in this Agreement or in any instrument, certificate, agreement,
or writing delivered to Seller or Parent by or on behalf of
Purchaser pursuant to this Agreement or in connection with the
transactions contemplated herein; and (d) breach of any covenant
or agreement of Purchaser contained in this Agreement or in any
instrument, certificate or agreement or other writing delivered
to Seller or Parent by or on behalf of Purchaser pursuant to this
Agreement or in connection with the transactions contemplated
herein; provided, however, that nothing contained in this SECTION
8.5 shall obligate Purchaser to indemnify Seller or Parent with
respect to any matter as to which Seller or Parent is obligated
to indemnify the Indemnitees pursuant to SECTION 8.1. The
procedures governing indemnification by Seller and Parent in
SECTIONs 8.2 and 8.3 shall apply to claims brought under this
SECTION 8.5 mutatis mutandis.
9. TERMINATION
9.1. TERMINATION FOR CERTAIN REASONS. If any
conditions to Closing contained in ARTICLEs 6 or 7 shall not have
been satisfied on or before July 1, 1998, then, unless otherwise
agreed by the parties in writing, the party or parties entitled
to the benefit of such condition shall, in its or their sole
discretion, either (x) waive the satisfaction of such condition
in writing and proceed with the Closing, or (y) terminate this
Agreement, provided that such terminating party shall have
complied with or performed or tendered performance of all
covenants and agreements to be complied with or performed by it
prior to or at the Closing, and satisfied all conditions
contained herein which are to be complied with, performed or
satisfied by such party immediately prior to or at the Closing.
Each party hereto shall promptly notify the other parties hereto
in writing if it becomes aware of circumstances which would cause
such party or another party to breach or be unable to comply with
or perform the conditions to Closing contained in ARTICLEs 6 or
7, as applicable.
9.2. EFFECT OF TERMINATION. Upon any termination
pursuant to SECTION 9.1, no party shall have any further rights,
Liabilities or obligations hereunder; provided, however, that, if
any of the terms and conditions contained herein have been
breached by any party, the non-breaching party may pursue any and
all rights and remedies it may have at Law, in equity or
otherwise, by reason of such breach regardless of such
termination, and such termination shall not constitute an
election of remedies. The obligations of Seller and Parent
pursuant to this SECTION 9.2 shall survive any termination
hereof.
34
10. MISCELLANEOUS
10.1. NOTICES. All notices and other communicationsr
equired or permitted to be given or made hereunder shall be in
writing and delivered personally or sent by pre-paid, first class
certified or registered mail, return receipt requested, or by
facsimile transmission, to the intended recipient thereof at its
address or facsimile number set out below. Any such notice or
communication shall be deemed to have been duly given immediately
(if given or made in person or by facsimile confirmed by mailing
a copy thereof to the recipient in accordance with this SECTION
10.1 on the date of such facsimile), or three days after mailing
(if given or made by mail), and in proving same it shall be
sufficient to show that the envelope containing the same was
delivered to the delivery or postal service and duly addressed,
or that receipt of a facsimile was confirmed by the recipient as
provided above. The addresses and facsimile numbers of the
parties for purposes of this Agreement are:
(i) If to Purchaser: Pameco Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
Suite 2800
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to Seller Park Heating and Air Conditioning
or Parent: Supply Co., Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Ltd.
▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
35
(b) Any party may change the address(es) or facsimile
number(s) to which notices or other communications to such party
shall be delivered, mailed or transmitted by giving notice
thereof to the other parties hereto in the manner provided
herein.
10.2. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the
same instrument.
10.3. GOVERNING LAW. The validity and effect of this
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Illinois, without regard
to its conflicts of laws rules.
10.4. SUCCESSORS AND ASSIGNS AND SUBSTITUTE PURCHASER.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and
permitted assigns. Neither Seller nor Parent may assign,
delegate or otherwise transfer any of its rights or obligations
under this Agreement without the prior written consent of
Purchaser. This Agreement may be assigned by Purchaser to any
Affiliate of Purchaser, but no such assignment shall relieve
Purchaser of its obligations hereunder.
10.5. PARTIAL INVALIDITY AND SEVERABILITY. All rights
and restrictions contained herein may be exercised and shall be
applicable and binding only to the extent that they do not
violate any Law and are intended to be limited to the extent
necessary to render this Agreement legal, valid and enforceable.
If any term of this Agreement, or part thereof, not essential to
the commercial purpose of this Agreement is held to be illegal,
invalid or unenforceable by a Tribunal of competent jurisdiction,
then the remaining terms hereof, or part thereof, shall
constitute the agreement of the parties with respect to the
subject matter hereof and all such remaining terms, or parts
thereof, shall remain in full force and effect. To the extent
legally permissible, any illegal, invalid or unenforceable
provision of this Agreement shall be replaced by a valid
provision which will implement the commercial purpose of the
illegal, invalid or unenforceable provision.
10.6. WAIVER. Any term or condition of this Agreement
may be waived at any time by the party which is entitled to the
benefit thereof, but only if such waiver is evidenced by a
writing expressly referring to this Agreement and signed by such
party. No failure on the part of any party hereto to exercise,
and no delay in exercising any right, power or remedy created
hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or remedy by such
party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. No waiver by any
party hereto of any breach of or default in any term or condition
of this Agreement shall constitute a waiver of or assent to any
succeeding breach of or default in the same or any other term or
condition hereof.
36
10.7. HEADINGS. The headings of particular provisions
of this Agreement are inserted for convenience of reference only
and shall not be construed as a part of this Agreement or serve
as a limitation or expansion on the scope of any term or
provision of this Agreement.
10.8. NUMBER AND GENDER. Where the context requires,
the use of the singular form herein shall include the plural, the
use of the plural shall include the singular, and the use of any
gender shall include all genders.
10.9. ENTIRE AGREEMENT. This Agreement and the
ancillary agreements contemplated hereunder supersede all prior
discussions and agreements between the parties with respect to
the subject matter hereof, and this Agreement (together with the
Exhibits and Schedules hereto) contains the sole and entire
agreement between the parties with respect to the matters covered
hereby. This Agreement shall not be altered or amended except by
an instrument in writing signed by or on behalf of the party
entitled to the benefit of the provision against whom enforcement
is sought.
10.10. DISPUTE RESOLUTION. (a) Any and all disputes
arising out of or in connection with the negotiation, execution,
interpretation, performance or nonperformance of this Agreement
and the transactions contemplated herein (other than the payment
of monies) shall be solely and finally settled by arbitration
which shall be conducted in Louisville, Kentucky, in accordance
with the Rules for Non-Administered Arbitration of Business
Disputes (the "RULES") as promulgated from time to time by the
CPR Institute for Dispute Resolution in New York, New York (the
"CPR"), by a panel of three arbitrators selected by the CPR in
accordance with the Rules (the "ARBITRATORS"). The Arbitrators
shall be lawyers experienced in corporate acquisition
transactions and shall not have been employed by or affiliated
with any of the parties or their Affiliates. The parties hereby
renounce all recourse to litigation and agree that the award of
the Arbitrators shall be final and subject to no judicial review.
The Arbitrators shall decide the issues submitted to them, in
writing, and in accordance with: (i) the provisions and
commercial purposes of this Agreement; and (ii) the laws of the
State of Illinois (without regard to its conflicts of laws
rules).
(b) The parties agree to facilitate the arbitration
by: (i) making available to one another and to the Arbitrators
for examination, inspection and extraction all documents, books,
records and personnel under their control if determined by the
Arbitrators to be relevant to the dispute; (ii) conducting
arbitration hearings to the greatest extent possible on
successive days; and (iii) observing strictly the time periods
established by the Rules or by the Arbitrators for submission of
evidence or briefs.
(c) Judgment on the award of the Arbitrators may be
entered in any court having jurisdiction over the party against
which enforcement of the award is being sought. Subject to the
provisions of ARTICLE 8, the Arbitrators shall divide all costs
(other than fees of counsel) incurred in conducting the
arbitration in their final award in accordance with what they
deem just and equitable under the circumstances.
37
10.11. NO THIRD PARTY BENEFICIARIES. This Agreement
shall not confer any rights or remedies upon any Person or entity
other than the parties hereto and their respective successors and
permitted assigns.
11. DEFINITIONS
For purposes of this Agreement, the following terms
have the meanings specified with respect thereto below:
"ACTION" means any action, suit, litigation, complaint,
counterclaim, claim, petition, investigation, mediation contest,
set-off or administrative proceeding, whether at law, in equity,
in arbitration or otherwise, and whether conducted by or before
any Government, any Tribunal or any other Person.
"AFFILIATE" of any Person means any other Person
directly or indirectly controlling, controlled by, or under
direct or indirect common control with the former person, where
"control" means the power, directly or indirectly, to direct or
cause the direction of the management and policies of another
person, whether through the ownership of voting securities, by
contract or otherwise.
"EBITDA" means net income, plus all amounts deducted in
the computation of such net income (i) on account of interest and
on account of taxes imposed on or measured by income, and (ii)
for depreciation and amortization, in all cases determined in
accordance with GAAP.
"ENVIRONMENTAL LAW" means a Law existing as of the date
hereof relating to health, safety or the environment, including,
without limitation, a Law relating to the manufacture,
generation, processing, distribution, application, use,
treatment, transport, handling or storage (whether alone or below
ground) of, or emissions, discharges, releases or threatened
releases into the environment (including without limitation
ambient air, surface water, ground water, soil and subsoil) of,
pollutants, contaminants, petroleum products, chemicals, or
industrial waste, Hazardous Materials, other solids, liquids,
gases or wastes, heat, light, noise, radiation, electro-magnetic
fields and other forms of matter or energy of every kind and
nature and the proper containment and disposal of the same, or to
occupational or worker safety and health.
"ENVIRONMENTAL PERMITS" means all permits, licenses,
certificates, approvals, authorizations, regulatory plans and
compliance schedules required as of the date hereof by applicable
Environmental Laws, or issued by a Government pursuant to
applicable Environmental Law, or entered into by agreement of the
party to be bound, relating to activities that affect human
health or the environment, including without limitation, permits,
licenses, certificates, approvals, authorizations, regulatory
plans and compliance schedules for air emissions, water
discharges, pesticide and herbicide or other agricultural
chemical storage, use or application, and Hazardous Material or
Solid Waste generation, use, storage, treatment and disposal.
38
"GAAP" means generally accepted accounting principles,
consistently applied.
"GOVERNMENT" means any federal, national, state,
provincial, local, municipal, or foreign government or any
department, commission, board, bureau, agency, instrumentality,
unit, or taxing authority thereof.
"HAZARDOUS MATERIAL" means any substance or material,
including, without limitation, any raw material, commercial
product, waste or waste product that, because of its quantity,
concentration, or physical, chemical or infectious
characteristics may cause or significantly contribute to an
increase in mortality or an increase in serious, irreversible or
incapacitating illness, or pose a substantial hazard to human
health or the environment, including without limitation all
substances and materials designated as hazardous or toxic under
any applicable Environmental Law and including, without
limitation, gasoline, fuel oil and other petroleum products,
except for vehicle fuels and petroleum products and typical
cleaning maintenance chemicals used in the normal course, to the
extent not released.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, or any successor Law, and any rules and
regulations issued or promulgated pursuant to such Act.
"IMPROVEMENTS" means all buildings, structures and
other improvements of any and every nature located on the Real
Property and all fixtures attached or affixed, actually or
constructively, to the Real Property or to any such buildings,
structures or other improvements.
"KNOWN," "TO THE KNOWLEDGE OF," "AWARE" or words of
similar import employed in this Agreement with reference to any
individual or entity shall be conclusively presumed to mean that
the individual or entity has made reasonable and diligent efforts
under the circumstances to become knowledgeable; in the case of
Seller and Parent, "KNOWLEDGE" shall be deemed to be the
individual and collective knowledge (as defined above) of its
directors and senior officers and managers.
"LAWS" mean all federal, national, international,
state, provincial, local, municipal or foreign constitutions,
statutes, rules, regulations, ordinances, acts, codes,
legislation, treaties, conventions, judicial decisions, common
law, equity or similar laws or legal requirements as in effect
from time to time.
"LEASED REAL PROPERTY" means all leasehold and similar
interests in real property leased from third parties by Seller
for use in the operation of the Seller's Business, and all of
Seller's rights, title and interest in and to all Improvements
thereon, together with all easements, rights of way, licenses and
other interests therein.
39
"LIABILITY" means any liability or obligation whether
known or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated and whether due
or to become due.
"LIEN" means any mortgage, pledge, hypothecation,
security interest, encumbrance, claim, restriction on use, lien
or charge of any kind, or any rights of others, however evidenced
or created (including any agreement to give any of the
foregoing), any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the lien notice
records, Uniform Commercial Code indices or other similar public
records of any jurisdiction.
"ORDERS" means any order, writ, judgment, decree,
ruling, consent agreement, or award of or by any Tribunal or
entered by consent of the party to be bound.
"PERSON" means an individual, partnership, joint
venture, corporation, limited liability company, trust,
unincorporated organization, or Government.
"RELATED PARTY" means any Person (i) owning, or
formerly owning, beneficially or of record, directly or
indirectly any of the shares of or other equity interest in
Seller; (ii) any Affiliate of such Person; (iii) any director or
officer of Seller; (iv) any Person in which any of the foregoing
Persons has, directly or indirectly, at least a five percent
(5.0%) beneficial interest in the capital stock or other type of
equity interest of such Person, or (v) any partnership in which
any of the foregoing Persons is a general partner or has at least
a five percent (5.0%) beneficial interest.
"TAXES" means any present or future taxes, levies,
imposts, duties, fees, assessments, deductions, withholdings or
other charges of whatever nature, including without limitation
income, gross receipts, excise, property, sales, use, customs,
value added, consumption, transfer, license, payroll, employee
income, withholding, social security, and franchise taxes, now or
hereafter imposed or levied by the United States of America, any
state, or any Government or by any department, agency or other
political subdivision or taxing authority thereof or therein, all
deposits required in connection therewith, and all interests,
penalties, additions to tax, and other similar liabilities with
respect thereto.
"TERRITORY" means the following states: Illinois,
Michigan, Indiana and Wisconsin.
"TRIBUNAL" means any federal, national, state, local,
municipal or foreign court, governmental agency, administrative
body or agency, tribunal, private alternative dispute resolution
system, or arbitration panel.
[Remainder of page intentionally left blank]
40
IN WITNESS WHEREOF, the parties have executed this
Agreement or caused it to be executed by their duly authorized
officers and agents as of the day and year first above written.
Signatures of the parties transmitted by facsimile shall be valid
and binding for all purposes.
PURCHASER:
PAMECO CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: V.P. CFO
SELLER:
PARK HEATING AND AIR CONDITIONING
SUPPLY CO., INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
PARENT:
______________________________
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
The undersigned, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, hereby agrees to be a
party to this Agreement for the limited purpose of agreeing to be
bound by the terms of SECTION 2.3 hereof given his position as
president of the Seller and as a significant indirect owner of
the Seller, who will benefit substantially from the transactions
contemplated herein.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇