EXHIBIT 2.2
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ASSET PURCHASE AGREEMENT
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Among
▇▇▇▇ ▇▇▇▇▇, Inc.
Pocono Knits, Inc.,
and
The Shareholders of Pocono Knits, Inc.
March 15, 2002
TABLE OF CONTENTS
Page
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ARTICLE I. - SALE AND PURCHASE OF ASSETS.......................................1
1.01 Sale and Purchase of Assets.........................................1
1.02 Payment for Assets..................................................3
ARTICLE II. - CLOSING 3
2.01 Closing.............................................................3
2.02 Deliveries by the Company...........................................3
2.03 Deliveries by Buyer.................................................4
2.04 Termination in Absence of Closing...................................4
ARTICLE III. - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
AND THE COMPANY...............................................4
3.01 Corporate Existence and Qualification...............................4
3.02 Authority, Approval and Enforceability..............................5
3.03 Capitalization and Corporate Records................................5
3.04 No Shareholder Defaults or Consents.................................5
3.05 No Company Defaults or Consents.....................................6
3.06 No Proceedings......................................................6
3.07 Employee Benefit Matters............................................6
3.08 Financial Statements; Liabilities; Accounts Receivable;
Inventories.......................................................9
3.09 Absence of Certain Changes..........................................9
3.10 Compliance with Laws...............................................11
3.11 Litigation.........................................................11
3.12 Real Property......................................................11
3.13 Commitments........................................................12
3.14 Insurance..........................................................13
3.15 Intangible Rights..................................................13
3.16 Equipment and Other Tangible Property..............................14
3.17 Permits; Environmental Matters.....................................14
3.18 Banks..............................................................15
3.19 Reserved...........................................................15
3.20 Absence of Certain Business Practices..............................15
3.21 Reserved...........................................................15
3.22 Transactions With Affiliates.......................................15
3.23 Other Information..................................................16
3.24 Investment Representations of the Shareholders.....................16
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES OF BUYER.........................16
4.01 Corporate Existence and Qualification..............................16
4.02 Authority, Approval and Enforceability.............................16
4.03 No Default or Consents.............................................17
4.04 No Proceedings.....................................................17
ARTICLE V. - OBLIGATIONS PRIOR TO CLOSING.....................................17
5.01 Buyer's Access to Information and Properties.......................17
5.02 Company's Conduct of Business and Operations.......................17
5.03 General Restrictions...............................................18
5.04 Notice Regarding Changes...........................................19
5.05 Preferential Purchase Rights.......................................19
5.06 Ensure Conditions Met..............................................19
5.07 Termination of Insurance Policies..................................20
5.08 Casualty Loss......................................................20
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5.09 Employee Matters...................................................20
5.10 Reserved...........................................................20
5.11 Reserved...........................................................20
5.12 Reserved...........................................................20
5.13 Payoff and Estoppel Letters........................................20
5.14 No Shop............................................................21
5.15 Name Change........................................................21
ARTICLE VI. - CONDITIONS TO COMPANY'S AND BUYER'S OBLIGATIONS.................21
6.01 Conditions to Obligations of the Company...........................21
6.02 Conditions to Obligations of Buyer.................................21
ARTICLE VII. - POST-CLOSING OBLIGATIONS......................................22
7.01 Further Assurances..............................................22
7.02 Publicity..........................................................23
7.03 Post-Closing Indemnity by the Company and the Shareholders.........23
7.04 Non-Competition, Non-Solicitation and Non-Disclosure...............23
7.05 Delivery of Property Received by the Company After Closing.........24
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7.06 Buyer Appointed Attorney for the Company...........................24
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7.07 Assignment of Contracts............................................25
7.08 Capital Infusion
ARTICLE VIII. - TAX MATTERS...................................................25
8.01 Representations and Obligations Regarding Taxes....................25
ARTICLE IX. - MISCELLANEOUS...................................................26
9.01 Limitation on Liability............................................26
9.02 Confidentiality....................................................27
9.03 Brokers............................................................28
9.04 Costs and Expenses.................................................28
9.05 Notices............................................................28
9.06 Governing Law......................................................29
9.07 Representations and Warranties.....................................29
9.08 Entire Agreement; Amendments and Waivers...........................29
9.09 Binding Effect and Assignment......................................29
9.10 Remedies...........................................................29
9.11 Reserved...........................................................29
9.12 Withholding of Payments............................................30
9.13 Exhibits and Schedules.............................................30
9.14 Multiple Counterparts..............................................30
9.15 References and Construction........................................30
9.16 Survival...........................................................30
9.17 Attorneys' Fees....................................................30
9.18 Risk of Loss.......................................................30
9.19 Representative of Company and Shareholders.........................31
ARTICLE X. - DEFINITIONS......................................................31
10.01 Affiliate..........................................................31
10.02 Available Cash.....................................................31
10.03 Collateral Agreements..............................................31
10.04 Confidential Information...........................................31
10.05 Contracts..........................................................31
10.06 Damages............................................................31
10.07 Financial Statements...............................................31
10.08 Funded Indebtedness................................................32
10.09 GAAP...............................................................32
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10.10 Governmental Authorities...........................................32
10.11 Hazardous Material.................................................32
10.12 Inventory..........................................................32
10.13 Knowledge of the Company...........................................32
10.14 Legal Requirements.................................................32
10.15 Net Worth..........................................................33
10.16 Permits............................................................33
10.17 Person.............................................................33
10.18 Product............................................................33
10.19 Properties.........................................................33
10.20 Real Property......................................................33
10.21 Regulations........................................................33
10.22 Subsidiary.........................................................33
10.23 Trade Secrets......................................................33
10.24 Used...............................................................33
10.25 Working Capital....................................................33
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LIST OF SCHEDULES
Schedule 1.01(a) Excluded Assets
Schedule 3.01 Qualifications as Foreign Corporation
Schedule 3.03(c) Subsidiaries
Schedule 3.04 Seller Defaults or Consents
Schedule 3.05 Company Defaults or Consents
Schedule 3.07(a) Employee Arrangements
Schedule 3.07(c) Benefit Plan Liabilities
Schedule 3.07(e) Current Employees
Schedule 3.08(a) Financial Statements
Schedule 3.08(b) Scheduled Liabilities
Schedule 3.08(c) Accounts Receivable
Schedule 3.08(d) Inventory Condition
Schedule 3.08(e) Encumbrances
Schedule 3.09(a) Certain Changes
Schedule 3.09(b) Certain Actions
Schedule 3.10(1) Compliance with Law
Schedule 3.10(2) Citations
Schedule 3.11 Litigation
Schedule 3.12(a) Owned Premises
Schedule 3.12(b) Leased Premises
Schedule 3.13 Commitments
Schedule 3.13(c) Non-Arm's Length Contracts
Schedule 3.14 Insurance
Schedule 3.15 Intangible Rights
Schedule 3.16 Tangible Assets Condition
Schedule 3.17(a) Permits
Schedule 3.17(b) Environmental Claims
Schedule 3.17(c) Storage of Hazardous Materials
Schedule 3.17(d) Noncompliance with Environmental Laws
Schedule 3.18 Banks, Accounts and Authorized Signatories
Schedule 3.22 Affiliate Transactions
Schedule 4.03 Buyer Defaults or Consents
Schedule 8.01(a) Tax Returns
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LIST OF EXHIBITS
Exhibit A - Certificate of Rights, Preferences and Designations..........A-1
Exhibit B - Investment Representation Letter.............................B-1
Exhibit C - Opinion of Seller's Counsel..................................C-1
Exhibit D - Employment Agreement.........................................D-1
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ASSET PURCHASE AGREEMENT
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This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the ___ day of _______, 2002, by and among (i) ▇▇▇▇ ▇▇▇▇▇, Inc., a Delaware
corporation (the "Buyer"), (ii) Pocono Knits, Inc., a New Jersey corporation
("Pocono") (Pocono individually and collectively with its Subsidiaries, the
"Company"), and (iii) ▇▇▇▇ ▇▇▇▇▇, an individual resident of the state of
Pennsylvania (the "Shareholder").
Recitals
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A. Buyer desires to purchase substantially all of the Company's assets.
B. The Company desires to sell and Buyer desires to purchase such assets
upon the terms and subject to the conditions set forth herein.
C. The Shareholder owns 100% of the Company's outstanding capital stock.
Agreement
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NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree as follows:
ARTICLE I. - SALE AND PURCHASE OF ASSETS
1.01 Sale and Purchase of Assets.
(a) On the terms and subject to the conditions of this Agreement, at the
Closing referred to in Section 2.01 hereof, the Company shall sell, convey,
assign, transfer and deliver to Buyer, and Buyer shall purchase, acquire and
accept delivery of, all assets and properties owned or Used by the Company in
connection with its business, except for (i) the Purchase Price and other rights
of the Company under this Agreement, (ii) the Company's corporate minute book
and stock records, and (iii) those assets specifically listed on Schedule
1.01(a) (such specifically listed assets in clauses (i), (ii) and (iii) (of this
introductory paragraph) being referred to as the "Excluded Assets"), including
without limiting the generality of the foregoing:
(i) all accounts receivable as reflected on the Financial Statements;
(ii) all raw materials, works-in-process, inventories and other
materials of the Company wherever located and including all inventory,
wherever located, in transit or on order and not yet delivered as reflected
on the Financial Statements, and all rights with respect to the processing
and completion of any works-in-process of the Company, including the right
to collect and receive charges for services performed by the Company with
respect thereto;
(iii) all supplies, equipment, vehicles, machinery, furniture,
fixtures, leasehold improvements and other tangible property Used by the
Company in connection with its business, and the Company's interest as
lessee in any leases with respect to any of the foregoing;
(iv) all of the Company's right, title and interest in and to its
Contracts, including the Contracts listed or required to be listed on
Schedule 3.13 hereto; provided that, the proceeds from the contract for the
sale of berets pursuant to the contract with the Defense Logistic Agency,
Defense Supply Center, PA (as listed on Schedule 3.13) will be distributed
as follows - 25% to Buyer, 50% to Company and 25% to the manufacturer in
Romania, provided, however, that Buyer must pay to Seller the sum of
$250,000 for the right to participate in the proceeds;
(v) all proprietary knowledge, Trade Secrets, Confidential
Information, computer software and licenses, formulae, designs and
drawings, quality control data, processes (whether secret or not), methods,
inventions and other similar know-how or rights Used in the conduct of the
Company's business, including, but not limited to, the areas of
manufacturing, marketing, advertising and personnel training and
recruitment, together with all other Intangible Rights Used in connection
with the Company's business, including all files, manuals, documentation
and source and object codes related thereto;
(vii) all utility, security and other deposits and prepaid expenses;
(viii) the Company's business as a going concern and its franchises,
Permits and other authorizations of Governmental Authorities (to the extent
such Permits and other authorizations of Governmental Authorities are
transferable) and third parties, licenses, telephone numbers, customer
lists, vendor lists, referral lists and contracts, advertising materials
and data, restrictive covenants, choses in action and similar obligations
owing to the Company from its present and former shareholders, officers,
employees, agents and others, together with all books, operating data and
records (including financial, accounting and credit records), files,
papers, records and other data of the Company;
(viii) all rights of the Company in and to all tradenames, trademarks
and slogans Used in its business, all variants thereof and all goodwill
associated therewith;
(ix) all rights to real property Used by the Company; and
(viii) all other property and rights of every kind or nature Used by
the Company in the operation of its business.
It is specifically understood and agreed by the parties hereto that the
Buyer is acquiring, and Company is selling, all of the tangible and intangible
assets attributable to or Used by the Company in its business, except the
Excluded Assets. The aforesaid assets and properties to be transferred to the
Buyer hereunder are hereinafter collectively referred to as the "Assets."
(b) Method of Conveyance. The sale, transfer, conveyance, assignment and
delivery by the Company of the Assets to the Buyer in accordance with Section
1.01(a) hereof shall be effected on the Closing Date by the Company's execution
and delivery to the Buyer of one or more Bills of Sale, Assignments and other
conveyance instruments with respect to the Company's transfer of Intangible
Rights, real property interests and other Assets in form and scope reasonably
satisfactory to Buyer (collectively the "Conveyance Documents"). At the Closing,
good, valid and marketable title to all of the Assets shall be transferred,
conveyed, assigned and delivered by the Company to the Buyer pursuant to the
Conveyance Documents, free and clear of any and all liens, encumbrances,
mortgages, security interests, pledges, claims, equities and other restrictions
or charges of any kind or nature whatsoever, excepting, however, the liabilities
set forth in Schedule 1.01(c).
(c) Assumed Obligations. At the Closing, the Buyer shall assume, and agree
to satisfy and discharge as the same shall become due, (i) all trade accounts
payable and accrued expenses that have been incurred in the ordinary course of
the Company's business and are reflected on the Financial Statements, (ii) the
Company's liabilities and other obligations arising under (x) the Contracts
listed on Schedule 3.13, and (y) all other Contracts entered into by the Company
in the ordinary course of its business (including open purchase orders) and not
required to be listed on Schedule 3.13, in each case to the extent that the
Company's rights thereunder are effectively transferred to Buyer at Closing, and
(iii) the obligations listed on Schedule 1.01(c) hereto (collectively the
"Assumed Obligations"). Except as expressly set forth in this paragraph (c), the
Buyer shall not assume or be responsible at any time for any liability,
obligation, debt or commitment of the Company, whether absolute or contingent,
accrued or unaccrued, asserted or unasserted, or otherwise, including but not
limited to any liabilities, obligations, debts or commitments of the Company
incident to, arising out of or incurred with respect to, this Agreement and the
transactions contemplated hereby (including any and all sales, income or other
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taxes arising out of the transactions contemplated hereby). Without limiting the
generality of the foregoing, the Company and the Shareholders expressly
acknowledge and agree that the Company shall retain, and that Buyer shall not
assume or otherwise be obligated to pay, perform, defend or discharge, (a) any
liability of the Company in connection with any Plan or Benefit Program or
Agreement, including, without limitation, any liability of the Company under
ERISA, (b) any liability of the Company under any federal, state or local law,
rule, regulation, ordinance, program, Permit, or other Legal Requirement
relating to health, safety, Hazardous Materials and environmental matters
applicable to the Company's business and/or the facilities Used by the Company
(whether or not owned by the Company), (c) any product liability pertaining to
products sold or manufactured by the Company prior to the Closing Date, (d), or
(e) any obligation of the Company to any Person claiming to have a right to
acquire any capital stock or other securities of the Company. The Company
further agrees to satisfy and discharge as the same shall become due all
obligations and liabilities of the Company not specifically assumed by the Buyer
hereunder.
At Closing, Buyer's Shareholder, Armitec, Inc., a Delaware corporation,
shall deliver to Shareholder a Pledge Agreement, pledging all of the outstanding
shares of stock of Buyer (the "Shares") to Shareholder to secure the Obligations
assumed by Buyer as set forth in this Subsection. The Shares shall be delivered
to a mutually acceptable Escrow Agent who shall hold the Shares until either (i)
the Obligations are paid in full, or (ii) Shareholder receives a release of
liability from all of the named Obligees, or (iii) a Default by Buyer. Upon a
Default in the payment of the Obligations by Buyer, Seller shall notify Buyer
and Escrow Agent in writing of such Default and on the failure by Buyer to cure
the Default within 10 days, Escrow Agent shall deliver the Shares to the
Shareholder.
1.02 Payment for Assets. As payment in full for the Assets being acquired
by the Buyer hereunder, Buyer shall deliver to the Company two million
(2,000,000) shares of the Armitec, Inc.'s common stock (the "Stock"), including
but not limited to the right of Company to exercise a put requiring Buyer to
repurchase the Stock on the fifth anniversary date of Closing for $500,000,
subject to further adjustment as provided in Section 7.03 (such sum, as so
adjusted from time to time, is herein referred to as the "Purchase Price").
The Purchase Price shall be allocated, apportioned and adjusted among the
Assets in the manner specified in IRS Form 8594 attached as Schedule 1.02 and
the parties agree to abide by such allocations for all tax reporting purposes.
ARTICLE II. - CLOSING
2.01 Closing. Subject to the conditions stated in Article VI of this
Agreement, the closing of the transactions contemplated hereby (the "Closing")
shall be on March 18, 2002, or, if the conditions set forth in Section 6.02 have
not been satisfied or waived on such date, on the fifth (5th) business day after
all such conditions shall have been satisfied or waived, at the offices of
Seller, or at such other location as the parties agree. The date upon which the
Closing occurs is hereinafter referred to as the "Closing Date." The Closing
shall be deemed completed as of 12:01 a.m. eastern standard time on the morning
of the Closing Date.
2.02 Deliveries by the Company. At or prior to the Closing, the Company
shall deliver to Buyer:
(i) the Conveyance Documents;
(ii) a certificate executed by Pocono to the effect that the
conditions set forth in Sections 6.02(a) and 6.02(c) have been satisfied;
(iii) possession of all originals and copies of agreements,
instruments, documents, deeds, books, records, files and other data and
information within the possession of the Company or any Affiliate of the
Company pertaining to the Company (collectively, the "Records"); provided,
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however, that the Company may retain (1) copies of any tax returns and
copies of Records relating thereto; (2) copies of any Records that the
Company is reasonably likely to need for complying with requirements of
law; and (3) copies of any Records that in the reasonable opinion of the
Company will be required in connection with the performance of its
obligations under Article VIII hereof; and
2.03 Deliveries by Buyer. At or prior to the Closing, Buyer shall deliver
to the Company:
(i) the form of Purchase Price required to be paid at Closing pursuant
to Section 1.02(a) hereof; and
(ii) a certificate executed by an authorized officer of the Buyer, on
behalf of the Buyer, to the effect that the conditions set forth in Section
6.01(b) have been satisfied.
2.04 Termination in Absence of Closing.
(a) Subject to the provisions of Section 2.04(b), if by the close of
business on March 18, 2002, the Closing has not occurred, then either the
Company or the Buyer may thereafter terminate this Agreement by written notice
to such effect, to the other parties hereto, without liability of or to any
party to this Agreement or any shareholder, director, officer, employee or
representative of such party unless the reason for Closing having not occurred
is (i) such party's willful breach of the provisions of this Agreement, or (ii)
if all of the conditions to such party's obligations set forth in Article VI
have been satisfied or waived in writing by the date scheduled for the Closing
pursuant to Section 2.01, the failure of such party to perform its obligations
under this Article II on such date; provided, however, that the provisions of
Sections 9.02 through 9.06 shall survive any such termination; and provided
further, however, that any termination pursuant to this Section 2.04 shall not
relieve any party hereto who was responsible for Closing having not occurred as
described in clauses (i) or (ii) above of any liability for (x) such party's
willful breach of the provisions of this Agreement, or (y) if all of the
conditions to such party's obligations set forth in Article VI have been
satisfied or waived in writing by the date scheduled for the Closing pursuant to
Section 2.01, the failure of such party to perform its obligations under this
Article II on such date.
(b) Notwithstanding the approval of the Board of Directors of Buyer, this
Agreement and the transactions contemplated herein may be terminated and
abandoned at any time on or prior to the Closing Date by the Buyer if:
(i) any representation or warranty made herein for the benefit of
Buyer, or any certificate, schedule or document furnished to Buyer pursuant
to this Agreement is untrue in any material respect; or
(ii) The Company or the Shareholders shall have defaulted in any
material respect in the performance of any material obligation under this
Agreement.
ARTICLE III. - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
AND THE COMPANY
Each of the Shareholders and the Company hereby jointly and severally
represents and warrants to Buyer that:
3.01 Corporate Existence and Qualification. Pocono is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey; Pocono has the corporate power to own, manage, lease and hold its
Properties and to carry on its business as and where such Properties are
presently located and such business is presently conducted. Neither the
character of the Company's Properties nor the nature of the Company's business
requires the Company to be duly qualified to do business as a foreign
corporation in any jurisdiction outside those identified in Schedule 3.01
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attached hereto, and the Company is qualified as a foreign corporation and in
good standing in each listed jurisdiction. 3.02 Authority, Approval and
Enforceability. This Agreement has been duly executed and delivered by the
Company and the Shareholders, and each of the Shareholders and the Company has
all requisite power and legal capacity to execute and deliver this Agreement and
all Collateral Agreements executed and delivered or to be executed and delivered
in connection with the transactions provided for hereby, to consummate the
transactions contemplated hereby and by the Collateral Agreements, and to
perform its and his obligations hereunder and under the Collateral Agreements.
This Agreement and each Collateral Agreement to which any of the Shareholders
and/or the Company is a party constitutes, or upon execution and delivery will
constitute, the legal, valid and binding obligation of such party, enforceable
in accordance with its terms, except as such enforcement may be limited by
general equitable principles or by applicable bankruptcy, insolvency,
moratorium, or similar laws and judicial decisions from time to time in effect
which affect creditors' rights generally.
3.03 Capitalization and Corporate Records.
(a) All issued and outstanding shares of the Company's capital stock are
owned of record by Shareholders.
(b) The copies of the Articles of Incorporation and Bylaws of Pocono
provided to Buyer are true, accurate, and complete and reflect all amendments
made through the date of this Agreement. Pocono's stock and minute books made
available to Buyer for review were correct and complete as of the date of such
review, no further entries have been made through the date of this Agreement,
and such minute books contain an accurate record of all shareholder and
corporate actions of the shareholders and directors. All corporate actions taken
by the Company have been duly authorized or ratified. All accounts, books,
ledgers and official and other records of the Company fairly and accurately
reflect all of the Company's transactions, properties, assets and liabilities.
(c) Except for the subsidiaries of the Company listed on Schedule 3.03(c),
the Company does not own, directly or indirectly, any outstanding voting
securities of or other interests in any other corporation, partnership, joint
venture or other business entity. Schedule 3.03(c) hereto sets forth the name of
each Subsidiary of the Company, and, with respect to each Subsidiary, the
jurisdiction in which it is incorporated or organized, the number of shares of
its authorized capital stock, the number and class of shares thereof duly issued
and outstanding, the names of all stockholders or other equity owners and the
number of shares of stock owned by each stockholder or the amount of equity
owned by each equity owner. The outstanding shares of capital stock or equity
interests of each Subsidiary are validly issued, fully paid and non-assessable,
and all such shares or other equity interests represented as being owned by
Company or another Subsidiary of the Company are owned by it free and clear of
any and all liens, pledges, encumbrances, charges, agreements or claims of any
kind whatsoever, except as set forth in Schedule 3.03 hereto. No shares of
capital stock are held by any Subsidiary as treasury stock. There is no existing
option, warrant, call, commitment or agreement to which any Subsidiary is a
party requiring, and there are no convertible securities of any Subsidiary
outstanding which upon conversion would require, the issuance of any additional
shares of capital stock or other equity interests of any Subsidiary or other
securities convertible into shares of capital stock or other equity interests of
any Subsidiary or other equity security of any Subsidiary. Each Subsidiary is a
duly organized and validly existing corporation or other entity in good standing
under the laws of the jurisdiction of its reorganization and is duly qualified
to do business and is in good standing under the laws of (i) each jurisdiction
in which it owns or leases real property and (ii) each other jurisdiction in
which the conduct of its business or the ownership of its assets requires such
qualification. Each Subsidiary has all requisite corporate power and authority
to own its properties and carry on its business as presently conducted.] [If
Subsidiaries, have separate conveyance of Subsidiary assets as sellers?]
3.04 No Shareholder Defaults or Consents. Except as otherwise set forth in
Schedule 3.04 hereto, the execution and delivery of this Agreement and the
Collateral Agreements by the Shareholders and the performance by the
Shareholders of their obligations hereunder and thereunder will not violate any
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provision of law or any judgment, award or decree or any indenture, agreement or
other instrument to which any Shareholder is a party, or by which the properties
or assets of the Shareholder is bound or affected, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement or other instrument, in each case except to
the extent that such violation, default or breach could not reasonably be
expected to delay or otherwise significantly impair the ability of the parties
to consummate the transactions contemplated hereby.
3.05 No Company Defaults or Consents. Except as otherwise set forth in
Schedule 3.05 attached hereto, neither the execution and delivery of this
Agreement nor the carrying out of any of the transactions contemplated hereby
will:
(i) violate or conflict with any of the terms, conditions or
provisions of the charter or bylaws of the Company;
(ii) violate any Legal Requirements applicable to the Company;
(iii) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or
both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any Contract or Permit
binding upon or applicable to the Company;
(iv) result in the creation of any lien, charge or other encumbrance
on any Properties of the Company; or
(v) require either of the Seller or the Company to obtain or make any
waiver, consent, action, approval or authorization of, or registration,
declaration, notice or filing with, any private non-governmental third
party or any Governmental Authority, except a Bulk Sales Notice with the
Commonwealth of the State of Pennsylvania Department of Revenue and the
Department of States, if requested.
3.06 No Proceedings. No suit, action or other proceeding is pending or, to
the Knowledge of the Company, threatened before any Governmental Authority
seeking to restrain the Company or the Seller or prohibit their entry into this
Agreement or prohibit the Closing, or seeking damages against the Company or its
Properties as a result of the consummation of this Agreement.
3.07 Employee Benefit Matters.
(a) Schedule 3.07(a) provides a description of each of the following, if
any, which is sponsored, maintained or contributed to by the Company for the
benefit of the employees or agents of the Company, which has been so sponsored,
maintained or contributed to at any time during the Company's existence or with
respect to which the Company has or may have any actual or contingent liability:
(i) each "employee benefit plan," as such term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA")
(including, but not limited to, employee benefit plans, such as foreign
plans, which are not subject to the provisions of ERISA) ("Plan"); and,
(ii) each personnel policy, employee manual or other written
statements of rules or policies concerning employment, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive award
plan or arrangement, vacation and sick leave policy, severance pay policy
or agreement, deferred compensation agreement or arrangement, consulting
agreement, employment contract and each other employee benefit plan,
agreement, arrangement, program, practice or understanding which is not
described in Section 3.07(a)(i) ("Benefit Program or Agreement").
6
(b) True, correct and complete copies of each of the Plans (if any), and
related trusts, if applicable, including all amendments thereto, have been
furnished to Buyer. There has also been furnished to Buyer, with respect to each
Plan required to file such report and description, the three most recent reports
on Form 5500 and the summary plan description. True, correct and complete copies
or descriptions of all Benefit Programs or Agreements have also been furnished
to Buyer.
(c) Except as otherwise set forth in Schedule 3.07(c),
(i) The Company does not contribute to or have an obligation to
contribute to, and the Company has not at any time contributed to or had an
obligation to contribute to, and the Company does not have any actual or
contingent liability under a multiemployer plan within the meaning of
Section 3(37) of ERISA ("Multiemployer Plan") or a multiple employer plan
within the meaning of Section 413(b) and (c) of the Code.
(ii) The Company has substantially performed all obligations, whether
arising by operation of law or by contract, required to be performed by it
in connection with the Plans and the Benefit Programs and Agreements, and
to the Knowledge of the Company, there have been no defaults or violations
by any other party to the Plans or Benefit Programs or Agreements;
(iii) All reports and disclosures relating to the Plans required to be
filed with or furnished to governmental agencies, Plan participants or Plan
beneficiaries have been filed or furnished in accordance with applicable
law in a timely manner, and each Plan and each Benefit Program or Agreement
has been administered in substantial compliance with its governing
documents;
(iv) Each of the Plans intended to be qualified under Section 401 of
the Code satisfies the requirements of such Section and has received a
favorable determination letter from the Internal Revenue Service regarding
such qualified status and has not, since receipt of the most recent
favorable determination letter, been amended or operated in a way which
could adversely affect such qualified status;
(v) There are no actions, suits or claims pending (other than routine
claims for benefits) or, to the Knowledge of the Company, threatened
against, or with respect to, any of the Plans or Benefit Programs or
Agreements or their assets;
(vi) All contributions required to be made to the Plans pursuant to
their terms and provisions and applicable law have been made timely;
(vii) As to any Plan subject to Title IV of ERISA, there has been no
event or condition which presents the material risk of Plan termination, no
accumulated funding deficiency, whether or not waived, within the meaning
of Section 302 of ERISA or Section 412 of the Code has been incurred, no
reportable event within the meaning of Section 4043 of ERISA (for which the
disclosure requirements of Regulation Section 2615.3 promulgated by the
Pension Benefit Guaranty Corporation ("PBGC") have not been waived) has
occurred, no notice of intent to terminate the Plan has been given under
Section 4041 of ERISA, no proceeding has been instituted under Section 4042
of ERISA to terminate the Plan, there has been no termination or partial
termination of the Plan within the meaning of Section 411(d)(3) of the
Code, no liability to the PBGC has been incurred, and the assets of the
Plan equal or exceed the aggregate present value of the benefit liabilities
(within the meaning of Section 4001(a)(16) of ERISA) under the Plan,
computed on a "plan termination basis" based upon reasonable actuarial
assumptions and the asset valuation principles established by the PBGC;
(viii) None of the Plans nor any trust created thereunder or with
respect thereto has engaged in any "prohibited transaction" or
7
"party-in-interest transaction" as such terms are defined in Section 4975
of the Code and Section 406 of ERISA which could subject any Plan, the
Seller or any officer, director or employee thereof to a tax or penalty on
prohibited transactions or party-in-interest transactions pursuant to
Section 4975 of the Code or Section 502(i) of ERISA;
(ix) To the Knowledge of the Company, there is no matter pending
(other than routine qualification determination filings) with respect to
any of the Plans or Benefit Programs or Agreements before the Internal
Revenue Service, the Department of Labor or the PBGC;
(x) Each trust funding a Plan, which trust is intended to be exempt
from federal income taxation pursuant to Section 501(c)(9) of the Code,
satisfies the requirements of such section and has received a favorable
determination letter from the Internal Revenue Service regarding such
exempt status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which would
adversely affect such exempt status.
(xi) The Company does not have any obligation to provide health
benefits or death benefits to former employees, except as specifically
required by law;
(xii) Neither the execution and delivery of this Agreement nor the
consummation of any or all of the transactions contemplated hereby will:
(A) entitle any current or former employee of the Company to severance pay,
unemployment compensation or any similar payment, (B) accelerate the time
of payment or vesting or increase the amount of any compensation due to any
such employee or former employee, or (C) directly or indirectly result in
any payment made to or on behalf of any person to constitute a "parachute
payment" within the meaning of Section 280G of the Code;
(xiii) The Company has not incurred any liability or taken any action,
and no action or event has occurred that could cause the Company to incur
any liability (A) under Section 412 of the Code or Title IV of ERISA with
respect to any "single-employer plan" within the meaning of Section
4001(a)(15) of ERISA that is not a Plan, or (B) to any Multiemployer Plan,
including without limitation an account of a partial or complete withdrawal
within the meaning of Sections 4203 and 4205 of ERISA.
(xiv) Since December 31, 2000, there have not been any (i) work
stoppages, labor disputes or other significant controversies between the
Company and its employees, (ii) labor union grievances or organizational
efforts, or (iii) unfair labor practice or labor arbitration proceedings
pending or threatened.
(d) Except as set forth in Schedule 3.07(a), the Company is not a party to
any agreement, and has not established any policy or practice, requiring the
Company to make a payment or provide any other form or compensation or benefit
to any person performing services for the Company upon termination of such
services which would not be payable or provided in the absence of the
consummation of the transactions contemplated by this Agreement.
(e) Schedule 3.07(e) sets forth by number and employment classification the
approximate numbers of employees employed by the Company as of the date of this
Agreement, and, except as set forth therein, none of said employees are subject
to union or collective bargaining agreements with the Company.
(f) Neither the Buyer nor any of its Affiliates shall have any liability or
obligations under or with respect to the Workers Adjustment Retraining
Notification Act in connection with any of the transactions contemplated in
connection herewith.
8
3.08 Financial Statements; Liabilities; Accounts Receivable; Inventories.
(a) The Company has delivered to Buyer true and complete copies of
Financial Statements with respect to the Company and its business as of and for
the years ended December 31, 1999, 2000 and 2001, and the balance sheet dated as
of February 28, 2002 (the "Financial Statements"), and said Financial Statements
are attached hereto as Schedule 3.08(a). All of such Financial Statements
present fairly the financial condition and results of operations of the Company
for the dates or periods indicated thereon. All of such Financial Statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods indicated.
(b) Except for (i) the liabilities reflected on the Company's February 28,
2002 balance sheet included with the Financial Statements attached as Schedule
3.08(a), (ii) trade payables and accrued expenses incurred since February 28,
2002 in the ordinary course of business, none of which are material, (iii)
executory contract obligations under (x) Contracts listed on Schedule 3.13,
and/or (y) Contracts not required to be listed on Schedule 3.13, and (iv) the
liabilities set forth in Schedule 3.08(b) attached hereto, the Company does not
have any liabilities or obligations (whether accrued, absolute, contingent,
known, unknown or otherwise, and whether or not of a nature required to be
reflected or reserved against in a balance sheet in accordance with GAAP).
(c) Except as otherwise set forth in Schedule 3.08(c), the accounts
receivable reflected on the February 28, 2002 balance sheet included in the
Financial Statements referenced in Section 3.08(a) and all of the Company's
accounts receivable arising since February 28, 2002 (the "Balance Sheet Date")
arose from bona fide transactions in the ordinary course of business, and the
goods and services involved have been sold, delivered and performed to the
account obligors, and no further filings (with governmental agencies, insurers
or others) are required to be made, no further goods are required to be provided
and no further services are required to be rendered in order to complete the
sales and fully render the services and to entitle the Company to collect the
accounts receivable in full. Except as set forth in Schedule 3.08(c), no such
account has been assigned or pledged to any other person, firm or corporation,
and, except only to the extent fully reserved against as set forth in the
February 28, 2002 balance sheet included in such Financial Statements, no
defense or set-off to any such account has been asserted by the account obligor
or exists.
(d) Except as otherwise set forth in Schedule 3.08(d), the Inventory of the
Company as of the Closing Date shall consist of items of a quality, condition
and quantity consistent with normal seasonally-adjusted Inventory levels of the
Company and be usable and saleable in the ordinary and usual course of business
for the purposes for which intended, except to the extent written down or
reserved against in the Financial Statements. Except as otherwise set forth in
Schedule 3.08(d), the Company's Inventory is valued on the Company's books of
account in accordance with GAAP (on an average cost basis) at the lower of cost
or market, and the value of obsolete materials, materials below standard quality
and slow-moving materials have been written down in accordance with GAAP.
(e) Except as provided under the provisions of the agreements described in
Schedule 3.08(e), the Company has and will have as of the Closing Date legal and
beneficial ownership of its Properties, free and clear of any and all liens,
mortgages, pledges, adverse claims, encumbrances or other restrictions or
limitations whatsoever ("Liens").
3.09 Absence of Certain Changes.
(a) Except as otherwise set forth in Schedule 3.09(a) attached hereto,
since February 28, 2002, there has not been:
(i) any event, circumstance or change that had or might have a
material adverse effect on the business, operations, prospects, Properties,
financial condition or working capital of the Company;
9
(ii) any damage, destruction or loss (whether or not covered by
insurance) that had or might have a material adverse effect on the
business, operations, prospects, Properties or financial condition of the
Company; or
(iii) any material adverse change in the Company's sales patterns,
pricing policies, accounts receivable or accounts payable.
(b) Except as otherwise set forth in Schedule 3.09(b) attached hereto,
since the Balance Sheet Date, the Company has not done any of the following:
(i) merged into or with or consolidated with, any other corporation or
acquired the business or assets of any Person;
(ii) purchased any securities of any Person;
(iii) created, incurred, assumed, guaranteed or otherwise become
liable or obligated with respect to any indebtedness, or made any loan or
advance to, or any investment in, any person, except in each case in the
ordinary course of business;
(iv) made any change in any existing election, or made any new
election, with respect to any tax law in any jurisdiction which election
could have an effect on the tax treatment of the Company or the Company's
business operations;
(v) entered into, amended or terminated any material agreement;
(vi) sold, transferred, leased, mortgaged, encumbered or otherwise
disposed of, or agreed to sell, transfer, lease, mortgage, encumber or
otherwise dispose of, any Properties except (i) in the ordinary course of
business, or (ii) pursuant to any agreement specified in Schedule 3.13;
(vii) settled any claim or litigation, or filed any motions, orders,
briefs or settlement agreements in any proceeding before any Governmental
Authority or any arbitrator;
(viii) incurred or approved, or entered into any agreement or
commitment to make, any expenditures in excess of $5,000 (other than those
arising in the ordinary course of business or those required pursuant to
any agreement specified in Schedule 3.13);
(ix) maintained its books of account other than in the usual, regular
and ordinary manner in accordance with generally accepted accounting
principles and on a basis consistent with prior periods or made any change
in any of its accounting methods or practices that would be required to be
disclosed under generally accepted accounting principles;
(x) adopted any Plan or Benefit Program or Agreement, or granted any
increase in the compensation payable or to become payable to directors,
officers or employees (including, without limitation, any such increase
pursuant to any bonus, profit-sharing or other plan or commitment), other
than merit increases to non-officer employees in the ordinary course of
business and consistent with past practice;
(xi) suffered any extraordinary losses or waived any rights of
material value;
(xii) made any payment to any Affiliate or forgiven any indebtedness
due or owing from any Affiliate to
the Company;
(xiii) (A) liquidated Inventory or accepted product returns other than
in the ordinary course, (B) accelerated receivables, (C) delayed payables,
or (D) changed in any material respect the Company's practices in
connection with the payment of payables and/or the collection of
receivables;
10
(xiv) engaged in any one or more activities or transactions with an
Affiliate or outside the ordinary course of business;
(xv) declared, set aside or paid any dividends, or made any
distributions or other payments in respect of its equity securities, or
repurchased, redeemed or otherwise acquired any such securities;
(xvi) amended its charter or bylaws;
(xvii) issued any capital stock or other securities, or granted, or
entered into any agreement to grant, any options, convertible rights, other
rights, warrants, calls or agreements relating to its capital stock; or
(xviii) committed to do any of the foregoing.
3.10 Compliance with Laws. Except as otherwise set forth in Schedule
3.10(1), the Company is and has been in compliance in all respects with any and
all Legal Requirements applicable to the Company, other than failures to so
comply that would not have an adverse effect on the business, operations,
prospects, Properties or financial condition of the Company. Except as otherwise
set forth in Schedule 3.10(2), the Company (x) has not received or entered into
any citations, complaints, consent orders, compliance schedules, or other
similar enforcement orders or received any written notice from any Governmental
Authority or any other written notice that would indicate that there is not
currently compliance with all such Legal Requirements, except for failures to so
comply that would not have an adverse effect on the business, operations,
prospects, Properties or financial condition of the Company, and (y) is not in
default under, and no condition exists (whether covered by insurance or not)
that with or without notice or lapse of time or both would constitute a default
under, or breach or violation of, any Legal Requirement or Permit applicable to
the Company. Without limiting the generality of the foregoing, the Company has
not received notice of and there is no basis for, any claim, action, suit,
investigation or proceeding that might result in a finding that the Company is
not or has not been in compliance with Legal Requirements relating to (a) the
development, testing, manufacture, packaging, distribution and marketing of
products, (b) employment, safety and health, (c) environmental protection,
building, zoning and land use and/or (d) the Foreign Corrupt Practices Act and
the rules and regulations promulgated thereunder.
3.11 Litigation. Except as otherwise set forth in Schedule 3.11, there are
no claims, actions, suits, investigations or proceedings against the Company
pending or, to the Knowledge of the Company, threatened in any court or before
or by any Governmental Authority, or before any arbitrator, that might have an
adverse effect (whether covered by insurance or not) on the business,
operations, prospects, Properties or financial condition of the Company and
there is no basis for any such claim, action, suit, investigation or proceeding.
Schedule 3.11 also includes a true and correct listing of all material actions,
suits, investigations, claims or proceedings that were pending, settled or
adjudicated since January 1, 199_.
3.12 Real Property.
(a) Schedule 3.12(a) sets forth a list of all real property or any interest
therein (including without limitation any option or other right or obligation to
purchase any real property or any interest therein) currently owned, or ever
owned, by the Company, in each case setting forth the street address and legal
description of each property covered thereby (the "Owned Premises").
(b) Schedule 3.12(b) sets forth a list of all leases, licenses or similar
agreements relating to the Company's use or occupancy of real estate owned by a
third party ("Leases"), true and correct copies of which have previously been
11
furnished to Buyer, in each case setting forth (i) the lessor and lessee thereof
and the commencement date, term and renewal rights under each of the Leases, and
(ii) the street address and legal description of each property covered thereby
(the "Leased Premises"). Except as listed on Schedule 3.12(a), the Leases and
all guaranties with respect thereto, are in full force and effect and have not
been amended in writing or otherwise, and no party thereto is in default or
breach under any such Lease, no event has occurred which, with the passage of
time or the giving of notice or both, would cause a material breach of or
default under any of such Leases, and neither the Company nor its agents or
employees have received written notice of any claimed abatements, offsets,
defenses or other bases for relief or adjustment.
(c) With respect to each Owned Premises and Leased Premises, as applicable:
(i) the Company has good, marketable and insurable fee simple interest in the
Owned Premises and a month-to-month in the Leased Premises, free and clear of
any Liens, encumbrances, covenants and easements or title defects that have had
or could have an adverse effect on the Company's use and occupancy of the Owned
Premises and the Leased Premises; (ii) the portions of the buildings located on
the Owned Premises and the Leased Premises that are used in the business of the
Company are each in good repair and condition, normal wear and tear excepted,
and are in the aggregate sufficient to satisfy the Company's current and
reasonably anticipated normal business activities as conducted thereon and, to
the Knowledge of the Company, there is no latent material defect in the
improvements on any Owned Premises, structural elements thereof, the mechanical
systems (including, without limitation, all heating, ventilating, air
conditioning, plumbing, electrical, utility and sprinkler systems) therein, the
utility system servicing each Owned Premises and the roofs which have not been
disclosed to Buyer in writing prior to the date of this Agreement; (iii) each of
the Owned Premises and the Leased Premises (a) has direct access to public roads
or access to public roads by means of a perpetual access easement, such access
being sufficient to satisfy the current transportation requirements of the
business presently conducted at such parcel; and (b) is served by all utilities
in such quantity and quality as are necessary and sufficient to satisfy the
current normal business activities conducted at such parcel; and (iv) the
Company has not received notice of (a) any condemnation, eminent domain or
similar proceeding affecting any portion of the Owned Premises or the Leased
Premises or any access thereto, and, to the Knowledge of the Company, no such
proceedings are contemplated, (b) any special assessment or pending improvement
liens to be made by any governmental authority which may affect any of the Owned
Premises or the Leased Premises, or (c) any violations of building codes and/or
zoning ordinances or other governmental regulations with respect to the Owned
Premises or the Leased Premises.
3.13 Commitments.
(a) Except as otherwise set forth in Schedule 3.13, the Company is not a
party to or bound by any of the following, whether written or oral:
(i) any Contract that cannot by its terms be terminated by the Company
with 30 days' or less notice without penalty or whose term continues beyond
one year after the date of this Agreement;
(ii) contract or commitment for capital expenditures by the Company in
excess of $5,000 per calendar quarter in the aggregate;
(iii) lease or license with respect to any Properties, real or
personal, whether as landlord, tenant, licensor or licensee;
(iv) agreement, contract, indenture or other instrument relating to
the borrowing of money or the guarantee of any obligation or the deferred
payment of the purchase price of any Properties;
(v) partnership agreement;
12
(vi) contract with any Affiliate of the Company (including the Seller)
relating to the provision of goods or services by or to the Company;
(vii) agreement for the sale of any assets that in the aggregate have
a net book value on the Company's books of greater than $5,000;
(viii) agreement that purports to limit the Company's freedom to
compete freely in any line of business or in any geographic area;
(ix) preferential purchase right, right of first refusal, or similar
agreement; or
(x) other Contract that is material to the business of the Company.
(b) All of the Contracts listed or required to be listed in Schedule 3.13
are valid, binding and in full force and effect, and the Company has not been
notified or advised by any party thereto of such party's intention or desire to
terminate or modify any such Contract in any respect, except as disclosed in
Schedule 3.13. Neither the Company nor, to the Knowledge of the Company, any
other party is in breach of any of the terms or covenants of any Contract listed
or required to be listed in Schedule 3.13. Following the Closing, the Company
will continue to be entitled to all of the benefits currently held by the
Company under each Contract listed or required to be listed in Schedule 3.13.
(c) Except as otherwise set forth in Schedule 3.13(c), the Company is not a
party to or bound by any Contract or Contracts the terms of which were arrived
at by or otherwise reflect less-than-arm's-length negotiations or bargaining.
3.14 Insurance. Schedule 3.14 hereto is a complete and correct list of all
insurance policies (including, without limitation, fire, liability, product
liability, workers' compensation and vehicular) presently in effect that relate
to the Company or its Properties, including the amounts of such insurance and
annual premiums with respect thereto, all of which have been in full force and
effect from and after the date(s) set forth on Schedule 3.14. Such policies are
sufficient for compliance by the Company with all applicable Legal Requirements
and all material Contracts. None of the insurance carriers has indicated to the
Company an intention to cancel any such policy or to materially increase any
insurance premiums (including, without limitation, workers' compensation
premiums), or that any insurance required to be listed on Schedule 3.14 will not
be available in the future on substantially the same terms as currently in
effect. The Company has no claim pending or anticipated against any of its
insurance carriers under any of such policies and, to the Knowledge of the
Company, there has been no actual or alleged occurrence of any kind which could
reasonably be expected to give rise to any such claim. During the prior three
years, all notices required to have been given by the Company or the Seller to
any insurance company have been timely and duly given, and no insurance company
has asserted that any claim is not covered by the applicable policy relating to
such claim.
3.15 Intangible Rights. Set forth on Schedule 3.15 is a list and
description of all material foreign and domestic patents, patent rights,
trademarks, service marks, trade names, brands and copyrights (whether or not
registered and, if applicable, including pending applications for registration)
owned, Used, licensed or controlled by the Company and all goodwill associated
therewith. The Company owns or has the right to use and shall as of the Closing
Date own or have the right to use any and all information, know-how, trade
secrets, patents, copyrights, trademarks, tradenames, software, formulae,
methods, processes and other intangible properties that are necessary or
customarily Used by the Company for the ownership, management or operation of
its Properties ("Intangible Rights") including, but not limited to, the
Intangible Rights listed on Schedule 3.15. Except as set forth on Schedule 3.15,
(i) the Company is the sole and exclusive owner of all right, title and interest
in and to all of the Intangible Rights, and has the exclusive right to use and
license the same, free and clear of any claim or conflict with the Intangible
Rights of others; (ii) no royalties, honorariums or fees are payable by the
Company to any person by reason of the ownership or use of any of the Intangible
Rights; (iii) there have been no claims made against the Company asserting the
invalidity, abuse, misuse, or unenforceability of any of the Intangible Rights
and no grounds for any such claims exist; (iv) the Company has not made any
13
claim of any violation or infringement by others of any of its Intangible Rights
or interests therein and, to the Knowledge of the Company, no grounds for any
such claims exist; (v) the Company has not received any notice that it is in
conflict with or infringing upon the asserted intellectual property rights of
others in connection with the Intangible Rights, and neither the use of the
Intangible Rights nor the operation of the Company's businesses is infringing or
has infringed upon any intellectual property rights of others; (vi) the
Intangible Rights are sufficient and include all intellectual property rights
necessary for the Company to lawfully conduct its business as presently being
conducted; (vii) no interest in any of the Company's Intangible Rights has been
assigned, transferred, licensed or sublicensed by the Company to any person
other than the Buyer pursuant to this Agreement; (viii) to the extent that any
item constituting part of the Intangible Rights has been registered with, filed
in or issued by, any Governmental Authority, such registrations, filings or
issuances are listed on Schedule 3.15 and were duly made and remain in full
force and effect; (ix) to the Knowledge of the Company, there has not been any
act or failure to act by the Company or any of its directors, officers,
employees, attorneys or agents during the prosecution or registration of, or any
other proceeding relating to, any of the Intangible Rights or of any other fact
which could render invalid or unenforceable, or negate the right to issuance of
any of the Intangible Rights; (x) to the extent any of the Intangible Rights
constitutes proprietary or confidential information, the Company has adequately
safeguarded such information from disclosure; and (xi) all of the Company's
current Intangible Rights will remain in full force and effect following the
Closing without alteration or impairment.
3.16 Equipment and Other Tangible Property. Except as otherwise set forth
on Schedule 3.16, the Company's equipment, furniture, machinery, vehicles,
structures, fixtures and other tangible property included in the Properties (the
"Tangible Company Properties"), other than Inventory, is suitable for the
purposes for which intended and in good operating condition and repair
consistent with normal industry standards, except for ordinary wear and tear,
and except for such Tangible Company Properties as shall have been taken out of
service on a temporary basis for repairs or replacement consistent with the
Company's prior practices and normal industry standards. To the Knowledge of the
Company, the Tangible Company Properties are free of any structural or
engineering defects, and during the past five years there has not been any
significant interruption of the Company's business due to inadequate maintenance
or obsolescence of the Tangible Company Properties.
3.17 Permits; Environmental Matters.
(a) Except as otherwise set forth in Schedule 3.17(a), the Company has all
Permits necessary for the Company to own, operate, use and/or maintain its
Properties and to conduct its business and operations as presently conducted and
as expected to be conducted in the future. Except as otherwise set forth in
Schedule 3.17(a), all such Permits are in effect, no proceeding is pending or,
to the Knowledge of the Company, threatened to modify, suspend or revoke,
withdraw, terminate, or otherwise limit any such Permits, and no administrative
or governmental actions have been taken or, to the Knowledge of the Company,
threatened in connection with the expiration or renewal of such Permits which
could adversely affect the ability of the Company to own, operate, use or
maintain any of its Properties or to conduct its business and operations as
presently conducted and as expected to be conducted in the future. Except as
otherwise set forth in Schedule 3.17(a), (i) no violations have occurred that
remain uncured, unwaived, or otherwise unresolved, or are occurring in respect
of any such Permits, other than inconsequential violations, and (ii) no
circumstances exist that would prevent or delay the obtaining of any requisite
consent, approval, waiver or other authorization of the transactions
contemplated hereby with respect to such Permits that by their terms or under
applicable law may be obtained only after Closing.
(b) Except as set forth on Schedule 3.17(b), there are no claims,
liabilities, investigations, litigation, administrative proceedings, whether
pending or, to the Knowledge of the Company, threatened, or judgments or orders
relating to any Hazardous Materials (collectively called "Environmental Claims")
asserted or threatened against the Company or relating to any real property
currently or formerly owned, leased or otherwise Used by the Company. Neither
the Company nor, to the Knowledge of the Company, any prior owner, lessee or
operator of said real property, has caused or permitted any Hazardous Material
to be used, generated, reclaimed, transported, released, treated, stored or
14
disposed of in a manner which could form the basis for an Environmental Claim
against the Company or the Buyer. Except as set forth on Schedule 3.17(b), the
Company has not assumed any liability of any Person for cleanup, compliance or
required capital expenditures in connection with any Environmental Claim.
(c) Except as set forth on Schedule 3.17(c), no Hazardous Materials are or
were stored or otherwise located, and no underground storage tanks or surface
impoundments are or were located, on real property currently or formerly owned,
leased or Used by the Company or, to the Knowledge of the Company, on adjacent
parcels of real property, and no part of such real property or, to the Knowledge
of the Company, any part of such adjacent parcels of real property, including
the groundwater located thereon, is presently contaminated by Hazardous
Materials.
(d) Except as set forth on Schedule 3.17(d), the Company has been and is
currently in compliance with all applicable Environmental Laws, including
obtaining and maintaining in effect all Permits required by applicable
Environmental Laws.
3.18 Banks. Schedule 3.18 sets forth (i) the name of each bank, trust
company or other financial institution and stock or other broker with which the
Company has an account, credit line or safe deposit box or vault, (ii) the names
of all persons authorized to draw thereon or to have access to any safe deposit
box or vault, (iii) the purpose of each such account, safe deposit box or vault,
and (iv) the names of all persons authorized by proxies, powers of attorney or
other like instrument to act on behalf of the Company in matters concerning any
of its business or affairs. Except as otherwise set forth in Schedule 3.18, no
such proxies, powers of attorney or other like instruments are irrevocable.
3.19 Reserved.
3.20 Absence of Certain Business Practices. None of the Shareholders, the
Company, nor any other Affiliate or agent of the Company, or any other person
acting on behalf of or associated with the Company, acting alone or together,
has (a) received, directly or indirectly, any rebates, payments, commissions,
promotional allowances or any other economic benefits, regardless of their
nature or type, from any customer, supplier, employee or agent of any customer
or supplier; or (b) directly or indirectly given or agreed to give any money,
gift or similar benefit to any customer, supplier, employee or agent of any
customer or supplier, any official or employee of any government (domestic or
foreign), or any political party or candidate for office (domestic or foreign),
or other person who was, is or may be in a position to help or hinder the
business of the Company (or assist the Company in connection with any actual or
proposed transaction), in each case which (i) may subject the Company to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, may have had an adverse effect on the
assets, business, operations or prospects of the Company, or (iii) if not
continued in the future, may adversely affect the assets, business, operations
or prospects of the Company.
3.21 Reserved.
3.22 Transactions With Affiliates. Except as set forth on Schedule 3.22 and
except for normal advances to employees consistent with past practices, payment
of compensation for employment to employees consistent with past practices, and
participation in scheduled Plans or Benefit Programs and Agreements by
employees, the Company has not purchased, acquired or leased any property or
services from, or sold, transferred or leased any property or services to, or
loaned or advanced any money to, or borrowed any money from, or entered into or
been subject to any management, consulting or similar agreement with, or engaged
in any other significant transaction with any of the Shareholders or any other
officer, director or shareholder of the Company or any of their respective
Affiliates. Except as set forth on Schedule 3.22, none of the Shareholders nor
any other Affiliate of the Company is indebted to the Company for money borrowed
or other loans or advances, and the Company is not indebted to any such
Affiliate.
15
3.23 Other Information. The information furnished by the Shareholders and
the Company to Buyer pursuant to this Agreement (including, without limitation,
information contained in the exhibits hereto, the Schedules identified herein,
the instruments referred to in such Schedules and the certificates and other
documents to be executed or delivered pursuant hereto by the Shareholders and/or
the Company at or prior to the Closing) is not, nor at the Closing will be,
false or misleading in any material respect, or contains, or at the Closing will
contain, any misstatement of material fact, or omits, or at the Closing will
omit, to state any material fact required to be stated in order to make the
statements therein not misleading.
3.24 Investment Representations of the Shareholders. In connection with its
acquisition of the Preferred Stock of the Buyer, each Shareholder hereby
severally represents and warrants to Buyer as follows:
(a) On or before the Closing, each of the Shareholders shall execute and
deliver to Buyer an Investment Representation Letter in the form attached hereto
as Exhibit B.
(b) The Preferred Stock issued pursuant to this Agreement will be issued by
Buyer relying on an exemption from registration pursuant to Section 4(2) under
the Securities Act and Regulation D thereunder or similar exemptions under the
Securities Act and any certificates representing the shares of Buyer's Preferred
Stock shall bear appropriate legends to identify such shares as "restricted
securities" under the Securities Act, to comply with applicable state securities
laws. Each Shareholder acknowledges and agrees that in order for Buyer to rely
on such exemptions from registration, Buyer will be required to obtain certain
representations made by the Shareholders including, but not limited to,
representations regarding limitations on resales of Buyer's Preferred Stock.
So long as required in the reasonable opinion of Buyer's counsel, stock
transfer orders will be given to Buyer's Transfer Agent in connection with the
certificates to be issued representing Buyer's Preferred Stock and such
certificates will bear legends substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR ANY APPLICABLE
STATE SECURITIES LAWS BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO
THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY
REGISTERED UNDER THE ACT AND THE [SPECIFIC STATE SECURITIES CODE], IF SUCH
REGISTRATION IS REQUIRED.]
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company that:
4.01 Corporate Existence and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; has the corporate power to own, manage, lease and hold its properties
and to carry on its business as and where such properties are presently located
and such business is presently conducted; and is duly qualified to do business
and is in good standing as a foreign corporation in each of the jurisdictions
where the character of its properties or the nature of its business requires it
to be so qualified.
4.02 Authority, Approval and Enforceability. This Agreement has been duly
executed and delivered by Buyer and Buyer has all requisite corporate power and
legal capacity to execute and deliver this Agreement and all Collateral
Agreements executed and delivered or to be executed and delivered by Buyer in
connection with the transactions provided for hereby, to consummate the
transactions contemplated hereby and by the Collateral Agreements, and to
perform its obligations hereunder and under the Collateral Agreements. Upon the
approval of this Agreement by the Board of Directors of Buyer, the execution and
delivery of this Agreement and the Collateral Agreements and the performance of
16
the transactions contemplated hereby and thereby will be duly and validly
authorized and approved by all corporate action necessary on behalf of Buyer.
Subject to such Board approval, this Agreement and each Collateral Agreement to
which Buyer is a party constitutes, or upon execution and delivery will
constitute, the legal, valid and binding obligation of Buyer, enforceable in
accordance with its terms, except as such enforcement may be limited by general
equitable principles or by applicable bankruptcy, insolvency, moratorium, or
similar laws and judicial decisions from time to time in effect which affect
creditors' rights generally.
4.03 No Default or Consents. Except as otherwise set forth in Schedule
4.03, neither the execution and delivery of this Agreement nor the carrying out
of the transactions contemplated hereby will:
(i) violate or conflict with any of the terms, conditions or
provisions of Buyer's Articles of Incorporation or bylaws;
(ii) violate any Legal Requirements applicable to Buyer;
(iii) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or
both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any contract or Permit
applicable to Buyer;
(iv) result in the creation of any lien, charge or other encumbrance
on any property of Buyer; or
(v) require Buyer to obtain or make any waiver, consent, action,
approval or authorization of, or registration, declaration, notice or
filing with, any private non-governmental third party or any Governmental
Authority.
4.04 No Proceedings. No suit, action or other proceeding is pending or, to
Buyer's knowledge, threatened before any Governmental Authority seeking to
restrain Buyer or prohibit its entry into this Agreement or prohibit the
Closing, or seeking Damages against Buyer or its properties as a result of the
consummation of this Agreement.
ARTICLE V. - OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
5.01 Buyer's Access to Information and Properties. The Company shall permit
Buyer and its authorized employees, agents, accountants, legal counsel and other
representatives to have access to the books, records, employees, counsel,
accountants, engineers and other representatives of the Company at all times
reasonably requested by Buyer for the purpose of conducting an investigation of
the Company's financial condition, corporate status, operations, prospects,
business and Properties. The Company shall make available to Buyer for
examination and reproduction all documents and data of every kind and character
relating to the Company in possession or control of, or subject to reasonable
access by, the Company and/or the Seller, including, without limitation, all
files, records, data and information relating to the Properties (whether stored
in paper, magnetic or other storage media) and all agreements, instruments,
contracts, assignments, certificates, orders, and amendments thereto. Also, the
Company shall allow Buyer access to, and the right to inspect, the Properties,
except to the extent that such Properties are operated by a third-party
operator, in which case the Company shall use its best efforts to cause the
operator of such Properties to allow Buyer access to, and the right to inspect,
such Properties.
5.02 Company's Conduct of Business and Operations. The Company and the
Shareholders shall keep Buyer advised as to all material operations and proposed
material operations relating to the Company. The Company shall (a) conduct its
17
business in the ordinary course, (b) keep available the services of present
employees, (c) maintain and operate its Properties in a good and workmanlike
manner, (d) pay or cause to be paid all costs and expenses (including but not
limited to insurance premiums) incurred in connection therewith in a timely
manner, (e) use reasonable efforts to keep all Contracts listed or required to
be listed on Schedule 3.13 in full force and effect, (f) comply with all of the
covenants contained in all such material Contracts, (g) maintain in force until
the Closing Date insurance policies (subject to the provisions of Section 5.07)
equivalent to those in effect on the date hereof, and (h) comply in all material
respects with all applicable Legal Requirements. Except as otherwise
contemplated in this Agreement, the Company will use its best efforts to
preserve the present relationships of the Company with persons having
significant business relations therewith.
5.03 General Restrictions. Except as otherwise expressly permitted in this
Agreement, without the prior written consent of Buyer, which consent shall not
be unreasonably withheld, the Company shall not:
(i) declare, set aside or pay any dividends, or make any distributions
or other payments in respect of its equity securities, or repurchase,
redeem or otherwise acquire any such securities;
(ii) merge into or with or consolidate with, any other corporation or
acquire the business or assets of any person;
(iii) purchase any securities of any person;
(iv) amend its charter or bylaws;
(v) issue any capital stock or other securities, or grant, or enter
into any agreement to grant, any options, convertibility rights, other
rights, warrants, calls or agreements relating to its securities;
(vi) create, incur, assume, guarantee or otherwise become liable or
obligated with respect to any indebtedness, or make any loan or advance to,
or any investment in, any person, except in each case in the ordinary
course of business;
(vii) make any change in any existing election, or make any new
election, with respect to any tax law in any jurisdiction which election
could have an effect on the tax treatment of the Company or the Company's
business operations;
(viii) enter into, amend or terminate any material agreement;
(ix) sell, transfer, lease, mortgage, encumber or otherwise dispose
of, or agree to sell, transfer, lease, mortgage, encumber or otherwise
dispose of, any Properties except (i) in the ordinary course of business,
or (ii) pursuant to any agreement specified in Schedule 3.13;
(x) settle any material claim or litigation, or file any material
motions, orders, briefs or settlement agreements in any proceeding before
any Governmental Authority or any arbitrator;
(xi) other than in the ordinary course of business consistent with
past practices, incur or approve, or enter into any agreement or commitment
to make, any expenditures in excess of $10,000 (other than those required
pursuant to any agreement specified in Schedule 3.13);
18
(xii) maintain its books of account other than in the usual, regular
and ordinary manner in accordance with generally accepted accounting
principles and on a basis consistent with prior periods or make any change
in any of its accounting methods or practices;
(xiii) make any change, whether written or oral, to any agreement or
understanding with any of the suppliers or customers listed or required to
be listed on Schedule 3.19;
(xiv) accelerate or delay collection of any notes or accounts
receivable in advance of or beyond their regular due dates or the dates
when they would have been collected in the ordinary course of business
consistent with past practices;
(xv) delay or accelerate payment of any accrued expense, trade payable
or other liability beyond or in advance of its due date or the date when
such liability would have been paid in the ordinary course of business
consistent with past practices;
(xvi) allow its levels of inventory to vary in any material respect
from the levels customarily maintained;
(xvii) adopt any Plan or Benefit Program or Agreement or increase the
compensation payable to any employee (including, without limitation, any
increase pursuant to any bonus, profit-sharing or other incentive plan or
commitment);
(xviii) become a party to or bound by any of the arrangements
described in Section 3.13(a), whether written or oral;
(xix) engage in any one or more activities or transactions outside the
ordinary course of business;
(xx) enter into any transaction or make any commitment which could
result in any of the representations, warranties or covenants of the
Company and/or Seller contained in this Agreement not being true and
correct after the occurrence of such transaction or event; or
(xxi) commit to do any of the foregoing.
5.04 Notice Regarding Changes. The Company and the Shareholders shall
promptly inform Buyer in writing of any change in facts and circumstances that
could render any of the representations and warranties made herein by the
Company and/or the Shareholders inaccurate or misleading if such representations
and warranties had been made upon the occurrence of the fact or circumstance in
question. The Buyer shall promptly inform the Company in writing of any change
in facts and circumstances that could render any of the representations and
warranties made herein by it inaccurate or misleading if such representations
and warranties had been made upon the occurrence of the fact or circumstance in
question.
5.05 Preferential Purchase Rights. To the extent there are any parties
entitled or who may become entitled to exercise preferential purchase or consent
rights with respect to the transactions contemplated hereby, the Company and the
Shareholders shall promptly use their best efforts to obtain the agreement in
writing of such parties to waive or not exercise such rights, which request
shall be in form reasonably satisfactory to and approved by Buyer.
5.06 Ensure Conditions Met. Subject to the terms and conditions of this
Agreement, each party hereto shall use all reasonable commercial efforts to take
or cause to be taken all actions and do or cause to be done all things required
under applicable Legal Requirements in order to consummate the transactions
contemplated hereby, including, without limitation, (i) obtaining all Permits,
authorizations, consents and approvals of any Governmental Authority or other
19
person which are required for or in connection with the consummation of the
transactions contemplated hereby and by the Collateral Agreements, (ii) taking
any and all reasonable actions necessary to satisfy all of the conditions to
each party's obligations hereunder as set forth in Article VI, and (iii)
executing and delivering all agreements and documents required by the terms
hereof to be executed and delivered by such party on or prior to the Closing.
5.07 Termination of Insurance Policies. The Company shall take all actions
necessary or appropriate to cause any and all insurance coverage currently
carried by or for the benefit of the Company to remain in full force and effect;
provided, however, that the Company shall cooperate with Buyer to cause
termination as of the Closing Date of the insurance coverage identified in
writing for this purpose by Buyer to the Company and the Company shall take all
actions necessary to discharge any and all liabilities or obligations of the
Company arising with respect to any such coverage that is to be terminated
hereunder.
5.08 Casualty Loss. If, between the date of this Agreement and the Closing,
any of the Properties of the Company shall be destroyed or damaged in whole or
in part by fire, earthquake, flood, other casualty or any other cause, then the
Company shall, at Buyer's election, (i) cause such Properties to be repaired or
replaced prior to the Closing with Properties of substantially the same
condition and function, (ii) deposit in a separate account an amount sufficient
to cause such Properties to be so repaired or replaced, or (iii) enter into
contractual arrangements satisfactory to Buyer so that the Company will have at
the Closing the same economic value as if such casualty had not occurred.
5.09 Employee Matters.
(a) Effective as of 12:01 a.m., local time, on the day after the Closing
Date, the employment by the Company of the employees listed on Schedule 3.07(e)
shall terminate and the Buyer shall be deemed to have offered employment to each
individual whose employment was so terminated (the "Business Employees"),
effective at 12:01 a.m., local time, on the day after the Closing Date or, in
the case of a Business Employee not actively at work on the Closing Date on
account of a disability, on the day such employee reports for work after
termination of such disability upon substantially the same terms and conditions
with substantially the same duties and responsibilities and at substantially the
same rate of pay as in effect on the Closing Date while such individuals were
employed by the Company. The Buyer shall assume responsibility for the payment
of any employee benefits or entitlement, including severance pay, accrued
vacation, sick or holiday pay, to any Business Employee pursuant to any Plan,
Benefit Program or Agreement or law or regulation as a result of the
consummation of the transactions contemplated hereby.
(b) Nothing in this Agreement, express or implied, shall confer upon any
employee of the Company, or any representative of any such employee, any rights
or remedies, including any right to employment or continued employment for any
period, of any nature whatsoever.
(c) The Company shall permit Buyer to contact and make arrangements with
the Company's employees for the purpose of assuring their continued employment
by the Company after the Closing and for the purpose of ensuring the continuity
of the Company's business, and the Company agrees not to discourage any such
employees from consulting with Buyer.
(d) The Company shall use its best efforts to keep available the services
of its present employees through the Closing Date.
5.10 Reserved
5.11 Reserved.
5.12 Reserved.
20
5.13 No Shop. From the date of this Agreement until the earlier of (i) the
Closing Date, or (ii) the termination of this Agreement, the Company shall not,
and the Company shall cause the Company's shareholders, officers, directors,
employees and other agents not to, directly or indirectly, take any action to
solicit, initiate or encourage any offer or proposal or indication of interest
in a merger, consolidation or other business combination involving any equity
interest in, or a substantial portion of the assets of the Company, other than
in connection with the transactions contemplated by this Agreement. The Company
shall immediately advise the Buyer of the terms of any offer, proposal or
indication of interest that it receives or otherwise becomes aware of.
5.14 Name Change. The Company hereby represents, warrants and covenants to
the Buyer that the corporate name "▇▇▇▇ ▇▇▇▇▇ Associates, Inc." is included with
the Assets and that the exclusive right to use such name will be transferred to
the Buyer on the Closing Date. The Company and the Shareholders shall, prior to
Closing, file an appropriate amendment to the Company's Articles or Certificate
of Incorporation, if required, changing its name to a name which is in no way
similar to the corporate name set forth on the signature page hereof and shall
furnish such written consents and assignments as the Buyer shall hereafter
reasonably request in connection with such name change.
ARTICLE VI. - CONDITIONS TO COMPANY'S AND BUYER'S OBLIGATIONS
6.01 Conditions to Obligations of the Company. The obligations of the
Company to carry out the transactions contemplated by this Agreement are
subject, at the option of the Company, to the satisfaction or waiver of the
following conditions:
(a) Buyer shall have furnished the Company with a copy of all necessary
corporate action on its behalf approving its execution, delivery and performance
of this Agreement.
(b) All representations and warranties of Buyer contained in this Agreement
shall be true and correct in all material respects at and as of the Closing, and
Buyer shall have performed and satisfied in all material respects all covenants
and agreements required by this Agreement to be performed and satisfied by Buyer
at or prior to the Closing.
(c) As of the Closing Date, no suit, action or other proceeding (excluding
any such matter initiated by or on behalf of the Company or any Shareholder)
shall be pending or threatened before any Governmental Authority seeking to
restrain the Company or prohibit the Closing or seeking Damages against the
Company as a result of the consummation of this Agreement.
6.02 Conditions to Obligations of Buyer. The obligations of Buyer to carry
out the transactions contemplated by this Agreement are subject, at the option
of Buyer, to the satisfaction, or waiver by Buyer, of the following conditions:
(a) All representations and warranties of the Company and the Shareholders
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing, and the Company and the Shareholders shall have
performed and satisfied in all material respects all agreements and covenants
required by this Agreement to be performed and satisfied by them at or prior to
the Closing.
(b) As of the Closing Date, no suit, action or other proceeding (excluding
any such matter initiated by or on behalf of Buyer) shall be pending or
threatened before any court or governmental agency seeking to restrain Buyer or
prohibit the Closing or seeking Damages against Buyer or the Company or its
Properties as a result of the consummation of this Agreement.
(c) Except for matters disclosed in Schedule 3.09(a) or 3.09(b) attached
hereto, since the Balance Sheet Date and up to and including the Closing, there
shall not have been any event, circumstance, change or effect that, individually
or in the aggregate, had or might have a material adverse effect on the
Company's business, operations, prospects, Properties or financial condition.
21
(d) The Buyer shall have received the opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇▇▇, counsel to the Company ("Company Counsel"), dated as of the Closing
Date, addressed to the Buyer and in form and substance reasonably satisfactory
to the Buyer, to the effect set forth on Exhibit C hereto. In rendering such
opinion, Company Counsel may rely as to factual matters on certificates of
officers, directors and shareholders of the Company and on certificates of
governmental officials.
(e) The Company shall have furnished Buyer with a copy of all necessary
corporate action on its behalf approving the Company's execution, delivery and
performance of this Agreement.
(f) All agreements, commitments and understandings between the Company and
any Affiliate thereof shall have been terminated in all respects on terms
satisfactory to Buyer, and all obligations, claims or entitlements thereunder
shall be unconditionally waived and released by such Affiliates and written
evidence thereof satisfactory in form and substance to Buyer shall have been
delivered to Buyer.
(g) Buyer shall have completed its due diligence investigation, and the
results thereof shall not have revealed that any of the representations of the
Company or the Shareholders set forth herein are untrue or incorrect in any
respect or otherwise be unsatisfactory to Buyer.
(h) All proceedings to be taken by the Company in connection with the
transactions contemplated hereby and all documents incident thereto shall be
satisfactory in form and substance to Buyer and its counsel, and Buyer and said
counsel shall have received all such counterpart originals or certified or other
copies of such documents as it or they may reasonably request.
(i) The Board of Directors of Buyer shall have approved this Agreement and
Buyer's acquisition of the Assets contemplated hereby.
(j) No proceeding in which any of the Shareholders or the Company shall be
a debtor, defendant or party seeking an order for its own relief or
reorganization shall have been brought or be pending by or against such person
under any United States or state bankruptcy or insolvency law.
(k) The Buyer shall have received copies of "payoff" or "estoppel" letters
or other evidence, reasonably satisfactory to it, of the termination, at or
prior to Closing, of all Funded Indebtedness and any and all Liens that encumber
the Company's Properties pursuant thereto.
(l) ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have executed and delivered to the
Buyer Consulting Agreements in the form attached hereto as Exhibit D.
(m) Buyer shall be satisfied that it will be able to obtain, not later than
sixty (60) days after the Closing Date, all audited historical and unaudited pro
forma Financial Statements with respect to the Company Business, if any,
together with any required consent of the Company's independent public
accountants, that may be required to be included in a Current Report on Form
8-K.
(n) The Company's landlord shall have agreed to accept $40,000 upon the
execution of this Agreement and to modify the current lease to allocate the
remaining arrearages (after the $40,000 payment) over twenty-four (24) equal
monthly payments in addition to the regular monthly rental payments.
ARTICLE VII. - POST-CLOSING OBLIGATIONS
7.01 Further Assurances. Following the Closing, the Company, the
Shareholders and the Buyer shall execute and deliver such documents, and take
such other action, as shall be reasonably requested by any other party hereto to
carry out the transactions contemplated by this Agreement.
22
7.02 Publicity. None of the parties hereto shall issue or make, or cause to
have issued or made, any public release or announcement concerning this
Agreement or the transactions contemplated hereby, without the advance approval
in writing of the form and substance thereof by each of the other parties,
except as required by law (in which case, so far as possible, there shall be
consultation among the parties prior to such announcement), and the parties
shall endeavor jointly to agree on the text of any announcement or circular so
approved or required.
7.03 Post-Closing Indemnity by the Company and the Shareholders. Subject to
the provisions of Section 9.01, from and after the Closing, the Company and the
Shareholders shall jointly and severally indemnify and hold harmless Buyer and
its Affiliates, directors, officers and employees from and against any and all
Damages arising out of, resulting from or in any way related to (i) a breach of,
or the failure to perform or satisfy any of, the representations, warranties,
covenants and agreements made by the Shareholders and/or the Company in this
Agreement or in any document or certificate delivered by the Shareholders and/or
the Company at the Closing pursuant hereto, (ii) the occurrence of any event on
or prior to the date of Closing that is (or would be, but for any deductible
thereunder) covered by individual policies of insurance, blanket insurance
policies or self insurance programs maintained by the Company, (iii) the
Excluded Assets, (iv) the existence of any liabilities or obligations of the
Company or any of the Shareholder (whether accrued, absolute, contingent, known
or unknown, or otherwise, and whether or not of a nature appropriate for
inclusion in a balance sheet in accordance with GAAP) other than the Assumed
Obligations. Any payment made to Buyer by the Company or the Shareholders
pursuant to the indemnification obligations under this Section 7.03 shall
constitute a reduction in the Purchase Price hereunder.
7.04 Non-Competition, Non-Solicitation and Non-Disclosure.
(a) General. In consideration of the payment of the Purchase Price, and in
order to induce the Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, each of the Shareholders hereby acknowledges
that he is a beneficiary of the Purchase Price payments to the Company and each
of the Shareholders hereby severally covenants and agrees as follows:
(i) Except as set forth in Schedule 7.04, without the prior written
consent of the Buyer, such Shareholder shall not for a period of five (5)
years from and after the Closing Date (A) directly or indirectly acquire or
own in any manner any interest in any person, firm, partnership,
corporation, association or other entity which engages or plans to engage
in any facet of the Business or which competes or plans to compete in any
way with the Buyer or any of its subsidiaries or Affiliates, anywhere in
the [states in which business is currently conducted] (the "Territory"),
(B) be employed by or serve as an employee, agent, officer, director of, or
as a consultant to, any person, firm, partnership, corporation, association
or other entity which engages or plans to engage in any facet of the
Business or which competes or plans to compete in any way with the Buyer or
any of its subsidiaries or Affiliates within the Territory, or (C) utilize
his special knowledge of the business of the Company and his or its
relationships with customers, suppliers and others to compete with Buyer
and/or any of its Affiliates in any business which engages or plans to
engage in the [describe business]; provided, however, that nothing herein
shall be deemed to prevent such Shareholder from acquiring through market
purchases and owning, solely as an investment, less than three percent in
the aggregate of the equity securities of any class of any issuer whose
shares are registered under ss.12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, and are listed or admitted for trading on any
United States national securities exchange or are quoted on the National
Association of Securities Dealers Automated Quotation System, or any
similar system of automated dissemination of quotations of securities
prices in common use, so long as such Shareholder is not a member of any
"control group" (within the meaning of the rules and regulations of the
United States Securities and Exchange Commission) of any such issuer. Such
Shareholder acknowledges and agrees that the covenants provided for in this
Section 7.04(a) are reasonable and necessary in terms of time, area and
line of business to protect the Company's Trade Secrets. Such Shareholder
further acknowledges and agrees that such covenants are reasonable and
necessary in terms of time, area and line of business to protect the
Buyer's legitimate business interests, which include its interests in
23
protecting the Buyer's (i) valuable confidential business information, (ii)
substantial relationships with customers throughout the United States, and
(iii) customer goodwill associated with the ongoing Business. Shareholder
expressly authorizes the enforcement of the covenants provided for in this
Section 7.04(a) by (A) the Buyer and its subsidiaries, (B) the Buyer's
permitted assigns, and (C) any successors to the Buyer's business. To the
extent that the covenants provided for in this Section 7.04(a) may later be
deemed by a court to be too broad to be enforced with respect to its
duration or with respect to any particular activity or geographic area, the
court making such determination shall have the power to reduce the duration
or scope of the provision, and to add or delete specific words or phrases
to or from the provision. The provision as modified shall then be enforced.
(ii) Without the prior consent of Buyer, such Shareholder shall not
for a period of five (5) years from the Closing Date, directly or
indirectly, for himself or for any other person, firm, corporation,
partnership, association or other entity (including the Company), (i)
attempt to employ or enter into any contractual arrangement with any
employee or former employee of the Business, unless such employee or former
employee has not been employed by the Business for a period in excess of
nine months, and/or (ii) call on or solicit any of the actual or targeted
prospective customers or clients of the Business, nor shall such
Shareholder make known the names and addresses of such customers or any
information relating in any manner to the Company's trade or business
relationships with such customers.
(iii) Such Shareholder shall not at any time divulge, communicate, use
to the detriment of the Buyer or for the benefit of any other person or
persons, or misuse in any way, any Confidential Information pertaining to
the Business. Any confidential information or data now known or hereafter
acquired by such Shareholder with respect to the Business shall be deemed a
valuable, special and unique asset of the Buyer that is received by such
Shareholder in confidence and as a fiduciary, and such Shareholder shall
remain a fiduciary to the Buyer with respect to all of such information.
(b) Injunction. It is recognized and hereby acknowledged by the parties
hereto that a breach or violation by a Shareholder of any or all of the
covenants and agreements contained in this Section 7.04 may cause irreparable
harm and damage to Buyer in a monetary amount which may be virtually impossible
to ascertain. As a result, each Shareholder recognizes and hereby acknowledges
that Buyer shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any breach or violation of any or all of
the covenants and agreements contained in this Section 7.04 by such Shareholder
and/or his associates, Affiliates, partners or agents, either directly or
indirectly, and that such right to injunction shall be cumulative and in
addition to whatever other rights or remedies the Buyer may possess hereunder,
at law or in equity. Nothing contained in this Section 7.04 shall be construed
to prevent Buyer from seeking and recovering from a Shareholder damages
sustained by it as a result of any breach or violation by such Shareholder of
any of the covenants or agreements contained herein.
7.05 Delivery of Property Received by the Company After Closing. From and
after the Closing, Buyer shall have the right and authority to collect, for the
account of Buyer, all receivables and other items which shall be transferred or
are intended to be transferred to Buyer as part of the Assets as provided in
this Agreement, and to endorse with the name of the Company any checks or drafts
received on account of any such receivables or other Assets. The Company agrees
that it will transfer or deliver to Buyer, promptly after the receipt thereof,
any cash or other property which the Company receives after the Closing Date in
respect of any claims, contracts, licenses, leases, commitments, sales orders,
purchase orders, receivables of any character or any other items transferred or
intended to be transferred to Buyer as part of the Assets under this Agreement.
7.06 Buyer Appointed Attorney for the Company. Effective at the Closing
Date, the Company hereby constitutes and appoints Buyer, and Buyer's successors
and assigns, its true and lawful attorney, in the name of either Buyer or the
Company (as Buyer shall determine in its sole discretion) but for the benefit
and at the expense of Buyer (except as otherwise herein provided), (a) to
institute and prosecute all proceedings which Buyer may deem proper in order to
24
collect, assert or enforce any claim, right or title of any kind in or to the
Assets as provided for in this Agreement; (b) to defend or compromise any and
all actions, suits or proceedings in respect of any of the Assets, and to do all
such acts and things in relation thereto as Buyer shall reasonably deem
advisable; and (c) to take all action which Buyer may reasonably deem proper in
order to provide for Buyer the benefits under any of the Assets where any
required consent of another party to the sale or assignment thereof to Buyer
pursuant to this Agreement shall not have been obtained. The Company
acknowledges that the foregoing powers are coupled with an interest and shall be
irrevocable. Buyer shall be entitled to retain for its own account any amounts
respecting the Assets collected pursuant to the foregoing powers, including any
amounts payable as interest in respect thereof.
7.07 Assignment of Contracts. At the option of Buyer, and notwithstanding
anything in this Agreement to the contrary, this Agreement shall not constitute
an assignment of any claim, contract, license, franchise, lease, commitment,
sales order, sales contract, supply contract, service agreement, purchase order
or purchase commitment if an attempted assignment thereof without the consent of
a third party thereto would constitute a breach thereof or in any way adversely
affect the rights of Buyer thereunder. If such consent is not obtained, or if
any attempt at an assignment thereof would be ineffective or would affect the
rights of the Company thereunder so that Buyer would not in fact receive all
such rights, the Company shall cooperate with Buyer to the extent necessary to
provide for Buyer the benefits under such claim, contract, license, franchise,
lease, commitment, sales order, sales contract, supply contract, service
agreement, purchase order or purchase commitment, including enforcement for the
benefit of Buyer of any and all rights of the Company against a third party
thereto arising out of the breach or cancellation by such third party or
otherwise.
7.08 Capital Infusion. Immediately after the Closing, the Buyer shall
provide the Company with $200,000 for general working capital.
ARTICLE VIII. - TAX MATTERS
8.01 Representations and Obligations Regarding Taxes. The Company and the
Shareholders jointly and severally represent and warrant to and agree with the
Buyer as follows:
(a) Except as set forth on Schedule 8.01(a), the Company has filed all Tax
Returns that it was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed by the Company (whether or not shown on
any Tax Return and whether or not any Tax Return was required) have been paid.
The Company is not currently the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by a taxing authority
in a jurisdiction where the Company does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no liens on any of the
assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax, except for liens for Taxes not yet due.
(b) Except as set forth on Schedule 8.01(b), the Company has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(c) Except as set forth on Schedule 8.01(c), there are, and after the date
of this Agreement will be, no Tax deficiencies (including penalties and
interest) or claims of any kind assessed against or relating to Company or the
Assets with respect to any taxable periods ending on or before, or including,
the Closing Date of a character or nature that could result in Liens or claims
on any of the Assets on Buyer's title or use of the Assets or that could result
in any claim against, or liability or obligation of , Buyer.
(d) Buyer and Company shall reasonably cooperate, and shall cause their
respective Affiliates, officers, employees, agents, auditors and representatives
reasonably to cooperate, in preparing and filing all returns, reports and forms
25
relating to Taxes, including maintaining and making available to each other all
records necessary in connection with Taxes and in resolving all disputes and
audits with respect to all Taxable periods relating to Taxes. Each of Buyer and
Company recognizes that Buyer and Company may need access, from time to time,
after the Closing Date, to certain accounting and Tax records and information
held by Company or Buyer, respectively, to the extent such records and
information pertain to events occurring prior to the Closing Date; therefore,
Company and Buyer each agrees, (a) to properly retain and maintain such records
until the earlier to occur of (i) the expiration of any applicable statute of
limitations or (ii) such time as Buyer and Company agree in writing that such
retention and maintenance is no longer necessary and (b) to allow the other
party and its agents and representatives, at times and dates mutually acceptable
to the parties, to inspect, review and make copies of such records as such party
or its representatives reasonably may deem necessary or appropriate from time to
time, such activities to be conducted during normal business hours and at the
expense of the requesting party.
(e) As used in this Agreement, "Affiliated Group" means any affiliated
group within the meaning of Section 1504(a) of the Code or any similar group
defined under a similar provision of state, local or foreign law; "Code" means
the Internal Revenue Code of 1986, as amended; "Company" means the Company
and/or any corporation that at any time has been a subsidiary of the Company;
"Person" means an individual, a partnership, a corporation, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization or
a governmental entity (or any department, agency or political subdivision
thereof); "Tax" means any Federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not, and "Taxes" means any or
all of the foregoing collectively; and "Tax Return" means any return,
declaration, report, claim for refund or information return or statement
relating to Taxes, including any schedule or attachment thereto and including
any amendment thereof.
ARTICLE IX. - MISCELLANEOUS
9.01 Limitation on Liability.
(a) The representations, warranties, agreements, and indemnities of the
Buyer, Company and the Shareholders set forth in this Agreement or in connection
with the transactions contemplated hereby shall survive the Closing except as
expressly provided in Section 9.01(b).
(b) The Company and the Shareholders shall have no liability under the
agreement to indemnify under either (A) clause (iii) of Section 7.03, or (B)
clause (i) of Section 7.03 against breaches of the provisions of Sections 3.05
(clauses (ii), (iii), (iv) and (v)), 3.06, and 3.08 through 3.24 (collectively
the "Business Indemnities"), in each case unless the Company receives notice in
writing from Buyer of Buyer's claim under said indemnity on or before the
three-year anniversary of the Closing Date. Said limitations shall not apply to
any breaches of or obligations to comply with any of the other provisions of
this Agreement, regardless of whether such breach or obligation also constitutes
a breach or obligation under any of the provisions specifically listed in this
Section 9.01(b). Buyer's indemnity shall be limited to its obligation described
in Section 1.01.
(c) The Company and the Shareholders shall be obligated to indemnify as and
to the extent set forth in Section 7.03 of this Agreement only if the aggregate
of all of their liability under such indemnity obligations exceeds $5000, it
being understood that such $5000 figure is to serve as a "trigger" for the
indemnification and not as a "deductible" (for example, if the indemnity claims
for which the Company and the Shareholders would, but for the provisions of this
paragraph (c), be liable aggregate $6000, the Company and the Shareholders would
then be liable for the full $6000, and not just $1,000). In addition, in no
event shall the aggregate liability of the Company and the Shareholders with
respect to the Business Indemnities exceed Nine Hundred Thousand Dollars
($900,000).
26
(d) For purposes of this Section 9.01(d), a party making a claim for
indemnity under Section 7.03 is hereinafter referred to as an "Indemnified
Party" and the party against whom such claim is asserted is hereinafter referred
to as the "Indemnifying Party." All claims by any Indemnified Party under
Section 7.03 hereof shall be asserted and resolved in accordance with the
following provisions. If any claim or demand for which an Indemnifying Party
would be liable to an Indemnified Party is asserted against or sought to be
collected from such Indemnified Party by such third party, said Indemnified
Party shall with reasonable promptness notify in writing the Indemnifying Party
of such claim or demand stating with reasonable specificity the circumstances of
the Indemnified Party's claim for indemnification; provided, however, that any
failure to give such notice will not waive any rights of the Indemnified Party
except to the extent the rights of the Indemnifying Party are actually
prejudiced or to the extent that any applicable period set forth in Section
9.01(b) has expired without such notice being given. After receipt by the
Indemnifying Party of such notice, then upon reasonable notice from the
Indemnifying Party to the Indemnified Party, or upon the request of the
Indemnified Party, the Indemnifying Party shall defend, manage and conduct any
proceedings, negotiations or communications involving any claimant whose claim
is the subject of the Indemnified Party's notice to the Indemnifying Party as
set forth above, and shall take all actions necessary, including but not limited
to the posting of such bond or other security as may be required by any
Governmental Authority, so as to enable the claim to be defended against or
resolved without expense or other action by the Indemnified Party. Upon request
of the Indemnifying Party, the Indemnified Party shall, to the extent it may
legally do so and to the extent that it is compensated in advance by the
Indemnifying Party for any costs and expenses thereby incurred,
(i) take such action as the Indemnifying Party may reasonably request
in connection with such action,
(ii) allow the Indemnifying Party to dispute such action in the name
of the Indemnified Party and to conduct a defense to such action on behalf
of the Indemnified Party, and
(iii) render to the Indemnifying Party all such assistance as the
Indemnifying Party may reasonably request in connection with such dispute
and defense.
9.02 Confidentiality.
(a) Prior to the Closing, Buyer shall, and shall cause its Affiliates and
its and their employees, agents, accountants, legal counsel and other
representatives and advisers to, hold in strict confidence all, and not divulge
or disclose any, information of any kind concerning the Company and its
business; provided, however, that the foregoing obligation of confidence shall
not apply to (i) information that is or becomes generally available to the
public other than as a result of a disclosure by Buyer or its Affiliates or any
of its or their employees, agents, accountants, legal counsel or other
representatives or advisers, (ii) information that is or becomes available to
Buyer or its Affiliates or any of its or their employees, agents, accountants,
legal counsel or other representatives or advisers on a nonconfidential basis
prior to its disclosure by Buyer or its Affiliates or any of its or their
employees, agents, accountants, legal counsel or other representatives or
advisers and (iii) information that is required to be disclosed by Buyer or its
Affiliates or any of its or their employees, agents, accountants, legal counsel
or other representatives or advisers as a result of any applicable law, rule or
regulation of any Governmental Authority; and provided further that Buyer
promptly shall notify the Company of any disclosure pursuant to clause (iii) of
this Section 9.02(a); and, provided, further, that the foregoing obligation of
confidence shall not apply to the furnishing of information by Buyer in bona
fide discussions or negotiations with prospective lenders.
(b) The Company and each of the Shareholders shall, and shall cause its or
his Affiliates and their respective employees, agents, accountants, legal
counsel and other representatives and advisers to, hold in strict confidence
all, and not divulge or disclose any, information of any kind concerning the
transactions contemplated by this Agreement, the Company, Buyer or their
respective businesses; provided, however, that the foregoing obligation of
confidence shall not apply to (i) information that is or becomes generally
available to the public other than as a result of a disclosure by the Company,
any of the Shareholders or any of their respective Affiliates, employees,
27
agents, accountants, legal counsel or other representatives or advisers, (ii)
information that is or becomes available to the Company, any of the Shareholders
or any of their respective Affiliates, employees, agents, accountants, legal
counsel or other representatives or advisers after the Closing on a
nonconfidential basis prior to its disclosure by the Company, any of the
Shareholders or any of their respective employees, agents, accountants, legal
counsel or other representatives or advisers and (iii) information that is
required to be disclosed by the Company, any of the Shareholders or any of their
respective employees, agents, accountants, legal counsel or other
representatives or advisers as a result of any applicable law, rule or
regulation of any Governmental Authority; and provided further that the Company
shall promptly shall notify Buyer of any disclosure pursuant to clause (iii) of
this Section 9.02(b).
9.03 Brokers. Regardless of whether the Closing shall occur, (i) the
Company and the Shareholders shall jointly and severally indemnify and hold
harmless Buyer from and against any and all liability for any brokers or
finders' fees arising with respect to brokers or finders retained or engaged by
the Company or any of the Shareholders in respect of the transactions
contemplated by this Agreement, and (ii) Buyer shall indemnify and hold harmless
the Company from and against any and all liability for any brokers' or finders'
fees arising with respect to brokers or finders retained or engaged by Buyer in
respect of the transactions contemplated by this Agreement.
9.04 Costs and Expenses. Each of the parties to this Agreement shall bear
his or its own expenses incurred in connection with the negotiation,
preparation, execution and closing of this Agreement and the transactions
contemplated hereby.
9.05 Notices. Any notice, request, instruction, correspondence or other
document to be given hereunder by any party hereto to another (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed by registered or certified mail, postage prepaid and return receipt
requested, or by telecopier, as follows:
IF TO BUYER: ▇▇▇▇ ▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
--------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
IF TO THE COMPANY AND/OR THE ANY OF THE
SHAREHOLDERS: Pocono Knits, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
--------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
28
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next normal business day after
receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery. Anything to the
contrary contained herein notwithstanding, notices to any party hereto shall not
be deemed effective with respect to such party until such Notice would, but for
this sentence, be effective both as to such party and as to all other persons to
whom copies are provided above to be given.
9.06 Governing Law. The provisions of this agreement and the documents
delivered pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Pennsylvania (excluding any conflict of law rule or
principle that would refer to the laws of another jurisdiction). Each party
hereby irrevocably agrees that all claims in respect of any such action or
proceeding shall be under the exclusive jurisdiction of the Federal courts and
shall be brought in the Federal District Court for the Middle District of
Pennsylvania. Each party hereto consents to service of process by any means
authorized by the applicable law of the forum in any action brought under or
arising out of this Agreement or any of the Collateral Agreements, and each
party irrevocably waives, to the fullest extent each may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY
JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
9.07 Representations and Warranties. Each of the representations and
warranties of each of the parties to this Agreement shall be deemed to have been
made, and the certificates delivered pursuant to clause (iv) of Section 2.02 and
clause (ii) of Section 2.03 by a party are agreed to and shall be deemed to
constitute the making of such representations and warranties, again at and as of
the Closing by and on behalf of the party on behalf of whom such certificates
are delivered.
9.08 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules attached hereto, constitutes the entire
agreement between and among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as set forth specifically
herein or contemplated hereby. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (regardless of whether
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
9.09 Binding Effect and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective permitted
successors and assigns; but neither this Agreement nor any of the rights,
benefits or obligations hereunder shall be assigned, by operation of law or
otherwise, by any party hereto without the prior written consent of the other
party, provided, however, that nothing herein shall prohibit the assignment of
Buyer's rights and obligations to any direct or indirect subsidiary or prohibit
the assignment of Buyer's rights (but not obligations) to any lender. Nothing in
this Agreement, express or implied, is intended to confer upon any person or
entity other than the parties hereto and their respective permitted successors
and assigns, any rights, benefits or obligations hereunder.
9.10 Remedies. The rights and remedies provided by this Agreement are
cumulative, and the use of any one right or remedy by any party hereto shall not
preclude or constitute a waiver of its right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights and remedies
a party may have by law, statute or otherwise.
9.11 Reserved.
29
9.12 Withholding of Payments. Notwithstanding any other provision of this
Agreement, the Company and the Shareholders agree that Buyer shall after the
Closing have the right to withhold any payment owing to the Company and/or the
Shareholders to the extent of any and all payments due to but not yet received
by the Buyer from the Company and/or the Shareholders pursuant to this
Agreement. The Shareholders and the Company specifically agree that (i) any
claims for indemnification by Buyer against the Shareholders and the Company (or
any of them) hereunder may be satisfied by deducting and otherwise offsetting
such claims against any amounts that might otherwise be payable by Buyer to such
persons hereunder, and (ii) to the extent that there remain unsatisfied
indemnification claims after the deductions and set-offs described above, Buyer
shall have full recourse against the Shareholders and the Company (including
their assets of whatsoever kind or nature) for payment of such indemnification
claims.
9.13 Exhibits and Schedules. The exhibits and Schedules referred to herein
are attached hereto and incorporated herein by this reference. Disclosure of a
specific item in any one Schedule shall be deemed restricted only to the Section
to which such disclosure specifically relates except where (i) there is an
explicit cross-reference to another Schedule, and (ii) Buyer could reasonably be
expected to ascertain the scope of the modification to a representation intended
by such cross-reference.
9.14 Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.15 References and Construction.
(a) Whenever required by the context, and is used in this Agreement, the
singular number shall include the plural and pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identification the person may require. References to monetary amounts,
specific named statutes and generally accepted accounting principles are
intended to be and shall be construed as references to United States dollars,
statutes of the United States of the stated name and United States generally
accepted accounting principles, respectively, unless the context otherwise
requires.
(b) The provisions of this Agreement shall be construed according to their
fair meaning and neither for nor against any party hereto irrespective of which
party caused such provisions to be drafted. Each of the parties acknowledge that
it has been represented by an attorney in connection with the preparation and
execution of this Agreement.
9.16 Survival. Any provision of this Agreement which contemplates
performance or the existence of obligations after the Closing Date, and any and
all representations and warranties set forth in this Agreement, shall not be
deemed to be merged into or waived by the execution and delivery of the
instruments executed at the Closing, but shall expressly survive Closing and
shall be binding upon the party or parties obligated thereby in accordance with
the terms of this Agreement, subject to any limitations expressly set forth in
this Agreement.
9.17 Attorneys' Fees. In the event any suit or other legal proceeding is
brought for the enforcement of any of the provisions of this Agreement, the
parties hereto agree that the prevailing party or parties shall be entitled to
recover from the other party or parties upon final judgment on the merits
reasonable attorneys' fees (and sales taxes thereon, if any), including
attorneys' fees for any appeal, and costs incurred in bringing such suit or
proceeding.
9.18 Risk of Loss. Prior to the Closing, the risk of loss of damage to, or
destruction of, any and all of the Company's assets, including without
limitation the Properties, shall remain with the Company, and the legal doctrine
known as the "Doctrine of Equitable Conversion" shall not be applicable to this
Agreement or to any of the transactions contemplated hereby.
30
9.19 Representative of the Company and the Shareholders. Each of the
Shareholders and the Company designates ▇▇▇▇ ▇▇▇▇▇ as its representative for all
purposes under this Agreement, including receipt of disclosures, granting and/or
executing consents or waivers, receiving notices and agreeing to and executing
amendments and/or modifications to this Agreement. Any such receipt, grant,
agreement and/or execution by ▇▇▇▇ ▇▇▇▇▇ shall be valid and binding on the
Company and the Shareholders. The designation by the Company and the
Shareholders of such representative may not be revoked without the written
consent of Buyer.
ARTICLE X. - DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this
Article X or elsewhere in this Agreement.
10.01 Affiliate. The term "Affiliate" shall mean, with respect to any
person, any other person controlling, controlled by or under common control with
such person. The term "Control" as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly, more
than 50% of the voting rights attributable to the shares of the controlled
corporation and, with respect to any person other than a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person.
10.02 Available Cash. The term "Available Cash" shall mean all cash and
cash equivalents (including marketable securities and short-term investments)
held by the Company as of midnight on the day before the Closing Date less the
amount of cash and cash equivalents necessary to cover outstanding checks which
have been mailed or otherwise delivered by the Company but have not cleared.
10.03 Collateral Agreements. The term "Collateral Agreements" shall mean
any or all of the exhibits to this Agreement and any and all other agreements,
instruments or documents required or expressly provided under this Agreement to
be executed and delivered in connection with the transactions contemplated by
this Agreement.
10.04 Confidential Information. The term "Confidential Information" shall
mean confidential data and confidential information relating to the business of
the Company (which does not rise to the status of a Trade Secret under
applicable law) which is or has been disclosed to any of the Shareholders or of
which any of the Shareholders became aware as a consequence of or through his
employment or other relationship with the Company and which has value to the
Company and is not generally known to the competitors of the Company.
Confidential Information shall not include any data or information that (i) has
been voluntarily disclosed to the general public by the Company or its
Affiliates, (ii) has been independently developed and disclosed to the general
public by others, or (iii) otherwise enters the public domain through lawful
means.
10.05 Contracts. The term "Contracts," when described as being those of or
applicable to any person, shall mean any and all contracts, agreements,
franchises, understandings, arrangements, leases, licenses, registrations,
authorizations, easements, servitudes, rights of way, mortgages, bonds, notes,
guaranties, liens, indebtedness, approvals or other instruments or undertakings
to which such person is a party or to which or by which such person or the
property of such person is subject or bound, excluding any Permits.
10.06 Damages. The term "Damages" shall mean any and all damages,
liabilities, obligations, penalties, fines, judgments, claims, deficiencies,
losses, costs, expenses and assessments (including without limitation income and
other taxes, interest, penalties and attorneys' and accountants' fees and
disbursements).
10.07 Financial Statements. The term "Financial Statements" shall mean any
or all of the financial statements, including balance sheets and related
statements of income and statements of changes in financial position and the
31
accompanying notes thereto, of the Company's business prepared in accordance
with generally accepted accounting principles consistently applied, except as
may be otherwise provided herein.
10.08 Funded Indebtedness. "Funded Indebtedness" shall mean the aggregate
amount (including the current portions thereof) of all (i) indebtedness for
money borrowed from others, capital lease obligations, dividends payable to the
Shareholders, bonus payables to employees, and purchase money indebtedness of
the Company, (ii) indebtedness of the type described in clause (i) above
guaranteed, directly or indirectly, in any manner by the Company, or in effect
guaranteed, directly or indirectly, in any manner by the Company, through an
agreement, contingent or otherwise, to supply funds to, or in any other manner
invest in, the debtor, or to purchase indebtedness, or to purchase and pay for
property if not delivered or to pay for services if not performed, primarily for
the purpose of enabling the debtor to make payment of the indebtedness or to
assure the owners of the indebtedness against loss, but excluding endorsements
of checks and other instruments in the ordinary course, (iii) indebtedness of
the type described in clause (i) above secured by any Lien upon property owned
by the Company, even though the Company has not in any manner become liable for
the payment of such indebtedness and (iv) interest expense accrued but unpaid,
and all prepayment premiums, on or relating to any of such indebtedness.
10.09 GAAP. "GAAP" means U.S. generally accepted accounting principles.
10.10 Governmental Authorities. The term "Governmental Authorities" shall
mean any nation or country (including but not limited to the United States) and
any commonwealth, territory or possession thereof and any political subdivision
of any of the foregoing, including but not limited to courts, departments,
commissions, boards, bureaus, agencies, ministries or other instrumentalities.
10.11 Hazardous Material. The term "Hazardous Material" shall mean all or
any of the following: (a) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable laws or regulations as "hazardous
substances," "hazardous materials," "Hazardous wastes," "toxic substances" or
any other formulation intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity or "EP toxicity"; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; and (d) asbestos in any form or electrical equipment which contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty parts per million.
10.12 Inventory. The term "Inventory" shall mean all goods, merchandise and
other personal property owned and held for sale, and all raw materials,
works-in-process, materials and supplies of every nature which contribute to the
finished products of the Company in the ordinary course of its business,
specifically excluding, however, damaged, defective or otherwise unsaleable
items.
10.13 Knowledge of the Company. The term "Knowledge of the Company" shall
mean the actual knowledge of ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ or any of the other
directors, officers or managerial personnel of the Company with respect to the
matter in question, and such knowledge as ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ or any of
the other directors, officers or managerial personnel of the Company reasonably
should have obtained upon diligent investigation and inquiry into the matter in
question.
10.14 Legal Requirements. The term "Legal Requirements," when described as
being applicable to any person, shall mean any and all laws (statutory, judicial
or otherwise), ordinances, regulations, judgments, orders, directives,
injunctions, writs, decrees or awards of, and any Contracts with, any
Governmental Authority, in each case as and to the extent applicable to such
person or such person's business, operations or properties.
32
10.15 Net Worth. The term "Net Worth" shall mean the Company's
"stockholders' equity" computed in accordance with GAAP except that no effect
shall be given to any purchase accounting or other similar adjustments resulting
from the consummation of the transaction contemplated herein.
10.16 Permits. The term "Permits" shall mean any and all permits, rights,
approvals, licenses, authorizations, legal status, orders or Contracts under any
Legal Requirement or otherwise granted by any Governmental Authority.
10.17 Person. The term "Person" shall mean any individual, partnership,
joint venture, firm, corporation, association, limited liability company, trust
or other enterprise or any governmental or political subdivision or any agency,
department or instrumentality thereof.
10.18 Product. The term "Product" shall mean each product, repair process
or service under development, developed, manufactured, licensed, distributed or
sold by the Company and any other products in which the Company has any
proprietary rights or beneficial interest.
10.19 Properties. The term "Properties" shall mean any and all properties
and assets (real, personal or mixed, tangible or intangible) owned or Used by
the Company, including all Assets to be conveyed to Buyer pursuant to this
Agreement.
10.20 Real Property. The term "Real Property" shall mean the real property
Used by the Company in the conduct of its business.
10.21 Regulations. The term "Regulations" shall mean any and all
regulations promulgated by the Department of the Treasury pursuant to the
Internal Revenue Code.
10.22 Subsidiary. The term "Subsidiary" shall mean any Person of which a
majority of the outstanding voting securities or other voting equity interests
are owned, directly or indirectly, by the Company.
10.23 Trade Secrets. The term "Trade Secrets" shall mean information of the
Company including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, financial data, financial plans, product or
service plans or lists of actual or potential customers or suppliers which (i)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
10.24 Used. The term "Used" shall mean, with respect to the Properties,
Contracts or Permits of the Company, those owned, leased, licensed or otherwise
held by the Company which were acquired for use or held for use by the Company
in connection with the Company's business and operations, whether or not
reflected on the Company's books of account.
10.25 Working Capital. The term "Working Capital" shall mean the difference
between (i) the Company's current assets, including accounts receivable,
inventory, prepaid expenses and deposits included in the Assets, and (ii) the
Company's current liabilities, including accounts payable and accrued expenses,
assumed by Buyer hereunder, in each case calculated in accordance with GAAP.
EXECUTED as of the date first written above.
34
BUYER:
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▇▇▇▇ ▇▇▇▇▇ Associates, Inc.
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By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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COMPANY:
Pocono Knits, Inc.
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By: /s. ▇▇▇▇ ▇▇▇▇▇
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SHAREHOLDERS:
/s/ ▇▇▇▇ ▇▇▇▇▇
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