September 13, 2000
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇
Exhibit 2(a)
STOCK PURCHASE AGREEMENT
by and among
MINI CROWN FUNDING CORP.,
("Buyer")
Its parent, SOVEREIGN SPECIALTY CHEMICALS, INC.,
("Parent")
IMPERIAL ADHESIVES, INC.
("Imperial")
and
NS GROUP, INC.
("Seller")
Dated as of September 13, 2000
TABLE OF CONTENTS
Page
1. Definitions 1
2. Purchase and Sale of the Imperial Shares 9
(a) Basic Transaction 9
(b) Purchase Price 9
(c) Working Capital Adjustment 9
(d) The Closing 9
(e) Deliveries at the Closing 10
(f) Closing Audit 11
(g) Post-Closing Purchase Price Adjustment 11
3. Representations and Warranties Concerning the
Transaction 12
(a) Representations and Warranties of Seller 12
(b) Representations and Warranties of the Buyer and
the Parent 13
4. Representations and Warranties Concerning Imperial 14
(a) Organization, Qualification and Corporate Power 15
(b) Capitalization 15
(c) Noncontravention 15
(d) Subsidiaries 15
(e) Financial Statements 15
(f) Events Subsequent to the Most Recent Financial
Statements 16
(g) Undisclosed Liabilities 18
(h) Tax Matters 18
(i) Tangible Assets 19
(j) Real Property 19
(k) Intellectual Property 21
(l) Warranties and Product Liability 22
(m) Contracts 23
(n) Insurance 23
(o) Litigation 24
(p) Employees 24
(q) Employee Benefits 24
(r) Environment, Health and Safety 26
(s) Legal Compliance 28
(t) Certain Business Relationships with Imperial 28
(u) Brokers' Fees 28
(v) Accounts Receivable 28
(w) Bank Accounts; Investments 29
(x) THERE IS NO SUBSECTION (x) 29
(y) Customers and Suppliers 29
(z) Certain Business Practices 29
5. Pre-Closing Covenants 29
(a) General 29
(b) Notices and Consents 29
(c) Operation of Business 30
(d) Preservation of Business 30
(e) Access 30
(f) Notice of Developments 30
(g) Exclusivity 31
(h) HSR Act Filing 31
(i) Plant Closing Notification 31
(j) Intercompany Items 31
(k) Excluded Assets and Excluded Liabilities 31
(l) No Negative Cash 32
(m) Title Insurance 32
(n) Surveys 32
(o) Certain Insurance Policies and Arrangements 32
(p) Comparison Month Financial Statements 32
(q) Physical Inventory Taking and Determination of
Whether Inventory Reserve Understatement Exists 33
(r) Termination of ▇▇▇▇▇▇▇ Salary Continuation
Agreement 33
6. Additional Covenants 33
(a) General 33
(b) Litigation Support 33
(c) Obligation to Refer Inquiries 34
(d) Confidentiality 34
(e) Additional Tax Matters 34
(f) Covenant Not to Compete 39
(g) Employee Benefit Plans 39
(h) Disability Workers' Compensation 41
(i) Severance Policy 41
(j) Collective Bargaining Agreement 41
(k) Backyear Audits 41
(l) Special Arrangements Relating to Known
Environmental Matters 41
(m) Post-Closing Employee Benefit Matters 44
7. Conditions to Obligations to Closing 44
(a) Conditions to Obligation of the Buyer 44
(b) Conditions to Obligations of the Seller 46
8. Remedies for Breach of This Agreement 47
(a) Survival 47
(b) Indemnification Provisions for Benefit of the
Buyer 48
(c) THERE IS NO SECTION 8(c) 49
(d) Indemnification Provisions for Benefit of the
Seller 49
(e) Matters Involving Third Parties Claims 50
(f) Determination of Loss 51
(g) Exclusive Remedy 51
(h) Payment 51
(i) Other Indemnification Provisions 51
(j) Arbitration with Respect to Certain
Indemnification Matters 51
(k) Adjustment to Purchase Price 52
9. Termination 52
(a) Termination of Agreement 52
(b) Effect of Termination 53
10. Miscellaneous 53
(a) Press Releases and Announcements 53
(b) No Third-Party Beneficiaries 54
(c) Entire Agreement 54
(d) Succession and Assignment 54
(e) Facsimile/Counterparts 54
(f) Headings 54
(g) Notices 54
(h) Submission to Jurisdiction 56
(i) Amendments and Waivers 56
(j) Severability 56
(k) Expenses 57
(l) Construction 57
(m) Incorporation of Exhibits, Annexes and
Schedules 57
(n) Specific Performance 57
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Financial Statements
Exhibit B Form of Opinion of Seller's Counsel
Exhibit C Form of Opinion of Seller's Buyer's Counsel
Exhibit D Press Release of Seller
Exhibit E Press Release of Buyer
SCHEDULES
Schedule 6(m) List of Applicable Plans
DISCLOSURE SCHEDULES
Schedule 4(a) Jurisdictions
Schedule 4(c) Noncontravention
Schedule 4(e) Financial Statements
Schedule 4(f) Material Adverse Change
Schedule 4(g) Undisclosed Liabilities
Schedule 4(h) Tax Matters
Schedule 4(j) Real Property
Schedule 4(k) Intellectual Property
Schedule 4(l) Warranties
Schedule 4(m) Contracts
Schedule 4(n) Insurance
Schedule 4(o) Litigation
Schedule 4(p)(i) Employees
Schedule 4(p)(ii) Terminations
Schedule 4(q) Employee Benefits
Schedule 4(r) Environment, Health and Safety
Schedule 4(w) Bank Accounts
Schedule 4(y) Customers and Suppliers
Schedule 5(e) Designated Imperial Customers
Schedule 5(o) Certain Insurance Contracts and Arrangements
Schedule 6(i) Severance Policy
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of the 13th day of September, 2000, by and among
MINI CROWN FUNDING CORP., a Delaware corporation (the "Buyer"),
the Buyer's parent, SOVEREIGN SPECIALTY CHEMICALS, INC., a
Delaware corporation (the "Parent"), IMPERIAL ADHESIVES, INC., an
Ohio corporation ("Imperial"), and NS GROUP, INC., a Kentucky
corporation (the "Seller"). The Buyer, the Parent and the Seller
are referred to herein individually as a "Party" and collectively
as the "Parties."
RECITALS
WHEREAS, the Seller owns all of the outstanding capital
stock of Imperial; and
WHEREAS, this Agreement contemplates a transaction in
which the Buyer will purchase from the Seller, and the Seller
will sell to the Buyer, all of the outstanding capital stock of
Imperial, and the Parent will be primarily liable as a co-maker,
of each and every liability and obligation of the Buyer to the
Seller created by the provisions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing
Recitals, the mutual promises herein made, and the
representations, warranties and covenants herein contained, the
receipt and sufficiency of which are hereby mutually acknowledged
by the Parties, they hereby agree as follows:
1. Definitions.
"AAA" has the meaning set forth in Section 8(j) hereof.
"Adjusted Inventory" means the dollar value of the inventory
of Imperial as of the date of determination net of all reserves,
but without any adjustment for capitalized labor or overhead.
"Adjusted Section 338 Taxes" has the meaning set forth in
Section 6(e((xiii) hereof.
"Applicable ▇▇▇ Tax Returns" has the meaning set forth in
Section 6(e)(iii) hereof.
"Arbitration" has the meaning set forth in Section 8(j)
hereof.
"Arbitrator" has the meaning set forth in Section 8(j)
hereof.
"Adverse Consequences" means all actual damages from
complaints, actions, suits, proceedings, hearings,
investigations, claims, demands, judgments, orders, decrees,
stipulations, injunctions, damages, dues, penalties, fines,
costs, amounts paid in settlement, liabilities, obligations,
taxes, liens, losses, expenses and fees, including all reasonable
accounting fees and all reasonable attorneys' fees and court
costs.
"Affected Participants" has the meaning set forth in Section
6(g)(i) hereof.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of
1934, as amended.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇" has the meaning set forth in Section 2(f)
hereof.
"Audited Statement of Net Working Capital" has the meaning
set forth in Section 2(f) hereof.
"Business" means the business of manufacturing, distributing
and selling specialty chemical adhesives, sealants and coatings
conducted by Imperial.
"Buyer" has the meaning set forth in the preface above.
"Buyer Customer Sign-Off Letter" has the meaning set forth
in Section 8(a)(vii) hereof.
"Buyer's Plan" has the meaning set forth in Section 6(g)(i)
hereof.
"Closing" has the meaning set forth in Section 2(d) hereof.
"Closing Date" has the meaning set forth in
Section 2(d) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Comparison Month" means Imperial's fiscal month ending
September 2, 2000.
"Comparison Month Financial Statements" has the meaning set
forth in Section 5(p) hereof.
"Confidential Information" means (i) the terms and
provisions of this Agreement or the transactions to be
consummated pursuant hereto and (ii) Imperial's trade secrets and
non-public confidential or proprietary business information,
including without limitation, all inventions, formulas or
compositions (whether patentable or unpatentable and whether or
not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, business and marketing plans, lists or
descriptions of any customers, referral sources or organizations,
financial statements, cost reports or other financial information
(and any analyses or compilations thereof or reports thereon),
contract proposals, or bidding information, training and
operations methods and manuals, personnel records, fee structure;
computer software, and management systems, policies or
procedures, including related forms and manuals, provided that
"Confidential Information" shall not include any information
(i) which is disclosed pursuant to subpoena or other legal
process, (ii) which has been publicly disclosed by means other
than by a breach of a confidentiality agreement, or (iii) which
is subsequently disclosed by any third party not in breach of a
confidentiality agreement.
"Controlled Group of Corporations" has the meaning set forth
in Code Sec. 1563.
"Current Employees" has the meaning set forth in
Section 4(p)(i) hereof.
"Designated Imperial Customers" has the meaning set forth in
Section 5(e) hereof.
"Disclosure Schedule" has the meaning set forth in Section 4
hereof.
"DOJ" means the Antitrust Division of the United States
Department of Justice or any successor Governmental Body.
"Employee Benefit Plan" means any (a) Employee Pension
Benefit Plan, (b) Employee Welfare Benefit Plan, or (c) any other
plan, arrangement, or policy relating to stock options, stock
purchases, compensation, deferred compensation, severance, fringe
benefit or other employee benefit, which covers any current or
former employee of Imperial or to which Imperial makes
contributions or has made contributions within the immediate past
five years.
"Employee Pension Benefit Plan" has the meaning set forth
in ERISA Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
"Equitable Exceptions" has the meaning set forth in
Section 3(a)(ii) below.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Assets" means (i) all real property associated
with the facility formerly owned by Imperial located in Virginia,
(ii) the note receivable of Imperial associated with the sale of
the real property formerly owned by Imperial located in Michigan,
(iii) cash and cash equivalents, (iv) intercompany indebtedness
owed to Imperial by the Seller and its other Affiliates, (v)
prepayments of any Taxes for which the Seller is liable pursuant
to Section 6(e) and (vi) prepaid premiums for insurance
maintained for Imperial by the Seller and/or its Affiliates other
than for Imperial.
"Excluded Liabilities" means (i) all Funded Indebtedness,
(ii) all liabilities and obligations of Imperial whatsoever
arising out of, in connection with or related to Imperial's
ownership of any real property located in Virginia or Michigan,
(iii) Taxes for which the Seller is liable pursuant to
Section 6(e); and (iv) premiums payable for insurance maintained
for Imperial by the Seller and/or its Affiliates other than
Imperial.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statements" has the meaning set forth in
Section 4(e) hereof.
"Funded Indebtedness" means all (i) indebtedness of Imperial
for borrowed money or other interest-bearing indebtedness; (ii)
capital lease obligations of Imperial; (iii) intercompany
indebtedness owed by Imperial to the Seller and its Affiliates
other than Imperial; and (iv) indebtedness of others guaranteed
by Imperial or secured by an Encumbrance on any of Imperial's
assets; provided, however, that Funded Indebtedness shall not
include any Letter of Credit unless actually drawn upon by the
beneficiary thereof.
"FTC" means the United States Federal Trade Commission or
any successor Governmental Body.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Governmental Body" means any foreign, federal, state,
county, city, town, village, municipal or other governmental
department, commission, board, bureau, agency, authority, court
or related judicial authority or instrumentality of any of the
foregoing.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
"Imperial" has the meaning set forth in the preface above.
"Imperial Shares" means all outstanding shares of the common
stock, no par value per share, of Imperial.
"Indemnified Party" has the meaning set forth in
Section 8(e) hereof.
"Indemnifying Party" has the meaning set forth in
Section 8(e) hereof.
"Independent Accountant" has the meaning set forth in
Section 2(f) hereof.
"Intellectual Property" means all (a) trademarks, service
marks, trade dress, logos, websites, e-mail domains, trade names
and corporate names and registrations and applications for
registration thereof, (b) copyrights and registrations and
applications for registration thereof, (c) computer software,
data and documentation and (d) trade secrets and confidential
business information (including formulas, compositions,
inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing and business
data, pricing and cost information, business and marketing plans,
and customer and supplier lists and information).
"Inventory Reserve Understatement" means that in accordance
with the provisions of Section 5(q), based upon ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇'▇
audit of the Adjusted Inventory, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ has determined
that such audited Adjusted Inventory as at the close of the
Comparison Month, determined in accordance with GAAP applied on a
basis consistent with the preparation of the Financial
Statements, is at least $175,000 less than the Adjusted Inventory
as disclosed by Imperial's Comparison Month Financial Statements.
"IRS" has the meaning set forth in Section 4(q) hereof.
"▇▇▇▇▇▇▇ Agreement" has the meaning set forth in
Section 5(r) hereof.
"Knowledge" of a matter referred to in this Agreement means,
with respect to each of (x) Imperial alone, (y) the Seller alone
and (z) Imperial and the Seller, together, the actual knowledge
about that matter held by any of the following persons: ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇.
"Known Environmental Activities" has the meaning set forth
in Section 6(l) hereof.
"Known Environmental Claim Resolution Activities" has the
meaning set forth in Section 6(l).
"Known Environmental Costs" has the meaning set forth in
Section 6(l)(iv) hereof.
"Known Environmental Identification and Remediation
Activities" has the meaning set forth in Section 6(l) hereof.
"Known Environmental Matters" has the meaning set forth in
Section 6(l) hereof.
"Known Environmental Third Party Claims" has the meaning set
forth in Section 6(l) hereof.
"Laws" means all laws, including the common law, statutes,
codes, rules, regulations, ordinances or Orders of any
Governmental Body.
"Leased Real Property" has the meaning set forth in Section
4(j) hereof.
"Leases" has the meaning set forth in Section 4(j)(ii)
hereof.
"Liability" means any liability, debt, obligation, amount or
sum due (whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated, and whether due
or to become due) including any liability for Taxes.
"Material" (whether or not capitalized) means, when used in
Section 4, an amount of money greater than $50,000 or an
occurrence or circumstance which results in a loss to Imperial in
excess of $50,000, provided that with respect to the occurrence
of any series of related events or set of related circumstances,
"Material" means an amount of money greater than $50,000 per
single event or circumstance or $100,000 in the aggregate for
such series of related events or set of related circumstances, or
which result in a loss to Imperial in excess of $50,000 per
single event or circumstance or $100,000 in the aggregate for
such series of related events or set of related circumstances.
"Material Adverse Change" or "Material Adverse Effect" means
one or more events, changes or effects, or a series of related
events, changes or effects, which, taken as a whole, or in the
aggregate, can reasonably be expected to have the effect of
reducing the annual income from operations of the Business for
one or more years by more than $175,000, provided that: (A) a
"Material Adverse Change" or a "Material Adverse Effect" shall
not include events, changes or effects relating to or caused by
general economic or industry conditions; (B) Imperial's customer
relationship with ▇▇▇▇▇ with respect to ▇▇▇▇▇'▇ volume of
purchasing from Imperial and the prices paid on such purchases
shall not be taken into account in determining whether a Material
Adverse Change or a Material Adverse Event has occurred; and (C)
the terms "Material Adverse Change" and "Material Adverse Effect"
do not include the expression of the intention by any one or more
of the "Designated Imperial Customers" (as that term is defined
in Section 5(e) hereof) to decline to continue to transact
business with Imperial following the Closing solely or primarily
on account of the Buyer's ownership of Imperial.
"Most Recent Balance Sheet" means the balance sheet
contained within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth
in Section 4(e) hereof.
"Most Recent Financial Statements Date" has the meaning set
forth in Section 4(e) hereof.
"Multiemployer Plan" has the meaning set forth in ERISA Sec.
3(37).
"Net Cash" has the meaning set forth in Section 2(b) hereof.
"Net Working Capital of Imperial" means an amount,
calculated as of the close of business on the Closing Date, equal
to (a) the book value of total current assets of Imperial other
than Excluded Assets (and all related reserves), minus (b) the
book value of total current liabilities of Imperial other than
Excluded Liabilities, in each case determined in accordance with
GAAP applied on a basis consistent with the preparation of the
Financial Statements; provided that neither (i) rework inventory
on hand on the Closing Date in excess of $416,000 nor (ii)
reserves for liabilities relating to any matters covered by
Section 4(r) and Section 6(l) hereof created after June 30, 2000
shall be included in the calculation of the Net Working Capital
of Imperial.
"Non-Section 338 Taxes" has the meaning set forth in Section
6(e)(xiii) hereof.
"Owned Real Property" has the meaning set forth in Section
4(j) hereof.
"Order" means any order, writ, injunction, decree, judgment,
award, determination or written direction of any court,
arbitrator or Governmental Body.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with
respect to quantity and frequency).
"Parent" has the meaning set forth in the preface above.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Lien" means (a) mechanic's, materialmen's and
similar liens, (b) liens for Taxes not yet due and payable (or
for Taxes that the taxpayer is contesting in good faith through
appropriate proceedings), (c) liens arising under workers'
compensation, unemployment insurance, social security, retirement
and similar legislation, (d) liens arising in connection with
sales of foreign receivables, (e) liens on goods in transit
incurred pursuant to documentary letters of credit, (f) purchase
money liens and liens securing rental payments under capital
lease arrangements, and (g) other liens arising in the Ordinary
Course of Business and not incurred in connection with the
borrowing of money.
"Person" means an individual, corporation, partnership,
association, trust or other entity or organization, including a
Governmental Body or an agency or instrumentality thereof.
"Physical Inventory Taking" means the physical counting of
Imperial's inventory to be observed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and the
Buyer's regularly employed independent public accountants,
commencing on or about September 5, 2000, incident to the
completion by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of the Audited Statement of Net
Working Capital.
"Post-Closing Tax Period" means any Tax period that
commences after the Closing Date.
"Pre-Closing Tax Period" means any Tax period ending on or
prior to the Closing Date.
"Preliminary Statement of Net Working Capital" has the
meaning set forth in Section 2(c) hereof.
"Products" means that group of products which has been
designed, developed, produced and/or sold or which is presently
sold or offered for sale by the Business.
"Prohibited Transaction" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"Purchase Price" has the meaning set forth in
Section 2(b) hereof.
"Real Property" has the meaning set forth in
Section 4(j) below, including all buildings and improvements
(collectively, the "Improvements") situated thereon, any
appurtenances thereto, and any right, title and interest of
Imperial in the fixtures attached or appurtenant to the
Improvements.
"Reportable Event" has the meaning set forth in ERISA Sec.
4043.
"▇▇▇ Tax Returns" has the meaning set forth in Section
6(e)(ii) hereof.
"Securities Act" means the Securities Act of 1933, as
amended.
"Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien, other than a
Permitted Lien.
"Section 338 Elections" has the meaning set forth in Section
6(e)(xi) hereof.
"Section 338 Report" has the meaning set forth in Section
6(e)(xiii) hereof.
"Section 338 Taxes" has the meaning set forth in Section
6(e)(xiii) hereof.
"Seller" has the meaning set forth in the preface above.
"Seller's Plan" has the meaning set forth in Section 6(g)(i)
hereof.
"Seller's Portion of Known Environmental Costs" has the
meaning set forth in Section 6(l)(iv) hereof.
"Special Section 338 Gross-Up Amounts and Fees" has the
meaning set forth in Section 6(e)(xiii) hereof.
"Straddle Period" shall mean any Tax period that begins
before and ends after the Closing Date.
"Subsidiary" means any corporation with respect to which
another specified corporation has the power to vote or direct the
voting of sufficient securities to elect a majority of the
directors.
"Target Net Working Capital" has the meaning set forth in
Section 2(c) hereof.
"Tax" or "Taxes" means any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto.
"Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
"Termination Fee" shall mean the sum of $260,000, provided
that if the Material Adverse Event or the Material Adverse Change
which has occurred is that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ has determined that
there was an Inventory Reserve Understatement, the "Termination
Fee" shall mean $75,000.
"Third Party Claim" has the meaning set forth in Section
8(e) hereof.
2. Purchase and Sale of the Imperial Shares.
(a) Basic Transaction. On and subject to the
terms and conditions of this Agreement, the Buyer agrees to
purchase from the Seller, and the Seller agrees to sell to the
Buyer, all of the Imperial Shares for the consideration specified
below in this Section 2. In order to induce the Seller to execute
and deliver this Agreement to the Buyer and the Parent, the
Parent expressly acknowledges and agrees that the Parent shall be
primarily liable to the Seller for each and every liability and
obligation of the Buyer to the Seller created by the provisions
of this Agreement as a co-maker of such liability or obligation,
provided that where, in the Seller's sole judgment, there is no
impairment to the Seller's receipt of the timely satisfaction of
any such liability or the timely performance of any such
obligation of the Buyer, the satisfaction of such liability or
obligation shall be made or performed by the Buyer.
(b) Purchase Price. The purchase price for the
Imperial Shares to be purchased by the Buyer from the Seller
pursuant to the terms hereof shall be the sum of $26,750,000, as
adjusted pursuant to the provisions of Section 2(c) and Section
2(g) hereof (the "Purchase Price"), which shall be paid in cash.
In addition, the Buyer will pay to the Seller the aggregate
amount of all cash and cash equivalents on the books of Imperial
as of the Closing Date (the "Net Cash"). The Purchase Price, as
preliminarily adjusted in accordance with the provisions of
Section 2(c) hereof, together with the Net Cash, shall be paid
by the Buyer to the Seller at the Closing by wire transfer or
delivery of other immediately available funds to an account or
accounts designated by the Seller not less than five (5) days
prior to the Closing Date.
(c) Working Capital Adjustment. At the Closing,
the Purchase Price shall be adjusted upward or downward on a
dollar-for-dollar basis by the amount by which the Net Working
Capital of Imperial at Closing is more or less than $6,550,000
(the "Target Net Working Capital Amount"), provided that if
rework inventory on hand on the Closing Date is less than
$416,000, the Target Net Working Capital Amount shall be reduced
by $1.00 for each $1.00 by the amount $416,000 exceeds the book
value of rework inventory on hand on the Closing Date. The Net
Working Capital of Imperial at Closing shall be preliminarily
determined by the Seller based on Imperial's Most Recent
Financial Statement (the "Preliminary Statement of Net Working
Capital").
(d) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Street,
40th Floor, in Chicago, Illinois, commencing at 8:00 a.m. local
time on the later of October 2, 2000 and the second (2nd)
business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the
transactions contemplated hereby, or such other date as the Buyer
and the Seller may mutually determine (the "Closing Date").
(e) Deliveries at the Closing. At the Closing:
(i) The Seller will deliver or cause to be
delivered to the Buyer:
(A) certificates representing the Imperial Shares, duly endorsed
or accompanied by stock powers duly executed in blank, and
otherwise in form acceptable for transfer on the books of
Imperial and any other documents that are necessary for the
transfer to the Buyer of good title to the Imperial Shares, with
any requisite transfer tax or stamps attached or provided for;
(B) a copy of the Certificate of Incorporation of Imperial with
all amendments thereto and Certificates of Good Standing for the
State of Ohio and each State where Imperial is qualified to do
business as a foreign corporation, each of which shall be
certified as of a date within thirty (30) days prior to the
Closing Date by the Secretary of State of such States;
(C) a copy of the by-laws of Imperial as amended through the
time of the Closing, certified by the Secretary of Imperial;
(D) the minute book, stock record book and corporate seal of
Imperial;
(E) all books and records of
Imperial which are requested by the Buyer;
and
(F) the various certificates,
instruments, and documents referred to in
Section 7(a) below.
(ii) The Buyer will deliver or cause to be delivered to the
Seller:
(A) the consideration specified in
Section 2(b) above as may be adjusted at the
Closing pursuant to Section 2(c) above and
subject to further adjustment after the
Closing pursuant to Section 2(g);
(B) the various certificates,
instruments and documents referred to in
Section 7(b) below.
(f) Closing Audit. Within ninety (90) days
following the Closing Date, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P. ("▇▇▇▇▇▇
▇▇▇▇▇▇▇▇") shall prepare and deliver to the Seller and the Buyer
an audit of the Net Working Capital of Imperial (the "Audited
Statement of Net Working Capital") at and as of the close of
business on the Closing Date. The Audited Statement of Net
Working Capital shall be determined in accordance with GAAP
applied on a basis consistent with the preparation of the
Financial Statements. The cost to prepare the Audited Statement
of Net Working Capital shall be borne equally by the Buyer and
the Seller; provided, however, that in the event that ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ audits more than the Net Working Capital of Imperial,
the Seller's portion of the costs of such audit of the Net
Working Capital of Imperial shall be limited to 50% of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇'▇ determination of its fees and expenses allocable to
the completion of the audit, preparation and delivery of the
Audited Statement of Net Working Capital. In the event that
either the Buyer or the Seller disputes any item(s) on the
Audited Statement of Net Working Capital within ten (10) days
after such Party's receipt thereof, and the Parties are unable to
resolve such dispute among themselves within thirty (30) days
following their receipt of the Audited Statement of Net Working
Capital, the Parties agree that another "Big Five" accounting
firm acceptable to the Buyer and the Seller (the "Independent
Accountant") will review the disputed item(s) on the Audited
Statement of Net Working Capital together with the documentation
provided by the Buyer and the Seller supporting their respective
positions in the dispute, which referral shall be made to such
Independent Accountant not more than ten (10) days following the
expiration of the said thirty (30) day period. The final
determination of such disputed item(s) by the Independent
Accountant shall be made within sixty (60) days following the
Parties' referral thereof to the Independent Accountant, which
determination shall be reflected on the Audited Statement of Net
Working Capital and shall be final and binding on the Parties for
all purposes and all references to "Audited Statement of Net
Working Capital" elsewhere in this Agreement shall be deemed to
refer to the Audited Statement of Net Working Capital as modified
by the Independent Accountant. The fees and expenses of the
Independent Accountant shall be allocated between the Buyer and
the Seller by the Independent Accountant in proportion to the
extent that, on a dollar-weighted basis, either Party did not
prevail on items in dispute, provided, however, that such fees
and expenses shall not include, so long as a Party complies with
the procedures of this Section 2(f), the other Party's outside
legal, accounting or other fees. All determinations by the
Independent Accountant shall be final, conclusive and binding
upon the Parties with respect to the Audited Statement of Net
Working Capital and the allocation of fees and expenses.
(g) Post-Closing Purchase Price Adjustment. In
the event that the Net Working Capital of Imperial as disclosed
on the Audited Statement of Net Working Capital as finally
determined is less than the Net Working Capital of Imperial as
disclosed on the Preliminary Statement of Net Working Capital,
then the Purchase Price will be adjusted downward, on a dollar-
for-dollar basis, to reflect the decrease in Net Working Capital
of Imperial as disclosed on the Audited Statement of Net Working
Capital from the amount of Net Working Capital of Imperial as
disclosed on the Preliminary Statement of Net Working Capital.
Conversely, the Purchase Price will be adjusted upward, on a
dollar-for-dollar basis, to reflect the increase, if any, in the
Net Working Capital of Imperial as disclosed on the Audited
Statement of Net Working Capital as finally determined from the
amount of the Net Working Capital of Imperial as disclosed on the
Preliminary Statement of Net Working Capital. The post-Closing
adjustment to the Purchase Price, if any, plus interest on the
amount of any such adjustment calculated at a per annum rate of
five per cent (5%) from the Closing Date, shall be paid by the
Seller to the Buyer or by the Buyer to the Seller, as the case
may be, in immediately available funds within fifteen (15) days
of delivery of the Audited Statement of Net Working Capital as
finally determined.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of Seller. The Seller
represents and warrants to the Buyer that, subject to the
specific qualifications and limitations set forth below, the
statements contained in this Section 3(a) are correct and
complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this
Agreement throughout this Section 3(a)).
(i) Organization of the Seller. The Seller
is a corporation duly organized, validly existing, and
in good standing under the laws of the Commonwealth of
Kentucky.
(ii) Authorization of Transaction. The
Seller has full corporate power and authority to
execute and deliver this Agreement and to perform its
obligations hereunder and this Agreement has been duly
executed and delivered by the Seller. This Agreement
constitutes the valid and legally binding obligation of
the Seller, enforceable in accordance with its terms
and conditions, except that (A) such enforceability may
be subject to bankruptcy, insolvency, reorganization,
moratorium or other laws, decisions or equitable
principles now or hereafter in effect relating to or
affecting the enforcement of creditors' rights or
debtors' obligations generally, and to general equity
principles and (B) the remedy of specific performance
and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion
of the court before which any proceeding therefore may
be brought (the terms of clause (A) and (B) are
sometimes collectively referred to as the "Equitable
Exceptions"). Except for filings required by the HSR
Act, the Seller need not give any notice to, make any
filing with, or obtain any authorization, consent or
approval of any Governmental Body in order to
consummate the transactions contemplated by this
Agreement.
(iii) Noncontravention. Except for
approvals required under the HSR Act, neither the
execution and the delivery of this Agreement by the
Seller, nor the consummation of the transactions
contemplated hereby by the Seller, will (A) violate any
Law or Order or other restriction of any Governmental
Body to which the Seller is subject or (B) conflict
with, result in a breach of, constitute a default
under, result in the acceleration of, create in any
part the right to accelerate, terminate, modify or
cancel, or require any notice under any contract,
lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or
other arrangement to which the Seller is a party or by
which it is bound or to which any of its assets is
subject, which, as to clauses (A) and (B), will prevent
the Seller from consummating the transactions
contemplated by this Agreement.
(iv) Broker's Fees. The Seller has no
Liability or obligation to pay any fees or commissions
to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which
the Buyer or the Parent could become liable or
obligated.
(v) Imperial Shares. The Seller holds of
record and owns beneficially all of the Imperial
Shares, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act
and state securities laws), claims, Taxes, Security
Interests (other than those to be removed prior to or
concurrently with the Closing pursuant to
Section 7(a)(xii)), options, warrants, rights,
contracts, calls, commitments, equities, preemptive
rights and demands. The Seller is not a party to any
option, warrant, right, contract, call, put or other
agreement or commitment providing for the disposition
by the Seller of any capital stock of Imperial (other
than this Agreement). The Seller is not a party to any
voting trust, proxy agreement, stockholders' agreement
or other understanding (written or oral) with respect
to the voting of any capital stock of Imperial.
(b) Representations and Warranties of the Buyer
and the Parent. The Buyer and the Parent jointly and severally
represent and warrant to the Seller that, subject to the specific
qualifications and limitations set forth below, the statements
contained in this Section 3(b) are correct and complete as of the
date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement throughout this
Section 3(b)).
(i) Organization of the Buyer. The Buyer and the Parent are
each corporations duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
(ii) Authorization of Transaction. Each of the Buyer and the
Parent has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder
and this Agreement has been duly executed and delivered by each
of the Buyer and the Parent. This Agreement constitutes the
valid and legally binding obligation of each of the Buyer and the
Parent, enforceable in accordance with its terms and conditions
except for the Equitable Exceptions. Except for filings made
under the HSR Act, neither the Buyer nor the Parent need give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Body in order to
consummate the transactions contemplated by this Agreement.
(iii) Noncontravention. Except for approvals required under
the HSR Act, neither the execution and the delivery of this
Agreement by the Buyer or the Parent, nor the consummation of the
transactions contemplated hereby by the Buyer and the Parent,
will (A) violate any Law or Order or other restriction of any
Governmental Body to which the Buyer or the Parent is subject or
any provision of its charter or bylaws or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest or other
arrangement to which either the Buyer or the Parent is a party or
by which it is bound or to which any of its assets is subject,
which, as to clauses (A) and (B), will prevent either the Buyer
or the Parent from consummating the transactions contemplated by
this Agreement.
(iv) Brokers' Fees. Neither the Buyer nor the Parent has any
Liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions
contemplated by this Agreement for which the Seller could become
liable or obligated.
(v) Investment. The Buyer is not acquiring the Imperial Shares
with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act.
4. Representations and Warranties Concerning Imperial. The
Seller represents and warrants to the Buyer that, subject to the
specific qualifications and limitations contained herein and
except as set forth on the Disclosure Schedule delivered by the
Seller to the Buyer concurrently with the execution and delivery
of this Agreement (the "Disclosure Schedule"), the statements
contained in this Section 4 are correct and complete as of the
date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement throughout this
Section 4), except to the extent that such representations and
warranties are made as of any other specified date, and as to
such representation, the same shall be true as of such date. The
Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this
Agreement. As required, the Disclosure Schedule will be updated
one or more times prior to the Closing Date; provided that except
as otherwise provided by the provisions of Section 4(p)(i), any
such updated Disclosure Schedule containing any change that would
result in any Material Adverse Effect must be delivered to the
Buyer not less than two (2) business days prior to the Closing
Date.
(a) Organization, Qualification and Corporate Power. Imperial
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio. Imperial is duly
authorized to conduct business and is in good standing under the
laws of the States of Ohio and Tennessee, and in each other
jurisdiction listed on Schedule 4(a) of the Disclosure Schedule,
which jurisdictions constitute all of the jurisdictions in which
the nature of its businesses or the ownership or leasing of its
properties requires such qualification, except where any such
failure would not have a Material adverse effect on the Business
or Imperial. Imperial has full corporate power and authority to
carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
(b) Capitalization. The entire authorized capital stock of
Imperial consists of 10,000 shares of common stock, 9,499 of
which are issued and outstanding and held by the Seller. None of
the Imperial Shares is held in treasury. The Imperial Shares
have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by the Seller. There are
no outstanding or authorized options, warrants, rights,
contracts, calls, puts, rights to subscribe, conversion rights or
other agreements or commitments to which Imperial is a party or
which are binding upon Imperial providing for the issuance,
disposition or acquisition of any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom
stock, or similar rights with respect to Imperial.
(c) Noncontravention. Except as set forth on Schedule 4(c) of
the Disclosure Schedule, neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any Law or Order or other
restriction of any Governmental Body to which Imperial is subject
or any provision of the charter or bylaws of Imperial or
(ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any
notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other
arrangement to which Imperial is a party or by which it is bound
or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets)
which, as to clauses (i) and (ii) will result in a Material
adverse effect on the Business or Imperial. Except for the
filing under the HSR Act, Imperial does not need to give any
notice to, make any filing with, or obtain any authorization,
consent or approval of any Governmental Body in order for the
Parties to consummate the transactions contemplated by this
Agreement.
(d) Subsidiaries. Imperial has no Subsidiaries and does not
control, directly or indirectly, or have any direct or indirect
equity participation in, any Person.
(e) Financial Statements. Attached hereto as Exhibit A are the
following financial statements (collectively, the "Financial
Statements") of Imperial: (i) unaudited statement of
operations, retained earnings and cash flows for the fiscal years
ended September 27, 1997, September 26, 1998 and September 25,
1999, (ii) unaudited balance sheet as of the last date of each
such fiscal years and (iii) an unaudited balance sheet and
statement of operations, changes in stockholders' equity and cash
flows as of and for the ten month period commencing September 26,
1999 and ending August 5, 2000 (such financial interim statements
being collectively referred to as the "Most Recent Financial
Statements" and the last day of the period covered thereby being
referred to as the "Most Recent Financial Statements Date,"
respectively). Except as set forth on Schedule 4(e) of the
Disclosure Schedule, the Financial Statements (A) have been
prepared in accordance with GAAP applied on a consistent basis
throughout the period covered thereby, (B) are correct and
complete in all material respects, (C) fairly present the
financial condition and results of operations of Imperial as of
such dates and for the periods indicated, and (D) have been
prepared from and in accordance with the books and records of
Imperial (which books and records are correct and complete in all
material respects).
(f) Events Subsequent to the Most Recent Financial Statements.
Except as set forth on Schedule 4(f) of the Disclosure Schedule,
since the Most Recent Financial Statements Date:
(i) there has not been any Material Adverse Change affecting
Imperial;
(ii) Imperial has not sold, leased, transferred or assigned any
of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(iii) Imperial has not entered into any contract, lease,
sublease, license or sublicense (or series of related contracts,
leases, subleases, licenses and sublicenses) either involving
more than $100,000 or outside the Ordinary Course of Business;
(iv) other than in the Ordinary Course of Business, Imperial has
not accelerated, terminated, modified or canceled any contract,
lease, sublease, license or sublicense (or series of related
contracts, leases, subleases, licenses and sublicenses) involving
more than $100,000 to which Imperial is a party or by which it is
bound;
(v) no Person has notified Imperial of any acceleration,
termination, modification or cancellation of any Material
contract (other than a customer contract in the Ordinary Course
of Business), agreement, lease, sublease, license or sublicense
(or series of related contracts, leases, subleases, licenses and
sublicenses), involving more than $100,000 to which Imperial is a
party or by which it is bound;
(vi) other than in the Ordinary Course of Business, Imperial has
not made any capital expenditure (or series of related capital
expenditures) either involving more than $50,000 individually or
$100,000 in the aggregate, or outside the Ordinary Course of
Business;
(vii) other than in the Ordinary Course of Business, Imperial
has not made any capital investment in, any loan to, or any
acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions)
either involving more than $50,000 individually or $100,000 in
the aggregate;
(viii) Imperial has not delayed or postponed (beyond its
normal practice) the payment of accounts payable and other
liabilities;
(ix) there has been no change made or authorized in the charter
or regulations of Imperial;
(x) Imperial has not experienced any damage, destruction or loss
involving more than $100,000 (whether or not covered by
insurance) to its assets;
(xi) Imperial has not made any loan to, or entered into any other
transaction with, any of its directors, officers and employees
outside the Ordinary Course of Business or involving more than
$50,000, giving rise to any claim or right on its part against
the Person or on the part of the Person against it;
(xii) Imperial has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified
in any material respect the terms of any existing such contract
or agreement with any of its full-time staff employees;
(xiii) Imperial has not granted an increase in the base
compensation of any of its directors, officers and employees
outside the Ordinary Course of Business;
(xiv) Imperial has not adopted any (A) bonus, (B) profit-
sharing, (C) incentive compensation, (D) pension, (E) retirement,
(F) medical, hospitalization, life, or other insurance,
(G) severance or (H) other plan, contract or commitment for any
of its directors, officers and employees, or modified or
terminated any existing such plan, contract or commitment;
(xv) Imperial has not changed its accounting methods or
principles;
(xvi) Imperial has not suffered any Material shortages of raw
materials used in the production of the Products;
(xvii) Imperial has not made or paid any non-cash dividends or
distributions to the Seller whether or not upon or in respect of
its capital stock;
(xviii) Imperial has not redeemed or otherwise acquired any
shares of its capital stock or issued any capital stock or any
option, warrant or right relating thereto or any securities
convertible or exchangeable for any shares of its capital stock;
and
(xix) Imperial has not agreed to do any of the foregoing.
(g) Undisclosed Liabilities. Since the Most Recent Financial
Statements Date, Imperial has incurred no Material Liabilities
required by GAAP to be reflected on its balance sheet other than
in the Ordinary Course of Business or as disclosed on Schedule
4(g) of the Disclosure Schedule.
(h) Tax Matters. Except as set forth on Schedule 4(h) of the
Disclosure Schedule:
(i) Imperial has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by Imperial (whether or not
shown on any Tax Return) have been paid or accrued. Imperial
currently is not the beneficiary of any extension of time within
which to file any Tax Return. No claim is currently pending by
an authority in a jurisdiction where Imperial does not file Tax
Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the
assets of Imperial that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) Neither the Seller nor any of the officers (or employees
responsible for Tax matters) of Imperial has received any notice
that any authority intends to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no
dispute or claim concerning any Tax liability of Imperial either
(A) claimed or raised by any authority in writing or (B) as to
which the Seller or Imperial has Knowledge based upon personal
contact with any agent of such authority. Schedule 4(h) of the
Disclosure Schedule lists all federal, state and local income Tax
Returns filed with respect to Imperial for taxable periods ended
on or after September 25, 1993 that currently are the subject of
an audit.
(iii) Imperial has not filed a consent under Code Sec. 341(f)
concerning collapsible corporations. Imperial has not made any
payments, is not obligated to make any payments, nor is a party
to any agreement that under certain circumstances could obligate
it to make any payments that will not be deductible to Imperial
under Code Sec. 280G. Imperial has disclosed on its federal
income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within
the meaning of Code Sec. 6662. Imperial is not a party to any
Tax allocation or sharing agreement.
(iv) Except for Taxes incurred in the Ordinary Course of Business
since the Most Recent Financial Statements Date, Imperial has no
liability for Taxes for any Tax period ending prior to the
Closing Date other than Taxes for which there is an accrual for
current taxes reflected on the Most Recent Balance Sheet.
(v) Imperial has no liability for Taxes of any other person or
entity and has no Tax liability as a successor or transferee,
except as provided pursuant to Section 1.1502-6 of the Treasury
Regulations or similar provisions of state, local or foreign Tax
laws.
(vi) Imperial has no liability pursuant to any agreement to
share, allocate or reimburse Taxes or Tax benefits.
(vii) Following the Closing, Imperial will not have any
"excess loss accounts" within the meaning of Section 1.1502-19 of
the Treasury Regulations and there will be no "intercompany
items" between Imperial and any member of the Seller's affiliated
group.
(i) Tangible Assets. Imperial owns or leases all tangible assets
necessary for the conduct of the Business as presently conducted.
Each such tangible asset is free from Security Interests (other
than Permitted Liens or the Security Interests to be removed
prior to or concurrently with the Closing pursuant to the
provisions of Section 7(a)(xii)), is in good operating condition
and repair (subject to normal wear and tear), and is suitable for
the purposes for which it presently is used.
(j) Real Property [[<*>]] . Schedule 4(j) of the Disclosure
Schedule lists and describes briefly all real property owned or
leased by Imperial (collectively, the "Real Property"; such owned
Real Property being hereinafter referred to collectively as the
"Owned Real Property" and such leased Real Property being
hereinafter referred to collectively as the "Leased Real
Property").
(i) With respect to the Owned Real Property,
except as set forth in Schedule 4(j) of the Disclosure
Schedule:
(A) Imperial has good and marketable
title to the Owned Real Property free and clear of
any Security Interest, easement, covenant, or
other restriction, except for (1) installments of
special assessments not yet delinquent, (2)
recorded easements, covenants, and other
restrictions which do not impair in any Material
respect the current use, occupancy, or value, or
the marketability of title, of the property
subject thereto and (3) Permitted Liens;
(B) there are no (1) pending or, to the
Knowledge of the Seller and Imperial, threatened
condemnation proceedings relating to such parcel,
or (2) pending or, to the Knowledge of the Seller
and Imperial, threatened litigation or
administrative actions relating to such parcel;
(C) the buildings and improvements
thereon are in Material compliance with applicable
setback requirements, zoning laws, and ordinances;
(D) all facilities located on such
parcel have received all approvals of governmental
authorities (including licenses and permits)
required in connection with the ownership or
operation thereof and have been operated and
maintained in Material compliance with applicable
laws, rules, and regulations;
(E) there are no leases or subleases,
written or oral, granting to any party or parties
the right of use or occupancy of any portion of
such parcel;
(F) there are no outstanding options or
rights of first refusal to purchase such parcel or
any portion thereof or interest therein; and
(G) there are no parties (other than
Imperial) in possession of such parcel, other than
tenants under any leases disclosed in Schedule
4(j) of the Disclosure Schedule who are in
possession of space to which they are entitled.
(ii) With respect to each parcel of Leased
Real Property, except as set forth in Schedule 4(j) of the
Disclosure Schedule, the leases by which Imperial is
invested with the leasehold estate in the Leased Real
Property (the "Leases") are each legal, valid, binding,
enforceable and in full force and effect and will remain so
on identical terms immediately following the Closing
(subject to the Equitable Exceptions), Imperial is the sole
owner of the leasehold estates created by the Leases for
each parcel of Leased Real Property and there are no Persons
(other than Imperial) in possession of any of such parcels
of Leased Property. A true, correct and complete copy of
each Lease, and all amendments and modifications thereto has
been delivered to the Buyer. Except as set forth in Schedule
4(j) of the Disclosure Schedule, neither Imperial nor, to
the Knowledge of Imperial and the Seller, the landlord under
any Lease has made any prior assignment or transfer of their
respective interest in the Leases. Subject to the Permitted
Liens and any Security Interests disclosed on Schedule 4(j)
of the Disclosure Schedule, Imperial has a valid leasehold
estate in each parcel of the Leased Real Property as created
by the applicable Lease free and clear of any Security
Interests. Except as set forth in Schedule 4(j) of the
Disclosure Schedule, Imperial is not in Material default
under any of the Leases, and to the Seller's and Imperial's
Knowledge, there does not exist under any Lease any Material
default of any other Person or any event which with notice
or lapse of time or both would constitute a Material default
by Imperial or any other Person. To the Knowledge of the
Seller and Imperial, except as set forth on Schedule 4(j) of
the Disclosure Schedule, there are no (A) pending or
threatened condemnation proceedings relating to any of the
Leased Real Property, or (B) pending or threatened
litigation or administrative actions relating to any of the
Leased Real Property.
(k) Intellectual Property.
(i) Except as set forth on Schedule 4(k) of the Disclosure
Schedule, Imperial owns or has the right to use pursuant to
license, sub-license, consent, agreement or permission, or may
otherwise lawfully use, all Intellectual Property necessary for
the operation of the Business as presently conducted. Each item
of Intellectual Property owned or used by Imperial immediately
prior to the Closing hereunder will be owned or available for use
by Imperial on identical terms and conditions immediately
subsequent to the Closing hereunder.
(ii) Except as set forth on Schedule 4(k) of the Disclosure
Schedule, to the Knowledge of Imperial and the Seller, Imperial
has neither (A) interfered with, infringed upon, misappropriated
or otherwise come into conflict with any Intellectual Property
rights of third parties, nor (B) received within the three (3)
year period immediately preceding the date of this Agreement, any
charge, complaint, claim or notice alleging any such
interference, infringement, misappropriation or violation.
(iii) Schedule 4(k) of the Disclosure Schedule identifies
each patent or trademark, tradename or copyright registration
which has been issued to Imperial with respect to any of its
Intellectual Property, identifies each pending patent application
or application for trademark, tradename or copyright registration
which Imperial has made with respect to any of its Intellectual
Property, and identifies each material license, agreement or
other permission which Imperial has granted to any third party
with respect to any of its Intellectual Property (together with
any exceptions). Except as identified in Schedule 4(k) of the
Disclosure Schedule, with respect to each item of Intellectual
Property that Imperial owns:
(A) Imperial possesses all right, title and interest in and to
the item;
(B) the item is not subject to any outstanding Order; and
(C) no charge, complaint, action, suit, proceedings, hearing,
investigation, claim or demand is pending or, to the Knowledge of
the Seller and Imperial, is threatened, which challenges the
legality, validity, enforceability, use or ownership of the item.
(iv) Schedule 4(k) of the Disclosure Schedule also identifies
each item of Intellectual Property that any third party owns and
that Imperial uses pursuant to license, sub-license, agreement or
permission, other than general commercial third party software
(as to which all license fees properly due and owing for
Imperial's usage thereof, have been properly paid). Except as
identified in Schedule 4(k) of the Disclosure Schedule, with
respect to each such item of used Intellectual Property:
(A) the license, sublicense, agreement or permission covering
the item is legal, valid, binding, enforceable and in full force
and effect (subject to the Equitable Exceptions) as to Imperial,
and to the Knowledge of the Seller and Imperial, as to the other
Persons who are parties thereto;
(B) the license, sublicense, agreement or permission will
continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the Closing
(subject to the Equitable Exceptions) as to Imperial, and to the
Knowledge of the Seller and Imperial, as to the other Persons who
are parties thereto;
(C) To the Knowledge of the Seller and Imperial, (i) Imperial is
not, and no other party to the license, sublicense, agreement, or
permission is in breach or default, and (ii) no event has
occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification or
acceleration thereunder; and
(D) to the Knowledge of the Seller and Imperial, no charge,
complaint, action, suit, proceedings, hearing, investigation,
claim or demand is pending or is threatened which challenges the
legality, validity or enforceability of any Material underlying
item of Intellectual Property.
(l) Warranties and Product Liability. Subject to
any applicable reserve established on the Audited Statement of
Net Working Capital, and except as disclosed on Schedule 4(l) of
the Disclosure Schedule, each product manufactured, sold or
delivered by Imperial has been in conformity with all applicable
contractual commitments and all express or implied warranties in
all material respects. There is no outstanding Material action,
suit, arbitration or other proceeding, or claim, demand, demand
letter, lien, notice of noncompliance or violation, or to the
Knowledge of the Seller and Imperial, threatened against
Imperial, for injury to any person or any property suffered as a
result of the manufacture, distribution or sale of any product or
material by Imperial, including any claim arising out of the
defective or unsafe nature, or allegedly defective or unsafe
nature, of any such product or material.
(m) Contracts. Schedule 4(m) of the Disclosure
Schedule lists the following contracts, agreements and other
arrangements (oral or written) to which Imperial is a party:
(i) any arrangement (or group of related
written arrangements) for the lease of personal
property from or to third parties providing lease
payments in excess of $75,000 per annum;
(ii) any arrangement (or group of related
written arrangements) for the purchase or sale of
Products, raw materials, commodities, supplies or other
personal property or for the furnishing or receipt of
services which either requires the performance over a
period of more than one year after the Closing Date or
requires expenditures of more than the sum of $100,000;
(iii) any arrangement concerning a
partnership or joint venture;
(iv) any arrangement requiring
confidentiality or non-competition;
(v) any arrangement involving the Seller and
its Affiliates that will survive the Closing; or
(vi) any other arrangement (or group of
related written arrangements) either involving more
than $100,000 or not entered into in the Ordinary
Course of Business.
The Seller has delivered to the Buyer a correct and complete copy
of each written arrangement (as amended to date) listed in
Schedule 4(m) of the Disclosure Schedule. With respect to each
arrangement so listed: (A) the arrangement is legal, valid,
binding, enforceable and in full force and effect (subject to the
Equitable Exceptions) as to Imperial, and to the Knowledge of the
Seller and Imperial, as to the other Persons who are parties
thereto; (B) the arrangement will continue to be legal, valid,
binding, enforceable and in full force and effect (subject to the
Equitable Exceptions) as to Imperial, and to the Knowledge of the
Seller and Imperial, as to the other Persons who are parties
thereto, on identical terms following the Closing; (C) Imperial
is not, nor to the Knowledge of the Seller and Imperial, is any
other Person who is a party thereto in breach or default, and no
event has occurred which with notice or lapse of time would
constitute a material breach or default or permit termination,
modification, or acceleration, under such arrangements; and
(D) Imperial has not, nor to the Knowledge of the Seller and
Imperial, has any other Person who is a party thereto, repudiated
any provision of any arrangement.
(n) Insurance. Schedule 4(n) of the Disclosure
Schedule sets forth an accurate and complete list of all policies
of fire, liability, keyman life insurance, worker's compensation,
products liability and other forms of insurance owned or held by
or beneficially for Imperial. All such policies are in full
force and effect, no premiums with respect thereto are past due
and no notice of cancellation or termination has been received by
the Seller or Imperial with respect to any such policy. Neither
the Seller nor Imperial has received any notification that
Material changes are required in the conduct of the Business as a
condition to the continuation of coverage under or renewal of any
such policy. True, correct and complete copies of such insurance
policies have been made available to the Buyer.
(o) Litigation. Schedule 4(o) of the Disclosure
Schedule sets forth each instance in which Imperial (i) is
subject to any unsatisfied judgment, order, decree, stipulation,
injunction or charge or (ii) is a party or, to the Knowledge of
the Seller and Imperial, is threatened to be made a party, to any
charge, complaint, action, suit, proceeding, hearing or
investigation of or in any court or quasi-judicial or
administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator.
(p) Employees.
(i) Schedule 4(p)(i) of the Disclosure
Schedule lists all of the employees of Imperial
currently on Imperial's payroll as of the date of this
Agreement (including those on leaves of absence), which
schedule will be updated at and as of the Closing Date
to reflect any employees hired or terminated prior to
the Closing Date ("Current Employees").
(ii) To the Knowledge of the Seller and
Imperial, no key employee or full-time group of
employees has any plans to terminate employment with
Imperial. Except as set forth on Schedule 4(p)(ii) of
the Disclosure Schedule, Imperial is not a party to or
bound by any employment agreement or any collective
bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices
or other collective bargaining disputes since January
1, 1999. Imperial has not committed any unfair labor
practice, including, without limitation, violation of
the Fair Labor Standards Act of 1938 or any laws
respecting the hiring of non-United States citizens.
(q) Employee Benefits. Schedule 4(q) of the
Disclosure Schedule lists all Employee Benefit Plans in which any
current or former employee of Imperial participates or has
participated within the last five years, whether sponsored by
Imperial or a current affiliate of Imperial. To the extent
reasonably available, copies of each such plan and related
summary plan descriptions, trust agreements, service agreements
and insurance policies and the three (3) most recent annual
reports on Internal Revenue Service ("IRS") Form 5500 for each
plan have heretofore been provided to the Buyer by the Seller. As
to each Employee Benefit Plan in respect of which a copy has not
been provided to the Buyer, Schedule 4(q) of the Disclosure
Schedule contains a description of the material terms of that
Employee Benefit Plan, including its eligibility requirements,
benefit accrual, vesting, distributions, funding arrangements and
financial condition.
(i) Each Employee Benefit Plan (and each
related trust or insurance contract) complies and has
at all times complied in all material respects in form
and in operation with the applicable requirements of
ERISA and the Code. No Employee Benefit Plan has been
the subject of an audit, review, or examination by the
Internal Revenue Service, Department of Labor, or the
PBGC.
(ii) The list of Employee Welfare Benefit
Plans in Schedule 4(q) of the Disclosure Schedule
discloses whether each such plan is (i) self-funded,
(ii) funded through a "welfare benefit fund," as such
term is defined in Section 419(e) of the Code, or other
funding mechanism or (iii) insured. Each Employee
Welfare Benefit Plan may be amended or terminated at
any time after the Closing Date without any material
Liability, other than claims incurred (and premiums
due) but not yet paid through the date of termination
and any applicable termination fees, penalties or
expenses. Each plan complies in all material respects
with the applicable requirements of Section 4980B(f) of
the Code with respect to each Benefit Plan that is a
group health plan, as such term is defined in Section
5000(b)(1) of the Code. Schedule 4(q) of the
Disclosure Schedule discloses each individual who is
currently receiving, who is currently eligible or
entitled to COBRA's continuation coverage, his or her
monthly premium payments, and number of months
remaining for such continuation coverage.
(iii) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each
Employee Benefit Plan and all contributions for any
period ending on or before the Closing Date which are
not yet due have been paid to each Employee Benefit
Plan or accrued on the Financial Statements in
accordance with the past custom and practice of
Imperial. All premiums or other payments which are due
for all periods ending on or before the Closing Date
with respect to each Employee Welfare Benefit Plan have
been paid or accrued on the Financial Statements in
accordance with the past custom and practice of
Imperial.
(iv) Each Employee Benefit Plan which is an
Employee Pension Benefit Plan intended to be a
qualified plan in fact meets the requirements of a
"qualified plan" under Code Sec. 401(a).
(v) No Employee Pension Benefit Plans is a
"multiemployer plan", as defined in Section 4001(a)(3)
of ERISA (a "Multiemployer Plan"), and the Seller and
its affiliates, including Imperial, has never
contributed to a Multiemployer Plan. Neither the
Seller nor an affiliate of the Seller, including
Imperial, has contributed or been obligated to
contribute at any time during the immediate past five
years to a "defined benefit plan" as defined in Section
3(35) of ERISA. Except as disclosed in Schedule 4(q)
of the Disclosure Schedule, no Employee Pension Benefit
Plan has been completely or partially terminated or
been the subject of a Reportable Event as to which
notices would be required to be filed with the PBGC,
and no proceeding by the PBGC to terminate any Employee
Pension Benefit Plan has been instituted or, to the
Knowledge of the Seller and Imperial, threatened.
(vi) There have been no Prohibited
Transactions with respect to any Employee Benefit Plan.
No Fiduciary has any Liability for breach of fiduciary
duty or any other failure to act or comply in
connection with the administration or investment of the
assets of any Employee Benefit Plans. No charge,
complaint, action, suit, proceeding, hearing,
investigation, claim or demand with respect to the
administration or the investment of the assets of any
Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the Knowledge of the Seller
and Imperial, threatened.
(vii) No compensation payable by Imperial
or an affiliate to any of its employees, officers or
directors under any existing contract, Employee Benefit
Plan or other employment arrangement or under-standing
(including by reason of the transactions contemplated
hereby) will be subject to disallowance under Section
162(m) of the Code or be characterized as an "excess
parachute payment under Section 280G of the Code.
Imperial has not incurred any Liability to the PBGC (other than
PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with
respect to any Employee Pension Benefit Plan that Imperial and
the Controlled Group of Corporations which includes Imperial
maintains or ever has maintained or to which any of them
contributes, ever has contributed, or ever has been required to
contribute. Imperial does not maintain, nor has it ever
maintained or contributed to, or ever has been required to
contribute to any Employee Welfare Benefit Plan providing health,
accident, or life insurance benefits to former employees, their
spouses or their dependents (other than in accordance with Code
Sec. 4980B).
(r) Environment, Health and Safety. Except as
disclosed on Schedule 4(r) of the Disclosure Schedule:
(i) Imperial is in material compliance with all Laws concerning
the environment, public health and safety, and employee health
and safety, and no material charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand or notice has
been filed or commenced against it or, to the Knowledge of the
Seller and Imperial, is threatened alleging any failure to comply
with any such Laws.
(ii) Imperial has no material Liability (and there is no present
or threatened charge, complaint, action, suit, proceeding,
hearing, investigation, claim or demand against Imperial giving
rise to any material Liability) under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, the Federal
Water Pollution Control Act of 1972, the Clean Air Act of 1970,
the Safe Drinking Water Act of 1974, the Toxic Substances Control
Act of 1976, the Refuse Act of 1899, or the Emergency Planning
and Community Right-to-Know Act of 1986 (each as amended), or any
other Law or Order of any Governmental Body, concerning release
or threatened release of hazardous substances, public health and
safety, or pollution or protection of the environment.
(iii) There is no present or, to the Knowledge of the Seller
and Imperial, threatened, charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand against
Imperial giving rise to any material Liability) for damage to any
Real Property, location, or body of water (surface or subsurface)
or for illness or personal injury.
(iv) Imperial has no material Liability under the Occupational
Safety and Health Act, as amended, or any other Law concerning
employee health and safety.
(v) Imperial has obtained and been in material compliance with
all of the terms and conditions of all permits, licenses and
other authorizations which are required under, and has been in
material compliance with all other, Laws and Orders of any
Governmental Body relating to public health and safety, worker
health and safety, and pollution or protection of the
environment, including laws relating to emissions, discharge,
releases or threatened releases of pollutants, contaminants or
chemical, industrial, hazardous or toxic materials or wastes into
ambient air, surface water, ground water or lands or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
pollutants, contaminants or chemical, industrial, hazardous or
toxic materials or wastes.
(vi) Imperial has delivered or caused to be delivered to the
Buyer all environmental assessments, reports, audits and other
documents in its possession or under its control that relate to
Real Property that Imperial or any predecessor entity currently
occupies or has occupied at any time in the past in connection
with the Business.
(vii) The Buyer will not incur more than $25,000 of Adverse
Consequences in any way resulting from, arising out of, relating
to or caused by the environmental matter described as item ▇.▇▇.
of Schedule 4(r) of the Disclosure Schedule.
(viii) The source of the material comprising the berm on the
parcel of Real Property located in Ohio was non-hazardous
construction debris, and not soil surrounding the underground
storage tank formerly located on that parcel.
(ix) The Buyer will not incur more than $25,000 of Adverse
Consequences in any way resulting from, arising out of, relating
to or caused by the environmental matter described as item B.V.
of Schedule 4(r) of the Disclosure Schedule.
(x) The Buyer will not incur more than $25,000 of Adverse
Consequences in any way resulting from, arising out of, relating
to or caused by the environmental matter described as item C.I.
of Schedule 4(r) of the Disclosure Schedule.
(s) Legal Compliance. Imperial has:
(i) been in Material compliance with all non-environmental Laws,
and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand or notice has been filed or
commenced against Imperial which is currently pending and alleges
any failure to comply with any such non-environmental Law;
(ii) not violated in any Material respect or received a notice or
charge asserting any violation of the ▇▇▇▇▇▇▇ Act, the ▇▇▇▇▇▇▇
Act, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Act or the Federal Trade Act, each as
amended;
(iii) been in Material compliance with all TOSCA and other
related rules and regulations; and
(iv) been in Material compliance with all requirements to file
all reports, documents, and other materials it was required to
file (and the information contained therein was correct and
complete in all material respects) under all applicable Laws.
(t) Certain Business Relationships with Imperial.
Neither the Seller nor its Affiliates other than Imperial owns
any property or right, tangible or intangible, which is necessary
for the conduct of the Business.
(u) Brokers' Fees. Imperial does not have any
Liability or obligation to pay any fees or commissions to any
broker, finder or similar representative with respect to the
transactions contemplated by this Agreement.
(v) Accounts Receivable. With respect to the
accounts, notes, and loans receivable recorded on the Most Recent
Financial Statements, subject to a reserve for bad debts set
forth in the Most Recent Financial Statements, as adjusted for
the passage of time through the Closing Date, and determined in
accordance with GAAP applied on a basis consistent with
Imperial's past custom and practice: (i) all of such accounts,
notes, and loans receivable are free and clear of any Security
Interests; (ii) no claims of offset have been asserted in writing
against any of such accounts, notes, or loans receivable; and
(iii) none of the obligors to such accounts, notes, or loans
receivable has given written notice that it will or may refuse to
pay the full amount or any portion thereof.
(w) Bank Accounts; Investments. Attached hereto
as Schedule 4(w) of the Disclosure Schedule is a list of all
banks or other financial institutions with which Imperial has an
account or maintains a safe deposit box, showing the type and
account number of each such account and safe deposit box and the
names of the persons authorized as signatories thereon or to act
or deal in connection therewith. Schedule 4(w) of the Disclosure
Schedule also contains a list of all material investments by
Imperial in any funds, accounts, securities, certificates of
deposit or instruments of any Person.
(x) THERE IS NO SUBSECTION (x).
(y) Customers and Suppliers. Schedule 4(y) of
the Disclosure Schedule lists the ten largest customers of
Imperial and the ten largest suppliers of Imperial for the twelve
(12) consecutive fiscal month period ending July 1, 2000. Since
the Most Recent Financial Statements Date, there has been no
Material Adverse Change in the business relationship of Imperial
with any customer or supplier named on Schedule 4(y) of the
Disclosure Schedule. To the Knowledge of Seller and Imperial and
other than in the Ordinary Course of Business, no customer or
supplier named on Schedule 4(y) of the Disclosure Schedule has
threatened or expressed an intention to reduce materially the
volume of its purchases from or sales to Imperial or otherwise
materially modify its business relationship with Imperial.
Notwithstanding the foregoing, no representation or warranty is
made by the Seller that Imperial's relationship with any customer
or supplier will not be effected by the purchase of Imperial by
the Buyer.
(z) Certain Business Practices. Neither Imperial
nor any of its directors, officers, agents or employees has
(i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political
activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (iii) made
any other unlawful payment.
5. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and
the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper
or advisable to consummate and make effective the transactions
contemplated by this Agreement (including satisfying the closing
conditions set forth in Section 7 below).
(b) Notices and Consents. The Seller will cause Imperial to
give any notices to third parties, and will cause Imperial to use
its reasonable best efforts to obtain third-party consents, that
the Buyer may reasonably request in connection with the matters
pertaining to Imperial disclosed or required to be disclosed in
the Disclosure Schedule. Each of the Parties will take any
additional action (and the Seller will cause Imperial to take any
additional action) that may be necessary, proper or advisable in
connection with any other notices to, filings with, and
authorizations, consents, and approvals of Governmental Bodies,
and third parties that he, she or it may be required to give,
make or obtain.
(c) Operation of Business. Except as contemplated hereby or as
may be incidental to or in furtherance of the transactions
contemplated hereby or as may have been set forth herein or in
the Disclosure Schedule, without the consent of the Buyer (which
consent shall not be unreasonably delayed or withheld), the
Seller will not cause or permit Imperial to engage in any
practice, take any action, embark on any course of inaction or
enter into any transaction outside the Ordinary Course of
Business or that would constitute a breach of the representation
and warranty contained in Section 4(f) hereof if such action,
inaction or transaction occurred after the date of the Most
Recent Financial Statements and prior to the date of this
Agreement.
(d) Preservation of Business. Except as contemplated hereby or
as may be incidental to or in furtherance of the transactions
contemplated hereby or as may have been set forth herein or in
the Disclosure Schedule, the Seller will cause Imperial to use
its reasonable best efforts to keep the Business and Imperial's
properties substantially intact, including its present
operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers and
employees.
(e) Access. Prior to the termination of this Agreement as
provided in Section 9 herein, the Seller will permit, and the
Seller will cause Imperial to permit, representatives of the
Buyer to have access at reasonable times, and in a manner so as
not to interfere with the normal business operations of Imperial,
to the headquarters and all other facilities of Imperial, to all
books, records, contracts, Tax records and documents of or
pertaining to Imperial and to all employees, customers and
suppliers of Imperial, provided however, that the Buyer shall not
be entitled to conduct any further environmental investigation on
site at the Real Property. During the Buyer's on-site
investigation of Imperial, except as otherwise provided herein,
the Buyer shall not discuss any aspects of the operation of
Imperial with any employee of Imperial, and the Buyer shall
direct all requests for information and material only through the
Seller, unless otherwise agreed to by the Buyer and the Seller in
writing. The Buyer shall be entitled to contact and interview the
customers of Imperial listed on Schedule 5(e) of the Disclosure
Schedule ("Designated Imperial Customers"), which communications
and interviews shall be conducted in strict conformity with the
format included in Schedule 5(e) of the Disclosure Schedule,
provided that the President of Imperial and/or representatives
designated by him shall accompany representatives of the Buyer on
any visit to or with any Designated Imperial Customer, and shall
participate in all communications between the Buyer and any
Designated Imperial Customer. At the request of the Buyer, the
Seller shall proceed to arrange with Imperial a mutually
agreeable time and place at which the Buyer may conduct
interviews with key employees of Imperial.
(f) Notice of Developments. The Seller will give prompt written
notice to the Buyer of the occurrence of any Material Adverse
Change or Event. Each Party will give prompt written notice to
the others of any Material development affecting the ability of
the Parties to consummate the transactions contemplated by this
Agreement.
(g) Exclusivity. The Seller will not (and the Seller will not
cause or permit Imperial to) (i) solicit, initiate or encourage
the submission of any proposal or offer from any person involving
Imperial or the Business relating to any (A) liquidation,
dissolution or recapitalization, (B) merger or consolidation,
(C) acquisition or purchase of securities or assets or
(D) similar transaction or business combination or
(ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in
or facilitate in any other manner any effort or attempt by an,
person to do or seek any of the foregoing.
(h) HSR Act Filing. The Buyer, the Parent and the Seller will
use commercially reasonable efforts to file or cause to be filed
with the FTC and the DOJ at Buyer's expense, as promptly as
practicable but in no event later than one (1) business day after
the execution of this Agreement, the Notification and Report Form
and related material required to be filed in connection with the
transactions contemplated in this Agreement pursuant to the HSR
Act, and to promptly file any additional information requested by
the FTC or the DOJ as soon as practicable after receipt of a
request therefor. In addition, the Buyer and the Parent shall
use its commercially reasonable efforts to take or cause to be
taken all actions necessary, proper or advisable to obtain any
consent, waiver, approval or authorizations relating to the HSR
Act that is required for the consummation of the transactions
contemplated by this Agreement; provided, however, that neither
the Parent nor the Buyer shall be obligated hereby to accept any
order providing for the divestiture by either the Parent or the
Buyer of such of the assets relating to the Business (or, in lieu
thereof, assets and businesses of the Parent or the Buyer having
an approximate equivalent value) as are necessary to fully
consummate the transactions contemplated by this Agreement or an
order to hold separate such assets and businesses pending such
divestiture.
(i) Plant Closing Notification. The Buyer shall be responsible
for providing any notice of layoff or plant closing required with
respect to any manufacturing facility of Imperial pursuant to the
Federal Worker Adjustment and Retraining Notification Act of
1988, any successor federal law and any applicable state or local
plant closing notification statute, for any such layoffs or plant
closings which will commence effective on or subsequent to the
Closing Date.
(j) Intercompany Items. The Seller shall, as of the date
immediately preceding the Closing Date, by appropriate
documentation and accounting entries, eliminate any intercompany
payables, receivables and/or indebtedness to the Seller arising
prior to the Closing Date, provided that the Seller expressly
agrees that any other provision of this Agreement to the contrary
notwithstanding, the "basket" provisions of Section 8(b)(ii)
hereof shall not apply to any obligation of the Seller to the
Buyer for a breach of this covenant.
(k) Excluded Assets and Excluded Liabilities. The Seller
covenants to the Buyer that prior to the Closing, Imperial shall
transfer and assign to the Seller, and the Seller shall accept
and assume, all of the Excluded Assets and all of the Excluded
Liabilities, and the Seller shall cause all related reserves to
be eliminated from the financial books and records of Imperial.
(l) No Negative Cash. The Seller covenants to the Buyer that
Imperial shall not have a negative cash position on close of
business on the Closing Date, provided that the Seller expressly
agrees that any other provision of this Agreement to the contrary
notwithstanding, the "basket" provisions of Section 8(b)(ii)
hereof shall not apply to any obligation of the Seller to the
Buyer for a breach of this covenant.
(m) Title Insurance. To the extent reasonably requested by the
Buyer, the Seller and Imperial shall cooperate with the Buyer and
assist the Buyer in obtaining (at the Buyer's expense) with
respect to each parcel of Real Property, an ALTA Owner's and
Leasehold Policies of Title Insurance in form and substance
reasonably acceptable to the Buyer's counsel.
(n) Surveys. To the extent reasonably requested by the Buyer,
the Seller and Imperial shall cooperate with the Buyer and assist
the Buyer in obtaining (at the Buyer's expense) with respect to
each parcel of Real Property as to which a title insurance policy
is to be procured pursuant to Section 5(m) above, a current
survey of that parcel certified to the Buyer, prepared by a
licensed surveyor in form and substance reasonably acceptable to
the Buyer's counsel.
(o) Certain Insurance Policies and Arrangements. With respect to
each of the insurance policies and other contractual arrangements
listed on Schedule 5(o) of the Disclosure Schedule, on or before
the Closing, the Seller shall cause the insurer providing such
insurance policy or the other party to such contractual
arrangement, as the case may be, to establish a separate
insurance policy or contractual arrangement for Imperial
providing for identical coverage as under such insurance policy
(and, with respect to the stop-loss insurance policy, taking into
account claims paid during the portion of the contract period
preceding the Closing) or identical terms as under such
contractual arrangement, to remain in effect for a period of time
commencing no later than the Closing and ending on the date of
the expiration of such insurance policy or the contract period of
such contractual arrangement (subject to the terms and conditions
of such policy or contract), as set forth opposite that insurance
policy or contractual arrangement on Schedule 5(o) of the
Disclosure Schedule. The Buyer acknowledges, however, that the
cost of such separate policies and contractual arrangements will
be higher than the cost of such policies and contractual
arrangements to the Seller or Imperial prior to the Closing.
(p) Comparison Month Financial Statements. The Seller covenants
to the Buyer that (i) the Seller shall cause to be prepared and
delivered to the Buyer within five (5) days following the date
hereof, Imperial's unaudited balance sheet and statement of
operations, changes in stockholders' equity and cash flows as of
and for the eleven month period commencing September 26, 1999 and
ending on the last day of the Comparison Month (the "Comparison
Month Financial Statements"), and (ii) except as set forth on
Schedule 4(e) of the Disclosure Schedule, the Comparison Month
Financial Statements shall be (A) prepared in accordance with
GAAP applied on a consistent basis throughout the period covered
thereby, (B) correct and complete in all material respects, (C)
fairly present the financial condition and results of operations
of Imperial as of such date and for the period indicated, and (D)
prepared from and in accordance with the books and records of
Imperial (which books and records shall be correct and complete
in all material respects).
(q) Physical Inventory Taking and Determination of Whether
Inventory Reserve Understatement Exists. The Seller shall have
caused the conduct of the Physical Inventory Taking to be
commenced on or about September 5, 2000. Within fifteen (15) days
following the date of this Agreement ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall
conduct an audit of the Adjusted Inventory as reflected in the
Comparison Month Financial Statement and issue a written report
thereon, which report shall disclose whether or not an Inventory
Reserve Understatement exists. The Buyer shall have an
opportunity to review and comment on the said ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
report and its underlying workpapers for at least five (5) days
following its receipt of same from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. The Buyer and
the Seller agree to consult and resolve in good faith any issues
arising as a result of the Buyer's review of the said ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ report. If the Buyer and the Seller are unable to reach
an agreement on the conclusions of the said ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
report within such five (5) day period, they shall submit the
issue to arbitration by a nationally recognized accounting firm
mutually acceptable to the Buyer and the Seller, whose
determination shall be made within twenty (20) days following the
first to occur of the date the Parties conclude they are unable
to reach agreement or the date of the expiration of the said five
(5) day period, and shall be final and binding on the Parties,
and whose expenses shall be shared equally by the Buyer and the
Seller.
(r) Termination of ▇▇▇▇▇▇▇ Salary Continuation Agreement. The
Seller shall deliver to the Buyer a copy of any termination of,
or amendment to, that certain Salary Continuation Agreement dated
May 1, 1999 by and between the Seller and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the
"▇▇▇▇▇▇▇ Agreement").
6. Additional Covenants. The Parties further covenant and
agree as follows:
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of
this Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments
and documents) as any other Party may reasonably request, all at
the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under
Section 8 below). The Seller acknowledges and agrees that, from
and after the Closing, the Buyer will be entitled to possession
of all documents, books, records, agreements, and financial data
of any sort relating to Imperial; provided that the Seller may
retain any copies of the foregoing as shall be necessary to
comply with applicable tax and other laws, regulations and
ordinances.
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any charge,
complaint, action, suit, proceeding, hearing, investigation,
claim or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or
transaction on or prior to the Closing Date involving Imperial,
each of the other Parties will cooperate with him, her or it and
his, her or its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their
books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Section 8
below).
(c) Obligation to Refer Inquiries. The Seller will use
reasonable best efforts to refer all customer inquiries relating
to Imperial's Business to the Buyer and/or Imperial from and
after the Closing for a period of 12 months thereafter.
(d) Confidentiality. The Seller will treat and hold as such all
of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement
for a period of two (2) years commencing with the day following
the Closing Date, and deliver promptly to the Buyer or destroy,
at the request and option of the Buyer, all tangible embodiments
(and all copies) of the Confidential Information which are in its
possession. In the event that the Seller is requested or
required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand or similar process) to disclose any
Confidential Information, the Seller will notify the Buyer
promptly of the request or requirement so that the Buyer may seek
an appropriate protective order or waive compliance with the
provisions of this Section 6(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, the Seller
is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for
contempt, the Seller may disclose the Confidential Information to
the tribunal; provided, however, that the Seller shall use its
reasonable best efforts to obtain, at the reasonable request and
at the expense of the Buyer, an order or other assurance that
confidential treatment will be accorded to such Portion of the
Confidential Information required to be disclosed as the Buyer
shall designate. The foregoing provisions shall not apply to any
Confidential Information which is generally available to the
public immediately prior to the time of disclosure.
Notwithstanding anything contained in this Section 6(d) to the
contrary, the Seller shall not be prevented from keeping copies
of Confidential Information and including such information in
any filing, report or disclosure it reasonably believes it is
required to make pursuant to Law, including without limitation
any filings, reports or disclosures to the IRS or the Securities
and Exchange Commission.
(e) Additional Tax Matters.
(i) The Seller shall be responsible for the preparation and
filing of all of the Seller's federal consolidated income Tax
Returns with respect to all Pre-Closing Tax Periods, which shall
include Imperial, and for the payment of all federal income Taxes
with respect to such Tax Returns.
(ii) The Seller shall be responsible for the preparation and
filing of all state and local Tax Returns ("▇▇▇ Tax Returns") of
Imperial for Pre-Closing Tax Periods that are required to be
filed on or before the Closing Date, and for the payment of all
Taxes with respect to such ▇▇▇ Tax Returns. Such ▇▇▇ Tax Returns
shall be prepared in a manner consistent with prior practice, and
shall utilize accounting methods, elections and conventions that
do not have the effect of distorting the allocation of income or
expense between Pre-Closing Tax Periods and Post-Closing Tax
Periods, unless required otherwise by law.
(iii) The Seller shall have prepared and delivered to the
Buyer for review and comment thereon at least fifteen (15) days
prior to the due date for their filing Tax Returns relating
solely to Pre-Closing Tax Periods that have not been filed on or
prior to the Closing Date and which are required by applicable
law to be signed and filed by the Buyer, provided that the
provisions of this paragraph (iii) shall not apply to any ▇▇▇ Tax
Returns (other than those to be filed in the States of Ohio and
Texas) in which Section 338 Taxes are or will be due and owing
(collectively, the "Applicable ▇▇▇ Tax Returns"), which
Applicable ▇▇▇ Tax Returns shall be subject to the provisions of
paragraph (xiii) hereof. The Buyer and the Seller agree to
consult and resolve in good faith any issues arising as a result
of the review of such Tax Returns by the Buyer prior to the
filing of Tax Returns to which this paragraph (iii) applies. The
Seller shall promptly reimburse the Buyer, in immediately
available funds, any Taxes that are required to be paid with such
Tax Returns.
(iv) The Buyer shall be responsible for the preparation and
filing of all Straddle Period Tax Returns with respect to
Imperial, and for the payment of all Taxes with respect to such
Tax Returns. The Buyer shall provide the Seller with an
opportunity to review and consult on all such Tax Returns at
least fifteen (15) days prior to the due date for the filing of
such Tax Returns, provided that the Buyer and the Seller agree to
consult and resolve in good faith any issues arising as a result
of the review of such Tax Returns by the Seller prior to the
filing of such Tax Returns. The Seller shall reimburse the Buyer,
in immediately available funds, for the portion of any Tax
relating to the Straddle Period that is allocable, in accordance
with paragraph (vii) below, to the pre-Closing portion of such
Straddle Period other than any Section 338 Taxes.
(v) The Buyer shall be responsible for the preparation and
filing of all Tax Returns and the payment of all Taxes with
respect to Imperial for all Post-Closing Tax Periods.
(vi) To the extent permitted by law, the Seller and the Buyer
shall use their best efforts to cause any Tax period to close on
the Closing Date.
(vii) Except for Section 338 Taxes provided for in paragraph
(xiii) below, Taxes payable with respect to a Straddle Period
shall be allocated to the pre-Closing and post-Closing portions
of a Straddle Period on the basis of the Audited Statement of Net
Working Capital, except that Taxes imposed on a periodic basis,
such as real and personal property Taxes, shall be prorated based
on the number of days before and after the Closing Date.
(viii) The Buyer covenants that it will not cause or permit
Imperial or any other Affiliate of the Buyer to amend any Tax
Return, take any Tax position on any Tax Return, or take any
other action that results in any increased Tax liability of
Imperial or the Seller in respect of any Pre-Closing Tax Period
without the prior consent of the Seller, which consent shall not
be unreasonably withheld or delayed. The Seller covenants that
neither it nor any Affiliate of the Seller will amend any Tax
Return, take any position on any Tax Return, or take any other
action that results in any increased Tax liability of Imperial or
the Buyer in respect of any Post-Closing Tax Period without the
prior consent of the Buyer, which consent shall not be
unreasonably withheld or delayed.
(ix) The Seller shall pay any stock transfer taxes due as a
result of the sale of the Imperial Shares to the Buyer pursuant
to the transactions contemplated by this Agreement.
(x) The Buyer shall promptly pay or shall cause prompt payment
to be made to the Seller of all refunds of Taxes and interest
thereon received by, or credited against the Tax liability of the
Buyer, Imperial or any other Affiliate of the Buyer attributable
to Taxes paid by the Seller, Imperial or any other Affiliate of
the Seller with respect to any Pre-Closing Tax Period or pre-
Closing portion of a Straddle Period. If, with respect to a Tax
Return required to be filed by Imperial, the Seller reasonably
determines that Imperial is entitled to file a claim for refund
or an amended Tax Return with respect to a Pre-Closing Tax
Period, the Buyer shall, upon the Seller's reasonable request,
cause Imperial to file any such claim or amended Tax Return,
except in the instance where the Buyer reasonably believes that
to take that action would adversely affect the Buyer's interests.
(xi) At the Buyer's request and expense, the Seller shall join
the Buyer in making elections under Code Sec. 338(g) and Code
Sec. 338(h)(10) of the Code and any state, local and foreign
counterparts with respect to Imperial (the "Section 338
Elections"). The Seller and the Buyer shall jointly complete and
make the Section 338 Elections on the applicable forms and in
accordance with applicable law. The Buyer shall deliver such
forms and related documents to the Seller within fourteen (14)
days following the Seller's receipt of the final Purchase Price
allocation referred to in Section 6(e)(xii) below. The Seller
shall, within fourteen (14) days of its receipt of those forms
and related documents, deliver to the Buyer such completed forms
as are required to be filed with respect to the Section 338
Elections. The Buyer and the Seller shall timely file the Section
338 Elections and any required forms and documents.
Notwithstanding the foregoing, the Seller makes no
representation, warranty or covenant as to the validity or
effectiveness of the Section 338 Elections other than as to the
capacity and authority of its officers or employees who join in
the making of the Section 338 Elections.
(xii) The Buyer and the Seller shall act reasonably and in
good faith to reach an agreement promptly, but in no event later
than one hundred fifty (150) days after the Closing Date, on the
allocation of the Purchase Price among the assets of Imperial for
purposes of the Section 338 Elections. The Buyer shall deliver to
the Seller a proposed allocation of the Purchase Price within one
hundred twenty (120) days following the Closing Date. The Seller
shall have an opportunity to review and comment on such proposed
allocation of the Purchase Price for at least fifteen (15) days
following its receipt of same from the Buyer. The Buyer and the
Seller agree to consult and resolve in good faith any issues
arising as a result of the Seller's review of the Buyer's
proposed allocation of the Purchase Price. If the Buyer and the
Seller are unable to reach an agreement on the allocation of the
Purchase Price within such one hundred fifty (150) day period,
they shall submit the issue to arbitration by a nationally
recognized accounting firm mutually acceptable to the Buyer and
the Seller, whose determination shall be made within forty-five
(45) days following the first to occur of the date the Parties
conclude they are unable to reach agreement or the date of the
expiration of the said one hundred fifty (150) day period, and
shall be final and binding on the Parties, and whose expenses
shall be shared equally by the Buyer and the Seller.
(xiii) Subject to the limitations set forth in the penultimate
sentence of this paragraph (xiii), the Buyer shall be responsible
for the payment of any Taxes of the Seller's affiliated group or
Imperial imposed by any State or local tax authority that result
from the Section 338 Elections (the "Section 338 Taxes"). The
Applicable ▇▇▇ Tax Returns shall be (x) prepared by the Seller in
mass in a manner consistent with prior practice, and shall
utilize accounting methods, elections and conventions that do not
have the effect of distorting the allocation of income or expense
between Pre-Closing Tax Periods and Post-Closing Tax Periods,
unless required otherwise by law, (y) delivered to the Buyer in
one group comprising all of the Applicable ▇▇▇ Tax Returns within
one hundred fifty (150) days after the Closing Date, and (z)
accompanied by a written report (the "Section 338 Report")
prepared by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ that sets forth in detail the
computation of the Section 338 Taxes due therewith and all other
Taxes due therewith relating to Pre-Closing Tax Periods (the "Non-
Section 338 Taxes"). The Buyer and its accounting firm shall have
a period of not more than thirty (30) days to review and comment
upon the Applicable ▇▇▇ Tax Returns and the Section 338 Report.
The Seller and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall permit the Buyer and its
accounting firm access to the Tax and accounting records they
reasonably request in order to verify the calculations set forth
in the Applicable ▇▇▇ Tax Returns and the Section 338 Report. The
Buyer and the Seller shall act reasonably and in good faith to
reach an agreement regarding the amount of the Section 338 Taxes
and the Non-Section 338 Taxes due with the Applicable ▇▇▇ Tax
Returns. If the Buyer and the Seller are unable to reach an
agreement within sixty (60) days after the Seller's delivery of
the Section 338 Report to the Buyer, then they shall promptly
submit the matter to arbitration by a nationally recognized
accounting firm mutually acceptable to the Seller and the Buyer,
whose determination shall be made within ninety (90) days after
the Seller's delivery of the Section 338 Report to the Buyer,
which shall be final and binding on the Parties. The expenses and
fees of the said accounting firm shall be shared equally by the
Buyer and the Seller. Following the determination of the Section
338 Taxes and the Non-Section 338 Taxes due in respect of the
Applicable ▇▇▇ Tax Returns, the Seller shall promptly pay to the
Buyer in immediately available funds an aggregate amount, if any,
equal to the sum of (1) the Non-Section 338 Taxes, if any, plus
(2) the Section 338 Taxes, if any, in excess of $403,000. The
Buyer shall promptly pay to the Seller in immediately available
funds an amount equal to the lesser of (x) any third-party
advisory fees paid by the Seller in connection with the Section
338 Elections and the analysis and determination of the Section
338 Taxes plus any additional Taxes payable by the Seller's
affiliated group as a result of the Buyer's payment of any
Section 338 Taxes, or (y) $37,000 (the "Special Section 338 Gross-
Up Amounts and Fees").
(xiv) The Seller, the Buyer and Imperial shall cooperate in
good faith in (a) preparing and filing all Tax Returns,
(b) maintaining and making available to each other all records
necessary in connection with the preparation and filing of all
Tax Returns and the payment of all Taxes and (c) resolving all
disputes and audits with respect to any Tax Returns and Taxes.
The Buyer and the Seller recognize that each may need access,
from time to time, after the Closing Date, to certain accounting
and Tax records and information held by the other; therefore, the
Buyer and the Seller agree (A) to retain and maintain Tax records
relating to Imperial for a period expiring on the earlier of five
(5) years after the Closing Date or a date that is at least
ninety (90) after the expiration of all applicable statutes of
limitation relating to Taxes and Tax Returns, (B) to allow each
other and their agents and representatives, at times and dates
mutually acceptable to the parties, to inspect, review and make
copies of such records, such activities to be conducted during
normal business hours and at the requesting party's expense and
(C) and to offer the other parties such records before destroying
such records.
(f) Covenant Not to Compete. For a period of
four (4) years from and after the Closing Date, the Seller will
not, directly or indirectly, as shareholder, partner, associate,
principal, agent, trustee or through the agency of any
corporation, partnership, association or agent, (i) participate
or engage in the Business existing as of the Closing Date, (ii)
take any action that is designed or intended to have the effect
of discouraging any lessor, licensor, customer, supplier or other
business associate of Imperial from maintaining the same business
relationships with Imperial after the Closing as it maintained
with Imperial prior to the Closing, or service or solicit any of
Imperial's Business from any customer of Imperial, (iii) request
or advise any customer of Imperial to withdraw, curtail or cancel
such customer's business with Imperial or (iv) solicit for
employment any person employed by Imperial on the Closing Date
(other than through means of general advertisements); provided
however, that (A) no owner of less than five percent (5%) of the
outstanding stock of any publicly traded corporation shall, for
purposes of this Section 6(f), be deemed to engage solely by
reason thereof in any of its businesses and (B) the future
acquisition by the Seller or its Affiliates of any Person or
business engaged in the Business shall not be deemed to violate
this Section 6(f) if (x) less than ten percent (10%) of the total
revenues of such acquired business or Person are derived from the
Business and (y) Sovereign is given a right of first refusal
pursuant to which it could purchase the portion of the acquired
business that is engaged in the Business.
(g) Employee Benefit Plans. Except as set forth
in Schedule 4(q) of the Disclosure Schedule, from and after the
Closing Date, the Buyer shall be the plan sponsor for each and
every Employee Benefit Plan of Imperial that is listed on
Schedule 4(q) and shall continue as sponsor of each such plan and
related trusts, insurance contracts, other assets and documents
that have been maintained by Imperial or the Seller for the
benefit of employees or former employees of Imperial and all of
which plans, trusts, insurance contracts and other assets and
documents are set forth on Schedule 4(q) of the Disclosure
Schedule); provided, however, that with respect to:
(i) Buyer's Plan. The Current Employees who
are salaried employees or hourly employees not subject
to a collective bargaining agreement shall cease
participating in the NS Group, Inc. Salaried Employees
Retirement Savings Plan (the "Seller's Plan") as of the
Closing Date. The Buyer or Imperial shall establish or
designate a defined contribution plan (the "Buyer's
Plan") effective as of the Closing Date, to accept the
assets of, and to assume the liability of, the Seller's
Plan associated with those Current Employees
participating in the Seller's Plan on the Closing Date
(collectively, the "Affected Participants").
(ii) Transfer of Plan Assets. No later than 30 days after the
Closing Date, the Buyer shall deliver to the Seller (a) a copy of
the Buyer's Plan and any amendment necessary to effectuate the
transfer of assets and the assumption of account balances in
accordance this Section and to preserve any benefits protected
from elimination or modification under Code Section 411(d)(6),
(b) a copy of the trust agreement for the Buyer's Plan, and
either, (c) the most recent favorable determination letter from
the IRS with respect to the Buyer's Plan, or (d) an opinion from
the Buyer's legal counsel acceptable to the Seller that the
Buyer's Plan document(s), as so amended, complies or will comply
on a timely basis with the applicable provisions of the Code
relating to the qualification of, and the transfer of assets and
assumption of benefit liabilities by, the Buyer's Plan. As soon
as practicable, but in no event later than 90 days after the
Buyer has established or designated the Buyer's Plan, the Seller
shall cause the Seller's Plan to transfer to the Buyer's Plan the
value of Affected Participants' account balances in the Seller's
Plan as of the transfer date, including shares of NS Group, Inc.
Common Stock having a fair market value equal to the aggregate
value of the Affected Participants' account balances invested in
the NS Group Common Stock Fund under the Seller's Plan as of the
transfer date. Prior to the transfer of assets, the Seller shall
certify in a form acceptable to the Buyer as follows: (1) that
the assets being transferred to the Buyer's Plan equal the
liabilities associated with the Affected Participants under the
Seller's Plan; (2) that the assets being transferred to the
Buyer's Plan from the Seller's Plan were calculated in accordance
with the provisions of the Seller's Plan, Section 414(l) of the
Internal Revenue Code, and Section 1.414(l)-1 of the Treasury
Department Regulations; and (3) that the transfer of assets to
the Buyer's Plan from the Seller's Plan will satisfy the
requirements of Section 414(l) of the Internal Revenue Code and
Section 1.414(l)-1 of the Treasury Department Regulations. Upon
such transfer and certification, the Buyer, Imperial and the
Buyer's Plan shall be responsible for all benefits attributable
to Affected Participants' accounts and the Seller and the
Seller's Plan shall cease to have any liability for such benefits
or accounts.
(iii) Back Service Credit. Service of each Current Employee
shall be recognized by the Buyer in connection with the
administration of the Buyer's Plan and the Buyer's Welfare
Benefit Plans for all purposes, including, without limitation,
vesting, eligibility for benefits, level of benefits and optional
forms of payment, but not benefit accrual.
(iv) Benefits. The Buyer covenants to the Seller that after the
Closing Date, the Buyer shall cause Imperial to provide to each
Current Employee benefits that are no less favorable than the
benefits offered by the Buyer to the employees of the Buyer's
operating subsidiaries relative to geographic location, business
area, job description, seniority and related relevant
classifications.
(v) COBRA. Schedule 4(q) of the Disclosure Schedule lists all
of the current and former employees of Imperial and the
dependents of such employees with respect to whom a qualifying
event occurred prior to or on the Closing Date and who is
receiving or who is currently entitled or eligible to
continuation coverage under COBRA. The Buyer shall assume all
COBRA obligations with respect to all such persons. The Buyer
shall assume all COBRA obligations that arise on or after the
Closing Date under all Employee Welfare Benefit Plans that are
listed in Schedule 4(q) of the Disclosure Schedule which are
group health plans subject to COBRA.
(h) Disability Workers' Compensation. To the
extent commercially feasible, the Buyer and its plans shall
assume all responsibility for unpaid workers' compensation, short-
term disability and long-term disability claims made by a Current
Employee after the Closing Date. With respect to any Current
Employee on short-term disability on the Closing Date, the Buyer
shall, at its expense, continue short-term disability coverage
substantially similar to that provided by the Seller.
(i) Severance Policy. The Buyer shall establish
and maintain, for the period commencing on the Closing Date and
terminating not less than one (1) year following the Closing
Date, a severance policy for Imperial which provides severance
benefits to the Current Employees who are retained by Imperial
following the Closing Date which are substantially similar to the
severance benefits described on Schedule 6(i) of the Disclosure
Schedule; provided that nothing in this Agreement shall require
the Buyer to retain any Current Employee or prevent the Buyer
from terminating any Current Employee at any time to the extent
not inconsistent with applicable Law.
(j) Collective Bargaining Agreement. The Buyer
agrees to be bound by the terms and conditions of the collective
bargaining agreement covering employees of Imperial described on
Schedule 4(p)(ii) of the Disclosure Schedule and to continue to
provide any compensation or employee benefits required to be
provided under the terms of Imperial's collective bargaining
agreement.
(k) Backyear Audits. Following the Closing, the
Seller shall cooperate with the Buyer's efforts to cause
Imperial, at Buyer's expense, to deliver, or cause to be
delivered, to the Buyer an unqualified and unmodified audit
report of Ernst &Young, LLP on the balance sheets of Imperial as
of September 26, 1998 and September 25, 1999, and audited
statements of operations and cash flows of Imperial for the
fiscal years then ended, which report shall be without limitation
as to the scope of the audit. The Seller shall assist the Buyer,
at no third-party cost or expense to the Seller, by providing all
management letters, reports or representations reasonably
requested by such auditors in connection with such audits. In
addition, the Buyer and the Seller shall cooperate with all
reasonable requests of the other to take any actions required to
consummate the transactions contemplated by this Agreement, and
to provide the other with such assistance as is reasonably
necessary to comply with all of their respective filing and
reporting obligations.
(l) Special Arrangements Relating to Known
Environmental Matters. All of the items listed on Schedule 4(r)
of the Disclosure Schedule are collectively referred to as "Known
Environmental Matters", provided that for purposes of this
Agreement, a breach of any of the representations of the Seller
set forth in Sections 4(r)(vii), (viii), (ix) and (x) are not
Known Environmental Matters, and the breach by the Seller of any
of the representations and warranties set forth therein are not
subject to the provisions of this Section 6(l). (Further, the
Parties expressly acknowledge and agree that notwithstanding that
the Seller has furnished the Buyer with a copy of that certain
report dated June 14, 2000 prepared by BHE Environmental
concerning the Imperial facility located in Cincinnati, Ohio, the
subject of that report shall also not be treated as a Known
Environmental Matter to which the provisions of this Section 6(l)
apply.) The Parties hereby agree that following the Closing, the
Buyer shall have the right to conduct the following activities
relating to the Known Environmental Matters (collectively
referred to as "Known Environmental Activities"): (x) all
activities reasonably necessary for the assessment, sampling,
investigation, monitoring, remediation, abatement or the like
relating to any of the Known Environmental Matters ("Known
Environmental Identification and Remediation Activities"); and
(y) the defense, settlement and/or other resolution of all third
party claims against the Seller, Imperial, the Buyer or the
Parent (including those asserted by any governmental agency)
arising from or relating to any of the Known Environmental
Matters to the extent such claims are asserted against the
Seller, Imperial, the Buyer or the Parent ("Known Environmental
Third Party Claims" and "Known Environmental Claim Resolution
Activities," respectively).
(i) With respect to the conduct of the Known
Environmental Identification and Remediation Activities
and any Known Environmental Claim Resolution Activities
in connection with any Known Environmental Third Party
Claims brought by any governmental agency, the Parties
hereby agree as follows:
(A) as appropriate, such activities
shall be conducted by an environmental consultant
selected by the Buyer with the consent of the
Seller, which consent shall not be unreasonably
delayed or withheld;
(B) a copy of all submissions to any
Governmental Body, including without limitation
work plans, sampling and analysis plans and health
and safety plans, shall be delivered to the Seller
within a reasonable time in advance of the
submission date to allow for the Seller to review
and consult with the Buyer;
(C) the Buyer shall deliver to the
Seller copies of all information discovered or
prepared as a result of the Buyer's conduct of any
such activities, including, but not limited to
results of soil or groundwater analysis, pumping
test results, monitoring results and consulting
reports or correspondence;
(D) the Seller shall have the right to
attend all meetings or discussions with any
Governmental Body, and the Seller shall receive
notice of the time and place of the meeting or
discussion within a reasonable time prior to any
such meeting or discussion, provided that so long
as the Buyer has furnished the Seller with such
reasonable advance notice thereof, the Buyer shall
have no responsibility for the Seller's
unavailability or failure to attend any such
meeting; and
(E) the Seller or its representative
shall have the right to enter the relevant portion
of Imperial's Real Property at all reasonable
times for the purpose of observing the conduct or
performance of any such activities, subject to
reasonable health and safety plans or restrictions
imposed on the Seller during such observation.
(ii) With respect to the conduct of any Known
Environmental Claim Resolution Activities in connection
with any Known Environmental Third Party Claims other
than a Known Environmental Third Party Claim brought by
a Governmental Body, the Parties hereby agree as
follows:
(A) upon the Buyer's or Imperial's
receipt of any such Known Environmental Third
Party Claim Buyer shall promptly so notify the
Seller in writing; provided, however, that no
delay on the part of the Buyer in notifying the
Seller shall relieve the Seller from any liability
or obligation hereunder unless (and then solely to
the extent) the Seller is damaged and prejudiced
from adequately participating in the defense of
that Known Environmental Third Party Claim;
(B) the Buyer shall defend any such
Known Environmental Third Party Claim with counsel
of its choice reasonably satisfactory to the
Seller, provided that the Seller may retain
separate co-counsel at its sole cost and expense,
to participate (as an observer) in such defense,
further provided that the Buyer shall have full
and complete control over any such defense;
(C) the Buyer shall deliver or cause to
be delivered to the Seller copies of all
correspondence, pleadings, motions, briefs,
appeals or other written statements relating to or
submitted in connection with the defense of any
such Known Environmental Third Party Claim, and
timely notices of, and the right to participate
(as an observer) in any hearing or other court
proceeding relating to any such Known
Environmental Third Party Claim; and
(D) the Buyer may defend against or
enter into any settlement with respect to any such
Known Environmental Third Party Claim in any
manner it reasonably may deem necessary or
appropriate.
(iii) If the Seller objects to any
significant matter related to any of the Known
Environmental Activities, the Seller and the Buyer
agree that they will attempt in good faith to promptly
resolve any such dispute, provided, however, that if
such dispute cannot be resolved through good faith
negotiations, the Buyer shall have the absolute right
to conduct the Environmental Activities in a manner
that it reasonably deems to be appropriate.
(iv) The Parties hereby agree that the Seller
shall reimburse the Buyer in immediately available
funds, within ten (10) days after receipt by the Seller
of reasonably satisfactory supporting documentation
from the Buyer, for (x) two-thirds (2/3rds) of the
first $750,000 of "Known Environmental Costs" (as that
term is hereinafter defined) incurred by the Buyer and
(y) one-half (1/2) of the next $750,000 of Known
Environmental Costs incurred by the Buyer, provided
that in no event shall the Seller be liable for more
than an aggregate of $875,000 of Known Environmental
Costs (the portion of the Known Environmental Costs for
which the Seller is liable to Buyer under this Section
6(l) being hereinafter referred to in this Agreement as
the "Seller's Portion of Known Environmental Costs").
For purposes of this Agreement, the term "Known
Environmental Costs" means the aggregate sum of all
costs and expenses incurred by Buyer in conducting the
Known Environmental Activities during the seven (7)
year period following the Closing.
(m) Post-Closing Employee Benefit Matters. The
Seller covenants to the Buyer that the Seller shall cooperate
with the Buyer and Imperial in establishing the insurance
policies and contractual arrangements listed in Schedule 5(o) of
the Disclosure Schedule.
7. Conditions to Obligations to Closing.
(a) Conditions to Obligation of the Buyer. The obligation of
the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction or waiver
of the following conditions:
(i) Representations and Warranties. The representations and
warranties set forth in Section 3(a) and Section 4 above shall be
true and correct in all material respects at and as of the
Closing Date, provided that in the case of the representation and
warranty contained in Section 4(f)(i), the provisions of Section
7(a)(xi) shall apply.
(ii) Covenants. The Seller shall have performed and complied with
all of its covenants hereunder in all material respects through
the Closing.
(iii) Third Party Consents. Imperial shall have procured all
necessary third party consents specified in Section 5(b) above.
(iv) Government Order, Injunction. No action, suit or proceeding
shall be pending or threatened before any court or quasi-judicial
or administrative agency of any federal, state, local or foreign
jurisdiction wherein an unfavorable judgment order, decree,
stipulation, injunction or charge would (A) prevent consummation
of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation or (C) affect adversely
the right of the Buyer to own the Imperial Shares or have a
Material Adverse Effect on Imperial's operation of the Business
(and no such judgment order, decree, stipulation, injunction or
charge shall be in effect).
(v) Compliance Certificate. The Seller shall have delivered to
the Buyer a certificate (without qualification as to knowledge or
materiality or otherwise) to the effect that each of the
conditions specified above in Section 7(a)(i)-(iv) is satisfied
in all respects.
(vi) Entire Ownership; Absence of Liens. The acquisition by the
Buyer of the Imperial Shares shall represent one hundred percent
(100%) of the issued and outstanding capital stock of Imperial
and all of the Imperial Shares shall be free and clear of any
Security Interests or other liens, claims or encumbrances of any
nature whatsoever.
(vii) Governmental Approvals. The Parties and Imperial shall
have received all required authorizations, consents and approvals
of Governmental Bodies including such authorizations, consents or
approvals required under the HSR Act and set forth in the
Disclosure Schedule;
(viii) Buyer Completion of Customer Due Diligence. Within
fourteen (14) days following the date of this Agreement, the
Buyer shall have completed a due diligence investigation of the
Designated Imperial Customers subject to the provisions of
Section 5(e) hereof and determined that no Material Adverse
Change has occurred in Imperial's vendor-customer relationship
with those Designated Imperial Customers, by delivering to the
Seller a written letter within the said fourteen (14) day period
advising the Seller to that effect (the "Buyer Customer DDI Sign-
Off Letter"); provided that: (A) if the Buyer shall fail to
deliver the Buyer Customer DDI Sign-Off Letter to the Seller
within the said fourteen (14) day period, the Buyer shall be
deemed to have waived the condition imposed by this Section
7(a)(viii); and (B) if a Material Adverse Change shall have
occurred and the Buyer shall, in its absolute discretion, elect
not to waive the condition created by this Section 7(a)(viii),
the Buyer shall pay the Seller the Termination Fee, payment of
which shall be made in immediately available funds by the Buyer
to the Seller within ten (10) days following the termination of
this Agreement by the Buyer.
(ix) Opinion of Seller's Counsel. The Buyer shall have received
from counsel to the Seller an opinion with respect to the matters
set forth in Exhibit B attached hereto, addressed to the Buyer
and dated as of the Closing Date;
(x) Resignations. The Buyer shall have received the
resignations, effective as of the Closing, of (A) each director
of Imperial and (B) each officer of Imperial designated by the
Seller, in each case prior to the Closing.
(xi) Absence of Certain Changes. Since the date of this Agreement
no Material Adverse Change shall have occurred in Imperial's
Business, provided that if a Material Adverse Change shall have
occurred and the Buyer shall, in its absolute discretion, elect
not to waive the condition created by this Section 7(a)(xi), the
Buyer shall pay the Seller the Termination Fee, payment of which
shall be made in immediately available funds by the Buyer to the
Seller within ten (10) days following the termination of this
Agreement by the Buyer.
(xii) Transfer of Excluded Assets and Excluded Liabilities;
No Security Interests. All Excluded Liabilities and all Excluded
Assets shall have been transferred to and assumed by the Seller,
all Funded Indebtedness of Imperial shall have been paid in full
prior to or at the Closing and all Security Interests in the
Shares and in any assets of Imperial except Permitted Liens shall
have been fully released of record to the satisfaction of the
Buyer and all mortgages and Uniform Commercial Code financing
statements covering such Funded Indebtedness shall have been
terminated or the Buyer shall be reasonably satisfied that all
such Security Interests will be fully released of record within
three (3) days thereafter.
(xiii) Required Corporate and Shareholder Actions. All
appropriate corporate and shareholder authorizations of Imperial
shall have been obtained.
(xiv) Absence of Proscribed Transfers. Except as set forth on
the Disclosure Schedule, since the date of the Most Recent
Financial Statements, Imperial shall not have transferred,
conveyed, disposed of and/or sold any Material assets, except in
the Ordinary Course of Business other than the Excluded Assets.
The Buyer may waive any condition specified in this Section 7(a)
if it executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligations of the Seller. The Obligation of
the Seller to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction or
waiver of the following conditions:
(i) Representations and Warranties. The representations and
warranties set forth in Section 3(b) above shall be true and
correct in all Material respects at and as of the Closing Date.
(ii) Covenants. The Buyer and the Parent shall have performed and
complied with all of their respective covenants hereunder in all
Material respects through the Closing.
(iii) Government Order, Injunction. No action, suit or
proceeding shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction wherein an unfavorable judgment
order, decree, stipulation, injunction or charge would
(A) prevent consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following
consummation (and no such judgment order, decree, stipulation,
injunction or charge shall be in effect).
(iv) Compliance Certificate. The Buyer shall have delivered to
the Seller a certificate (without qualification as to knowledge
or Materiality or otherwise) to the effect that each of the
conditions specified above in Section 7(b)(i)-(iii) is satisfied
in all respects.
(v) Governmental Approvals. The Parties and Imperial shall have
received all other authorizations, consents, and approvals of
Governmental Bodies including such authorizations, consents and
approvals required under the HSR Act and set forth in the
Disclosure Schedule.
(vi) Opinion of Buyer's Counsel. The Seller shall have received
from counsel to the Buyer an opinion with respect to the matters
set forth in Exhibit C attached hereto, addressed to the Seller
and dated as of the Closing Date.
(vii) Receipt of Buyer Customer DDI Sign-Off Letter. The
Seller shall have received, or be deemed to have received, the
Buyer Customer DDI Sign-Off Letter within the time period fixed
by the provisions of Section 7(a)(viii) hereof.
The Seller may waive any condition specified in this Section 7(b)
if it executes a writing so stating at or prior to the Closing.
8. Remedies for Breach of This Agreement.
(a) Survival.
(i) Seller - General. All of the
representations and warranties of the Seller contained
in Section 4 above (other than the representations and
warranties of the Seller contained in Sections 4(b),
(h), (r) and (u) above) shall survive the Closing
hereunder and continue in full force and effect for a
period of one (1) year following the Closing Date.
(ii) Seller - Environmental. The
representations and warranties of the Seller contained
in Section 4(r) shall survive the Closing hereunder and
continue in full force and effect for a period of three
(3) years following the Closing Date.
(iii) Seller - Certain Other
Representations and Warranties; Seller Covenants. The
representations and warranties of the contained in
Section 3(a) and Sections 4(b), (h) and (u) above, and
the covenants of the Seller contained in this
Agreement, including the indemnification obligation of
the Seller created by the provisions of Section 8(b),
shall survive the Closing and continue in full force
and effect until and only until the expiration of the
applicable statue of limitations.
(iv) Buyer - General. The representations and
warranties of the Buyer and the Parent contained in
Section 3(b) and the covenants of the Buyer and the
Parent contained in this Agreement, including the
indemnification obligation of the Buyer and the Parent
created by the provisions of Section 8(d), shall
survive the Closing and continue in full force and
effect until and only until the expiration of the
applicable statue of limitations.
(v) Prior Knowledge; Timeliness of Claims;
Post-Claim Adverse Consequences. All of the
representations and warranties of a Party shall survive
the Closing hereunder even if any other Party knew or
had reason to know of any misrepresentation or breach
of warranty by that Party at the time of the Closing.
Provided that a Party makes a written claim for
indemnification against any other Party pursuant to the
notice provisions of Section 10(g) below within the
applicable survival period fixed by the provisions of
Section 8(a): (A) such claim shall survive the
expiration of the applicable survival period so fixed
by the provisions of Section 8(a); and (B) except as
expressly provided otherwise in this Section 8, such
claim shall include any Adverse Consequences the other
Party may suffer after the date of the claim for
indemnification and/or after the end of the applicable
survival period.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) Seller - General. Except as expressly provided otherwise in
this Section 8, in the event that the Seller breaches any of its
representations, warranties, agreements or covenants to the Buyer
contained herein, subject to the provisions of Section 8(b)(ii),
the Seller agrees to indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer may suffer through
and after the date of the claim for indemnification resulting
from, arising out of, relating to or caused by any such breach.
Without limiting the generality of the foregoing, the Seller
agrees to indemnify the Buyer and Imperial from and against (A)
all liability for Taxes of the Seller (other than Section 338
Taxes to the extent provided in Section 8(d)(i), below) and its
Affiliates, including Imperial, for all Pre-Closing Tax Periods
and for the portion of all Straddle Periods that ends on the
Closing Date, including all Adverse Consequences suffered by the
Buyer in connection with the determination and settlement of any
such Seller liability for Taxes, (B) all Adverse Consequences
suffered by the Buyer resulting from, arising out, relating to or
caused by any of the Excluded Liabilities or any of the Excluded
Assets, (C) the Seller's Portion of the Known Environmental Costs
and (D) any Adverse Consequences suffered by the Buyer arising in
any manner whatsoever out of the ▇▇▇▇▇▇▇ Agreement.
(ii) Seller - Monetary Liability Limitations. The Buyer shall not
be entitled to indemnification under Section 8(b)(i) for breaches
of the Seller's representations and warranties made in Section 4
hereof unless (and then, only to the extent that) the Buyer's
aggregate Adverse Consequences by reason of such breaches exceed
$100,000. The Buyer shall also not be entitled to indemnification
under Section 8(b)(i) for breaches of the Seller's
representations and warranties made in (A) Section 4 (other than
those contained in Sections 4(b), 4(h) and 4(u)) to the extent
that the Buyer's aggregate Adverse Consequences by reason of such
breaches exceed $2,600,000, and (B) in any other Section of this
Agreement, including without limitation, Section 3(a) and
Sections 4(b), 4(h) and 4(u), to the extent that the Buyer's
aggregate Adverse Consequences by reason of such breaches when
taken together with all Adverse Consequences subject to the
limitations in the immediately preceding clause (A), exceed the
amount of the Purchase Price (as adjusted pursuant to the
provisions of Sections 2(c) and 2(g)). Finally, with respect to
any matter for which a reserve or liability was established on
the Audited Statement of Net Working Capital, the Buyer shall not
be entitled to indemnification for any Adverse Consequences under
Section 8(b) to the extent of any such reserve or liability.
(c) THERE IS NO SECTION 8(c)
(d) Indemnification Provisions for Benefit of the Seller.
(i) Buyer - General. Except as expressly provided otherwise in
this Section 8 hereof, in the event the Buyer or the Parent
breaches any of its representations, warranties and covenants
contained herein, the Buyer and the Parent jointly and severally
agree to indemnify the Seller from and against any Adverse
Consequences the Seller may suffer through and after the date of
the claim for indemnification, resulting from, arising out of,
relating to or caused by the breach. Without limiting the
generality of the foregoing, the Buyer and the Parent shall
jointly and severally indemnify the Seller for (A) all liability
for Non-Section 338 Taxes of the Buyer, the Parent and their
subsidiaries, including Imperial, for all Post-Closing Tax
Periods and for Taxes for the portion of all Straddle Periods
after the Closing Date, (B) all liability for Section 338 Taxes
properly due with any ▇▇▇ Tax Returns to be filed in the States
of Ohio and Texas, (C) all other Section 338 Taxes (but in no
event more than $403,000) due with any Applicable ▇▇▇ Tax
Returns, (D) all of the Special Section 338 Gross-Up Amounts and
Fees (but in no event more than $37,000), and (E) the Adverse
Consequences to the Seller arising from or relating to a Known
Environmental Matter (as defined in Section 6(l) above) in excess
of the Seller's Portion of the Known Environmental Costs (as that
term is defined in Section 6(l) above).
(ii) Buyer - Monetary Liability Limitation. The Seller shall not
be entitled to indemnification under Section 8(d)(i) for breaches
of the Buyer's and the Parent's representations and warranties to
the extent that the Seller's aggregate Adverse Consequences by
reason of such breaches exceed the amount of the Purchase Price
(as adjusted pursuant to the provisions of Section 2(b)).
(e) Matters Involving Third Party Claims. If any third party
shall notify any Party (the "Indemnified Party") with respect to
any matter which may give rise to a claim for indemnification
against any other Party (the "Indemnifying Party") under this
Section 8 other than Known Environmental Third Party Claims
(which shall be subject to the provisions of Section 6(l) above)
(a "Third Party Claim"), then the Indemnified Party shall notify
in writing each Indemnifying Party thereof promptly; provided,
however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying
Party from any liability or obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is damaged
and prejudiced from adequately defending such Third Party Claim.
In the event any Indemnifying Party notifies the Indemnified
Party within thirty (30) days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party
is assuming the defense thereof, (i) the Indemnifying Party will
defend the Indemnified Party against that Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified
Party, (ii) the Indemnified Party may retain separate co-counsel
at its sole cost and expense and (iii) the Indemnified Party will
not consent to the entry of any judgment or enter into any
settlement with respect to that Third Party Claim without the
written consent of the Indemnifying Party (which consent may not
be unreasonably withheld or delayed). In the event no
Indemnifying Party notifies in writing the Indemnified Party
within thirty (30) days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party is
assuming the defense thereof, however, the Indemnified Party may
defend against or enter into any settlement with respect to, that
Third Party Claim in any manner it reasonably may deem
appropriate, and the Indemnifying Party shall be liable for the
settlement amount of that Third Party Claim if and only if its is
finally determined to be liable for such amount pursuant to the
provisions of this Section 8. At any time after commencement of
any such Third Party Claim, any Indemnifying Party may request an
Indemnified Party to accept a bona fide offer from the other
Party(ies) to the Third Party Claim for a monetary settlement
thereof payable solely by such Indemnifying Party (which does not
unreasonably burden or restrict the Indemnified Party nor
otherwise prejudice it, him or her) whereupon such course of
action shall be taken unless the Indemnified Party determines
that such Third Party Claim should be continued, in which case
the Indemnifying Party shall be liable to the Indemnified Party
for indemnity hereunder in respect of that Third Party Claim only
to the extent of the lesser of (A) the amount of the settlement
offer or (B) the amount for which the Indemnified Party may be
liable with respect to such Third Party Claim. In addition, the
Party controlling the defense of any Third Party Claim shall
deliver or cause to be delivered, to the other Party copies of
all correspondence, pleadings, motions, briefs, appeals or other
written statements relating to or submitted in connection with
the defense of that Third Party Claim, and timely notices of, and
the right to participate in (as an observer) any hearing or other
court proceeding relating to that Third Party Claim.
(f) Determination of Loss. The Parties shall make appropriate
adjustments for Tax benefits and insurance proceeds (reasonably
certain of receipt and utility in each case) in determining the
amount of any Adverse Consequence or loss for purposes of this
Agreement.
(g) Exclusive Remedy. Except as set forth in Section 8(i), the
Parties acknowledge and agree that the foregoing indemnification
provisions in this Section 8 shall be the exclusive remedy of the
Parties for any claim or action arising out of any breach of this
Agreement or relating to the transactions contemplated hereby.
(h) Payment. The Indemnifying Party shall promptly pay to the
Indemnified Party as may be entitled to indemnity hereunder in
cash the amount of any Adverse Consequences to which such
Indemnified Party may become entitled to by reason of the
provisions of this Agreement if and when it has been finally
determined that the Indemnifying Party is liable for such amount
in accordance with the provisions of Section 8(j) hereof.
(i) Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in
derogation of, any statutory or common law remedy any Party may
have for intentional fraud.
(j) Arbitration with Respect to Certain
Indemnification Matters. For purposes of this Section 8(j), the
Buyer and the Parent shall be deemed to be one and the same
Party. Except as expressly provided otherwise elsewhere in this
Agreement, the Parties agree to submit to arbitration, in
accordance with these provisions, any disputed claim or
controversy arising from or related to the alleged breach of this
Agreement or any disputed indemnification claim made pursuant to
the provisions of this Section 8. The Parties further agree that
the arbitration process agreed upon herein shall be the exclusive
means for resolving all disputes made subject to arbitration
herein, but that no arbitrator shall have authority to expand the
scope of these arbitration provisions. Any arbitration hereunder
shall be conducted under the procedures of the American
Arbitration Association (the "AAA"). Any Party may invoke the
following arbitration procedures fixed by the provisions of this
Section 8(j) by written notice for arbitration containing a
statement of the matter to be arbitrated, and any disputed
matter, controversy or indemnification claim so submitted
hereunder is hereinafter referred to as an "Arbitration"). Each
Arbitration hereunder shall be conducted in accordance with the
following procedures.
(i) The Arbitration shall be conducted in
Cincinnati, Ohio.
(ii) The governing law shall be Ohio.
(ii) The Arbitration shall be conducted by a
mutually agreeable, neutral arbitrator who, in the case of
any arbitration the subject matter of which is related to
accounting matters, shall have extensive knowledge of
accounting matters (the "Arbitrator"). Within fourteen (14)
days following written notice of arbitration, the Parties
shall prepare and submit to the AAA a joint submission, with
each Party to contribute half of the appropriate
administrative fee. In the event the Parties cannot
mutually agree upon a neutral arbitrator within that
fourteen (14) day period, their joint submission to the AAA
shall request a panel of three arbitrators who are
practicing attorneys with professional experience in the
field of corporate law, and the Parties shall attempt to
select an Arbitrator from the panel according to AAA
procedures.
(iv) Each Party shall be responsible for its costs
incurred in any Arbitration, and the Arbitrator shall not
have authority to include all or any portion of said costs
in an award, regardless of' which Party prevails.
(v) In the conduct of the Arbitration:
(A) each Party shall be entitled to
discovery pursuant to the Federal Rules of Civil
Procedure; and
(B) evidence shall be competent only if it
is admissible in evidence, under the Federal Rules
of Evidence.
(vi) The award of the Arbitrator shall be rendered
"baseball style," such that the award by the Arbitrator
shall be only (A) as requested by one Party or (B) as
requested by the other Party; provided that the legal and
accounting fees incurred in connection with the Arbitration
by the Party whose award request is accepted by the
Arbitrator shall be paid by the Party whose reward request
is rejected by the Arbitrator, as soon as practicable after
receipt of the appropriate supporting invoice.
(vii) Any Arbitration award shall be
accompanied by a written statement containing a summary of
the issues in controversy, a description of the award, and
an explanation of the reasons for the award. Judgement upon
any award may be entered in a court of competent
jurisdiction.
(k) Adjustment to Purchase Price. Any payment
under this Section 8 shall be treated for tax purposes as an
adjustment of the Purchase Price to the extent such
characterization is proper and permissible under relevant Tax
authorities, including court decisions, statutes, regulations and
administrative promulgations.
9. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the
event the Seller is in breach of any representation, warranty or
covenant contained in this Agreement and such breach, if curable,
has not been cured within fifteen (15) days of written notice
thereof, and the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing in
the event the Buyer is in breach of any representation, warranty
or covenant contained in this Agreement and such breach has not
been cured within fifteen (15) days of written notice thereof;
(iii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing if
the Closing shall not have occurred on or before October 15, 2000
by reason of the failure of any condition precedent under
Section 7(a) hereof (unless the failure results primarily from
the Buyer itself breaching any representation, warranty or
covenant contained in this Agreement); or
(iv) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing if the
Closing shall not have occurred on or before October 15, 2000 by
reason of the failure of any condition precedent under Section
7(b) hereof (unless the failure results primarily from the Seller
itself breaching any representation, warranty or covenant
contained in this Agreement).
Nothing contained in this Section 9(a) shall alter, affect,
modify or restrict any of the Parties' rights to rely on and/or
seek indemnification for a breach of any of the representations
and warranties and/or conditions or covenants of any of the
Parties contained in this Agreement.
(b) Effect of Termination. If either the Buyer or the Seller
terminates this Agreement pursuant to Section 9(a) above, all
obligations of the Parties hereunder shall terminate without any
Liability of any Party to any other Party, except as provided in
Sections 7(a)(viii) and (xi), if applicable.
10. Miscellaneous.
(a) Press Releases and Announcements. Attached hereto as
Exhibit D and Exhibit E, respectively, are the form of the press
release each of the Seller, on the one hand, and the Parent and
the Buyer, on the other hand, will issue promptly following the
date hereof. Except as may be required by applicable securities
laws or stock exchange requirements, no Party shall issue any
other press release or announcement relating to the subject
matter of this Agreement prior to, at or about the Closing
without the prior written approval of the Buyer and the Seller,
which written approval will not be unreasonably withheld;
provided, however, that any Party may make any public disclosure
it believes in good faith is required by law or regulation (in
which case the disclosing Party will advise the other Parties
prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the
Parties and their respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein), and that certain letter agreement dated the
day preceding the date of this Agreement between the Buyer and
the Seller related to certain Designated Imperial Customers,
constitute the entire agreement among the Parties and supersedes
any prior understandings, agreements or representations by or
among the Parties, written or oral, that may have related in any
way to the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. No Party may
assign either this Agreement or any of his, her or its rights,
interests or obligations hereunder without the prior written
approval of the Buyer, the Parent and the Seller; provided,
however, that the Buyer or the Parent may (i) assign any or all
of its rights and interests hereunder to another wholly-owned
Subsidiary of the Parent (but not its obligations, without the
consent of the Seller, which consent shall not be unreasonably
delayed or withheld) and (ii) assign its rights to indemnity
hereunder as additional collateral to its lenders.
(e) Facsimile/Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the
same instrument. A facsimile, telecopy or other reproduction of
this Agreement may be executed by one or more Parties, and an
executed copy of this Agreement may be delivered by one or more
Parties by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on
behalf of such Party can be seen, and such execution and delivery
shall be considered valid, binding and effective for all
purposes. At the request of any Party, all Parties agree to
execute an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof.
(f) Headings. The section, paragraph and subparagraph headings
contained in this Agreement are inserted for convenience only and
shall not affect in any way the meaning or interpretation of this
Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice,
request, demand, claim or other communication hereunder shall be
deemed duly given if (and then three (3) days after) it is sent
by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set
forth below:
If to Buyer or Parent:
c/o Sovereign Specialty Chemicals, Inc.
▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇
Vice President
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Seller or Imperial:
c/o NS Group, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may give any notice, request, demand, claim or
other communication hereunder using any other means (including
personal delivery, expedited courier, messenger service,
facsimile, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by
the individual for whom it is intended. Any Party may change the
address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other
parties notice in the manner herein set forth.
(h) Submission to Jurisdiction. This Agreement and the rights
and obligations of the Parties hereunder shall be construed in
accordance with and be governed by the laws of the State of Ohio,
without regard to any applicable conflict of law principles.
Except as provided in Section 8(i), any legal action or
proceeding against any of the Parties with respect to this
Agreement may be brought and enforced:
(i) if the Party bringing the legal action
or proceeding is the Seller, in a federal or state court
located in the Circuit Court of ▇▇▇▇ County of the State of
Illinois or in the District Court of the United States of
America for the Northern District of Illinois, and by
execution and delivery of this Agreement, in either case
each of the Parties hereby irrevocably accepts for itself
and in respect of its property, generally, irrevocably and
unconditionally, the jurisdiction of the aforesaid courts;
and
(ii) if the Party bringing the legal action
or proceeding is the Buyer or the Parent, in a federal or
state court located in the Court of Common Pleas of ▇▇▇▇▇▇▇▇
County of the State of Ohio or in the District Court of the
United States of America for Southern District of Ohio, and
by execution and delivery of this Agreement, in either case
each of the Parties hereby irrevocably accepts for itself
and in respect of its property, generally, irrevocably and
unconditionally, the jurisdiction of the aforesaid courts.
Each of the Parties agree that a judgment, after exhaustion of
all available appeals, in any such action or proceedings shall be
conclusive and binding upon them, and may be enforced in any
other jurisdiction by a suit upon such judgment, a certified copy
of which shall be conclusive evidenced of this judgment. In the
instance where the provisions of Section 10(h)(i) apply, each of
the Parties hereby waives irrevocably, to the fullest extent
permitted by law, any objection to the laying of venue in
Chicago, Illinois or any claim of inconvenient forum in respect
of any such action in Chicago, Illinois to which it might
otherwise now or hereafter be entitled in any actions arising out
of or based on this Agreement; and in the instance where the
provisions of Section 10(h)(ii) apply, each of the Parties hereby
waives irrevocably, to the fullest extent permitted by law, any
objection to the laying of venue in Cincinnati, Ohio or any claim
of inconvenient forum in respect of any such action in
Cincinnati, Ohio to which it might otherwise now or hereafter be
entitled in any actions arising out of or based on this
Agreement.
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing
and signed by the Parties. No waiver by any Party of any
default, misrepresentation or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend
to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any
other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof
is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration or area of the term
or provision, to delete specific words or phrases or to replace
any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be
appealed.
(k) Expenses. Each of the Parties and Imperial will bear its
own costs and expenses (including legal fees and expenses and
investment banking fees) incurred in connection with this
Agreement and the transactions contemplated hereby. Except as
paid out of the cash of Imperial or reflected as a liability on
the Audited Statement of Net Working Capital, the Seller
acknowledges and agrees that Imperial has not borne or will not
bear any of the Seller's costs and expenses (including any of its
legal fees and expenses and investment banking fees) in
connection with this Agreement or any of the transactions
contemplated hereby.
(l) Construction. The language used in this Agreement will be
deemed to be the language chosen by the Parties to express their
mutual intent, and no rule of strict construction shall be
applied against any Party. Any reference to any federal, state,
local or foreign statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the
context requires otherwise. The Parties intend that each
representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any
representation, warranty or covenant relating to the same subject
matter as any other representation, warranty or covenant
(regardless of the relative levels of specificity) which the
Party has not breached, it shall not detract from or mitigate the
fact that the Party is in breach of the first representation,
warranty or covenant.
(m) Incorporation of Exhibits, Annexes and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the
event any of the provisions of this Agreement are not performed
in accordance with their specific terms or otherwise are
breached. Accordingly, each of the Parties agrees that the other
Parties shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions
hereof in any action instituted in any court of the United States
or any state thereof having jurisdiction over the Parties and the
matter, in addition to any other remedy to which they may be
entitled, at law or in equity.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
BUYER:
MINI CROWN FUNDING CORP.
By:
Name:
Title:
PARENT:
SOVEREIGN SPECIALTY CHEMICALS,
INC.
By:
Name:
Title:
IMPERIAL:
IMPERIAL ADHESIVES, INC.
By:
Name:
Title:
SELLER:
NS GROUP, INC.
By:
Name:
Title:
1100483