EXHIBIT 6.1
ASSET PURCHASE AGREEMENT
By and among
▇▇▇▇ PLASTIC ENTERPRISES, INC.,
an Ohio corporation as "Buyer",
and
SANAR MANUFACTURING COMPANY,
an Ohio Corporation
a subsidiary of OurPet's Company,
a Colorado Corporation as "Seller"
March 31, 2000
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of the
last day of March, 2000 by and between ▇▇▇▇ PLASTIC ENTERPRISES, INC., an Ohio
corporation ("Buyer"), and SANAR MANUFACTURING COMPANY, an Ohio corporation
("Seller") a wholly owned subsidiary of OurPet's COMPANY a Colorado corporation.
RECITALS
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A. Seller is engaged in the business of custom blow molding of plastics
through its Sanar Manufacturing Company, subsidiary (the "Purchased Business").
B. Pursuant to the provisions set forth in this Agreement, Buyer desires
to purchase from Seller, and Seller desires to sell to Buyer, substantially all
of the assets of Seller used in or related to the Purchased Business.
PROVISIONS
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NOW, THEREFORE, in consideration of the covenants, representations and
warranties contained in this Agreement, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
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Sale of Assets and Assumption of Liabilities
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Section 1.01. Purchased Assets. Pursuant to the provisions set forth in
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this Agreement, on the Closing Date (as defined in Section 3.01 below), Seller
shall sell, convey, transfer, assign and deliver, or cause to be sold, conveyed,
transferred, assigned and delivered, to Buyer, and Buyer shall purchase and
acquire, all of the assets (other than the Excluded Assets specifically defined
in Section 1.02 below) owned by Seller and used in the Purchased Business of
every kind, character, and description, whether tangible, intangible and
wheresoever located, whether carried on the books of Seller or not carried on
the books of Seller due to having been expensed, fully depreciated or otherwise
described more fully in Section 1.01 (n) below (all of such assets and leased
equipment called the "Purchased Assets"), including, but not limited to, the
following:
(a) Accounts Receivable. Except as provided herein, all rights of
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Seller or the Purchased Business to payment for goods sold or
leased or for services rendered, whether or not earned by
performance and howsoever evidenced, whether classified as
uncollectible or otherwise written off by Seller, and all rights
of rescission, replevin, reclamation and stoppage in transit and
rights to returned, reclaimed or repossessed goods (collectively,
the "Accounts Receivable"); in connection therewith, Seller shall
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deliver to Buyer on the Closing Date a list and itemizations of
Seller's Accounts Receivable as of the most recent practicable
date;
(b) Inventory. All of Seller's inventory of raw materials, supplies,
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packaging, components, samples, work-in-process, finished goods
and other similar items, including any inventory warehoused on a
third party's property or held on consignment and any unprocessed
warranty items (collectively the "Inventory") including all
obsolete virgin plastic, obsolete regrind plastic and obsolete
molded parts; "obsolete" as used herein shall mean items not
required in production or sold within a period of twelve months
(the "Obsolete Inventory") except items which are reasonably
expected to be used in production or sold at a point subsequent
to such twelve month period;
(c) Machinery and Equipment. All machinery and equipment to the
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point of affixing to or resting on the structure, tools, certain molds
listed on Schedule 1.01 (c), accessories, maintenance equipment,
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instruments, plant furniture, plant furnishings (excluding partition walls,
excluding the interior maintenance building walls), computer software, and
other tangible personal property owned and used by Seller in the operation
of the Purchased Business, wherever located, including any of the foregoing
purchased subject to any conditional sales or title retention agreement and
including, but not limited to, such of the foregoing as are listed on
Schedule 1.01 (c) attached hereto
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(d) Prepaids, Credits and Deposits. All prepaid expenses and
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similar items including, but not limited to, and to the extent they are
transferable, rebates, advertising allowances and credits owing from or
payable by suppliers (but excluding prepaid city income taxes), and all
security or other deposits as listed on schedule 1.01 (d);
(e) Leasehold Improvements. All of Seller's rights in and to
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leasehold improvements, including, but not limited to, those identified on
Schedule 1.01 (e) attached hereto. Buyer will make all reasonable attempts
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to minimize any damage to the building and if appropriate, patch all holes
to the roof, walls and floor before vacating the building;
(f) Personal Property Leases. All rights in, to and under all leases
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of tools, furniture, machinery, supplies, equipment and other items of
personal property entered into in the ordinary course of the Purchased
Business which are listed in Schedule 1.01 (f) (the "Leased Personal
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Property"); provided, however, that to the extent the assignment of any
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such lease or any claim or right or any benefit arising under or resulting
from such lease (s) shall require the consent of another party, this
Agreement shall not constitute an assignment of such lease (s) if an
attempted assignment would constitute a breach of such lease (s), and, in
lieu thereof, Seller shall cooperate with Buyer in any reasonable
arrangement designed to provide Buyer the benefits under, or any claim or
right arising under, such lease (s);
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(g) Purchase Orders. All rights in, to and under all contracts,
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agreements, purchase orders or work orders with vendors or suppliers of the
Seller, purchase orders and work orders from customers of the Seller
entered into in the ordinary course of the Purchased Business prior to the
Closing Date, including all rights to assert claims and take action and
receive damages in respect of breaches, defaults and other violations of
such documents (collectively, the "Purchase Orders"); provided, however,
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that to the extent the assignment of, or any claim or right or any benefit
arising under or from, any such contract, agreement, purchase order,
customer order or work order shall require the consent or approval of
another party thereto, this Agreement shall not constitute an assignment
thereof if an attempted assignment would constitute a breach thereof, and,
in lieu thereof, Seller shall cooperate with Buyer in any reasonable
arrangement designed to provide Buyer the benefits under such contract,
agreement, purchase order, customer order or work order, or any claim or
right arising thereunder;
(h) Licenses, Permits and Approvals. To the extent legally
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assignable, all licenses, permits, franchises, certificates, approvals and
other governmental authorizations currently held by Seller and necessary to
own or lease and operate the Purchased Assets and to conduct the Purchased
Business as it is presently conducted including, but not limited to, those
licenses and permits listed in Schedule 1.01 (h); provided, however, that
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to the extent the assignment of any of the foregoing items requires the
consent or approval of another party thereto, this Agreement shall not
constitute an assignment thereof if an attempted assignment would
constitute a breach thereof, and, in lieu thereof, Seller shall cooperate
with Buyer in any reasonable arrangement designed to provide Buyer the
benefits under such licenses, permits, franchises, certificates, approvals
or other governmental authorizations;
(i) Intellectual Property. All patents, patent applications and
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rights to patentable inventions and all reissues, divisions, continuations,
continuations in part and extensions thereof; all service marks,
trademarks, trade names, copyrights and licenses, and all registrations or
applications relating thereto; all goodwill associated with any trademark,
service ▇▇▇▇ or trade name; all inventions, trade secrets, know-how,
formulae, computer programs and software, including Seller's rights in
software licenses, patterns, plans, specifications, blueprints, manuals,
designs and drawings and other confidential or proprietary information; and
the right to ▇▇▇ and receive damages for past infringement or improper use
or disclosure of any such items, including, without limitation, such of the
foregoing as are listed on Schedule 1.01 (i) attached hereto (the
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"Intellectual Property") provided, however, that to the extent the
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assignment of any of the foregoing items of Intellectual Property require
the consent or approval of another party thereto, this Agreement shall not
constitute an assignment thereof if an attempted assignment would
constitute a breach thereof, and, in lieu thereof, Seller shall cooperate
with Buyer in any reasonable arrangement designed to provide Buyer the
benefits under such contracts, agreement, purchase order, customer order or
work order, or any claim or right arising thereunder. No Intellectual
Property is to be obtained from OurPet's or Virtu Company, a wholly owned
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subsidiary of OurPet's (Virtu);
(j) Books and Records. To the extent they existed as of December 31,
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1999, all books and records related to the Purchased Business including,
but not limited to, property records, compliance records, employee training
materials, purchasing and sales records, credit data, copies of personnel
and payroll records, MSDS and OSHA Right to Know Book, accounting records,
customer lists, supplier lists, parts lists, manuals, sales literature,
catalogs, artwork and any similar items and copies of all income tax
returns of Seller for the previous Five (5) years. Seller shall have the
right to access the records transferred to the Buyer for a period of 5
years after the purchase date at the Buyer's place of business and during
normal business hours. The Buyer will only be required to keep such
records for a period of time as required by the statute of limitations and
offer to the Seller any items prior their disposal;
(k) Name. The name "Sanar Manufacturing Company" (the "Name") and
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all trade names or fictitious names used in connection with the Purchased
Business;
(l) Goodwill. The goodwill of the Purchased Business as a going
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concern;
(m) Insurance. The insurance policy or policies listed on Schedule
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4.19 to this Agreement.
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(n) Customer Molds. All of Seller's right to possess and use molds
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of customers of the Purchased Business on the premises of the Purchased
Business as of the Closing Date as listed and specified on Schedule 1.01
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(p) attached hereto; provided, however, that to the extent the use of the
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customer molds require the consent or approval of a customer, this
Agreement shall not constitute a license to use such molds if such an
attempted license would constitute a breach of an agreement with a
customer, and, in lieu thereof, Seller shall cooperate with Buyer in any
reasonable arrangement designed to provide Buyer the full right to use such
customer molds; in connection therewith; Seller represents that it has
furnished to Buyer prior to the date hereof, specimen copies of current
customer purchase orders.
Section 1.02. Excluded Assets. Seller shall not sell, convey,
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transfer, assign or deliver to Buyer, and Buyer shall not purchase or
acquire, the following assets of Seller (the "Excluded Assets"):
(a) Any real property, buildings or fixtures owned legally or
equitably by Seller;
(b) The corporate minute books and stock records of Seller;
(c) Those other assets of Seller which are listed specifically
on Schedule 1.02 (c). including, but not limited to, office furniture,
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computer hardware, automobiles, advances to employees who are
shareholders of Seller, and molds, tooling, fixtures,
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owned and used for the manufacturing of OurPet's products;
(d) Prepaid city income taxes;
(e) Assets owned by stockholders of Seller and used by Seller,
listed on Schedule 1.02 (g); and
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(f) Cash. All cash and cash equivalents as of the Closing
Date, including, but not limited to, ▇▇▇▇▇ cash;
(g) Certain Accounts Receivable. Accounts receivable due Seller
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and their respective molds listed in Schedule 1.02 (i) from
such accounts receivable and security interest shall remain
the property of the Seller for collection pursuant to
Section 2.10 hereof as Seller shall see fit, except as
otherwise provided in Section 2.10.
(h) Any proprietary rights or confidential information to
products produced for OurPet's or its affiliates not including Sanar;
Section 1.03. Assumed Liabilities. Subject to the terms and conditions set
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forth herein, on the Closing Date Buyer shall assume and agree to pay, honor and
discharge the following specified liabilities or obligations of Seller and the
Purchased Business (collectively, the "Assumed Liabilities") as calculated in
accordance with generally accepted accounting principles applied on a consistent
basis ("GAAP"):
(a) Purchase Orders. The obligations to complete any Purchase Orders
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pending on the Closing Date; provided, that the Buyer shall not be
obligated to assume and does not assume any Purchase Order placed by Seller
with any of Seller's vendors or suppliers in excess of $5,000 unless such
Purchase Order is listed on Schedule 1.03 (a);
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(b) Trade Payables and Accrued Liabilities. Those liabilities of
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Seller for trade and other payables and accrued liabilities arising in the
ordinary course of the Purchased Business which are of a type, nature and
amount consistent with Seller's historical accounting practices and
financial statements as consistently applied and which are recorded on the
books and records of Seller as of the Closing Date and listed in, or
attached as a schedule to, the Post-Closing Statement of Net Assets less
Liabilities referred to in Section 2.03 hereof; in connection therewith,
Seller shall deliver to Buyer on the Closing Date a list and itemization of
Seller's trade payables and accrued liabilities as of the most recent
practicable date;
(c) Post-Closing Product Warranty and Liability. Those obligations
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and liabilities to third parties for property damage, personal injury or
death caused by products of the Purchase Business manufactured and sold on
and/or after the Closing Date and any loss or damage from, or costs and
expenses incurred in connection with, warranty claims arising out of
business
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operations conducted, services performed or products manufactured or sold
on or after the Closing Date;
(d) Customer Molds. Custody and care of all customer molds possessed
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and/or in which a possessory interest is claimed by Seller on the Closing
Date, as listed on Schedule 1.01 (p)
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(e) Funded Bank Debt and Capital Leases. Any liabilities or
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obligations for borrowed money or the deferred portion of the purchase
price of any capital asset or under any capital lease or financing lease
except Seller's debt to National Canada Business Corporation ("NCBC"). All
of Seller's obligations are to be terminated at closing;
(f) Occupancy Obligations. All obligations and liabilities on the
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part of Buyer, as an occupant of the premise located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ as of the Closing Date will be governed by the
Buyer's lease agreement between the buyer and Sanar Manufacturing Company,
dated March 31, 2000.
Section 1.04. Excluded Liabilities. Except for the Assumed Liabilities,
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Seller and Buyer specifically acknowledge and agree that Buyer does not agree to
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pay, assume, discharge or hold Seller harmless from any liabilities or
obligations or of Seller or relating to Seller's operation of the Purchased
Business, whether known or unknown, contingent or matured, disclosed or
undisclosed pursuant to this Agreement, of any nature whatsoever, and howsoever
and whenever arising (collectively the "Excluded Liabilities"). The Excluded
Liabilities shall include, but not be limited to, the following:
(a) Transaction Costs. Any costs, expenses or liabilities of any
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nature incurred by Seller at any time in connection with this Agreement or
the transactions contemplated hereby;
(b) Transfer Taxes. All state, local and foreign taxes, if any, due
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on account of the sale and transfer of the Purchased Assets which are
lawfully and appropriately assessed or levied against Seller
(c) Other Taxes. Any liabilities relating to the payment of (1)
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federal, state or local taxes imposed upon either Seller, or any of the
Purchased Assets arising out of or measured by the earnings or income of
Seller, (2) real property or personal property taxes arising out of the
ownership of real estate or any Purchased Assets by Seller prior to the
Closing Date or (3) any other taxes relating to Seller or the Purchased
Business respecting periods ending before the Closing Date. It is
acknowledged that Buyer is not responsible for taxes of the Seller arising
from earnings or income prior to closing;
(d) Pre-Closing Product Warranty and Liability. Those obligations
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and liabilities to third parties for property damage, personal injury or
death caused by products of the Purchase
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Business manufactured and sold prior to the Closing Date and any loss or
damage from, or costs and expenses incurred in connection with warranty
claims arising out of business operations conducted, services performed or
products manufactured or sold prior to the Closing Date, Sanar will ▇▇▇▇
all molds on the Closing Day to indicate what was made after the Closing;
(e) Employee Benefit Plans. All claims relating to (1) the
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administration by Seller of any employee benefit plan (within the meaning
of Section 3 (3) of the Employee Retirement Income Security Act of 1974, as
amended) or other plan or policy respecting the employees of Seller, (2)
the investment of assets, if applicable thereof, or (3) contributions
required to be made by Seller thereunder;
(f) Unemployment Insurance. Any liabilities or obligations for
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unemployment insurance contributions or other charges or assessments prior
to the Closing Date;
(g) Environmental Matters. Except as otherwise provided in this
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Agreement, liabilities for all environmental, wetlands or health and safety
claims, costs or damages or for violation of Environmental Laws (as defined
in Section 4.16 below) pertaining to the Purchased Assets or the Purchased
Business, which relate to conditions existing or events occurring prior to
the Closing Date, including, but not limited to, those relating to the
Release of any Contaminants (as such terms are defined in Section 4.16
below);
(h) Litigation. Any liabilities or obligations of Seller arising
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from existing litigation or litigation arising out of, or relating to, an
occurrence or event happening on or prior to the Closing Date;
(i) Employee Claims. Any liabilities or obligations to current or
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former employees of Seller which relate to (1) health and safety claims
resulting from exposure to any hazardous conditions in the workplace,
existing or occurring prior to the Closing date or (2) claims of
discrimination, harassment, unlawful termination or other employee claims
relating to events or occurrences prior to the Closing Date;
(j) Shareholder Advances. Any liability or obligation to repay
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advances from shareholders of Seller including but not limited to
past lease payments;
(k) Intracompany Payables. Any liabilities between Sanar, Virtu,
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NAPRO, and OurPet's.
ARTICLE II
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Purchase Price. Adjustment and Receivables Collection
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Section 2.01. Amount of the Purchase Price. Subject to the terms of this
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Agreement, on the Closing Date Buyer, in full consideration for the Purchased
Assets, shall (a) assume the Assumed Liabilities as of the Closing Date, (b) pay
to Seller the aggregate amount of $100,000 in cash (the "Cash Closing Amount")
(which amount may be adjusted as described below), and (c) a cash amount equal
to seller's outstanding debt to N.C.B.C. plus accrued interest after March
31/st/, 2000. The Cash Closing Amount shall be paid to Seller as follows:
Date of Closing $25,000
1/st/ Day of fourth month after Closing $25,000
1/st/ Day of seventh month after Closing $25,000
1/st/ Day of tenth month after Closing $25,000
The net of the Assumed Assets minus Assumed Liabilities will not be below
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($50,000). The Seller will use all cash on hand as of the day prior to closing
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to pay current liabilities and reserve enough cash to pay accrued payroll and
payroll taxes through the date of Closing. The cash accounts of the Seller as
of the Closing Date shall be at $0 except for the $25,000 paid to the Seller by
the Buyer.
Section 2.02. Payment of Purchase Price. On the Closing Date, Buyer
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shall (a) execute a ▇▇▇▇ of Sale, Assignment and Assumption Agreement relating
to the Assumed Liabilities and (b) pay the Cash Closing Amount to Seller, by
wire transfer of immediately available funds for credit to the Seller, at a bank
account or accounts designated by Seller in writing within ten days of the
consumation of this transaction.
Section 2.03. Preliminary and Post-Closing Statements of Net Assets less
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Liabilities. Based upon an audited physical count of inventory taken as of
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December 31, 1999 and the Seller's unaudited compiled financial statements as of
the same date, the Seller has prepared a Computation of Preliminary Net Assets
less Liabilities at Closing, in the form attached hereto as Exhibit 2.03 (the
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"Preliminary Statement of Net Assets less Liabilities"). As used herein, the
term Net Assets less Liabilities is as defined in Section 2.07 below.
Seller hereby represents that on the weekend immediately after to the
Closing Date, Seller will take a spot physical count of Seller's inventory based
on adjustments to the December 31, 1999 audited inventory on items presented by
the Buyer to the Seller the day of the inventory. (Assumes signing Agreement
and Closing simultaneously) Contemporaneous with such physical inventory, Seller
has taken a physical survey of all goods (whether raw materials, packaging
materials or other items of personal property) held on a consignment, sale-on-
approval or any other similar repurchase, return or for use basis on behalf of
customers (collectively the "Consigned Goods"), Schedule 2.03 attached hereto
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contains a list and description, by item or category but not quantified, of the
Consigned Goods. Representatives of Buyer have been permitted to observe the
taking of such physical counts.
If in the sole opinion of the Buyer, the above referenced inventory is not
reasonable, then within 24 hours after the Closing, Seller shall cause the
independent certified public accountants of Seller, or
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another firm of independent certified public accountants acceptable to Buyer (in
either event, "Seller's Accountants," regarding the Inventory and the Audit), to
conduct an audit of the Seller's Inventory as of the Closing Date (the "Audit")
within 5 working days of the Closing Inventory. The physical counts of Inventory
conducted on the weekend immediately prior to the Closing Date as referred to in
the previous paragraph shall be used by Seller's Accountants in conducting such
Audit. Internal Accountants of Buyer and, if Buyer shall so elect, its
independent certified public accountants, may observe the Inventory and Buyer,
its internal accountants and other representatives, shall have full access to
all books of account, work papers and other records and files of Seller and
Seller's Accountants.
Upon completion of the pre-inventory or Audit, which shall in no event be
later than 45 business days after the Closing Date, Seller's Accountants shall
prepare and deliver to Seller and Buyer its report on the Inventory of the
Seller as of the Closing Date together with a revised statement of Net Assets
less Liabilities (the "Post-Closing Statement of Net Assets less Liabilities")
based thereon (which shall be prepared in the same format as the Preliminary
Statement of Net Assets less Liabilities). The report on Inventory shall be
prepared in accordance with the Statement on Auditing Standards No. 62 as issued
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by the AICPA in April of 1989, and certified without qualification by Seller's
Accountants substantially in the form of proposed report attached hereto as
Exhibit 2.03-1. The Post-Closing Statement of Net Assets less Liabilities
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shall be compiled in accordance with (i) the books and records of the Seller and
(ii) in a manner consistent with those accounting methods used in Seller's
unaudited compiled financial statements. Notwithstanding any of the foregoing,
the Post-Closing Statement of Net Assets less Liabilities shall not include (i)
any assets which are not Purchased Assets, (ii) any Excluded Assets, (iii) any
liabilities other than Assumed Liabilities or (iv) any liabilities retained by
Seller including, without limitation, the Excluded Liabilities. All fees, costs
and expenses of Seller, Seller's Accountants and other representatives incurred
in connection with the Audit shall be borne by Seller. All fees, and expenses
of Buyer, its accountants and other representatives incurred in connection with
the Audit or the review and analysis thereof shall be borne by Buyer
Section 2.04. Adjustment to Post-Closing Statement of Net Assets less
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Liabilities. Within forty-five (45) business days after Buyer's receipt of
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the Post-Closing Statement of Net Assets less Liabilities, Buyer shall complete
its examination of the Post-Closing Statement of Net Assets less Liabilities and
shall deliver to Seller either a written acknowledgment of Buyer accepting the
Post-Closing Statement of Net Assets less Liabilities or a written report of
Buyer setting forth in reasonable detail any proposed adjustments to the Post-
Closing Statement of Net Assets less Liabilities (the "Adjustment Report"). In
the event Buyer fails to deliver such acknowledgment or Adjustment Report within
the time period provided herein, the Post-Closing Statement of Net Assets less
Liabilities shall be deemed to be correct and to have been finally determined
for purposes of this Section 2.04 and Sections 2.05 and 2.06.
Section 2.05. Failure to Agree. In the event Seller and Buyer fail to
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agree on any or all of Buyer's proposed adjustments to the Post-Closing
Statement of Net Assets less Liabilities contained in the Adjustment Report
within twenty (20) business days after Seller receives the Adjustment Report,
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then the parties shall notify a certified public accounting firm mutually
agreeable to the parties (the "Independent Auditors") of the need for their
services. The Independent Auditors, acting as independent auditors and not for
Seller or Buyer, shall make the final determination with respect to the
correctness of the proposed adjustments in the Adjustment Report in light of the
terms and provisions of this Agreement. The decision of the Independent Auditors
shall be in writing and state the basis for the finding and shall be final and
binding on Seller and Buyer. The costs and expenses of the Independent Auditors
and their services rendered pursuant to this Section 2.05 shall be borne equally
by Seller and Buyer, provided that the Independent Auditors determine the claims
made by Seller or Buyer to have been made in good faith. In the event the
Independent Auditors determine that a claim was not made in good faith, then the
party advancing such claim shall bear the costs and expenses of the Independent
Auditors with regard to that claim. If the parties are unable to agree on a firm
of certified public accountants within the above-stated time period, they each
agree to submit the selection of the firm of certified public accountants to
make the final determination with respect to the correctness of the proposed
adjustments in the Adjustment Report to the American Arbitration Association.
The selection shall be made by the American Arbitration Association in
accordance with Arbitration Rules for Professional Accounting and Related
Services Disputes of the American Arbitration Association.
Section 2.06. Final Statement of Net Assets less Liabilities. The term
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"Final Statement of Net Assets less Liabilities" shall mean the Post-Closing
Statement of Net Assets less Liabilities delivered pursuant to Section 2.03
hereof, as adjusted, if at all, pursuant to Section 2.04 and/or 2.05 hereof, and
the term "Settlement Date" shall mean the date on which such Final Statement of
Net Assets less Liabilities is agreed to by the parties or determined by the
Independent Auditors, as the case may be. During the twenty (20) days referred
to in Section 2.05, or such longer period as the Independent Auditors may
require to review the proposed adjustments as set forth in the Adjustment Report
(not to exceed thirty (30) days from the date the Independent Auditors are
retained hereunder), Buyer agrees to provide Seller and its representatives and
the Independent Auditors with access, during Buyer's normal business hours and
upon reasonable advance notice, to the books and records of the Purchased
Business for the purpose of verifying or analyzing any proposed adjustments.
Section 2.07. Definition of "Net Assets less Liabilities". As used herein
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the phrase "Net Assets less Liabilities" shall mean the difference between the
total assets included in the Purchased Assets and the total liabilities included
in the Assumed Liabilities, computed on a basis consistent with the computation
of the Preliminary Statement of Net Assets less Liabilities. As to any
accounting methods and procedures not specifically set forth herein,
determinations of the Net Assets less Liabilities shall be made in a manner
consistent with those accounting methods used in Seller's unaudited compiled
financial statements.
Section 2.08. Adjustment to Purchase Price.
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(a) In the event that the amount of the Final Statement of Net Assets
less Liabilities is less than the amount of the Preliminary Statement of
Net Assets less Liabilities, then Seller shall
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pay Buyer the full amount of such deficit within ten (10) business days
after the determination of the Final Statement of Net Assets less
Liabilities, by wire transfer of immediately available funds to an account
specified by Buyer. In the event that Seller does not pay to Buyer the full
amount of such deficit within such period, Buyer shall have the right to
offset such amounts against amounts payable to the Seller.
(b) In the event that at any time subsequent to the Closing Date, a
claim is made by a customer or former customer of either Seller or Buyer
for the return of any Consigned Goods and it is impossible for Buyer to
return the Consigned Goods pursuant to the customer's request because they
were lost or missing prior to closing, Seller shall indemnify and hold
harmless Buyer from any loss, cost, damage or expense incurred in
connection with the request for return, unless Seller can demonstrate that
the requested Consigned Goods were on hand and in good condition, confirmed
as to the number consigned by the customer, as of the Closing Date. Such
indemnification shall be without regard to the limits contained in Section
13.01 (g) hereof and the obligation to indemnify shall survive the Closing
Date for a period of five years. It is agreed that the amounts due Buyer
from Seller pursuant to this indemnification if not paid within ten (10)
business days of the date due may be set off against amounts due Seller.
Letters will be sent to customers as part of the closing procedure to
verify consigned goods and molds. Unless noted differently in the closing
inventory, consigned goods will be assumed to be in good condition.
Section 2.09. Allocation of Purchase Price. The Purchase Price shall be
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allocated among the Purchased Assets in the manner required by Treasury
Regulation (S)1.1060-1T and shall be as mutually agreed among Buyer and Seller
in accordance with Schedule 2.09 attached. Buyer and Seller agree that: except
--------------
as otherwise required by law, (i) the Allocation shall be binding upon Buyer and
Seller for all federal, state and local tax purposes and (ii) Buyer and Seller,
if required, shall file with their respective income tax returns consistent IRS
Form 8594 -- Asset Acquisition Statements Under Section 1060, including any
required amendments thereto which will reflect the allocations set forth in the
Allocation. The parties acknowledge that the allocation of the Purchase Price
provided for in the Allocation is reasonable.
Section 2.10. Collection of Accounts Receivable. Seller shall guarantee the
-------------------------------------------------
collection of the Accounts Receivable by Buyer subject to the terms hereof.
From the Closing Date until a time ninety (90) days after the Closing Date (the
"Receivable Collection Period"), Buyer shall use its reasonable best efforts
consistent with normal business practices (except that instituting suit shall in
no event be required) to collect the full amount net of discounts, rebates and
allowances actually paid or granted in the ordinary course of business pursuant
to agreed to terms or to the Accounts Receivable transferred to Buyer and,
unless otherwise specifically designated by an account debtor thereof, all
amounts collected by Buyer from such account debtor shall be applied in
chronological order starting with the oldest Accounts Receivable owing from such
account debtor. In connection with collecting such Accounts Receivable, Buyer
shall be permitted to grant discounts for prompt payment so long as the same are
substantially similar to those granted by Seller to its customers prior to the
Closing Date, which discount
12
practice is summarily described on Schedule 2.10. During the Receivable
--------------
Collection Period, Buyer shall maintain accurate and complete records of the
status of all the Accounts Receivable and shall provide Seller with a summary of
any and all collections made or received at the end of every 30 day period and
at the end of such period. To the extent Buyer collects an amount less than the
face amount of all the Accounts Receivables as of the Closing Date (the
"Receivables Amount"), Seller shall promptly, within ten (10) business days
after the end of the Receivable Collection Period, pay to Buyer the full amount
of such deficit and Buyer shall contemporaneously reassign to Seller any and all
uncollected Accounts Receivable. To the extent Seller does not immediately pay
to Buyer the full amount of such deficit within such period, Buyer shall have
the right to offset such amount against amounts payable to Seller. Each party
agrees to provide reasonable assistance to the other concerning the collection
of receivables and to promptly remit to the other, within five (5) business
days, any and all collections pertaining to the receivables that such party
receives in contravention of this Section 2.10. Seller may identify itself as
"formerly known as Sanar Plastics, Inc." in any action to collect reassigned and
excluded accounts receivable. In connection with the collection of such
reassigned account receivable, Seller shall use a law firm as may be acceptable
to Buyer and shall provide Buyer with copies of all pleadings and other court
papers and all relevant correspondence in connection with such collection
proceedings.
ARTICLE III
-----------
Closing
-------
Section 3.01. The Closing. The consummation of the transactions
---------------------------
contemplated by this Agreement (the "Closing") shall be held the Seller's
offices located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ on the 31/st/ day of
March, 2000
The transactions contemplated by this Agreement shall be effective as of
11:59 p.m. on the Closing Date.
ARTICLE IV
----------
Representations and Warranties of Seller
----------------------------------------
As an inducement to Buyer to enter into this Agreement, and to consummate
the transactions contemplated by this Agreement, Seller represents and warrants
to Buyer as follows:
Section 4.01. Organization; Power. Seller is a corporation duly organized,
----------------------------------
validly existing and in good standing under the laws of the state of Ohio.
Seller has all the requisite corporate power and authority to own, lease and
operate its assets, to carry on the Purchased Business as it is now being
conducted, and to enter into this Agreement and the agreements and documents
contemplated by this Agreement or otherwise executed in connection herewith
(collectively the "Acquisition Documents").
Section 4.02. Authority, No Violation, Etc. The execution and delivery of
--------------------------------------------
this Agreement and the other Acquisition Documents to be executed and delivery
by Seller, and the consummation by Seller, respectively, of the transactions
contemplated thereby have been duly and validly authorized by all
13
necessary corporate action on the part of the Board of Directors and
shareholders of each. This Agreement and the other Acquisition Documents to be
executed and delivered by each constitute legal, valid and binding obligations
of each, enforceable against each in accordance with their respective provisions
and must be approved by the OurPet's board of directors. Except as specified on
Schedule 4.02. the execution and delivery of this Agreement and the other
--------------
Acquisition Documents, the consummation of the transactions contemplated
thereby, or compliance by each of them with the provisions thereof, will not:
(a) Conflict with or result in a breach of any provision of the
Articles of Incorporation or Code of Regulations of Seller, or result in a
default or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of any note,
lien, bond, mortgage, indenture, license, lease or other document,
agreement or instrument evidencing any Material Contract (as defined in
Section 4.11 below) to which either is a party or by which either, any of
the Purchased Assets or the Purchased Business may be bound, except for
such conflict, breach or default as to which valid waivers or consents have
been obtained or the failure to so obtain would not have an adverse impact
upon the Purchased Assets or the Purchased Business;
(b) Violate any judgment, order, writ, injunction or decree of any
court, administrative agency or governmental body applicable to Seller, the
Purchased Assets or the Purchased Business and no action, suit or
proceeding has been instituted or, to the best knowledge of either of them,
is threatened to restrain or prohibit or otherwise challenge the legality
or validity of the transactions contemplated by this Agreement; or
(c) Cause, or give any person grounds to cause (with or without
notice, the passage of time or both), the maturity of any liability or
obligation of Seller to be accelerated or increased.
Except as set forth in Schedule 4.02, all consents and approvals of third
--------------
parties and governmental authorities required in connection with the execution
and delivery by Seller of this Agreement and the consummation by Seller of the
transactions contemplated by this Agreement which, if not obtained, would have a
adverse impact upon the Purchased Business or the Purchased Assets, have been
obtained. Except as set forth in Schedule 4.02. Seller has given all notices to
------
governmental authorities and other third parties and taken all such other action
required to be given or taken by Seller under any authorization, lease, note,
mortgage, indenture, agreement or other instrument which, if not obtained, would
have a adverse impact on the Purchased Business or the Purchased Assets, in
connection with the transactions contemplated by this Agreement.
Section 4.03. Financial Statements. Seller has furnished to Buyer true,
------------------------------------
correct and complete copies of the following financial statements (collectively
referred to as the "Financial Statements") copies of which are attached as
Schedule 4.03:
--------------
(a) The balance sheet of Seller as of December 31, 1996, 1997 and
1998 and the related
14
statements of income (loss), retained earnings and cash flows for
each of the years in the three year period ended December 31,
1998, as compiled by Seller's independent certified public
accountants (collectively, the "Compiled Financial Statements").
The Compiled Financial Statements have been prepared from the
books and records of Seller in accordance with GAAP applied on a
consistent basis with prior years with the exception of the
periodic valuation of inventory and except as provided therein
and fairly present the financial position of Seller as of the
respective dates thereof and the results of operations and cash
flows of Seller for the years then ended.
(a) The balance sheet of Seller as of December 31, 1999, and the
related statement of income and retained earnings for the
year-to-date periods then ended as compiled by Seller
(collectively, the "Interim Financial Statements"). The Interim
Financial Statements have been compiled from the books and
records of Seller, fairly present the financial position of
Seller as of the date thereof, and fairly present the results of
operations and cash flows of Seller for the accounting period
then ended.
Except as set forth on Schedule 4.03 (b), Seller has no liabilities or
------------- ----
obligations, fixed, contingent, accrued or otherwise, which are not
reflected in the December 31, 1999 balance sheet or in the other Interim
Financial Statements delivered since December 31, 1999 or referred to in
the footnotes thereto except for nonmaterial liabilities or obligations
incurred since December 31, 1999 in the ordinary and normal course of the
Purchased Business of a type, nature and amount consistent with prior
practice and except as otherwise referred to in Section 4.16 hereof and
Schedule 4.16 hereto.
-------------
Section 4.04. Tax Matters. Except as set forth in Schedule 4.04 Seller
--------------------------- -------------
has accurately prepared in good faith and has duly filed with the appropriate
federal, state or local governmental agencies all tax returns or reports
required to be filed by or on behalf of Seller with respect to the Purchased
Business or the Purchased Assets. Except as set forth in Schedule 4.04. all
--------------
taxes owed to any governmental authority for or with respect to the periods
covered by such returns and reports or with respect to any period (or portions
thereof) ending on or before the date hereof and all interest, penalties,
assessments and deficiencies connected therewith have been paid in full or
adequately provided for as shown on the Financial Statements. Except as set
forth in Schedule 4.04, Seller, to the best of its knowledge, has paid all taxes
-------------
due and payable for the years 1994 through and including 1999 to the date of
signing of this Agreement. Except as set forth in Schedule 4.04 Seller has not
-------------
executed or filed with any taxing authority any agreement extending the period
for assessment or collection of any taxes. Seller is not a party to any tax
sharing agreement or to any pending action or proceeding with respect to the
Purchased Business or the Purchased Assets, nor, to the best of Seller's
knowledge, is any such action or proceeding threatened by any governmental
authority for the assessment or collection of taxes, and no deficiency notices
or reports have been received by Seller in respect to any of its tax returns
with respect to the
15
Purchased Business or the Purchased Assets. Within the past seven (7) years,
Seller has not been subject to any tax audit relating to or arising out of
Seller's business, operations or assets except as set forth on Schedule 4.04.
--------------
Section 4.05. Absence of Changes or Events. Except as set forth in Schedule
------------------------------------------- --------
4.05, and except otherwise referred to in Section 4.16 hereof and Schedule 4.16
----- -------------
hereof since December 31, 1999, the Purchased Business has been conducted only
in the ordinary course and Seller, has not, with respect to the Purchased
Business or the Purchased Assets:
(a) Incurred any material obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, except
liabilities incurred in the ordinary course of the Purchased Business;
(b) Mortgaged, pledged or subjected to lien, charge, security
interest or any other encumbrance or restriction any of the Purchased
Assets;
(c) Sold, transferred, leased to others or otherwise disposed of any
material amount of the Purchased Assets, except for inventory sold in the
ordinary course of the Purchased Business;
(d) Received any notice of termination of any contract, lease or
other agreement, or suffered any damage, destruction or loss (whether or
not covered by insurance) which, in any case or in the aggregate, has had a
material adverse effect on the Purchased Business or Purchased Assets;
(e) Encountered any labor union organizing activity, had any actual
or overtly threatened employee strikes, work stoppages, slow-downs or lock-
outs or had any material change in its relationship with any of its
employees, salesmen, suppliers, customers or independent contractors;
(f) Made any material change in the rate of compensation, commission,
bonus or other remuneration payable, or paid or agreed to pay any bonus,
extra compensation, pension, severance or vacation pay, to any shareholder,
director, officer, employee, salesman or distributor other than
regularly scheduled increases except as disclosed in Schedule 4.05 hereto;
-------------
(g) Changed its accounting methods or practices (including, but not
limited to, changes in depreciation or amortization policies or rates);
(h) Revalued any of its assets;
(i) Instituted, settled or agreed to settle any litigation, action,
proceeding or arbitration related to the Purchased Assets or the Purchased
Business except for settlements of, or agreements to settle, labor
grievances pursuant to which no material obligation or liability was
incurred;
16
(j) Failed to replenish its inventories or supplies in a normal and
customary manner consistent with Seller's prior practices or made any
purchase commitment other than in the ordinary course of the Purchased
Business;
(k) Entered into any material transaction, contract or commitment
other than in the ordinary course of the Purchased Business;
(1) Suffered any material adverse change in its financial
condition, the Purchased Assets, its prospects or the Purchased Business;
(m) Granted credit to any customer or distributor on terms or in
amounts more favorable than those which have been extended to such customer
or distributor in the past or otherwise changed Seller's policy with
respect to the granting of credit;
(n) Entered into any agreement, made any commitment or otherwise
deferred or modified in any material respect Seller's historical policy
or practices for the payment of the accounts payable; or
(o) Accelerated the collection of any accounts receivable in a manner
inconsistent with past practice of the Purchased Business;
(p) Entered into any agreement or made any commitment to take any of
the actions described in Subsections (a) through (o) inclusive of this
Section 4.05; or
(q) Disposed of any books and records related to the Purchased
Business since December 31, 1994.
Section 4.06. Compliance with Laws; No Default. Except as set forth in
------------------------------------------------
Schedule 4.06, Seller, is not in default or violation in any material respect
--------------
under (i) any note, lien, bond, mortgage, indenture, license, lease or other
document or agreement evidencing any Material Contract or any consent order or
other commitment included in the Purchased Assets or (ii) to the best of
Seller's knowledge any law, rule, regulation, writ, injunction, order or decree
of any court or any governmental department, commission, board, bureau, agency
or instrumentality applicable to the Purchased Assets or the Purchased Business
except as referred to in Section 4.07.
Section 4.07. Machinery and Equipment. Except as disclosed in Schedule
--------------------------------------- --------
4.07, all of the Machinery and Equipment owned or used in the Purchased Business
-----
is in essentially the same condition as when inspected by the Buyer and/or the
Buyer's appraiser less normal wear and tear, and is, together with the other
Purchased Assets to be transferred to Buyer hereunder, operable and adequate to
carry on the Purchased Business as presently conducted. Seller will provide all
maintenance records in Seller's possession of the past service performed and all
available service and technical manuals in Seller's possession relating to the
Purchased Machinery and Equipment. To the best of the Seller's knowledge,
Seller represents and warrants the Machinery and Equipment conforms to all
safety laws, codes,
17
regulations and ordinances. Seller represents and warrants within the five year
period prior to Closing Seller has not been fined or cited for any violation of
safety laws or regulations except for as noted in Schedule 4.07.
Section 4.08. Real Property Occupancy. ▇▇▇▇ Properties, the owner of the
---------------------------------------
property, has no claims or causes of action against Seller arising out of
Seller's use or occupancy of the premises. Seller acknowledges that its rights
of occupancy of the warehouse and manufacturing premises terminate as of the
Closing Date.
Section 4.09. Leased Personal Property. Schedule 1.01 (f) contains a
-------------------------------------------------------- ----
true, correct and complete list of all leases and other agreements under which
Seller is a lessee with respect to the Purchased Assets or the Purchased
Business, or holds or operates any tools, furniture, machinery, vehicles,
equipment or other personal property owned by any other person and under which
payments to such other person exceed One Thousand Dollars ($1, 000) per annum or
for which the term of such lease arrangement is longer than one (1) year. No
consent of any lessor of any items of Leased Personal Property is required in
connection with the transactions provided for in this Agreement, except as set
forth in Schedule 4.02.
--------------
Section 4.10. Inventory. Except as set forth on Schedule 4.10, and
------------------------- ---------
except for those items of Inventory with respect to which an adjustment shall be
made pursuant to Section 13.01 (g) hereof, no portion of Seller's Inventory of
finished goods consists of items which are not merchantable or which are
otherwise not usable or suitable for sale within a twelve month period after the
closing date. The quantities of all lines of Inventory are merchantable,
reasonable and appropriate in the present circumstances of the Purchased
Business to the best of the Seller's knowledge.
Section 4.11. Material Contracts. Schedule 4.11 hereto contains a
---------------------------------------------------
complete and correct list of all agreements, contracts and commitments
(collectively, the "Material Contracts") of the following types, whether written
or oral by which any of the Purchased Assets are bound or to which Seller, as
the case may be, is a party and which relate to the Purchased Business:
(a) mortgages, indentures, security agreements and other agreements
and instruments relating to the borrowing of money by, Seller, in respect
to the Purchased Business;
(b) employment, consulting and agency agreements (other than oral
employment arrangements terminable at will without liability on the part of
the employer or upon payment of no more than applicable statutory or
regulatory severance or termination benefits);
(c) collective bargaining agreements;
(d) sales agency, manufacturer's representative, distributorship
or marketing agreements;
(e) agreements, orders or commitments for the purchase of raw
materials and supplies or contracted services, in each case involving
payments or receipts in excess of $5, 000;
18
(f) licenses to or from others of Intellectual Property;
(g) agreements or commitments for capital expenditures in excess of
$5, 000 for any single project or related series of projects;
(h) contracts or commitments to sell, lease or otherwise dispose of
any assets other than in the ordinary course of the Purchased Business;
(i) contracts or commitments, including royalty agreements, with any
employee, director, officer or affiliate of Seller;
(j) contracts or commitments limiting the freedom of Seller to
compete in any line of business or in any geographic area or with any
person;
(k) any other agreements, contracts and commitments material to
Seller or the Purchased Business as it may relate to the Purchased
Business.
Each Material Contract is valid, legally binding and enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws and equitable principles
affecting creditors' rights generally and Seller, has substantially complied
with each of its obligations thereunder and is in compliance with the terms
thereof. Seller has or will deliver to Buyer complete and correct copies of all
written Material Contracts, together with all amendments thereto, and accurate
descriptions of all oral Material Contracts.
Section 4.12. Accounts Receivable. Except as set forth on Schedule 4.12
----------------------------------- -------------
and the Retained Accounts Receivable in Section 1.02 (i), all of Seller's
Accounts Receivable as of the date of this Agreement constitutes valid claims,
which arose from bona fide transactions in the ordinary course of the Purchased
----------
Business, and there is:
(a) No Accounts Receivable debtor who has refused or threatened to
refuse to pay its obligations for any reason;
(b) No Accounts Receivable debtor who is insolvent, unable to pay its
debts as they become due or in bankruptcy; and
(c) No Accounts Receivable pledged to any third party except as set
forth on Schedule 4.12.
--------------
Section 4.13. Licenses and Permits. Except as set forth on Schedule 4.13
------------------------------------ -------------
or Schedule 4.16, Seller possesses all licenses, permits, certificates,
---------
franchises, approvals and other authorizations necessary to own or lease and
operate the Purchased Assets and to conduct the Purchased Business as presently
conducted (the "Permits").
Section 4.14. Proprietary Information. Seller is not infringing upon any
---------------------------------------
trade names, trademarks, service marks, theme concepts, copyrights, patents,
inventions, trade secrets, proprietary
19
processes and formulae, or any other proprietary technical information the
rights to which are owned by any other person.
Section 4.15. Title to the Purchased Assets. Seller owns all the
---------------------------------------------
respective Purchased Assets, free and clear of all liens, pledges, charges,
security interests, encumbrances, rights of third parties or other interests of
any kind or character (collectively "Liens"), except those Liens that will
terminate prior to Closing. Seller has complete and unrestricted power and the
unqualified right to sell, convey, assign, transfer and deliver the respective
Purchased Assets to Buyer pursuant to the provisions of this Agreement. At the
Closing, Buyer will receive good and marketable title to all the Purchased
Assets, free and clear of all Liens of any nature whatsoever other than assumed
liabilities for funded bank debt and capital leases under section 1.03 (e).
Section 4.16. Environmental Matters. Schedule 4.16 contains a
------------------------------------- -------------
description of (i) all licenses, permits, regulatory plans and compliance
schedules, together with the duration's and renewal dates thereof, which to
Seller's knowledge relate to the Purchased Business, copies of which are
attached to Schedule 4.16. and (ii) all litigation, investigations, inquiries
--------------
and other proceedings, rulings, orders or citations with respect to the
Purchased Business pending of which Seller has received notice, or, threatened
by government officials with respect to the Purchased Business or the Purchased
Assets, as the result of any actual or alleged failure of Seller to comply with
any requirement of any Environmental Laws (as hereinafter defined).
Seller, except as disclosed on Schedule 4.16, has received all permits and
--------------
approvals, has kept all records and has made all filings required by applicable
Environmental Laws with respect to emissions into the environment (including
solids, liquids, and gases) and the proper disposal of such materials (including
solid waste materials). Except as set forth on Schedule 4.16, the Purchased
--------------
Business, the Purchased Assets and all operations thereof or thereon are to the
best of the Seller's Knowledge, currently in compliance with all applicable
Environmental Laws. Except as set forth in Schedule 4.16:. After review (i)
--------------
none of the operations of the Purchased Business or any real property owned,
leased or used by the Purchased Business is the subject of any federal, state or
local investigation evaluating whether any Remedial Action (as hereinafter
defined) is needed to respond to a Release (as hereinafter defined) of any
Contaminant (as hereinafter defined) into the environment; (ii) Seller has not
filed, nor has been required to file, any notice under federal, state or local
laws indicating past or present treatment, storage or disposal of a Contaminant
or reporting a spill or Release of a Contaminant at, on, under or about any
property owned, leased or used by the Purchased Business; (iii) the operations
of the Purchased Business do not involve the generation, transportation,
treatment, storage or disposal of any amount of any Contaminant; (iv) Seller
has not disposed of or otherwise Released any Contaminant by placing it in or on
the ground or waters of any premises owned, leased or used by the Purchased
Business; (v) no underground storage tanks or surface impoundments are located
at, on, or under any real property owned, leased or used by the Purchased
Business except those for which all requisite permits have been obtained and are
in effect; and (vi) no lien in favor of any governmental authority for (A) any
liability under any Environmental Laws or (B) damages arising from or costs
incurred by such governmental authority in
20
response to a Release of a Contaminant into the environment has been filed or to
Seller's knowledge attached to any real property owned, leased or used by the
Purchased Business.
For purposes of this Agreement:
(a) "Contaminant" means those substances which are regulated by or
form the basis of liability under any Environmental Laws, including, but
not limited to, asbestos, polychlorinated biphenyls ("PCBs") and
radioactive or other hazardous wastes or substances;
(b) "Environmental Laws" means all applicable federal, state or local
laws, regulations or ordinances relative to air quality, water quality,
solid waste management, hazardous or toxic substances or the protection of
health or the environment, as these laws may have been amended or
supplemented through the date of the Phase I or II Site Assessment, and any
analogous statutes and the regulations promulgated pursuant thereto;
(c) "Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the indoor or outdoor environment, including the movement of any
Contaminant or other substance through or in the air, soil, surface water,
groundwater or property; and
(d) "Remedial Action" means any action required under any
Environmental Laws to (i) clean up, remove, treat or in any other way
address any Contaminant or other substance in the indoor or outdoor
environment, (ii) prevent the Release or threat of Release, or minimize the
further Release of any Contaminant or other substance so it does not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment or (iii) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
Seller agrees to provide Buyer after Closing with (i) all safety data
sheets in Seller's possession regarding materials brought into the Manufacturing
Facility (as defined in Section 9.01 (f) below) and (ii) all available reports
in Seller's possession relating to the Resource Conservation and Recovery Act,
42 U.S.C. (S)6901, et seq., the Comprehensive Environmental Response,
--
Compensation and Liability Act, 42 U.S.C. (S)9601, et seq. (as amended by the
-------
Superfund Amendments and Reauthorization Act of 1986) or any other Environmental
Law.
Seller agrees to hold harmless and safe the Buyer for all environmental
matter associated with the purchased assets prior to the Closing Date.
Section 4.17. Compensation. Schedule 4.17 sets forth a true, correct and
------------------------------------------
complete list of all hourly employees of Seller and their wage rates, and all
salaried employees of Seller who had during the twelve (12) month period ended
December 31, 1999 received remuneration from Seller in excess of twenty-five
Thousand Dollars ($25, 000) together with the current annual salary (including
bonus) for each such person.
Section 4.18. Employee Matters. Schedule 4.18 sets forth a true, correct
-----------------------------------------------
and complete list of
21
all agreements with any of Seller's current or former employees to which Seller
is a party or by which it is bound and in any such case pursuant to which Seller
has any continuing obligations, including, but not limited to, any bonus,
pension, profit sharing, deferred compensation, retirement, hospitalization,
disability, insurance or similar plan, formal or informal, with respect to any
of its employees (copies of which plans and related documents and employee
information materials as amended to date have been or shall be made available to
Buyer). Except as set forth on Schedule 4.18. Seller has no employees who are in
--------------
lay-off or who are on medical leave or disability as of the Closing Date.
Section 4.19. Insurance. Schedule 4.19 sets forth a true, correct, and
----------------------------------------
complete list of all policies of liability, theft, fidelity, life, fire, product
liability, health and other forms of insurance held by Seller with respect to
the Purchased Business or the Purchased Assets, and specifies the insurer,
amount of coverage, type of insurance and policy number. Schedule 4.19 also
--------------
sets forth any pending claims under such policies applicable to the Purchased
Business or the Purchased Assets. The policies listed in Schedule 4.19 are
-------------
outstanding, in full force and effect, and all premiums due and payable with
respect to such policies have been paid.
Section 4.20. Litigation; Product Liability; Product Warranty. Except as
---------------------------------------------------------------
set forth on Schedule 4.20 or 4.16, Seller has not been served with process in
----------------------
any litigation, suit, proceeding, action, and there is no claim or
investigation, at law or in equity, pending or, threatened against the Purchased
Business or affecting the Purchased Assets before any governmental authority,
except for routine workers' compensation cases arising in the ordinary course of
business and there are no facts known to Seller that might reasonably be
expected to result in any such litigation, suit, proceeding, action, claim or
investigation. Schedule 4.20-1 lists and describes substantially all of the
---------------
claims for workers compensation made by Seller's employees during the years 1994
through and including 1999 and to the date of this Agreement and lists and
describes substantially all lost time accidents and injuries which have occurred
during said periods, known to Seller and noted in Seller's files and records,
together with copies of OSHA Form 200 filed to report such accidents and
injuries. Except as set forth on Schedule 4.20 or 4.16, Seller, or the
-------------
Purchased Business is subject to or in default with respect to any presently
existing notice, order, writ, injunction or decree of any governmental
authority. There are no product warranty or similar claim (s) relating to the
Purchased Business except routine claims which, in the aggregate, are either
immaterial in amount or are fully covered by insurance.
Except as set forth on Schedule 4.20. there have been no warranty or charge
--------------
back claims outside the ordinary course of business and no product liability
claims made against Seller, the Purchased Assets or the Purchased Business or in
respect of products sold by Seller for the three (3) years prior to the date of
this Agreement. Schedule 4.20 sets forth a true, correct and complete summary
-------------
of all of Seller's customer charge-backs over $10, 000 for defective products
for the three (3) years prior to the date of this Agreement.
Section 4.21. Suppliers and Customers. Schedule 4.21 sets forth a
------------------------------------------------------
complete and accurate list of the twenty (20) largest suppliers (by dollar
volume) of products to Seller during the 12 month period
22
ending on December 31, 1999, and indicates the existing contractual arrangements
with each such supplier; the names of any sole-source supplier of any
significant goods or services to Seller with respect to which practical
alternative sources of supply are not available on comparable terms and
conditions, indicating the contractual arrangements and/or standard terms of
purchase and sale with each such supplier; and a complete and accurate list of
the twenty (20) largest customers (by dollar volume) of Seller during the 12
month period ending on December 31, 1999, indicating the existing contractual
arrangements and/or standard terms of purchase and sale with each such customer.
Section 4.22. Brokers' or Finders' Fees. No agent, broker, investment
-----------------------------------------
banker or other person or firm acting on behalf of Seller or any shareholder of
Seller or under the authority of any of them, is or will be entitled to any
broker's or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties in connection with any of the transactions
contemplated hereby.
Section 4.23. Computer System. The computer system software specific to
-------------------------------
Sanar included in the Purchased Assets has performed all tasks required of it in
the normal course of the Purchased Business. No licenses are required from
third parties to exercise any rights with respect to or use any related computer
software, except for licenses provided to Seller with the computer software.
Seller shall provide all source codes for any software sold to the Buyer.
Section 4.24. Intellectual Property. Except as set forth on Schedule
------------------------------------- --------
4.24, the Intellectual Property is owned by Seller and Seller has no actual
-----
knowledge that any Intellectual Property is not valid or in full force and
effect and Seller has not received any notice or claim that any of the
Intellectual Property is invalid or unenforceable by it or otherwise infringes,
or is claimed to infringe, the rights of any third party. The Intellectual
Property which is owned by Seller and the rights to the Name are owned free and
clear of any license, sublicense, agreement, right, order, decree, stipulation,
or encumbrance other than those disclosed on Schedule 4.24 hereto. Seller
-------------
shall not use or disclose information regarding the Intellectual Property after
the Closing Date. No Intellectual Property is to be obtained from OurPet's or
Virtu.
Section 4.25. Accuracy of Information Furnished; Representations, and
----------------------------------------------------------------------
Warranties as of Date Hereof. Any information contained in this Agreement, the
-----------------------------
Schedules or Exhibits referred to in this Agreement, does not as of the date
hereof contain any untrue statement of a fact and does not omit to state any
fact necessary to make any such statement, in light of the circumstances under
which such statement is made, not misleading. If an item is listed on a
schedule, it need not appear on another schedule unless the omission is a
material fact specific to the schedule for which that item is omitted.
The representations and warranties contained in the foregoing Section 4.01
through Section 4.24 inclusive and in this Section 4.25 are made as of the date
hereof, except as otherwise expressly indicated therein and be consistent with
Section 14.10.
ARTICLE V
---------
Warranties and Representations of Buyer
---------------------------------------
23
As a material inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated by this Agreement, Buyer represents and
warrants to Seller as follows:
Section 5.01. Organization; Power. Buyer is a corporation duly formed,
-----------------------------------
validly existing and in good standing under the laws of the State of Ohio.
Buyer has all the requisite corporate power and authority to own, lease, and
operate its business as it is now being conducted and to enter into this
Agreement and the other agreements and documents of transfer contemplated by
this Agreement.
Section 5.02. Authority, No Violation, Etc. The execution and delivery of
--------------------------------------------
this Agreement by Buyer and the consummation of the transactions contemplated by
this Agreement including, but not limited to, the execution and delivery of the
other agreements and documents to be executed and delivered by Buyer and the
consummation of the transactions contemplated by such other agreements and
documents, have been duly and validly authorized by all necessary corporate
action on the part of the Buyer. This Agreement and the other agreements and
documents to be executed and delivered by Buyer pursuant to the provisions of
this Agreement constitute legal, valid, and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms and
conditions. The execution and delivery of this Agreement, and the other
Acquisition Documents the consummation of the transactions contemplated hereby,
and compliance by Buyer with any of the provisions hereof, will not:
(a) Conflict with or result in a breach of any provision of the
Articles of Incorporation or Code of Regulations of Buyer, or result in a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
lien, bond, mortgage, indenture, license, lease, agreement or other
instrument or obligation to which Buyer is a party, or by which any of its
properties or assets may be bound, except for such conflict, breach, or
default as to which valid waivers or consents have been obtained;
(b) Violate any judgment, order, writ, injunction or decree of any
court, administrative agency or governmental body applicable to Buyer or
any of its properties or assets; or
(c) Cause, or give any person grounds to cause (with or without
notice, the passage of time or both), the maturity of any liability or
obligation of Buyer to be accelerated or increased.
All consents and approvals of third parties and governmental authorities
required in connection with the execution and delivery by Buyer of this
Agreement and the consummation by Buyer of the transactions contemplated by this
Agreement have been obtained.
Section 5.03. No Litigation. No action, suit or proceeding has been
-----------------------------
instituted or, to the best knowledge of Buyer, is threatened to restrain or
prohibit or otherwise challenge the legality or validity of the transactions
contemplated by this Agreement.
Section 5.04. Brokers' or Finders' Fees. No agent, broker, investment
-----------------------------------------
banker or other person or firm acting on behalf of Buyer or under Buyer's
authority is or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly from any of the parties hereto
in
24
connection with any of the transactions contemplated hereby.
Section 5.05. Financing. Buyer has the funds or has available commitments
-------------------------
from creditworthy financial institutions to provide the funds required paying
the Purchase Price and consummate the transactions contemplated hereby. The
Buyer intends to pay or perform the Assumed Liabilities.
Section 5.06. Accuracy of Information Furnished; Representations. and
----------------------------------------------------------------------
Warranties as of Date Hereof. Any information contained in this Agreement does
-----------------------------
not as of the date hereof contain any untrue statement of a fact and does not
omit to state any fact necessary to make any such statement, in light of the
circumstances under which such statement is made, not misleading.
The representations and warranties contained in the foregoing Section 5.01
------------
through Section 5.05 inclusive and in this Section 5.06 are made as of the date
------------ ------------
hereof, except as otherwise expressly indicated in this Agreement.
ARTICLE IX
----------
Deliveries
----------
Section 9.01. Deliveries to Seller at the Closing. At the Closing, and
---------------------------------------------------
simultaneously with the deliveries to Buyer specified in Section 9.02, Buyer
-------------
shall deliver or cause to be delivered to Seller the following:
(a) The Cash Closing Amount and ▇▇▇▇ and Assumption Agreement as
provided in Section 2.02 above;
(b) A Certificate of the Officers certifying the purchase and Good
Standing of the company;
(c) Non-Competition Agreement by and between ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
President of Seller duly executed by Buyer, in form and substance
satisfactory to Seller and its counsel.
(d) A certificate of the Secretary or Assistant Secretary of
Buyer, certifying to Seller the adoption of appropriate resolutions by the
board of directors of Buyer authorizing the execution, delivery and
performance of this Agreement and the other Acquisition Documents and
the transactions contemplated thereby, and that such resolutions are in
full force and effect as of the Closing Date; and
(f) A Lease Agreement (the "Facility Lease") of the manufacturing
and warehouse facility currently used by Seller for a monthly rent $9825
($4.50/square foot, 26,200 square feet) plus utilities.
(g) Form U-9, Application For Transfer of Workers' Compensation
Account and
25
Premium Obligation to Succeeding Employer, as prescribed by the Bureau of
Workers' Compensation, duly executed by Buyer if allowed by law.
Section 9.02. Deliveries to Buyer at the Closing. At the Closing, and
--------------------------------------------------
simultaneously with the deliveries to Seller specified in Section 9.01, Seller
shall deliver or cause to be delivered to Buyer the following:
(a) A ▇▇▇▇ of Sale and Assignment and Assumption Agreement duly
executed by Seller in form and substance satisfactory to Buyer and its
counsel;
(b) UCC termination statements or similar instruments or documents
duly executed by Seller's lenders and other creditors releasing their
security interest in any and all of the Purchased Assets including, without
limitation, all documents and instruments necessary to permit and effect
the transaction contemplated hereunder;
(c) Non-Competition Agreement, duly executed by Tsengas as referred
to in Section 9.01 (c) above in form and substance satisfactory to Buyer
and its counsel;
(d) Certified copies of the resolutions adopted by the respective
boards of directors Seller authorizing and approving the execution and
delivery of this Agreement and the other Acquisition Documents and the
performance by Seller of their respective obligations thereunder, and that
such resolutions are in full force and effect as of the Closing Date;
(e) A Certificate of the Officers approving the sales of the Assets
and Good Standing of the company;
(f) The Facility Lease in form and substance satisfactory to Buyer
and its counsel;
(g) Any other documents or instruments of conveyance and transfer as
Buyer may reasonably request for the purpose of assigning, transferring,
granting, conveying and confirming the Purchased Assets or any part of the
Purchased Assets to Buyer, including, but not limited to, an amendment
(duly executed and approved by Seller) to Seller's Articles of
Incorporation providing for the change of Seller's corporate name to one
dissimilar to the Name so as not to create confusion with Buyer's ongoing
use of the Name, as well as all consents of Seller which are reasonably
required in order to transfer to Buyer all of Seller's rights in and to the
Name, any assignments necessary with respect to any Leased Personal
Property and a separate assignment of the Intellectual Property;
(h) Form No. U-9, Application For Transfer of Workers' Compensation
Account and Premium Obligation to Succeeding Employer, as prescribed by the
Bureau of Workers' Compensation, duly executed by Seller if allowed by law;
(i) List of trade payables and accrued liabilities pursuant to
Section 1.03 (b);
(j) List of Accounts Receivable pursuant to Section 1.01 (a); and
(k) A list of all goods consigned to the Seller, and the owner of the
consigned good's
26
affirmation of the quantities at Seller are correct set forth in Schedule
9.02 (k).
ARTICLE X
---------
Additional Agreements of the Parties
------------------------------------
Section 10.01. Best Efforts. Subject to the terms and conditions of this
----------------------------
Agreement, each of the parties shall use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable to consummate the transactions provided for in this
Agreement.
Section 10.02. Further Assurances. Seller after the Closing, without
----------------------------------
further consideration, shall execute, acknowledge, and deliver any further
assignments, conveyances, and other assurances, documents and instruments of
transfer, reasonably requested by Buyer, and shall take any other action
consistent with the terms of this Agreement that may reasonably be requested by
Buyer for the purpose of assigning, transferring, granting, conveying and
confirming the Purchased Assets or any part of the Purchased Assets to Buyer.
Seller agrees that it shall, upon the reasonable request of Buyer, use Seller's
best efforts to obtain promptly all consents and authorizations of third parties
and governmental authorities, to make all filings, and to give all notices to
third parties which may be necessary or required after closing to give effect to
the transactions contemplated by this Agreement.
Section 10.03. Access to Records. For a period of eight (8) years after
---------------------------------
the Closing Date:
(a) Buyer shall retain, and Seller and its representatives shall have
reasonable access to (including the right to make copies of), all of the
books and records purchased by Buyer hereunder as part of the Purchased
Assets, to the extent that such access may reasonably be required by Seller
in connection with matters relating to or affected by the operation of the
Purchased Assets or the Purchased Business prior to the Closing.
(b) Seller shall retain, and Buyer and its representatives shall have
reasonable access to (including the right to make copies of), all of the
books and records of Seller relating to the Purchased Business or the
Purchased Assets, to the extent such access may reasonably be required by
Buyer in connection with matters relating to or affected by the operation
of the Purchased Assets or the Purchased Business after the Closing. Seller
and Buyer each shall be solely responsible for any costs or expenses
incurred by it pursuant to this Section. After such eight-year period, all
such records may be destroyed, except those books or records which either
party specifically request be retained by the other party; provided,
---------
however, the cost of storing or delivering such retained books or records
--------
shall be borne by the party requesting such records be retained.
Section 10.04. Employees. All employees of Seller offered employment by
-------------------------
Buyer will be considered "new hires" by Buyer. Seller will assist Buyer in
hiring any employees of Seller who Buyer wishes to hire. Buyer will assume no
past or future obligations of Seller to such new hires resulting
27
from periods prior to the Closing Date, including, without limitation, any
obligations to pay severance pay, unemployment liability or other benefits to
such employees, and such obligations will be and remain obligations of Seller
and considered Excluded Liabilities here-under, as the case may be, as will any
similar obligations to any employees of Seller who are not hired by Purchaser.
Notwithstanding the foregoing, Buyer agrees to offer employment to all non-
shareholder employees on Seller's payroll at the close of business of the day
immediately prior to the Closing Date. Buyer shall have in its sole discretion
the ability to make all employment decisions regarding such employees after the
Closing Date, including the decision to terminate any such employee and hire
additional employees. Those employees of the Seller accepting employment of the
Buyer will have their respective service time of employment carry forward to the
Buyer. The Buyer will make a one time payment of Accrued Vacation pay at the
time of Closing to employees of the Seller who do not accept employment with the
Buyer and who have had vacation pay accrued for them by the Seller at the time
of Closing, and will also pay the accrued vacation pay at time of Closing to
employees of Seller who do accept employment with the Buyer when the employees
take their vacations.
Section 10.05. Checks and Drafts. Seller shall honor (whether presented
---------------------------------
before, on or after the Closing) all checks and drafts drawn by it on or prior
to the Closing to pay trade payables and accrued expenses of Seller in
conducting the Purchased Business in the ordinary course of business.
Section 10.06. Bulk Sales Compliance. Buyer shall waive compliance by
-------------------------------------
Seller with the provisions of applicable bulk sales law; provided that Seller
warrants and agrees to pay and discharge when due all claims of creditors which
could be asserted against Buyer by reason of such non-compliance, except for
claims which Buyer specifically assumes hereunder. Each of the parties hereto
hereby agrees to indemnify and hold the other party harmless from, against and
in respect of (and shall on demand reimburse the other party for) any loss,
liability, cost or expense, including, but not limited to, reasonable attorneys
fees, suffered or incurred by such party by reason of the failure of the other
party to pay or discharge such claims for which it is responsible.
Section 10.07. Consulting Agreement. Seller agrees to provide the
------------------------------------
personal services of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as an inducement to the Buyer to
purchase the assets of Sanar. Tsengas will make himself available to the Buyer
to perform all tasks necessary to the Buyer to allow for the orderly transition
of assets, liabilities, and goodwill. These tasks may include, but are not
limited to the following - sales account transition, inventory, machinery
operation, computer software, and vendors. The time to be given to the Buyer is
set forth in the following table:
First month after closing: 30 hours
Second month: 20 hours
Third month: 15 hours
Fourth month: 10 hours
28
Fifth month: 8 hours
Sixth month: 8 hours
The total hours to be made available will be 91 hours. If the monthly hours are
not used in the month set forth above, the available hours will carry forward to
the next month. After the sixth month, if the hours have not been used, the
Seller will have not further obligation to the Buyer. The Buyer will make all
reasonable efforts to coordinate the time used to mutually benefit both Buyer
and Seller's schedule.
Section 10.08 Blow Mold and Injection Mold Purchase Agreement. OurPet's
---------------------------------------------------------------
agrees to offer all of its blow and injection molding requirements to the Buyer
for a period of three years after the Closing Date. OurPet's will provide
quoting details to the Buyer first before providing the same information to any
other potential supplier. OurPet's agrees to purchase these requirements from
the Buyer as long as the Buyer's selling price, payment terms, delivery schedule
and quality standards are equal to or better than any single competitive offer
presented to OurPet's. OurPet's will disclose to the Buyer the competitive offer
prior to purchasing goods from someone other than the Buyer. The Buyer has the
right to refuse any purchase order from the OurPet's and will provide 2 business
days notice to OurPet's of either acceptance or refusal of any purchase order.
ARTICLE XI
----------
Endorsement Authorization
-------------------------
Section 11.01. Endorsement Authorization. Effective as of the Closing Date,
-----------------------------------------
Seller appoints Buyer its attorney-in-fact to open all mail relating to the
Purchased Business addressed to Seller at the Facility and to endorse in the
name of Seller any checks, drafts, or other instruments received in payment on
account of the Purchased Assets. Buyer promptly will send to Seller all mail not
relating to the Purchased Assets or the Purchased Business, and copies of all
checks and stubs related to the Purchased Receivables within one week of their
receipt by Buyer, except personal mail of any employee or former employee of the
Purchased Business.
ARTICLE XIII
------------
Indemnification
---------------
Section 13.01. Indemnification by Seller. Subject to the limits provided
-----------------------------------------
in Section 13.01 (h) of this Agreement and except to the extent such losses,
damages, liabilities, settlements, judgments and penalties are covered by
Available Insurance, as defined hereinafter, Seller shall indemnify, defend and
hold Buyer, and its officers, directors, employees and shareholders and their
respective successors and assigns (collectively, "Buyer's Indemnified Persons")
harmless from and against all losses, damages,
29
liabilities, settlements, judgments, penalties and reasonable costs and, court
costs and any other litigation related expenses incident thereto, including lost
profits and consequential damages (collectively, the "Indemnity Losses" and,
individually, an "Indemnity Loss") actually incurred, as defined hereinafter, by
any of Buyer's Indemnified Persons arising out of or in any way related to:
(a) Any misrepresentation in or breach of the representations and
warranties of Seller or the failure of Seller to perform in any respect any
of its covenants or obligations contained in this Agreement or in any
Exhibit, Schedule, certificate or other instrument, document or agreement
furnished or to be furnished by Seller pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement;
(b) Any actions, claims, suits or proceedings asserted by third
parties alleging personal injury, property damage or business loss due to,
arising out of or by reason of the design, manufacture or use of any
products of the Purchased Business manufactured or sold prior to the
Closing Date;
(c) The Seller's sole responsibility is to guarantee the payment of
the indemnity provided therein to the extent provided in this Article XIII,
any Environmental Claim (as hereinafter defined) arising under any of the
Environmental Laws or any Remedial Action arising pursuant to any of the
Environmental Laws including, but not limited to, investigation,
remediation or removal of any Contaminant (whether now located at the
Facility or elsewhere), arising out of or based upon the operation of the
Purchased Business or the use of the Purchased Assets, prior to the Closing
Date and it is acknowledged that the disclosures made pursuant to Schedule
--------
4.16 or any attachment thereto shall in no way limit the right of any of
----
Buyer's Indemnified Persons to indemnification under this Section 13.01 (d)
with respect to any undisclosed environmental matters;
(d) Any and all claims for compensation and other employee benefits
(including, but not limited to, severance pay, out-placement benefits,
disability benefits, health, retiree medical, tuition assistance, death
benefits and pension and profit sharing plans and claims relating to
employment or termination of employment) accruing prior to the Closing Date
and not Assumed Liabilities;
(e) Noncompliance with the provisions of any applicable bulk sales
law in connection with the transactions contemplated hereby to the extent
that claims of creditors are not expressly assumed by Buyer;
(f) Any liabilities, obligations or expenses of Seller not expressly
assumed by Buyer pursuant to the provisions of this Agreement; or
(g) The Seller for Article XIII shall be defined as Sanar
Manufacturing Company and OurPet's Company. If Sanar is unable to perform
under Article XIII, OurPet's will assume any and all responsibilities,
duties and obligation of Sanar.
30
(h) Notwithstanding the foregoing, the Seller shall not be liable to
the Buyer's Indemnified Persons for Indemnity Losses, as qualified below,
until the total amount of the Indemnity Losses equal Fifty Thousand Dollars
($50,000) or more in the aggregate at which point all further Indemnity
Losses, subject to the qualifications below, shall be indemnified.
The maximum amount of the Seller's liability for all Indemnity Losses
in the aggregate hereunder shall be limited to Two Hundred Thousand Dollars
($200,000) and shall be only for those Indemnity Losses actually incurred
by the Buyer's Indemnified Persons within the first 5 years after the
Closing Date or Indemnity Losses arising out of bona fide third party
claims which have been asserted against any of Buyer's Indemnified Persons
within the first 5 years after the Closing Date and about which the Buyer
provides notice to the Seller within the first 6 years after the Closing
Date. The foregoing limitations shall not apply to Indemnity Losses arising
under subparagraph (f) or (g) of this Section 13.01 above.
"Actually Incurred," when used in connection with an Indemnity Loss,
-------------------
means that such loss shall be deemed to be "actually incurred" when
determined by the Buyer. The Buyer will in form the Seller in writing of
such indemnity loss within one week of the Buyers determination.
"Available Insurance" means any policies of insurance maintained
----------------------------
by Buyer or Seller of this Agreement and any other policies of insurance
which are maintained, or have been maintained by Buyer or Seller, in its
sole discretion, which provide coverage or are known to be required by law.
Buyer and Seller will provide to each other copies of all applicable
insurance policies.
"Environmental Claim" means any notice of any violation, claim,
---------------------
demand, abatement or other order or direction (conditional or otherwise) by
any governmental authority or any person (other than Buyer's Indemnified
Persons) for personal injury (including sickness, disease or death),
tangible or intangible property damage, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or restrictions, resulting from or
based upon (i) the existence, or the continuation of the existence, of a
Release (including, but not limited to, sudden or non-sudden, accidental or
non-accidental Releases) of, or exposure to, any substance, chemical,
material, pollutant, Contaminant, odor or audible noise or other Release or
emission in, into or onto the environment (including, but not limited to,
the air, ground, water or any surface) at, in, by, from or related to the
Purchased Business, the Facility, (ii) the environmental aspects of the
transportation, storage, treatment or disposal of Contaminants or other
substances in connection with the operation of the Purchased Business, the
Facility or (iii) the violation, or alleged violation, of any statutes,
ordinances, orders, rules, regulations, Permits or licenses as in effect on
the date hereof or as of the Closing Date of or from any governmental
authority, agency or court relating to environmental matters connected with
the Purchased Business or the Facility Lease. Environmental Claims shall
not include costs and expenses the Buyer may incur in the acquisition of
any licenses, permits, regulatory plans, compliance schedules, etc., which
may be necessary or desirable to conduct the Purchased
31
Business on or after the Closing Date.
Section 13.02. Indemnification by Buyer. Except to the extent that such
----------------------------------------
Indemnity Losses are covered by any insurance which may provide coverage for
such loss, including without limitation, Available Insurance, Buyer shall
indemnify, defend and hold Seller and its officers, directors, employees and
shareholders and their respective successors and assigns (collectively "Seller's
Indemnified Persons") harmless from and against any Indemnity Loss actually
incurred by any of Sellers Indemnified Persons arising out of or in any way
related to:
(a) Any misrepresentation in or breach of the representations and
warranties of Buyer or the failure of Buyer to perform any of its
covenants or obligations contained in this Agreement or in any certificate
or other instrument or document furnished or to be furnished by Buyer
pursuant to this Agreement or in connection with the transactions
contemplated hereby;
(b) [LEFT INTENTIONALLY BLANK]
(c) The failure to pay Seller amounts owing from current or prior
customers for receivables, but not with respect to certain accounts
receivable listed in Section 1.02 (i), or inventory related to the release
of customer molds held as security therefor in contravention of Buyer's
obligations to collect accounts receivable and payment of inventories
pursuant to Section 13.01 (i);
(d) The Assumed Liabilities; or
(e) All claims, investigations, actions, suits, proceedings, demands,
assessments, judgments, costs, and expenses, including reasonable
attorneys' fees and expenses incident to the foregoing.
Section 13.03. Notice. If any of Seller's or Buyer's Indemnified Persons
----------------------
believes that he, she, or it has actually incurred any Indemnity Loss, such
Indemnified Person shall so notify the indemnifying party in writing describing
such Indemnity Loss, the amount thereof, if known, and the method of computation
of such Indemnity Loss, all with reasonable particularity. If any action at
law, suit in equity or administrative action is instituted by or against a third
party with respect to which any Indemnified Person intends to claim any
liability or expense as an Indemnity Loss under this Article XIII, such person
shall provide written notice within three (3) business days to the indemnifying
party of such action.
In the event that Buyer shall provide notice as contemplated by the first
paragraph of this Section 13.03 to Seller. The notice so furnished by Buyer
shall contain a statement, or good faith estimate, of the Indemnity Loss and if
the Indemnity Loss has not been actually incurred but is estimated, the basis
for such estimate. Upon receipt of such notice, Seller shall have sixty (60)
days in which Seller may pay the amount of the Indemnity Loss claimed or
estimated by Buyer or, in the event that such Indemnity Loss is estimated based
upon the commencement of a third party proceeding against Buyer, to settle the
third party proceeding and pay the third party claim in full so that Buyer is
released totally from such claim. If
32
Seller does not settle or pay the amount of the claimed Indemnity Loss within
the sixty (60) day period following the giving of such notice in accordance with
the preceding paragraph, Buyer shall have the right and option to pay the claim
from funds owed to the Seller.
Section 13.04. Defense of Claims. The indemnifying party shall have
---------------------------------
twenty (20) business days after receipt of either notice referred to in Section
13.03 hereof to notify the indemnified party that it elects to conduct and
control any legal or administrative action or suit brought or asserted by any
person not a party to this Agreement against the indemnified party with respect
to an indemnifiable claim. If the indemnifying party does not give such notice,
the indemnified person shall have the right to defend, contest, settle or
compromise such action or suit in the exercise of its exclusive discretion, and
the indemnifying party shall, upon request from the indemnified person, promptly
pay the indemnified person in accordance with the other terms and conditions of
this Article XIII the amount of any Indemnity Loss resulting from its liability
to the third party claimant. Provided, however, prior to the settlement or
compromise of any such action or suit, the indemnified party shall notify the
indemnifying party of the terms of the proposed settlement or compromise. The
indemnifying party shall have the option to agree to the proposed settlement or
compromise in which case it shall indemnify the indemnified party for such
settlement or compromise to the extent of its obligation under Section 13.01
hereof. If, however, the indemnifying party does not agree to the terms of the
proposed settlement or compromise, the indemnified party shall have the option
to accept the proposed compromise or settlement, at its sole cost and expense,
or to proceed to defend and contest the claim, in which case, should the
ultimate non-appealable judgment exceed the amount of the proposed settlement or
compromise which was rejected by the indemnifying party, the indemnifying party
shall indemnify the indemnified party for the full amount of such judgment and
costs and expenses of defense and, if the indemnifying party is the Seller,
without regard to the maximum imposed by 13.01 (h). However, the amount of any
such judgment and expense paid by the Seller shall be applied against the amount
to which it is obligated to pay pursuant to Section 13.01 (h) hereunder. If,
however, final non-appealable judgment or settlement or compromise is less than
the amount of the rejected settlement or compromise, the indemnified party shall
bear the cost and expense of defending such claim or proceeding and the
indemnifying party shall indemnify the indemnified party only for the lower
judgment or settlement or compromise. The amounts so paid by the indemnifying
party shall be subject to all of the limitations of Section 13.01 (h).
If the indemnifying party gives such notice of its election to conduct and
control such action or suit, it shall have the right to undertake, conduct and
control, through counsel of its own choosing (which counsel shall be
satisfactory to the indemnified party in the reasonable judgment of the
indemnified party) and at its sole expense, the conduct and settlement of such
action or suit, and the indemnified person shall cooperate with the indemnifying
party in connection therewith; provided, however, that (i) the indemnifying
------------------
party shall not thereby permit to exist any lien, encumbrance or other adverse
charge securing the claims indemnified hereunder upon any asset of the
indemnified person, (ii) the indemnifying party shall not thereby consent to the
imposition of any injunction against the indemnified person without the written
consent of the indemnified person not to be unreasonably withheld, (iii) the
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indemnifying party shall permit the indemnified person to participate in such
conduct or settlement through counsel chosen by the indemnified person, but the
fees and expenses of such counsel shall be borne by the indemnified person
except as provided in clause (iv) below, and (iv) upon a final determination of
such action or suit, the indemnifying party shall agree promptly to reimburse
(to the extent required under this Article XIII and subject to the limitations
of Section 13.01 hereof) the indemnified person for the full amount of any
Indemnity Loss resulting from such action or suit and all reasonable and related
expenses incurred by the indemnified person, except fees and expenses of counsel
for the indemnified person incurred after the assumption of the conduct and
control of such action or suit by the indemnifying party. So long as the
indemnifying party is contesting any such action in good faith, the indemnified
person shall not pay or settle any such action or suit. Notwithstanding the
foregoing, the indemnified person shall have the right to pay or settle any such
action or suit, provided that in such event the indemnified person shall (i)
--------
waive any right to indemnity therefor from the indemnifying party, (ii) no
amount in respect thereof shall be claimed as an Indemnity Loss under this
Article XIII.
Section 13.05. Cooperation. If requested by the party controlling the
---------------------------
claim, the other party shall cooperate with the indemnifying party and its
counsel in contesting any claim which the indemnifying party elects to contest
or, if appropriate, in making any counterclaim against the person asserting the
claim, or any cross-complaint against any person, and further agrees to take
such other action as reasonably may be requested by an indemnifying party to
reduce or eliminate any loss or expense for which the indemnifying party would
have responsibility, but the indemnifying party will reimburse the indemnified
person for any reasonable out-of-pocket expenses, exclusive of its attorneys' or
consultants' fees, incurred by it in so cooperating or acting at the request of
the indemnifying party.
Section 13.06. Right to Participate. The party controlling the claim shall
------------------------------------
afford the other party and its counsel the opportunity to be present at, and to
participate in, conferences with all persons, including governmental
authorities, asserting any claim against the indemnified person or conferences
with representatives of or counsel for such persons.
Section 13.07. Payment of Losses. The indemnifying party shall promptly
---------------------------------
pay to the indemnified person in cash the amount of any Indemnity Loss to which
the indemnified person may become entitled by reason of the provisions of this
Agreement. In the event that Seller does not pay to Buyer the full amount of
any Indemnity Loss to which Buyer is entitled to reasons of the provisions of
this Agreement, Buyer shall have the right to offset such Indemnity Loss against
amounts thereafter payable to the Seller. Any claim for which indemnification
occurs under this Agreement shall be assigned (without recourse) to the
indemnifying party. The parties covenant that any payment made pursuant to this
Article XIII will be treated by the parties on their respective tax returns as
an adjustment to the Purchase Price. In the event that any indemnifying party
hereunder does not pay to the indemnified party the full amount of any Indemnity
Loss to which such indemnified party is entitled by reasons of the provisions of
this Agreement, the indemnifying party shall pay the interest on the unpaid
amount of the Indemnity Loss to the indemnified party from the time payment was
originally due or payable, at the rate of 8% per annum.
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Section 13.08. Subrogation. In the event of any payment by an indemnifying
---------------------------
party to an indemnified party in connection with any Indemnity Loss, the
indemnifying party shall be subrogated to and shall stand in the place of the
indemnified party as to any events or circumstances in respect of which the
indemnified party may have any right or claim against any third party relating
to such event of indemnification. The indemnified party shall cooperate with
the indemnifying party in any reasonable manner in prosecuting any subrogated
claim.
ARTICLE XIV
-----------
Miscellaneous Provisions
------------------------
Section 14.01. Confidential Nature of Information. Each party shall treat
--------------------------------------------------
in confidence all documents, materials and other information which it shall have
obtained regarding the other party during the course of the negotiations leading
to the consummation of the transactions contemplated by this Agreement (whether
obtained before or after the date hereof), and the preparation of this Agreement
and other related Acquisition Documents. The obligation of each party to treat
such documents, materials and other information in confidence shall not apply to
any information which (a) such party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party, (b) is known to
the public and did not become so known through any violation of a legal
obligation, (c) became known to the public through no fault of such party, (d)
is later lawfully acquired by such party from other sources, (e) is required to
be disclosed under the provisions of any federal, state or local statute or
regulation issued by a duly authorized agency, board or commission thereof or
(f) is required to be disclosed by a rule or order of any court of competent
jurisdiction.
Section 14.02. Public Notices. All notices to third parties and all other
------------------------------
publicity concerning the transactions contemplated by this Agreement shall be
jointly planned and coordinated by Seller and Buyer and no party shall act
unilaterally in this regard without the prior approval of Seller or Buyer, as
the case may be, (which approval shall not be unreasonably withheld), except as
follows:
(a) In the case of Seller, for communications made in confidence to
Seller's advisors, employees and creditors affected by such transactions;
(b) In the case of Buyer, for communications made in confidence to
Buyer's advisors and employees and financial institutions considering
financing the proposed transaction; or
(c) Where required to do so by law.
Section 14.03. Expenses. Each of the parties shall pay all costs and
------------------------
expenses incurred or to be incurred by it in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated by this
Agreement and the other Acquisition Documents, except as otherwise expressly
provided for in this Agreement.
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Section 14.04. Headings. The subject headings of the Articles and Sections
------------------------
of this Agreement are included for purposes of convenience only and shall not
affect the construction or interpretation of any of its provisions.
Section 14.05. Entire Agreement. This Agreement, including the Exhibits
--------------------------------
and Schedules referred to herein which form a part of this Agreement, and the
other Acquisition Documents contain the entire understanding of the parties with
respect to the transactions contemplated by this Agreement. There are no
representations, warranties, covenants or undertakings other than those
expressly set forth or provided for in this Agreement. This Agreement
supersedes the Preliminary Term Sheet executed by the parties, dated December
23, 1999, and all other agreements and understandings between the parties with
respect to the transactions contemplated by this Agreement.
Section 14.06. Modification and Waiver. No supplement, modification or
----------------------------------------
amendment of this Agreement shall be binding unless executed in writing by all
the parties. The party for whose benefit a warranty, representation, covenant or
condition is intended may in writing waive any inaccuracies in the warranties
and representations contained in this Agreement or waive compliance with any of
the covenants or conditions contained herein and so waive performance of any of
the obligations of the other party hereto and any defaults hereunder; provided,
---------
however, that such waiver shall not affect or impair the waiving party's rights
--------
with respect to any other warranty, representation or covenant or any default
hereunder, nor shall any waiver constitute a continuing waiver. No oral waivers
shall be valid.
Section 14.07. Counterparts. This Agreement may be executed simultaneously
----------------------------
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same agreement.
Section 14.08. Incorporation of Exhibits and Schedules. All Exhibits and
-------------------------------------------------------
Schedules attached to this Agreement are incorporated herein and made a part
hereof in the same manner as if such exhibits and schedules were set forth at
length in the text of this Agreement.
Section 14.09. Successors. This Agreement shall be binding on, and shall
--------------------------
inure to the benefit of, the parties and their respective successors, assigns,
debtors-in-possession and bankruptcy trustees.
Section 14.10. Nature and Survival of Representations. Warranties.
---------------------------------------------------------------------
Covenants and Indemnification.
------------------------------
(a) Except as otherwise provided herein, all representations,
warranties, covenants and obligations made by the Seller shall survive the
Closing Date for a period of two (2) years, at which time such
representations, warranties, covenants and obligations shall expire;
provided, however, that notwithstanding the foregoing: (i) the Seller's
obligations with respect to indemnification as provided in Article XIII
shall continue with respect to any matter for which indemnification had
been properly sought prior to the expiration of such survival period and
(ii) all representations, warranties and covenants as to the title of the
Purchased Assets set forth in Section 4.15 shall survive for five (5)
years, as to environmental matters set forth in Section 4.16,
36
eight (8) years, and as to taxes set forth in Section 4.04, until the
expiration of the applicable statute of limitations.
(b) Except as otherwise provided herein, all representations,
warranties, covenant and obligations made by the Buyer shall survive the
Closing Date until the expirations of the applicable statutes of
limitations.
(c) Except for claims for fraudulent misrepresentations, the parties'
remedies for breach of representations, warranties, covenants and
obligations herein contained and all other rights and remedies of the
parties for breach of this Agreement or in connection with any dispute
arising from or out of this Agreement of the transactions effected hereby
shall be exclusively governed by and exclusively limited to the causes of
action and remedies provided for in this Agreement.
37
Section 14.11. Notices. All notices, requests, demands, and other
-----------------------
communications to be given under this Agreement shall be in writing and shall be
deemed to have been duly given on the date of service if served personally on
the party to whom notice is to be given, or on the third business day after
mailing if mailed to the party to whom notice is to be given by certified or
registered mail, return receipt requested, postage prepaid and properly
addressed as follows:
If to Buyer: ▇▇▇▇ Plastic Enterprises, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
With Copy to: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Co., LPA
Key Building, Sixt Floor
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to Seller: OurPet's Company, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
With Copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇
800 Banc One Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Section 14.12. Gender. Any reference to the masculine gender shall be
----------------------
deemed to include the feminine and neuter genders unless the context otherwise
requires.
Section 14.13. Governing Law. This Agreement and all transactions
-----------------------------
contemplated hereby shall be governed by, construed and enforced in accordance
with the laws of the State of Ohio, without giving effect to the principles of
conflicts of laws thereof.
Section 14.14. Buyer not Successor. Buyer agrees to assume only the
-----------------------------------
liabilities set forth in this Agreement and, as between the parties hereto,
Buyer does not agree to assume any other liabilities and does not agree hereby
to be bound as a successor in interest to Seller or to any of Seller's employees
as to any liabilities not specifically assumed by Buyer herein.
Section 14.15. Severability. In the event that any of the terms or
----------------------------
provisions of this Agreement
38
are determined to be unenforceable by any court of competent jurisdiction, the
parties to this Agreement shall consider such terms or provisions amended and
modified so as to eliminate such invalidity or unenforce-ability, and all other
terms and provisions shall remain in full force and effect as originally
written.
Section 14.16.
--------------
Section 14.17. Ambiguities. Buyer and Seller acknowledge that this
---------------------------
Agreement and the other Acquisition Documents have been entered into in the
context of free and understanding negotiations and are the product of individual
bargaining, in a competitive market, between parties enjoying equal bargaining
strength. In the event that a court is called upon to interpret any ambiguous
provision in this Agreement or the other Acquisition Documents;
Buyer and Seller agree that the ambiguity shall not be construed against Buyer
or Seller simply because Buyer or Seller, or their respective counsel, may have
drafted such provision.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
BUYER: SELLER:
------ -------
▇▇▇▇ Plastic Enterprises, Inc. Sanar Manufacturing Company, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------- -----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President Title: President
39