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EXHIBIT 10.20
STOCK PURCHASE AGREEMENT
BY AND AMONG
▇▇▇▇▇ INDUSTRIES, INC.,
("BUYER")
MERCER PRODUCTS COMPANY, INC.
("MERCER")
AND
SOVEREIGN SPECIALTY CHEMICALS, INC.
("SELLER")
DATED AS OF MARCH 5, 1998
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TABLE OF CONTENTS
PAGE
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of the Mercer Shares . . . . . . . . . . . . . . 6
(a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . . 6
(b) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Working Capital Adjustment. . . . . . . . . . . . . . . . . . 6
(d) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Deliveries at the Closing . . . . . . . . . . . . . . . . . . 6
(f) Closing Review. . . . . . . . . . . . . . . . . . . . . . . . 7
(g) Post-Closing Purchase Price Adjustment. . . . . . . . . . . . 7
3. Representations and Warranties Concerning the Transaction . . . . . 8
(a) Representations and Warranties of Seller. . . . . . . . . . . 8
(i) Organization of the Seller . . . . . . . . . . . . . . . 8
(ii) Authorization of Transaction. . . . . . . . . . . . . . 8
(iii) Noncontravention . . . . . . . . . . . . . . . . . . . 8
(iv) Broker's Fees . . . . . . . . . . . . . . . . . . . . . 8
(v) Mercer Shares. . . . . . . . . . . . . . . . . . . . . . 9
(b) Representations and Warranties of the Buyer . . . . . . . . . 9
(i) Organization of the Buyer. . . . . . . . . . . . . . . . 9
(ii) Authorization of Transaction. . . . . . . . . . . . . . 9
(iii) Noncontravention . . . . . . . . . . . . . . . . . . . 9
(iv) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . 10
(v) Investment . . . . . . . . . . . . . . . . . . . . . . . 10
4. Representations and Warranties Concerning Mercer. . . . . . . . . . 10
(a) Organization, Qualification and Corporate Power . . . . . . . 10
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Noncontravention. . . . . . . . . . . . . . . . . . . . . . . 11
(d) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) Financial Statements. . . . . . . . . . . . . . . . . . . . . 11
(f) Events Subsequent to the Most Recent Financial Statements . . 11
(g) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . 13
(h) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 13
(i) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . 14
(j) Real Property . . . . . . . . . . . . . . . . . . . . . . . . 15
(k) Intellectual Property . . . . . . . . . . . . . . . . . . . . 15
(l) Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . 16
(m) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(n) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(o) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 18
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PAGE
(p) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(q) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . 18
(r) Environment, Health and Safety. . . . . . . . . . . . . . . . 19
(s) Legal Compliance. . . . . . . . . . . . . . . . . . . . . . . 20
(t) Certain Business Relationships with Mercer. . . . . . . . . . 21
(u) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . 21
(v) Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 21
(w) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 21
(x) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(y) Customers and Suppliers . . . . . . . . . . . . . . . . . . . 21
(z) Certain Business Practices. . . . . . . . . . . . . . . . . . 22
5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 22
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Notices and Consents. . . . . . . . . . . . . . . . . . . . . 22
(c) Operation of Business . . . . . . . . . . . . . . . . . . . . 22
(d) Preservation of Business. . . . . . . . . . . . . . . . . . . 23
(e) Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(f) Notice of Developments. . . . . . . . . . . . . . . . . . . . 23
(g) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . 23
(h) HSR Act Filing. . . . . . . . . . . . . . . . . . . . . . . . 23
(i) Plant Closing Notification. . . . . . . . . . . . . . . . . . 24
(j) Intercompany Items. . . . . . . . . . . . . . . . . . . . . . 24
(k) 1996 Audit. . . . . . . . . . . . . . . . . . . . . . . . . . 24
(l) Transitional Services . . . . . . . . . . . . . . . . . . . . 24
6. Additional Covenants. . . . . . . . . . . . . . . . . . . . . . . . 25
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Litigation Support. . . . . . . . . . . . . . . . . . . . . . 25
(c) Transition. . . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 25
(e) Additional Tax Matters. . . . . . . . . . . . . . . . . . . . 26
(f) Covenant Not to Compete . . . . . . . . . . . . . . . . . . . 28
(g) Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 28
(i) Pension Benefits Provided by the Seller. . . . . . . . . 28
(ii) Welfare Benefits Provided by the Seller . . . . . . . . 29
(iii) Back Service Credit. . . . . . . . . . . . . . . . . . 29
(h) Disability Workers' Compensation. . . . . . . . . . . . . . . 29
(i) Severance Policy. . . . . . . . . . . . . . . . . . . . . . . 29
(j) Collective Bargaining Agreement . . . . . . . . . . . . . . . 30
7. Conditions to Obligations to Closing. . . . . . . . . . . . . . . . 30
(a) Conditions to Obligation of the Buyer . . . . . . . . . . . . 30
(b) Conditions to Obligations of the Seller . . . . . . . . . . . 31
8. Remedies for Breach of This Agreement . . . . . . . . . . . . . . . 32
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PAGE
(a) Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) Indemnification Provisions for Benefit of the Buyer . . . . . 33
(c) Indemnification Provisions for Benefit of the Seller. . . . . 34
(d) Matters Involving Third Parties . . . . . . . . . . . . . . . 35
(e) Determination of Loss . . . . . . . . . . . . . . . . . . . . 36
(f) Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . 36
(g) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(h) Reservation and Nonwaiver of Rights and Remedies. . . . . . . 36
(i) Arbitration with Respect to Certain Indemnification Matters . 36
(j) Adjustment to Purchase Price. . . . . . . . . . . . . . . . . 37
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) Termination of Agreement. . . . . . . . . . . . . . . . . . . 37
(b) Effect of Termination . . . . . . . . . . . . . . . . . . . . 38
10. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(a) Press Releases and Announcements. . . . . . . . . . . . . . . 38
(b) No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . 38
(c) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 38
(d) Succession and Assignment . . . . . . . . . . . . . . . . . . 38
(e) Facsimile/Counterparts. . . . . . . . . . . . . . . . . . . . 38
(f) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(g) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(h) Submission to Jurisdiction. . . . . . . . . . . . . . . . . . 40
(i) Amendments and Waivers. . . . . . . . . . . . . . . . . . . . 41
(j) Severability. . . . . . . . . . . . . . . . . . . . . . . . . 41
(k) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(1) Construction. . . . . . . . . . . . . . . . . . . . . . . . . 41
(m) Incorporation of Exhibits, Annexes and Schedules. . . . . . . 42
(n) Specific Performance. . . . . . . . . . . . . . . . . . . . . 42
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LIST OF EXHIBITS, ANNEXES AND SCHEDULES
EXHIBITS
Exhibit A Financial Statements
Exhibit B Form of Opinion of Buyer's Legal Counsel
Exhibit C Form of Opinion of Seller's Legal Counsel
ANNEXES
Annex I List of Stay-on Bonuses
SCHEDULES
Disclosure Schedule
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of the
5th day of March, 1998, by and among ▇▇▇▇▇ INDUSTRIES, INC., a California
corporation (the "BUYER"), MERCER PRODUCTS COMPANY, INC., a New Jersey
corporation ("MERCER"), and SOVEREIGN SPECIALTY CHEMICALS, INC., a Delaware
corporation (the "SELLER"). The Buyer and the Seller are referred to herein
individually as a "PARTY" and collectively as the "PARTIES."
RECITALS
WHEREAS, the Seller owns all of the outstanding capital stock of Mercer;
and,
WHEREAS, this Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of Mercer.
AGREEMENT
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ADVERSE CONSEQUENCES" means all actual damages from complaints, actions,
suits, proceedings, hearings, investigations, claims, demands, judgments,
orders, decrees, stipulations, injunctions, damages, dues, penalties, fines,
costs, amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses and fees, including all reasonable attorneys' fees and court
costs.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction that forms the basis for any specified
consequence.
"BUSINESS" means the business of manufacturing extruded PVC into flooring
profiles sold to the construction industry.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day in
which commercial banks in the State of New York are authorized by law to close.
"BUYER" has the meaning set forth in the preface above.
"CLOSING" has the meaning set forth in SECTION 2(d) below.
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"CLOSING DATE" has the meaning set forth in SECTION 2(d) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means all confidential information and trade
secrets of Mercer including, without limitation, the identity, lists or
descriptions of any customers, referral sources or organizations, Financial
Statements, cost reports or other Financial Information, contract proposals, or
bidding information, business plans and training and operations methods and
manuals, personnel records, fee structure and management systems, policies or
procedures, including related forms and manuals.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Code Sec.
1563.
"CURRENT EMPLOYEES" has the meaning set forth in SECTION 4(p)(i) below.
"DISCLOSURE SCHEDULE" has the meaning set forth in SECTION 4 below.
"DOJ" means the Antitrust Division of the United States Department of
Justice or any successor Governmental Body.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan) or (d) Employee Welfare Benefit Plan or Material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
"EQUITABLE EXCEPTIONS" has the meaning set forth in SECTION 3(a)(i) below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4(e) below.
"FTC" means the United States Federal Trade Commission or any successor
Governmental Body.
"GAAP" means generally accepted accounting principles as in effect from
time to time.
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"GOVERNMENTAL BODY" means any federal, state, county, city, town, village,
municipal or other governmental department, commission, board, bureau, agency,
authority, court or related judicial authority or instrumentality of any of the
foregoing.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 8(d) below.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 8(d) below.
"INDEPENDENT ACCOUNTANTS" has the meaning set forth in Section 2(f) below.
"INTELLECTUAL PROPERTY" means all (a) trademarks, service marks, trade
dress, logos, trade names and corporate names and registrations and
applications for registration thereof, (b) copyrights and registrations and
applications for registration thereof, (c) computer software, data and
documentation and (d) trade secrets and confidential business information
(including formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information).
"IRS" has the meaning set forth in SECTION 4(q).
"KNOWLEDGE" means, with respect to Mercer or the Seller, actual knowledge
after reasonable investigation and inquiry by the Seller, which inquiry shall
an inquiry of the following persons: ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇▇.
"LAWS" means all laws, including the common law, statutes, codes, rules,
regulations, ordinances or Orders of any Governmental Body.
"LIABILITY" means any liability, debt, obligation, amount or sum due
(whether known or unknown, whether absolute or contingent, whether liquidated
or unliquidated, and whether due or to become due) including any liability for
Taxes.
"MATERIAL," "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse effect on the assets, financial condition or results of
operations of Mercer.
"MERCER" has the meaning set forth in the preface above.
"▇▇▇▇▇▇'▇ BUSINESS" means the manufacture and distribution of extruded
plastic and vinyl products.
"MERCER SHARES" means all outstanding shares of the Common Stock, $.10 par
value per share, of Mercer.
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"MOST RECENT BALANCE SHEET" means the balance sheet contained within the
Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in
SECTION 4(e) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in SECTION (e)
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"NET WORKING CAPITAL OF MERCER" means an amount equal to (a) total current
assets of Mercer (other than cash and cash equivalents, intercompany
indebtedness (other than trade receivables), prepayments of any Taxes for which
Seller is liable pursuant to SECTION 6(e) and prepaid premiums for insurance
maintained for Mercer by Seller and/or its Affiliates), MINUS (b) total current
liabilities of Mercer (excluding intercompany indebtedness (other than
intercompany trade payables), premiums payable for insurance maintained for
Mercer by Seller and/or its Affiliates, accruals on account of stay-on bonuses
listed on ANNEX I hereto and Taxes for which Seller is liable pursuant to
SECTION 6(e), PLUS (c) the amount of Retained Cash Balances, in each case
calculated in accordance with GAAP, consistently applied on a basis consistent
with the application of accounting principles utilized in the preparation of
the Financial Statements.
"ORDER" means any order, writ, injunction, decree, judgment, award,
determination or written direction of any court, arbitrator or Governmental
Body.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED LIEN" means (a) mechanic's, materialmen's and similar liens,
(b) liens for Taxes not yet due and payable (or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings), (c) liens arising
under workers' compensation, unemployment insurance, social security,
retirement and similar legislation, (d) liens arising in connection with sales
of foreign receivables, (e) liens on goods in transit incurred pursuant to
documentary letters of credit and (f) purchase money liens and liens securing
rental payments under capital lease arrangements.
"PERSON" means an individual, corporation, partnership, association, trust
or other entity or organization, including a Governmental Body or an agency or
instrumentality thereof.
"POST-CLOSING TAX PERIOD" means any Tax period that commences after the
Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period that ends prior to the
Closing Date.
"PRELIMINARY CLOSING BALANCE SHEET" has the meaning set forth in
SECTION 2(c) below.
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"PRODUCTS" means that group of products which has been designed, developed
and/or produced or which is presently sold or offered for sale by the Business.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"PURCHASE PRICE" has the meaning set forth in SECTION 2(b) below.
"REAL PROPERTY" has the meaning set forth in SECTION 4(j) below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec. 4043.
"RETAINED CASH BALANCES" means the balances of all cash, deposit, money
market and the like accounts of Mercer immediately following the Closing.
"SECTION 338 DELTA" has the meaning set forth in Section 6(e)(xi).
"SECTION 338 ELECTIONS" has the meaning set forth in Section 6(e)(ix).
"SECTION 338 TAXES" has the meaning set forth in Section 6(e)(xi).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) mechanic's, materialmen's
and similar liens, (b) liens for Taxes not yet due and payable (or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings),
(c) liens arising under workers' compensation, unemployment insurance, social
security, retirement and similar legislation, (d) liens arising in connection
with sales of foreign receivables, (e) liens on goods in transit incurred
pursuant to documentary letters of credit, (f) purchase money liens and liens
securing rental payments under capital lease arrangements and (g) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"STRADDLE PERIOD" shall mean any Tax period that begins before and ends
after the Closing Date.
"SUBSIDIARY" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"TAX" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
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added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty or addition thereto.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"WORKING CAPITAL TARGET" means $3,500,000.
2. PURCHASE AND SALE OF THE MERCER SHARES.
(A) BASIC TRANSACTION. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all of the Mercer Shares for the consideration
specified below in this SECTION 2.
(B) PURCHASE PRICE. The purchase price for the Mercer Shares to be
purchased by the Buyer from the Seller pursuant to the terms hereof shall be
the sum of $35,750,000, subject to adjustments as provided in Section 2(g)
herein, which shall be paid in cash (the "PURCHASE PRICE"). The Purchase Price
shall be paid by the Buyer to the Seller at the Closing by wire transfer or
delivery of other immediately available funds to an account or accounts
designated by the Seller not less than three (3) business days prior to the
Closing Date.
(C) WORKING CAPITAL ADJUSTMENT. At the Closing, the Purchase Price
shall be adjusted upward on a dollar-for-dollar basis by the amount by which
the Net Working Capital of Mercer at Closing is more than $3,600,000, and the
Purchase Price shall be adjusted downward on a dollar-for-dollar basis by the
amount by which the Net Working Capital of Mercer at Closing is less than
$3,400,000. The Net Working Capital of Mercer at Closing shall be
preliminarily determined by the Seller not less than five (5) days prior to the
Closing Date in good faith by preparation of an estimated balance sheet of
Mercer as of the Closing Date (the "PRELIMINARY CLOSING BALANCE SHEET").
(D) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇
& ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, commencing at 8:00 a.m.
local time on a Business Day to be designated by the Buyer (the "CLOSING
DATE"); PROVIDED, HOWEVER, that the Closing Date shall be no earlier than the
third Business Day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby and no later than April 30, 1998, and PROVIDED, FURTHER, that the Buyer
shall give the Seller at least two Business Days advance notice of the Closing.
(E) DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in SECTION 7(a) below, (ii) the Buyer will deliver to the Seller
the various certificates, instruments and documents referred to in
SECTION 7(b) below, (iii) the Seller will deliver to the Buyer stock
certificates representing all of the Mercer Shares, endorsed in blank or
accompanied by duly executed assignment documents and (iv) the Buyer will
deliver to the Seller the consideration specified in SECTION 2(b) above as
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may be adjusted at the Closing pursuant to SECTION 2(c) above and subject to
further adjustment after the Closing pursuant to SECTION 2(g).
(F) CLOSING AUDIT. Within 120 days following the Closing Date,
Ernst & Young LLP shall prepare and deliver to the Seller and Buyer an audit of
the balance sheet of the Company (the "AUDITED CLOSING BALANCE SHEET") at and
as of the Closing Date. The cost to prepare the Audited Closing Balance Sheet
shall be borne by Buyer. In the event that either Buyer or Seller disputes any
item(s) on the Audited Closing Balance Sheet within ten days after such party's
receipt thereof, the parties agree that another "Big Five" accounting firm
acceptable to Buyer and Seller (the "INDEPENDENT ACCOUNTANTS") will review the
disputed item(s) on the Audited Closing Balance Sheet. In conducting such
review, the Independent Accountants shall be given access to the workpapers of
Ernst & Young, LLP and Buyer shall make available on a reasonable basis those
employees and representatives (including employees of Ernst & Young, LLP) who
participated in the preparation of the Audited Closing Balance Sheet and the
determination of Net Working Capital of Mercer contained therein. The final
determination of such disputed item(s) by the Independent Accountants shall be
reflected on the Audited Closing Balance Sheet and shall be final and binding
on the parties for all purposes and all references to "Audited Closing Balance
Sheet" elsewhere in this Agreement shall be deemed to refer to the Audited
Closing Balance Sheet as modified by the Independent Accountants. The cost of
retaining the Independent Accountants shall be borne by the disputing party;
provided however, that the non-disputing party shall reimburse the disputing
party for 50% of the cost of the Independent Accountants in the event that such
review results in an increase (if Seller is the disputing party) or decrease
(if Buyer is the disputing party) of more than $25,000 in the Net Working
Capital of Mercer as reflected on the Audited Closing Balance Sheet audited by
Ernst & Young LLP.
(G) POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
Net Working Capital of Mercer as reflected on the Audited Closing Balance Sheet
as finally determined ("FINAL WORKING CAPITAL") is less than the Net Working
Capital of Mercer as reflected on the Preliminary Closing Balance Sheet
("PRELIMINARY WORKING CAPITAL"), then the Purchase Price will be adjusted
downward, on a dollar-for-dollar basis, to reflect the lesser of (i) the
decrease in Final Working Capital from Preliminary Working Capital and (ii) the
sum of (A) the amount, if any, by which Final Working Capital is less than
$3,400,000 and (B) the amount, if any, by which Preliminary Working Capital
exceeded $3,600,000. Conversely, in the event that the Final Working Capital
is more than the Preliminary Working Capital, then the Purchase Price will be
adjusted upward, on a dollar-for-dollar basis, to reflect the lesser of (i) the
increase, if any, in Final Working Capital from Preliminary Working Capital and
(ii) the sum of (A) the amount, if any, by which Final Working Capital exceeds
$3,600,000 and (B) the amount, if any, by which Preliminary Working Capital was
less than $3,400,000. The post-closing adjustment to the Purchase Price, if
any, shall be paid by Seller to Buyer or by Buyer to Seller, as the case may
be, in immediately available funds within fifteen (15) days of delivery of the
Audited Closing Balance Sheet as finally determined.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
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(A) REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller represents
and Warrants to the Buyer that, subject to the specific qualifications and
limitations set forth below, the statements contained in this SECTION 3(a) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this
SECTION 3(a) with respect to itself.
(I) ORGANIZATION OF THE SELLER. The Seller is a corporation
duly organized, validly existing, and in good standing under the laws of
the State of Delaware.
(II) AUTHORIZATION OF TRANSACTION. The Seller has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and this Agreement has been duly
executed and delivered by the Seller. This Agreement constitutes the
valid and legally binding obligation of the Seller, enforceable in
accordance with its terms and conditions, except that (A) such
enforceability may be subject to bankruptcy, insolvency, reorganization,
moratorium or other laws, decisions or equitable principles now or
hereafter in effect relating to or affecting the enforcement of creditors'
rights or debtors' obligations generally, and to general equity principles
and (B) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefore may be
brought (the terms of clause (A) and (B) are sometimes collectively
referred to as the "EQUITABLE EXCEPTIONS"). Except for filings required
by the HSR Act, the Seller need not give any notice to, make any filing
with, or obtain any authorization, consent or approval of any Governmental
Body in order to consummate the transactions contemplated by this
Agreement.
(III) NONCONTRAVENTION. Except for approvals required under
the HSR Act, neither the execution and the delivery of this Agreement by
the Seller, nor the consummation of the transactions contemplated hereby
by the Seller, will (A) violate any Law or Order or other restriction of
any Governmental Body to which the Seller is subject or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any part the right to accelerate, terminate,
modify or cancel, or require any notice under any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest
or other arrangement to which the Seller is a party or by which it is
bound or to which any of its assets is subject.
(IV) BROKER'S FEES. The Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect
to the transactions contemplated by this Agreement for which the Buyer
could become liable or obligated.
(V) ▇▇▇▇▇▇ SHARES. The Seller holds of record and owns
beneficially all of the ▇▇▇▇▇▇ Shares, free and clear of any restrictions
on transfer (other than any restrictions under the Securities Act and
state securities laws), claims, Taxes, Security Interests (other than
those to be removed prior to or concurrently with the Closing pursuant to
SECTION 7(a)(xi)), options, warrants, rights, contracts, calls,
commitments,
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equities, preemptive rights and demands. The Seller is not a party to
any option, warrant, right, contract, call, put or other agreement or
commitment providing for the disposition by the Seller of any capital
stock of ▇▇▇▇▇▇ (other than this Agreement). The Seller is not a party
to any voting trust, proxy agreement, stockholders' agreement or other
understanding (written or oral) with respect to the voting of any capital
stock of ▇▇▇▇▇▇.
(B) REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Seller that the statements contained in this
SECTION 3(b) are correct and complete In all material respects as of the date
of this agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date
of this Agreement throughout this SECTION 3(b).
(I) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of California.
(II) AUTHORIZATION OF TRANSACTION. The Buyer has full corporate
power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder and this Agreement has been duly executed and delivered by the
Buyer. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms and
conditions except for the Equitable Exceptions. Except for filings made
under the HSR Act, the Buyer need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
Governmental Body in order to consummate the transactions contemplated by
this Agreement.
(III) NONCONTRAVENTION. Except for approvals required under
the HSR Act and as set forth on Schedule 3(a)(iii), neither the execution
and the delivery of this Agreement by the Buyer, nor the consummation of
the transactions contemplated hereby by the Buyer, will (A) violate any
Law or Order or other restriction of any Governmental Body to which the
Buyer is subject or any provision of its charter or bylaws or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest
or other arrangement to which the Buyer is a party or by which it is bound
or to which any of its assets is subject and which has a Material Adverse
Effect on the Buyer.
(IV) BROKERS' FEES. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which the Seller could
become liable or obligated.
(V) INVESTMENT. The Buyer is not acquiring the ▇▇▇▇▇▇ Shares
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
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4. REPRESENTATIONS AND WARRANTIES CONCERNING ▇▇▇▇▇▇. The Seller
represents and warrants to the Buyer that, subject to the specific
qualifications and limitations set forth herein, the statements contained in
this SECTION 4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this SECTION 4), except to the extent that such representations
and warranties are expressed, made as of another specified date, and as to
such representation, the same shall be true as of such date and except as set
forth in the Disclosure Schedule delivered by the Seller to the Buyer on the
date hereof (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule may be
updated one or more times prior to the Closing Date; provided that except as
otherwise provided in Section 4(p)(i) any such updated Disclosure Schedule
containing any material changes must be delivered to the Buyer not less than
two business days prior to the date on which the filings required under the
HSR Act are to be made pursuant to SECTION 5(h).
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER. ▇▇▇▇▇▇ is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New Jersey. ▇▇▇▇▇▇ is duly authorized to conduct
business and is in good standing under the laws of the State of Florida and
each other jurisdiction listed on SCHEDULE 4(a) of the Disclosure Schedule,
which jurisdictions constitute all of the jurisdictions in which the nature
of its businesses or the ownership or leasing of its properties requires such
qualification, except where any such failure would not have a Material
Adverse Effect. ▇▇▇▇▇▇ has full corporate power and authority to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it.
(b) CAPITALIZATION. The entire authorized capital stock of ▇▇▇▇▇▇
consists of 1,000 shares of common stock, 10 of which are issued and
outstanding and held by the Seller. None of the ▇▇▇▇▇▇ Shares is held in
treasury. The ▇▇▇▇▇▇ Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the Seller. There
are no outstanding or authorized options, warrants, rights, contracts, calls,
puts, rights to subscribe, conversion rights or other agreements or
commitments to which ▇▇▇▇▇▇ is a party or which are binding upon ▇▇▇▇▇▇
providing for the issuance, disposition or acquisition of any of its capital
stock. There are no outstanding or authorized stock appreciation, phantom
stock, or similar rights with respect to ▇▇▇▇▇▇.
(c) NONCONTRAVENTION. Except as set forth on SCHEDULE 4(c) of the
Disclosure Schedule, neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any Law or Order or other restriction of any Governmental Body to
which ▇▇▇▇▇▇ is subject or any provision of the charter or bylaws of ▇▇▇▇▇▇
or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice under any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest or
other arrangement to which ▇▇▇▇▇▇ is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). Except for the filing under the
HSR Act, ▇▇▇▇▇▇ does not need to give any notice to, make any filing with, or
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obtain any authorization, consent or approval of any Governmental Body in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(d) SUBSIDIARIES. Except as disclosed on SCHEDULE 4(D) of the
Disclosure Schedule, ▇▇▇▇▇▇ has no Subsidiaries and does not control,
directly or indirectly, or have any direct or indirect equity participation
in any Person.
(e) FINANCIAL STATEMENTS. Attached hereto as EXHIBIT A are the
following financial statements (collectively, the "FINANCIAL STATEMENTS") of
▇▇▇▇▇▇: (i) unaudited statement of operations and cash flows for the fiscal
years ended December 3l, 1995 and 1996, (ii) unaudited balance sheet as of
December 31, 1994, 1995 and 1996 (collectively, the Financial Statements
contained in (i) and (ii) are collectively referred to herein as the
"UNAUDITED FINANCIAL STATEMENTS"), (iii) an audited balance sheet and
statement of operations, changes in stockholders' equity and cash flows as of
and for the period commencing January 1, 1997 and ending August 4, 1997
(prior to the acquisition by Seller) and (iv) a draft audited balance sheet
and statement of operations, changes in stockholders' equity and cash flows
as of and for the period commencing August 5, 1997 and ending December 31,
1997 (the "Draft Statements," and collectively with the financial statements
set forth in part (iii), the "MOST RECENT FINANCIAL STATEMENTS"). Except as
set forth on Schedule 4(e) of the Disclosure Schedule, the Most Recent
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, are correct and
complete in all material respects, fairly present the financial condition of
▇▇▇▇▇▇ as of such dates, and are consistent with the books and records of
▇▇▇▇▇▇ (which books and records are correct and complete in all material
respects). Except as set forth on Schedule 4(e) of the Disclosure Schedule,
the Financial Statements for the fiscal years ended December 31, 1995 and
1996 fairly present the financial condition of ▇▇▇▇▇▇ as of such dates, and
are consistent with the books and records of ▇▇▇▇▇▇ (which books and records
are correct and complete in all material respects).
(f) EVENTS SUBSEQUENT TO THE MOST RECENT FINANCIAL STATEMENTS.
Except as set forth on SCHEDULE 4(F) of the Disclosure Schedule, since
December 31, 1997, there has not been any adverse change in the assets,
Liabilities, business, financial condition, operations or results of
operations of ▇▇▇▇▇▇. Without limiting the generality of the foregoing since
that date:
(i) ▇▇▇▇▇▇ has not sold, leased, transferred or assigned any of
its assets, tangible or intangible, other than for a fair consideration in
the Ordinary Course of Business;
(ii) ▇▇▇▇▇▇ has not entered into any contract, lease, sublease,
license or sublicense (or series or related contracts, leases, subleases,
licenses and sublicenses) either involving more than $100,000 or outside
the Ordinary Course of Business;
(iii) ▇▇▇▇▇▇ has not accelerated, terminated, modified or
canceled any contract, lease, sublease, license or sublicense (or series
of related contracts, leases, subleases, licenses and sublicenses)
involving more than $100,000 to which ▇▇▇▇▇▇ is a party or by which it is
bound;
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(iv) no party has notified ▇▇▇▇▇▇ of any acceleration,
termination, modification or cancellation of any Material customer
contract or any contract, agreement, lease, sublease, license or
sublicense (or series of related contracts, leases, subleases, licenses
and sublicenses), involving more than $100,000 to which ▇▇▇▇▇▇ is a party
or by which it is bound;
(v) ▇▇▇▇▇▇ has not made any capital expenditure (or series
of related capital expenditures) either involving more than $62,500
individually or $162,500 in the aggregate, or outside the Ordinary Course
of Business;
(vi) ▇▇▇▇▇▇ has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions) either
involving more than $50,000 individually or $162,500 in the aggregate;
(vii) ▇▇▇▇▇▇ has not delayed or postponed (beyond its normal
practice) the payment of accounts payable and other Liabilities;
(viii) there has been no change made or authorized in the
charter or bylaws of ▇▇▇▇▇▇;
(ix) ▇▇▇▇▇▇ has not experienced any damage, destruction or
loss involving more than $100,000 (whether or not covered by insurance) to
its Property;
(x) ▇▇▇▇▇▇ has not made any loan to, or entered into any
other transaction with, any of its directors, officers and employees
outside the Ordinary Course of Business or involving more than $50,000,
giving rise to any claim or right on its part against the person or on
the part of the person against it;
(xi) ▇▇▇▇▇▇ has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement with any of its full-time staff
employees;
(xii) ▇▇▇▇▇▇ has not granted an increase in the base
compensation of any of its directors, officers and employees outside the
Ordinary Course of Business and as set forth on SCHEDULE 4(F) of the
Disclosure Schedule;
(xiii) ▇▇▇▇▇▇ has not adopted any (A) bonus, (B) profit-
sharing, (C) incentive compensation, (D) pension, (E) retirement,
(F) medical, hospitalization, life, or other insurance, (G) severance or
(H) other plan, contract or commitment for any of its directors, officers
and employees, or modified or terminated any existing such plan, contract
or commitment;
(xiv) ▇▇▇▇▇▇ has not lost and does not have notice of any
potential loss of any significant customer or supplier;
(xv) ▇▇▇▇▇▇ has not changed its accounting, methods or
principles;
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(xvi) ▇▇▇▇▇▇ has not suffered any material shortages of raw
materials used in the production of the Products;
(xvii) ▇▇▇▇▇▇ has not made any material provisions for
inventory markdowns or inventory shrinkage;
(xviii) ▇▇▇▇▇▇ has not made or paid any non-cash dividends or
distributions to Seller whether or not upon or in respect of its capital
stock;
(xix) ▇▇▇▇▇▇ has not redeemed or otherwise acquired any
shares of its capital stock or issued any capital stock or any option,
warrant or right relating thereto or any securities convertible or
exchangeable for any shares of its capital stock; and
(xx) ▇▇▇▇▇▇ has not agreed to do any of the foregoing.
(g) UNDISCLOSED LIABILITIES. ▇▇▇▇▇▇ does not have any Liability
which is individually in excess of $100,000, except for (i) Liabilities set
forth on the face of the Most Recent Financial Statements and (ii) Liabilities
which have arisen after the Most Recent Financial Statements in the Ordinary
Course of Business.
(h) TAX MATTERS. Except as set forth on Schedule 4(h) of the
Disclosure Schedule:
(i) ▇▇▇▇▇▇ has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by ▇▇▇▇▇▇ (whether or not shown on any Tax
Return) have been paid. ▇▇▇▇▇▇ currently is not the beneficiary of any
extension of time within which to file any Tax Return. To Seller's
Knowledge, no claim is currently pending by an authority in a jurisdiction
where ▇▇▇▇▇▇ does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any of
the assets of ▇▇▇▇▇▇ that arose in connection with any failure (or alleged
failure) to pay any Tax.
(ii) Neither the Seller nor any of the officers (or employees
responsible for Tax matters) of ▇▇▇▇▇▇ has received any notice that any
authority intends to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any
Tax Liability of ▇▇▇▇▇▇ either (A) claimed or raised by any authority in
writing or (B) as to which the Seller or ▇▇▇▇▇▇ has Knowledge based upon
personal contact with any agent of such authority. SCHEDULE 4(H) of the
Disclosure Schedule lists all federal, state and local income Tax Returns
filed with respect to ▇▇▇▇▇▇ for taxable periods ended on or after
December 31, 1993 that currently are the subject of an audit.
(iii) ▇▇▇▇▇▇ has not filed a consent under Code Sec. 341(f)
concerning collapsible corporations. ▇▇▇▇▇▇ has not made any payments, is
not obligated to make any payments, nor is a party to any agreement that
under certain circumstances could obligate it to make any payments that
will not be deductible to ▇▇▇▇▇▇ under Code Sec. 280G. ▇▇▇▇▇▇ has not
been a United States real property holding corporation within the meaning
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of Code Sec. 897(c)(2) during the applicable period specified in Code Sec.
897(c)(1)(A)(ii). ▇▇▇▇▇▇ has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Sec. 6662.
▇▇▇▇▇▇ is not a party to any Tax allocation or sharing agreement.
(iv) ▇▇▇▇▇▇ has no liability for Taxes for any Tax period ending
prior to the Closing Date other than Taxes for which there is an accrual
for current taxes reflected on the Most Recent Balance Sheet.
(v) ▇▇▇▇▇▇ has no liability for Taxes of any other person or
entity, has no Tax liability as a successor or transferee, and has no Tax
liability pursuant to Section 1.1502-6 of the Treasury Regulations or
similar provisions of state, local or foreign Tax laws.
(vi) ▇▇▇▇▇▇ has no liability pursuant to any agreement to share,
allocate or reimburse Taxes or Tax benefits.
(vii) There are no "excess loss accounts" or "intercompany
items," within the meaning of Section 1-1502 of the Treasury Regulations,
between ▇▇▇▇▇▇ and any member of the Seller affiliated group.
(i) TANGIBLE ASSETS. SCHEDULE 4(I) of the Disclosure Schedule
includes a true and correct copy of the appraisal of the fixed assets of ▇▇▇▇▇▇
obtained by the Seller at the time it acquired ▇▇▇▇▇▇, which covers all of the
significant fixed assets of ▇▇▇▇▇▇ owned at such time. ▇▇▇▇▇▇ owns or leases
all tangible assets necessary for the conduct of its businesses as presently
conducted. To the Knowledge of the Seller, each such tangible asset is free
from Security Interests (other than Permitted Liens or the Security Interests
to be removed prior to or concurrently with the Closing pursuant to Section
7(a)(xi)) free from material defects (patent and latent), has been maintained
in accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used.
(j) REAL PROPERTY. SCHEDULE 4(J) of the Disclosure Schedule sets
forth all real property owned or leased by ▇▇▇▇▇▇ (the "REAL PROPERTY").
Subject to the Permitted Liens and any Security Interests disclosed on
SCHEDULE 4(J), ▇▇▇▇▇▇ has good and marketable title to, or in the case of
leased Real Property has a valid leasehold interest in, the Real Property. All
leases of Real Property are valid, binding and enforceable in accordance with
their respective terms. ▇▇▇▇▇▇ is not in material default under any such
leases, and to the Seller's Knowledge, there does not exist under any such
lease any material default of any other party or any event which with notice or
lapse of time or both would constitute a material default. To the Seller's
Knowledge, the Real Property is in good operating condition and repair, normal
wear and tear excepted, and is free from any defects that have, or reasonably
could have, a Material Adverse Effect. Except as set forth on SCHEDULE 4(J) of
the Disclosure Schedule, to the Seller's Knowledge, there are no existing
structural defects in any of the Real Property.
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(k) INTELLECTUAL PROPERTY.
(i) Except as set forth on Schedule 4(k) of the Disclosure
Schedule, ▇▇▇▇▇▇ owns or has the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property necessary
for the operation of the business of ▇▇▇▇▇▇ as presently conducted. Each
item of Intellectual Property owned or used by ▇▇▇▇▇▇ immediately prior to
the Closing hereunder will be owned or available for use by ▇▇▇▇▇▇ on
identical terms and conditions immediately subsequent to the Closing
hereunder.
(ii) To the Knowledge of the Seller, ▇▇▇▇▇▇ has not interfered
with, infringed upon, misappropriated or otherwise come into conflict with
any Intellectual Property rights of third parties, and neither the Seller
nor any of the officers (or employees with responsibility for Intellectual
Property matters) of ▇▇▇▇▇▇ has received within the past year any charge,
complaint, claim or notice alleging any such interference, infringement,
misappropriation or violation.
(iii) SCHEDULE 4(K) of the Disclosure Schedule identifies
each patent or trademark, tradename or copyright registration which has
been issued to ▇▇▇▇▇▇ with respect to any of its Intellectual Property,
identifies each pending patent application or application for trademark,
tradename or copyright registration which ▇▇▇▇▇▇ has made with respect to
any of its Intellectual Property, and identifies each license, agreement
or other permission which ▇▇▇▇▇▇ has granted to any third party with
respect to any of its Intellectual Property (together with any
exceptions). Except as identified in Schedule 4(k) of the Disclosure
Schedule, with respect to each item of Intellectual Property that ▇▇▇▇▇▇
owns:
(A) the identified owner possesses all right, title and
interest in and to the item;
(B) the item is not subject to any outstanding Order; and
(C) no charge, complaint, action, suit, proceedings,
hearing, investigation, claim or demand is pending or, to the
Knowledge of the Seller and the officers (and employees with
responsibility for Intellectual Property matters) of ▇▇▇▇▇▇, is
threatened which challenges the legality, validity, enforceability,
use or ownership of the item.
(iv) SCHEDULE 4(K) of the Disclosure Schedule also identifies
each item of Intellectual Property that any third party owns and that
▇▇▇▇▇▇ uses pursuant to license, sublicense, agreement or permission
(other than general commercial software). Except as identified in
SCHEDULE 4(K) of the Disclosure Schedule, with respect to each such item
of used Intellectual Property:
(A) to the Knowledge of Seller, the license, sublicense,
agreement or permission covering the item is legal, valid, binding,
enforceable and in full force and effect, subject to the Equitable
Exceptions;
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(B) to the Knowledge of Seller, the license, sublicense,
agreement or permission will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following
the Closing;
(C) ▇▇▇▇▇▇ is not, and to the Knowledge of the Seller and
officers (and employees with responsibility for Intellectual Property
matters) of ▇▇▇▇▇▇, no other party to the license, sublicense,
agreement, or permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification or acceleration
thereunder; and
(D) to the Knowledge of the Seller and officers (and
employees with responsibility for Intellectual Property matters) of
▇▇▇▇▇▇, no charge, complaint, action, suit, proceedings, hearing,
investigation, claim or demand is pending or is threatened which
challenges the legality, validity or enforceability of the underling
item of Intellectual Property.
(l) WARRANTIES. Except as disclosed on SCHEDULE 4(L) of the
Disclosure Schedule, there is no outstanding action, suit, arbitration or
other proceeding, or claim, demand, demand letter, lien or notice of
noncompliance or violation has been asserted in writing against ▇▇▇▇▇▇ and,
to the Knowledge of the Seller and ▇▇▇▇▇▇, no event or circumstance has
occurred that could reasonably be expected to constitute the basis of any
claim against ▇▇▇▇▇▇ for injury to any person or any property suffered as a
result of the manufacture, distribution or sale of any product or material by
▇▇▇▇▇▇, including any claim arising out of the defective or unsafe nature, or
allegedly defective or unsafe nature, of any such product or material, which
individually or in the aggregate exceeds $162,500. Due to the historically
low warranty claims against the Business, ▇▇▇▇▇▇ has expensed such claims and
has not set aside reserves on its balance sheet included as part of the Most
Recent Financial Statements for all warranty and product liability claims.
(m) CONTRACTS. SCHEDULE 4(M) of the Disclosure Schedule lists the
following contracts, agreements, customer contracts or agreements and other
arrangements (oral or written) to which ▇▇▇▇▇▇ is a party:
(i) any arrangement (or group of related written arrangements)
for the lease of personal property from or to third parties providing
lease payments in excess of $100,000 per annum;
(ii) any arrangement (or group of related written arrangements)
for the purchase or sale of Products, raw materials, commodities, supplies
or other personal property or for the furnishing or receipt of services
which either calls for performance over a period of more than one year
after the Closing Date or involves more than the sum of $100,000;
(iii) any arrangement concerning a partnership or joint
venture;
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(iv) any arrangement requiring noncompetition;
(v) any arrangement involving the Seller and its Affiliates; or
(vi) any other arrangement (or group of related written
arrangements) either involving or remaining outstanding one year after the
Closing Date of more than $100,000 or not entered into in the Ordinary
Course of Business.
The Seller has delivered to the Buyer a correct and complete copy
of each written arrangement (as amended to date) listed in SCHEDULE 4(M) of
the Disclosure Schedule. With respect to each arrangement so listed: (A)
the arrangement is legal, valid, binding, enforceable and in full force and
effect, subject to the Equitable Exceptions; (B) to the Seller's Knowledge,
the arrangement will continue to be legal, valid, binding, enforceable and in
full force and effect, subject to Equitable Exceptions, on identical terms
following the Closing; (C) ▇▇▇▇▇▇ is not, nor to the Knowledge of the Seller,
any other party in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the arrangements; and (D)
▇▇▇▇▇▇ has not, nor to the Knowledge of the Seller, has any other party,
repudiated any provision of any arrangement.
(n) INSURANCE. SCHEDULE 4(N) of the Disclosure Schedule sets forth
an accurate and complete list of all policies of fire, liability, keyman life
insurance, worker's compensation, products liability and other forms of
insurance owned or held by or beneficially for ▇▇▇▇▇▇. All such policies are
in full force and effect, no premiums with respect thereto are past due and no
notice of cancellation or termination has been received by the Seller or ▇▇▇▇▇▇
with respect to any such policy. Neither the Seller nor Mercer has received
any notification that material changes are required in the conduct of the
Business as a condition to the continuation of coverage under or renewal of any
such policy. True, correct and complete copies of such insurance policies have
been made available to the Buyer.
(o) LITIGATION. SCHEDULE 4(O) of the Disclosure Schedule sets forth
each instance in which Mercer (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction or charge or (ii) is a party or, to the
Knowledge of the Seller and Mercer, is threatened to be made a party, to any
charge, complaint, action, suit, proceeding, hearing or investigation of or in
any court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or before any arbitrator.
(p) EMPLOYEES.
(i) SCHEDULE 4(P)(I) of the Disclosure Schedule lists all of
the employees of Mercer currently on the Mercer payroll as of the date of
this Agreement (including those on leaves of absence), which schedule will
be updated at and as of the Closing Date to reflect any employees hired or
terminated prior to the Closing Date ("CURRENT EMPLOYEES").
(ii) To the Knowledge of the Seller, no key employee or full-
time group of employees has any plans to terminate employment with Mercer
(other than
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▇▇▇▇▇▇▇ ▇▇▇▇▇). Except as set forth on SCHEDULE 4(P)(II) of
the Disclosure Schedule, Mercer is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices or other collective
bargaining disputes. To the Knowledge of the Seller, Mercer has not
committed any unfair labor practice.
(q) EMPLOYEE BENEFITS. SCHEDULE 4(Q) of the Disclosure Schedule
lists all Employee Benefit Plans in which any current or former employee of
Mercer participates, whether sponsored by Mercer or an affiliate of Mercer.
Copies of each such plan and related trust agreements, service agreements and
insurance policies and the three (3) most recent annual reports on Internal
Revenue Service ("IRS") Form 5500 for each plan shall be provided to Buyer.
(i) Each Employee Benefit Plan (and each related trust or
insurance contract) substantially complies in form and in operation with
its terms and the applicable requirements of ERISA and the Code.
(ii) To the Knowledge of Seller, all contributions (including
all employer contributions and employee salary reduction contributions)
which are due have been paid to each Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date which
are not yet due have been paid to each Employee Pension Benefit Plan or
accrued in accordance with the past custom and practice of Mercer. All
premiums or other payments which are due for all periods ending on or
before the Closing Date have been paid with respect to each Employee
Welfare Benefit Plan.
(iii) Each Employee Benefit Plan which is an Employee
Pension Benefit Plan intended to be a qualified plan in fact meets the
requirements of a "qualified plan" under Code Sec. 401(a), and Seller
shall provide to Buyer a copy of the most recent IRS determination letter
respecting such plan's qualification.
(iv) No Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially terminated or been
the subject of a Reportable Event as to which notices would be required to
be filed with the PBGC. No proceeding by the PBGC to terminate any
Employee Pension Benefit Plan (other than any Multiemployer Plan) has been
instituted or, to the Knowledge of the Seller and officers (and employees
with responsibility for employee benefits matters) of Mercer, threatened.
(v) There have been no Prohibited Transactions with respect to
any Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any Employee Benefit
Plans. No charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand with respect to the administration or the
investment of the assets of any Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of the Seller and the
officers (and employees with responsibility for employee benefits matters)
of Mercer, threatened. Neither the Seller nor any of the officers (or
employees with responsibility for litigation matters) of
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Mercer has any Knowledge of any Basis for any such charge, complaint,
action, suit, proceeding, hearing, investigation, claim or demand.
Mercer has not incurred, and neither the Seller nor any of the
officers (or employees with responsibility for litigation matters) of Mercer
has any reason to expect that Mercer will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with respect to any
Employee Pension Benefit Plan that Mercer and the Controlled Group of
Corporations which includes Mercer maintains or ever has maintained or to
which any of them contributes, ever has contributed, or ever has been
required to contribute. Mercer does not maintain, nor has it ever maintained
or contributed to, or ever has been required to contribute to any Employee
Welfare Benefit Plan providing health, accident, or life insurance benefits
to former employees, their spouses or their dependents (other than in
accordance with Code Sec. 4980B).
(r) ENVIRONMENT, HEALTH AND SAFETY. Except as disclosed on
SCHEDULE 4(R) of the Disclosure Schedule:
(i) Mercer has been and is in compliance with all Laws
concerning the environment, public health and safety, and employee health
and safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand or notice has been filed or commenced against
it or, to the Knowledge of the Seller, is threatened alleging any failure
to comply with any such Laws.
(ii) Mercer has no Liability (and there is no Basis related to
the past or present operations, properties or facilities of Mercer and its
respective predecessors and Affiliates for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim or
demand against Mercer giving rise to any Liability) under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976, the Federal
Water Pollution Control Act of 1972, the Clean Air Act of 1970, the Safe
Drinking Water Act of 1974, the Toxic Substances Control Act of 1976, the
Refuse Act of 1899, or the Emergency Planning and Community Right-to-Know
Act of 1986 (each as amended), or any other Law or Order of any
Governmental Body, concerning release or threatened release of hazardous
substances, public health and safety, or pollution or protection of the
environment.
(iii) Mercer has no Liability (and Mercer and its
predecessors have not handled or disposed of any substance, arranged for
the disposal of any substance, or owned or operated any property or
facility in any manner that could form the Basis for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand (under any Law) against Mercer giving rise to any
Liability) for damage to any site (including the Real Property), location,
or body of water (surface or subsurface) or for illness or personal
injury.
(iv) Mercer has no Liability under the Occupational Safety and
Health Act, as amended, or any other Law concerning employee health and
safety.
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(v) Mercer has obtained and been in compliance with all of the
terms and conditions of all permits, licenses and other authorizations
which are required under, and has complied with all other, Laws and Orders
of any Governmental Body relating to public health and safety, worker
health and safety, and pollution or protection of the environment,
including laws relating to emissions, discharge, releases or threatened
releases of pollutants, contaminants or chemical, industrial, hazardous or
toxic materials or wastes into ambient air, surface water, ground water or
lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants or chemical, industrial, hazardous or toxic materials or
wastes.
(vi) Mercer has delivered or caused to be delivered to the Buyer
all environmental assessments, reports, audits and other documents in its
possession or under its control that relate to Real Property that Mercer
or any predecessor entity currently occupies or has occupied at any time
in the past in connection with the Business.
(s) LEGAL COMPLIANCE. Mercer has:
(i) complied with all non-environmental Laws. No charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand
or notice has been filed or commenced against Mercer which is currently
pending and alleges any failure to comply with any such non-environmental
Law.
(ii) not violated in any respect or received a notice or charge
asserting any violation of the ▇▇▇▇▇▇▇ Act, the ▇▇▇▇▇▇▇ Act, the ▇▇▇▇▇▇▇▇-
▇▇▇▇▇▇ Act or the Federal Trade Act, each as amended.
(iii) filed in a timely manner all reports, documents, and
other materials it was required to file (and the information contained
therein was correct and complete in all material respects) under all
applicable Laws.
(t) CERTAIN BUSINESS RELATIONSHIPS WITH MERCER. Except as set forth
on SCHEDULE 4(T) of the Disclosure Schedule, neither the Seller nor its
Affiliates has been involved in any business arrangement or relationship with
Mercer within the past twelve (12) months, and neither the Seller nor
Affiliates owns any property or right, tangible or intangible, which is used in
▇▇▇▇▇▇'▇ Business.
(u) BROKERS' FEES. Mercer does not have any Liability or obligation
to pay any fees or commissions to any broker, finder or similar representative
with respect to the transactions contemplated by this Agreement.
(v) DISCLOSURE. To the Knowledge of the Seller and the directors
and officers of Mercer, the representations and warranties contained in this
SECTION 4 as amended, modified and/or supplemented by the Disclosure Schedules
do not contain any untrue statement of a Material fact or omit to state any
Material fact necessary in order to make the statements and information
contained in this SECTION 4 not misleading.
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(w) ACCOUNTS RECEIVABLE. The accounts receivable of Mercer
reflected in the Most Recent Balance Sheet represent sales actually made in the
Ordinary Course of Business, represent valid and enforceable claims, and have
been properly accrued in accordance with GAAP, net of any reserves reflected in
the Most Recent Balance Sheet. Schedule 4(w) of the Disclosure Schedule sets
forth an accurate aging schedule of all accounts receivable reflected in the
Most Recent Balance Sheet.
(x) INVENTORY. As of the date of the Most Recent Financial
Statements, all inventory of Mercer consisted of a quality and quantity
consistent with the past practices of Mercer, net of any reserves reflected in
the Most Recent Balance Sheet. The values reflected on the Most Recent Balance
Sheet of obsolete or substandard items of inventory, as determined by Mercer in
consultation with their accountants, have been written down to realizable
market values or written off, or adequate reserves therefor have been
established, all in accordance with GAAP. There are no claims against Mercer
to return in excess of an aggregate of $50,000 of merchandise by reason of
alleged overshipments, defective merchandise or otherwise, or of merchandise in
the possession of customers under an understanding that such merchandise would
be returnable.
(y) CUSTOMERS AND SUPPLIERS. Schedule 4(y) lists the ten largest
customers of Mercer and the ten largest suppliers of Mercer for the most recent
fiscal year. To the Knowledge of Seller and Mercer, since January 1, 1997,
there has been no material adverse change in the business relationship of
Mercer with any customer or supplier named on Schedule 4(y). To the Knowledge
of Seller and Mercer and other than in the Ordinary Course of Business, no
customer or supplier named on Schedule 4(y) has threatened or expressed an
intention to reduce materially the volume of its purchases from or sales to
Mercer or otherwise materially modify its business relationship with Mercer.
Notwithstanding the foregoing, no representation or warranty is made by Seller
that ▇▇▇▇▇▇'▇ relationship with any customer or supplier will not be affected
by the purchase of Mercer by Buyer.
(z) CERTAIN BUSINESS PRACTICES. To Seller's Knowledge, neither
Mercer nor any of its directors, officers, agents or employees has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or (iii) made any other unlawful payment.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement (including satisfying the closing conditions set forth in SECTION 7
below). In the event that the Buyer notifies the Seller of its desire to
acquire Mercer by means of a reverse triangular merger of Mercer with and into
a wholly-owned Subsidiary of Buyer no less than five (5) business days prior to
the Closing Date, the Parties will cooperate with each other to amend this
Agreement to provide for, and to facilitate, such merger.
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(b) NOTICES AND CONSENTS. The Seller will cause Mercer to give any
notices to third parties, and will cause Mercer to use its reasonable best
efforts to obtain third-party consents, that the Buyer may reasonably request
in connection with the matters pertaining to Mercer disclosed or required to be
disclosed in the Disclosure Schedule. Each of the Parties will take any
additional action (and the Seller will cause Mercer to take any additional
action) that may be necessary, proper or advisable in connection with any other
notices to, filings with, and authorizations, consents, and approvals of
Governmental Bodies, and third parties that he, she or it may be required to
give, make or obtain.
(c) OPERATION OF BUSINESS. Except as contemplated hereby or as may
be incidental to or in furtherance of the transactions contemplated hereby or
as may have been set forth herein or in the Disclosure Schedule, the Seller
will not cause or permit Mercer to engage in any practice, take any action,
embark on any course of inaction or enter into any transaction outside the
Ordinary Course of Business or that would constitute a breach of the
representation and warranty contained in SECTION 4(F) if such action, inaction
or transaction occurred after December 31, 1997 and prior to the date of this
Agreement.
(d) PRESERVATION OF BUSINESS. Except as contemplated hereby or as
may be incidental to or in furtherance of the transactions contemplated hereby
or as may have been set forth herein or in the Disclosure Schedule, the Seller
will cause Mercer to use its best efforts to keep its business and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers and employees.
(e) ACCESS. Only in the event that neither the Buyer nor the
Seller exercised its right to terminate this Agreement as provided in SECTION
9 herein, the Seller will permit, and the Seller will cause Mercer to permit,
representatives of the Buyer to have access at reasonable times, and in a
manner so as not to interfere with the normal business operations of Mercer,
to the headquarters and all other facilities of Mercer, to all books,
records, contracts, Tax records and documents of or pertaining to Mercer and
to all employees, customers and suppliers of Mercer. During the Buyer's
on-site investigation of Mercer, except as otherwise provided herein, the
Buyer shall not discuss any aspects of the operation of Mercer with any
employee of Mercer, and the Buyer shall direct all requests for information
and material only through the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co., unless otherwise agreed
to by the Buyer and the Seller in writing. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. shall
proceed to arrange with the Seller a mutually agreeable time and place at
which the Buyer may conduct interviews with key employees and/or customers of
Mercer mutually agreed to by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. and the Seller. Such
interviews shall be in strict conformity with the format mutually agreed to
by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. and the Seller.
(f) NOTICE OF DEVELOPMENTS. The Seller will give prompt written
notice to the Buyer of any Material development affecting the assets,
Liabilities, business, financial condition, operations, results of operations
or future prospects of Mercer. Each Party will give prompt written notice to
the others of any Material development affecting the ability of the Parties
to consummate the transactions contemplated by this Agreement.
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(g) EXCLUSIVITY. The Seller will not (and the Seller will not
cause or permit Mercer to) (i) solicit, initiate or encourage the submission
of any proposal or offer from any person relating to any (A) liquidation,
dissolution or recapitalization, (B) merger or consolidation, (C) acquisition
or purchase of securities or assets or (D) similar transaction or business
combination involving Mercer or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by an,
person to do or seek any of the foregoing. The Seller will notify the Buyer
immediately if any person makes any proposal, offer, inquiry or contact with
respect to any of the foregoing.
(h) HSR ACT FILING. The Buyer and the Seller will use
commercially reasonable efforts to file or cause to be filed with the FTC and
the DOJ (it being understood that the Buyer will bear the expense of the
filing fee to be paid by the acquiring person), as promptly as practicable
but in no event later than ten (10) Business Days after the execution of this
Agreement, the Notification and Report Form and related material required to
be filed in connection with the transactions contemplated in this Agreement
pursuant to the HSR Act, and to promptly file any additional information
requested by the FTC or the DOJ as soon as practicable after receipt of a
request therefor. In addition, the Buyer shall use its commercially
reasonable efforts to take or cause to be taken all actions necessary, proper
or advisable to obtain any consent, waiver, approval or authorizations
relating to the HSR Act that is required for the consummation of the
transactions contemplated by this Agreement; PROVIDED, HOWEVER, that the
Buyer shall not be obligated hereby to accept any order providing for the
divestiture by the Buyer of such of the assets relating to the Business (or,
in lieu thereof, assets and businesses of the Buyer having an approximate
equivalent value) as are necessary to fully consummate the transactions
contemplated by this Agreement or an order to hold separate such assets and
businesses pending such divestiture.
(i) PLANT CLOSING NOTIFICATION. The Buyer shall be responsible
for providing any notice of layoff or plant closing required with respect to
any manufacturing facility of Mercer pursuant to the Federal Worker
Adjustment and Retraining Notification Act of 1988, any successor federal law
and any applicable state or local plant closing notification statute, for any
such layoffs or plant closings which will commence effective on or subsequent
to the Closing Date.
(j) INTERCOMPANY ITEMS. The Seller shall, as of the date
immediately preceding the Closing Date, by appropriate documentation and
accounting entries, contribute to the paid in capital of Mercer, any
intercompany payables, receivables and/or indebtedness to the Seller arising
prior to the Closing Date.
(k) 1996 AUDIT. Seller shall cause Mercer to cooperate with Buyer
in connection with the audit by KPMG Peat Marwick of ▇▇▇▇▇▇'▇ financial
statements for the year ended (which audit shall be paid for by Buyer), and
as of, December 31, 1996, including causing Mercer to provide Buyer with
access to all related work papers and other documents of Mercer relating to
such audit.
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(l) TRANSITIONAL SERVICES. Prior to the Closing, Buyer and Seller
shall use their best efforts to identify and make appropriate arrangements
for dealing with any transitional issues which may arise as a result of the
purchase of Mercer by Buyer and shall negotiate in good faith to enter into a
Transitional Services Agreement reasonably acceptable to both parties, which
Agreement shall contemplate the provision to Buyer of certain computer,
accounting and similar services and other services relating to the
maintenance of ▇▇▇▇▇▇'▇ Employee Benefit Plans and related arrangements
through December 31, 1998 or accommodations reasonably necessary for the
conduct of ▇▇▇▇▇▇'▇ business for a period of up to six months after the
Closing Date. Buyer shall cause Mercer to reimburse Seller for all actual
costs for such services in accordance with past practices.
(m) FINAL AUDITED FINANCIAL STATEMENTS. On or before March 13,
1998, Seller shall deliver to the Buyer the final audited financial
statements ("FINAL AUDITED FINANCIAL STATEMENTS") covering the period shown
in the Draft Statements.
6. ADDITIONAL COVENANTS. The Parties further covenant and agree as
follows:
(a) GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution
and delivery of such further instruments and documents) as any other Party
reasonable, may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under SECTION 8 below). The Seller acknowledges and agrees that, from and
after the Closing, the Buyer will be entitled to possession of all documents,
books, records, agreements, and financial data of any sort relating to
Mercer; provided that the Seller may retain any copies of the foregoing as
shall be necessary to comply with applicable tax and other laws, regulations
and ordinances.
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action,
suit, proceeding, hearing, investigation, claim or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction on or
prior to the Closing Date involving Mercer, each of the other Parties will
cooperate with him, her or it and his, her or its counsel in the contest or
defense, make available their personnel, and provide such testimony and
access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under SECTION 8 below).
(c) TRANSITION. The Seller will not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of Mercer from maintaining the
same business relationships with Mercer after the Closing for a period of 12
months thereafter as it maintained with Mercer prior to the Closing. The
Seller will refer all customer inquiries relating to ▇▇▇▇▇▇'▇ Business to the
Buyer and/or Mercer from and after the Closing for a period of 12 months
thereafter.
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(d) CONFIDENTIALITY. The Seller will treat and hold as such all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement for a period of two (2)
years from the Closing, and deliver promptly to the Buyer or destroy, at the
request and option of the Buyer, all tangible embodiments (and all copies) of
the Confidential Information which are in its possession. In the event that
the Seller is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand or similar process) to disclose any Confidential
Information, the Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or
waive compliance with the provisions of this SECTION 6(D). If, in the
absence of a protective order or the receipt of a waiver hereunder, the
Seller is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, the Seller may
disclose the Confidential Information to the tribunal; PROVIDED, HOWEVER,
that the Seller shall use its reasonable best efforts to obtain, at the
reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such Portion of the Confidential
Information required to be disclosed as the Buyer shall designate. The
foregoing provisions shall not apply to any Confidential Information which is
generally available to the public immediately prior to the time of disclosure.
(e) ADDITIONAL TAX MATTERS.
(i) Seller shall be responsible for the preparation and filing of
all Seller's federal consolidated income Tax Returns with respect to all
Pre-Closing Periods, which shall include Mercer, and for the payment of all
federal income Taxes with respect to such returns.
(ii) Seller shall be responsible for the preparation and filing of
all state and local Tax Returns of Mercer that are required to be filed on or
before the Closing Date, and for the payment of all Taxes with respect to
such Tax Returns (less the portion of such Taxes that are specifically
accrued as current taxes on Most Recent Financial Statements.) Such Tax
Returns shall be prepared in a manner consistent with prior practice, and
shall utilize accounting methods, elections and conventions that do not have
the effect of distorting the allocation of income or expense between
Pre-Closing Tax Periods and Post-Closing Tax Periods.
(iii) Buyer shall be responsible for the preparation and filing of
all state and local Tax Returns of Mercer that relate to a Pre-Closing Tax
Period and that are required to be filed after the Closing Date. Seller
shall pay Buyer, in immediately available funds, any Taxes that are required
to be paid with such Tax Returns (less the portion of such Taxes that are
specifically accrued as current taxes on Most Recent Financial Statements.)
(iv) Buyer shall be responsible for the preparation and filing of
all Straddle Period Tax Returns with respect to Mercer, and for the payment
of all Taxes with respect to such returns. Seller shall reimburse Buyer, in
immediately available funds, for the portion of any Tax relating to a
Straddle Period that is allocable, in accordance with paragraph (vii) below,
to the pre-Closing portion of such Straddle Period (less the portion of such
Taxes that are specifically accrued as current taxes on Most Recent Financial
Statements.)
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(v) Buyer shall be responsible for the preparation and filing of
all Tax Returns and the payment of all Taxes with respect to Mercer for all
Post-Closing Tax Periods
(vi) To the extent permitted by law, Seller and Buyer shall use
their best efforts to cause any Tax period to close on the Closing Date.
(vii) Taxes payable with respect to a Straddle Period shall be
allocated to the pre-Closing and post-Closing portions of a Straddle Period on
the basis of a closing of the books as of the Closing Date or any other method
agreed upon by Buyer and Seller, except that Taxes imposed on a periodic basis,
such as real and personal property Taxes, shall be prorated based on the number
of days before and after the Closing Date.
(viii) Seller shall pay any stock transfer taxes due as a result
of the sale of the Shares to Buyer pursuant to the transactions contemplated by
this Agreement.
(ix) At Buyer's request, Seller shall join Buyer in making
elections under Section 338(g) and Section 338(h)(10) of the Code and any
state, local and foreign counterparts with respect to Mercer (the "SECTION
338 ELECTIONS"). Seller shall provide to Buyer such information as may be
reasonably requested by Buyer for purposes of determining whether Buyer should
make a Section 338 Election under any state or local law. Seller and Buyer
shall jointly complete and make the Section 338 Elections on the applicable
forms and in accordance with applicable law. Seller shall deliver such forms
and related documents to Buyer at least ninety (90) days prior to the due date
for filing such elections or forms. Buyer shall deliver to Seller at least
forty-five (45) days prior to the due date for filing, such completed forms as
are required to be filed with respect to the Section 338 Elections. Buyer and
Seller shall timely file the Section 338 Elections and any required forms and
documents.
(x) Buyer and Seller shall act reasonably and in good faith to
reach an agreement promptly, but in no event later than ninety (90) days after
the Closing Date, on the allocation of the Purchase Price among the assets of
▇▇▇▇▇▇ for purposes of the Section 338 Elections. If Buyer and Seller are
unable to reach an agreement within such ninety (90) day period, they shall
submit the issue to arbitration by a nationally recognized accounting firm
mutually acceptable to Buyer and Seller, whose determination shall be final and
binding on both parties, and whose expenses shall be shared equally by Buyer
and Seller.
(xi) Seller shall be responsible for the payment of any Taxes of
Seller's affiliated group or ▇▇▇▇▇▇ that result from the Section 338 Elections
(the "SECTION 338 TAXES"). However, to the extent the state and local Taxes
payable by Seller as a result of making Section 338 Elections exceed the state
and local taxes payable by Seller in the absence of Section 338 Elections (such
excess hereinafter referred to as the "Section 338 Delta"), Buyer shall
reimburse Seller for the Section 338 Delta.
(xii) Seller, Buyer and ▇▇▇▇▇▇ shall cooperate in good faith in
(a) preparing and filing all Tax Returns, (b) maintaining and making available
to each other all records necessary in connection with the preparation and
filing of all Tax Returns and the payment of all Taxes and (c) resolving all
disputes and audits with respect to any Tax Returns and Taxes. Buyer
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and Seller recognize that each may need access, from time to time, after the
Closing Date, to certain accounting and Tax records and information held by
the other; therefore, Buyer and Seller agree (A) to retain and maintain Tax
records relating to ▇▇▇▇▇▇ for a period of five (5) years after the Closing
Date, (B) to allow each other and their agents and representatives, at times
and dates mutually acceptable to the parties, to inspect, review and make
copies of such records, such activities to be conducted during normal
business hours and at the requesting party's expense and (C) and to offer the
other parties such records before destroying such records.
(f) COVENANT NOT TO COMPETE. For a period of two (2) years from and
after the Closing Date, the Seller will not, directly or indirectly, as
principal, agent, trustee or through the agency of any corporation,
partnership, association or agent or agency, (i) participate or engage in the
Business existing as of the Closing Date, (ii) service or solicit any of
▇▇▇▇▇▇'▇ business from any customer of ▇▇▇▇▇▇, (iii) request or advise any
customer of ▇▇▇▇▇▇ to withdraw, curtail or cancel such customer's business with
▇▇▇▇▇▇ or (iv) solicit for employment any person employed by ▇▇▇▇▇▇ on the
Closing Date (other than ▇▇▇▇▇▇▇ ▇▇▇▇▇); PROVIDED HOWEVER, that (A) no owner of
less than five percent (5%) of the outstanding stock of any publicly traded
corporation shall, for purposes of this SECTION 6(f), be deemed to engage
solely by reason thereof in any of its businesses and (B) the future
acquisition by the Seller or its Affiliates of any Person or entity engaged in
the business of manufacturing floor coverings or related accessories (other
than specialty chemicals) (herein, a "Competitive Business") shall not be
deemed to violate this SECTION 6(F) if (x) less than thirty percent (30%) of
the total revenues of such acquired entity or Person are derived from the
Competitive Business and (y) ▇▇▇▇▇▇ is given (aa) an option to purchase the
Competitive Business on terms and conditions to be negotiated in good faith by
the parties at a purchase price reasonably related to the portion of the
purchase price of the acquired entity that is related to the Competitive
Business and (bb) a right of first refusal to acquire the Competitive Business
also on terms and conditions to be negotiated in good faith by the parties.
(g) EMPLOYEE BENEFIT PLANS. From and after the Closing Date, the
Buyer shall be the plan sponsor for each and every Employee Benefit Plan which
is not a Welfare Benefit Plan and such other plans, programs, policies and
arrangements of ▇▇▇▇▇▇ and shall assume or retain all related trusts, insurance
contracts, other assets and documents that have been maintained by ▇▇▇▇▇▇ or
the Seller for the benefit of employees or former employees of ▇▇▇▇▇▇ (all of
which plans, trusts, policies, insurance contracts and other assets are set
forth on SCHEDULE 4(Q) of the Disclosure Schedule); PROVIDED, HOWEVER, that
with respect to:
(i) PENSION BENEFITS PROVIDED BY THE SELLER. Prior to the
Closing Date, the Buyer shall have established or designated a defined
retirement plan of Buyer or ▇▇▇▇▇▇ with a Code Section 401(k) arrangement
(the "BUYER'S 401(K) PLAN") and, as soon as practicable after the Closing
Date, the Seller shall transfer to the Buyer's 401(k) Plan all of the
assets and liabilities pertaining to employees and former employees of
▇▇▇▇▇▇ from the Sovereign 401(k) Plan (the "SOVEREIGN 401(K) PLAN"). The
Buyer shall establish the Buyer's 401(k) Plan on terms substantially
equivalent to the Sovereign 401(k) Plan. With respect to notes evidencing
plan loans, the Sovereign 401(k) Plan will assign such notes to the
Buyer's 401(k) Plan. The interests transferred to the Buyer's 401(k) Plan
shall be fully vested effective for periods after the Closing Date or as
otherwise provided pursuant to
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the applicable plan. Current Employees shall cease to make contributions
or have contributions made on their behalf under the Sovereign 401(k)
Plan. The Seller will cause the Sovereign 401(k) Plan to vest fully all
Current Employees in their benefits under such plan, determined as of the
Closing Date.
(ii) WELFARE BENEFITS PROVIDED BY THE SELLER. Effective as of
the Closing Date and through December 31, 1998, Seller shall maintain the
Current Employees of ▇▇▇▇▇▇ who are retained as employees of ▇▇▇▇▇▇ after
the Closing Date on the Welfare Benefits Plans of Seller (as set forth on
Schedule 4(q) of the Disclosure Schedule) without any change in terms of
such Plans. Seller shall ▇▇▇▇ Buyer for the ▇▇▇▇▇▇ employees' share of
premium costs and expenses from the Closing Date through December 31, 1998
pursuant to Seller's normal procedures. Effective as of January 1, 1999,
the Buyer shall establish or designate a plan or plans to provide welfare
benefits (but not retiree medical or life insurance) for ▇▇▇▇▇▇'▇
employees as of that date (collectively, the "BUYER'S WELFARE BENEFITS
PLANS"). The Buyer's Welfare Benefits Plans shall provide benefits that
are reasonably similar to the benefits provided under the Welfare Benefits
Plans of Seller. The Buyer shall cause the Buyer's Welfare Benefits Plans
to waive any waiting period and restrictions or limitations for
preexisting conditions with respect to ▇▇▇▇▇▇ employees. In addition,
effective as of the Closing Date and through December 31, 1998, Seller
shall be responsible for the administration of "COBRA" for any Current
Employee eligible for such benefits on or after the Closing Date and
through December 31, 1998. Effective as of January 1, 1999, the Buyer
shall be responsible for the administration of "COBRA" for any ▇▇▇▇▇▇
employee eligible for such benefits on or after January 1, 1999.
(iii) BACK SERVICE CREDIT. Service of each Current Employee
shall be recognized by the Buyer's pension plans, the Buyer's 401(k) Plan
and the Buyer's Welfare Benefit Plans for all purposes, including, without
limitation, vesting, eligibility for benefits and level of benefits but
not benefit accrual or optional forms of payment.
(h) DISABILITY WORKERS' COMPENSATION. To the extent commercially
feasible, the Buyer and its plans shall assume all responsibility for unpaid
workers' compensation, short-term disability and long-term disability incurred
by a Current Employee after the Closing Date. Any Current Employee on short-
term disability on the Closing Date shall continue short-term disability
coverage under Seller's Plan for the duration of the coverage period.
(i) SEVERANCE POLICY. The Buyer shall establish and maintain, for
the period commencing on the Closing Date and terminating not less than one (1)
year following the Closing Date, a severance policy for ▇▇▇▇▇▇ which provides
severance benefits to the Current Employees who are retained by ▇▇▇▇▇▇
following the Closing Date which are substantially similar to the severance
benefits described on SCHEDULE 6(I) of the Disclosure Schedule; PROVIDED THAT
nothing in this Agreement shall require the Buyer to retain any Current
Employee or prevent the Buyer from terminating any Current Employee at any time
to the extent not inconsistent with applicable Law. The Buyer shall indemnify
the Seller against any and all Adverse Consequences the Seller may suffer after
the Closing Date as a result of Buyer's termination after the Closing Date of
any Current Employee who was retained by ▇▇▇▇▇▇ following the Closing Date.
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(j) COLLECTIVE BARGAINING AGREEMENT. The Buyer agrees to be bound
by the terms and conditions of the collective bargaining agreement covering
employees of ▇▇▇▇▇▇ described on SCHEDULE 4(p)(ii) of the Disclosure Schedule
and to continue to provide any compensation or employee benefits required to be
provided under the terms of ▇▇▇▇▇▇'▇ collective bargaining agreement.
7. CONDITIONS TO OBLIGATIONS TO CLOSING.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction or waiver of the following conditions:
(i) the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and correct in all Material
respects at and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of
its covenants hereunder in all Material respects through the Closing;
(iii) ▇▇▇▇▇▇ shall have procured all necessary third party
consents specified in SECTION 5(B) above;
(iv) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of
any federal, state, local or foreign jurisdiction wherein an unfavorable
judgment order, decree, stipulation, injunction or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation or (C) affect adversely
the right of the Buyer to own, operate or control the ▇▇▇▇▇▇ Shares or
▇▇▇▇▇▇ (and no such judgment order, decree, stipulation, injunction or
charge shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or Materiality or otherwise) to the
effect that each of the conditions specified above in SECTION 7(a)(i)-
(iv) is satisfied in all respects;
(vi) the acquisition by the Buyer of the ▇▇▇▇▇▇ Shares shall
represent one hundred percent (100%) of the issued and outstanding capital
stock of ▇▇▇▇▇▇ and all of the ▇▇▇▇▇▇ Shares shall be free and clear of
any Security Interests or other liens, claims or encumbrances of any
nature whatsoever;
(vii) the Parties and ▇▇▇▇▇▇ shall have received all other
authorizations, consents and approvals of Governmental Bodies including
such authorizations, consents or approvals required under the HSR Act and
set forth in the Disclosure Schedule;
(viii) the Buyer shall have received from counsel to the
Seller an opinion with respect to the matters set forth in EXHIBIT B
attached hereto, addressed to the Buyer and Buyer's financing sources and
dated as of the Closing Date;
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(ix) the Buyer shall have received the resignations, effective
as of the Closing, of (A) each director of ▇▇▇▇▇▇ and (B) each officer of
▇▇▇▇▇▇ designated by the Buyer, in each case prior to the Closing;
(x) no Material Adverse Change shall have occurred in ▇▇▇▇▇▇'▇
Business or its future prospects;
(xi) all funded indebtedness of ▇▇▇▇▇▇ shall have been paid in
full prior to or at the Closing and all Security Interests in the Shares
and in any assets of ▇▇▇▇▇▇ except Permitted Liens shall have been fully
released of record to the satisfaction of the Buyer and all mortgages and
Uniform Commercial Code financing statements covering such funded
indebtedness shall have been terminated or the Buyer shall be reasonably
satisfied that all such Security Interests will be fully released of
record within three (3) days thereafter;
(xii) all appropriate corporate and shareholder authorizations
of ▇▇▇▇▇▇ shall have been obtained;
(xiii) except as set forth on the Disclosure Schedule, since
August 5, 1997, ▇▇▇▇▇▇ shall not have transferred, conveyed, disposed of
and/or sold any of Material assets, except in the Ordinary Course of
Business; and
(xiv) On or before March 13, 1998, Seller shall have
delivered to Buyer the Final Audited Financial Statements, which shall not
change from the Draft Statements except for the allocation of goodwill
amortization and the tax implications related thereto.
The Buyer may waive any condition specified in this SECTION 7(A) if
it executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATIONS OF THE SELLER. Obligations of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction or waiver of the following conditions:
(i) the representations and warranties set forth in
Section 3(b) above shall be true and correct in all Material respects at
and as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all Material respects through the Closing;
(iii) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of
any federal, state, local or foreign jurisdiction wherein an unfavorable
judgment order, decree, stipulation, injunction or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such judgment
order, decree, stipulation, injunction or charge shall be in effect);
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(iv) the Buyer shall have delivered to the Seller a certificate
(without qualification as to knowledge or Materiality or otherwise) to the
effect that each of the conditions specified above in SECTION 702)(i)-(iii)
is satisfied in all respects;
(v) the Parties and ▇▇▇▇▇▇ shall have received all other
authorizations, consents, and approvals of Governmental Bodies including
such authorizations, consents and approvals required under the HSR Act and
set forth in the Disclosure Schedule;
(vi) the Seller shall have received from counsel to the Buyer
an opinion with respect to the matters set forth in EXHIBIT C attached
hereto, addressed to the Seller and dated as of the Closing Date;
(vii) the Buyer shall have delivered to the Seller a
certificate of Buyer addressed to ▇▇▇▇▇▇▇ Inc. pursuant to which Buyer
agrees to be bound by the provisions of Section 8.4(a)(viii) of that
certain Stock Purchase Agreement dated May 22, 1997, as amended, among
▇▇▇▇▇▇▇ Inc., Seller and Sovereign Specialty Chemicals, L.P.; and
(viii) all actions to be taken by the Buyer in connection
with the consummation of the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this SECTION 7(b) if
it executes a writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACH OF THIS AGREEMENT.
(a) SURVIVAL. All of the representations and warranties of the
Seller contained in SECTION 4 above (other than the representations and
warranties of the Seller contained in SECTIONS 4(b), (h), (r), (u) and (z)
above) shall survive the Closing hereunder (even if the Buyer knew or had
reason to know of any misrepresentation or breach of warranty at the time of
the Closing) and continue in full force and effect until the 90th day after
receipt by the Buyer of audited financial statements of ▇▇▇▇▇▇ for the fiscal
year ending December 31, 1998, but in no event later than June 30, 1999. The
representation and warranty of the Seller contained in SECTION 4(r) shall
survive the Closing hereunder (even if the Buyer knew or had reason to know
of any misrepresentation or breach of warranty at the time of the Closing)
and continue in full force and effect until the 90th day after receipt by the
Buyer of audited financial statements of ▇▇▇▇▇▇ for the fiscal year ending
December 31, 1999, but in no event later than June 30, 2000. The other
representations, warranties, and covenants of the Parties contained in this
Agreement (including the representations and warranties of the Seller
contained in SECTION 3(a) and SECTIONS 4(b), (h), (u) and (z) above and the
representations and warranties of the Buyer contained in SECTION 3(b) above)
shall survive the Closing (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty or covenant at the time
of the Closing) and continue in full force and effect until the expiration of
the applicable statute of limitations.
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(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(i) In the event the Seller breaches any of its
representations, warranties, agreements and covenants contained herein
(other than those contained in SECTION 3(A) above), and provided that the
particular representation, warranty, agreement or covenant survives the
Closing and that the Buyer makes a written claim for indemnification
against the Seller pursuant to SECTION 10(G) below within the applicable
survival period, then the Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Buyer may suffer after the end of the applicable
survival period; PROVIDED THAT the Buyer asserted its claim for
indemnification prior to the end of the applicable survival period)
resulting from, arising out of, relating to, in the nature of or caused by
the breach; PROVIDED, HOWEVER, that the Seller shall not have any
obligation to indemnify the Buyer from and against any Adverse
Consequences resulting from, arising out of, relating to, in the nature of
or caused by the breach of any representation or warranty of the Seller
contained in SECTION 4 above (A) until the Buyer has suffered by reason of
any breaches aggregate losses in excess of a $250,000 threshold (at which
point the Seller will be obligated to indemnify the Buyer from and against
all aggregate losses in excess of $25,000) and (B) if the Seller has
already paid any claims for indemnification pursuant to this
Section 8(b)(i) in excess of $5,000,000 (or the Purchase Price, as
adjusted, in the case of Sections 4(b), (h), and (u)) individually or in
the aggregate (after which point the Seller shall have no obligation to
indemnify the Buyer from and against further such Adverse Consequences).
Notwithstanding anything herein to the contrary, it is understood and
agreed that the disclosures relating to environmental matters on
Schedule 4(r) are included herein for informational purposes only and
shall not be deemed to qualify or otherwise alter, affect or limit the
representations and warranties made by the Seller in Section 4(r) hereof
(and any purported breach of the representation and warranty contained in
Section 4(r) shall be tested without regard to such disclosures relating
to environmental matters on Schedule 4(r) for purposes of Section 8(b)).
Notwithstanding anything herein to the contrary, it is understood and
agreed that Seller will not be liable to Buyer for any breach of the
representations and warranties contained in Sections 4(w) and 4(x) above
to the extent that an appropriate adjustment to ▇▇▇▇▇▇'▇ accounts
receivables or inventory entries to the Net Working Capital of ▇▇▇▇▇▇ at
Closing has been made.
(ii) In the event any Seller breaches any of its representations
and warranties contained in SECTION 3(A) herein and provided that the
Buyer makes a written claim for indemnification against such Seller
pursuant to SECTION 10(G) below within the applicable survival period,
then the Seller agrees to indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences the Buyer may suffer after the end of the applicable survival
period; PROVIDED THAT the Buyer asserted its claim for indemnification
prior to the end of the applicable survival period) resulting from,
arising out of, relating to, in the nature of or caused by the breach;
PROVIDED, HOWEVER, that the Seller shall not have any obligation to
indemnify the Buyer from and against any Adverse Consequences resulting
from, arising out of, relating to or caused by the breach
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of any representation or warranty of the Seller contained in SECTION 3(a)
if the Seller has already paid any claims for indemnification pursuant to
this SECTION 8(b)(ii) in excess of the Purchase Price, as adjusted.
(iii) The Seller agrees to indemnify the Buyer from and
against the entirety of any brokerage fees or investment banking
commissions due by the Seller or ▇▇▇▇▇▇ by reason of the transactions
contemplated by this Agreement.
(iv) Seller shall indemnify Buyer and ▇▇▇▇▇▇ for (A) breaches
of any representations and warranties in Section 4(h)(iv), (v) and (vi),
(B) all liability for Taxes of the Seller and its subsidiaries, including
▇▇▇▇▇▇, for all Pre-Closing Tax Periods and for the portion of all
Straddle Periods that ends on the Closing Date, (C) all Section 338 Taxes
other than Section 338 Delta and (D) all liability for reasonable legal
and accounting fees and expenses incurred with respect to any item
indemnified pursuant to clauses (A), (B) and (C) above. The
indemnification obligations of the parties set forth in this subsection
(iv) shall survive until the expiration of the applicable statute of
limitations relating to the Taxes that are the subject of the
indemnification obligation.
(v) The Seller shall be liable for, and hereby agrees to
indemnify, the Buyer for and all liability associated, directly or
indirectly, with the stay-on bonuses.
(vi) Seller shall be liable for, and hereby agrees to indemnify,
subject to the dollar limitations of Section 8(b)(i), the Buyer, its
successors, and successors in interest, from and against the entirety of
any Adverse Consequences the Buyer, its successors, and successors in
interest may suffer resulting from, arising out of, or relating to
liability attributable to ▇▇▇▇▇▇▇ Inc. or any of its affiliates in respect
to any contamination of the Real Property or facility thereon with
hazardous materials, the existence, storage or presence of hazardous
materials in, on or under the facility or the buildings, structures and
all other improvements on any portion of such Real Property or the
emission, disposal, deposit, release or discharge of hazardous materials
(whether on or off such Real Property or facility).
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER. In the
event the Buyer breaches any of its representations, warranties and covenants
contained herein, and provided that the particular representation, warranty or
covenant survives the Closing and that the Seller make a written claim for
indemnification against the Buyer pursuant to SECTION 10(g) below within the
applicable survival period, then the Buyer agrees to indemnify the Seller from
and against the entirety of any Adverse Consequences the Seller may suffer
through and after the date of the claim for indemnification, (including any
Adverse Consequences the Seller may suffer after the end of the applicable
survival period) resulting from, arising out of, relating to, in the nature of
or caused by the breach; PROVIDED, HOWEVER, that the Buyer shall not have any
obligation to indemnify the Seller from and against any Adverse Consequences
resulting from, arising out of, relating to or caused by the breach of any
representation or warranty of the Buyer contained in SECTION 3(b) if the Buyer
has already paid any claims for indemnification pursuant to this SECTION 8(c)
in excess of the Purchase Price, as adjusted. In addition, Buyer shall
indemnify Seller for (A) all liability for Taxes of the Buyer and its
subsidiaries, including ▇▇▇▇▇▇, for all Post-
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Closing Tax Periods and for the portion of all Straddle Periods after the
Closing Date, (B) all Section 338 Delta and (C) all liability for reasonable
legal and accounting fees and expenses incurred with respect to any item
indemnified pursuant to clauses (A) and (B) above. The indemnification
obligation of Buyer set forth in the previous sentence shall survive until
the expiration of the applicable statute of limitations relating to the Taxes
that are the subject of the indemnification obligation.
(d) MATTERS INVOLVING THIRD PARTIES. If any third party shall
notify any Party (the "INDEMNIFIED PARTY") with respect to any matter which
may give rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this SECTION 8, then the Indemnified Party shall
notify in writing each Indemnifying Party thereof promptly; PROVIDED,
HOWEVER, that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any liability or
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is damaged and prejudiced from adequately defending such claim.
In the event any Indemnifying Party notifies the Indemnified Party within 30
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, (i) the Indemnifying
Party will defend the Indemnified Party against the matter with counsel of
its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and (iii) the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the matter without the written
consent of the Indemnifying Party (not to be withheld unreasonably). In the
event no Indemnifying Party notifies in writing the Indemnified Party within
thirty (30) days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, however, the
Indemnified Party may defend against or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate. At
any time after commencement of any such action, any Indemnifying Party may
request an Indemnified Party to accept a bona fide offer from the other
Party(ies) to the action for a monetary settlement payable solely by such
Indemnifying Party (which does not burden or restrict the Indemnified Party
nor otherwise prejudice him or her) whereupon such action shall be taken
unless the Indemnified Party determines that the dispute should be continued,
the Indemnifying Party shall be liable for indemnity hereunder only to the
extent of the lesser of (A) the amount of the settlement offer or (B) the
amount for which the Indemnified Party may be liable with respect to such
action. In addition, the Party controlling the defense of any third party
claim shall deliver or cause to be delivered, to the other Party copies of
all correspondence, pleadings, motions, briefs, appeals or other written
statements relating to or submitted in connection with the defense of the
third party claim, and timely notices of, and the right to participate in (as
an observer) any hearing or other court proceeding relating to the third
party claim.
(e) DETERMINATION OF LOSS. The Parties shall make appropriate
adjustments for Tax benefits and insurance proceeds (reasonably certain of
receipt and utility in each case) in determining the amount of any Adverse
Consequence or loss for purposes of this SECTION 8.
(f) EXCLUSIVE REMEDY. Except as set forth in SECTION 8(h), the
Parties acknowledge and agree that the foregoing indemnification provisions
in this SECTION 8 shall be the exclusive remedy of the Parties for any breach
of the representations and warranties of the Parties contained in SECTION 3
or SECTION 4 of this Agreement.
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(g) PAYMENT. The Indemnifying Parties shall promptly pay to the
Indemnified Party as may be entitled to indemnity hereunder in cash the
amount of any Adverse Consequences to which such Indemnified Party may become
entitled to by reason of the provisions of this Agreement.
(h) RESERVATION AND NONWAIVER OF RIGHTS AND REMEDIES.
Notwithstanding any other provision of this Agreement, the Parties reserve,
and this Agreement is without prejudice to, any rights or remedies the
Parties have or may have against each other under any state or federal
statutory or common law.
(i) ARBITRATION WITH RESPECT TO CERTAIN INDEMNIFICATION MATTERS.
The Parties agree to submit to arbitration, in accordance with these
provisions, any disputed claim or controversy arising from or related to the
alleged breach of this Agreement or any disputed indemnification claim made
pursuant to this SECTION 8. The Parties further agree that the arbitration
process agreed upon herein shall be the exclusive means for resolving all
disputes made subject to arbitration herein, but that no arbitrator shall
have authority to expand the scope of these arbitration provisions. Any
arbitration hereunder shall be conducted under the procedures of the American
Arbitration Association (AAA). Either Party may invoke arbitration
procedures herein by written notice for arbitration containing a statement of
the matter to be arbitrated. The Parties shall then have fourteen (14) days
in which they may identify a mutually agreeable, neutral arbitrator who, in
the case of any arbitration the subject matter of which is related to
accounting matters, shall have extensive knowledge of accounting matters.
After the fourteen (14) day period has expired, the Parties shall prepare and
submit to the AAA a joint submission, with each Party to contribute half of
the appropriate administrative fee. In the event the Parties cannot agree
upon a neutral arbitrator within fourteen (14) days after written notice for
arbitration is received, their joint submission to the AAA shall request a
panel of three arbitrators who are practicing attorneys with professional
experience in the field of corporate law, and the Parties shall attempt to
select an arbitrator from the panel according to AAA procedures. Unless
otherwise agreed by the Parties, the arbitration hearing shall take place in
Chicago, Illinois, at a place designated by the AAA. All procedures
hereunder shall be confidential. Each Party shall be responsible for its
costs incurred in any arbitration, and the arbitrator shall not have
authority to include all or any portion of said costs in an award, regardless
of' which Party prevails. The arbitrator may include equitable relief. Any
arbitration awarded shall be accompanied by a written statement containing a
summary of the issues in controversy, a description of the award, and an
explanation of the reasons for the award. The arbitration will be subject to
the following conditions:
(i) that each party shall be entitled to discovery pursuant to
the Federal Rules of Civil Procedure and Federal Rules of Evidence;
(ii) that evidence shall be competent only if it is admissible
in evidence, under the Federal Rules of Civil Procedure and Federal Rules
of Evidence; and
(iii) that the losing Party shall pay the reasonable legal
fees and costs of the prevailing Party, as shall be determined by the
arbitrator.
35
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(j) ADJUSTMENT TO PURCHASE PRICE. Any payment under this Section 8
shall be treated for tax purposes as an adjustment of the Purchase Price to the
extent such characterization is proper and permissible under relevant Tax
authorities, including court decisions, statutes, regulations and
administrative promulgations.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach of any representation, warranty or covenant contained
in this Agreement and such breach has not been cured within fifteen (15)
days of written notice thereof, and the Seller may terminate this
Agreement by giving written notice to the Buyer at any time prior to the
Closing in the event the Buyer is in breach of any representation,
warranty or covenant contained in this Agreement and such breach has not
been cured within fifteen (15) days of written notice thereof;
(iii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing if the
Closing shall not have occurred on or before April 30, 1998 by reason of
the failure of any condition precedent under SECTION 7(a) hereof (unless
the failure results primarily from the Buyer itself breaching any
representation, warranty or covenant contained in this Agreement); or
(iv) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing if the Closing shall
not have occurred on or before April 30, 1998 by reason of the failure of
any condition precedent under SECTION 7(b) hereof (unless the failure
results primarily from the Seller itself breaching any representation,
warranty or covenant contained in this Agreement).
Nothing contained in this SECTION 9(a) shall alter, affect, modify or
restrict either Parties' rights to rely on and/or seek indemnification for a
breach of any of the representations and warranties and/or conditions or
covenants of any of the Parties contained in this Agreement.
(b) EFFECT OF TERMINATION. If either the Buyer or the Seller
terminates this Agreement pursuant to SECTION 9(a) above, all obligations of
the Parties hereunder shall terminate without any Liability of any Party to any
other Party.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND ANNOUNCEMENTS. Except as may be required by
applicable securities laws or stock exchange requirements, no Party shall issue
any press release or announcement relating to the subject matter of this
Agreement prior to, at or about the Closing
36
42
without the prior written approval of the Buyer and the Seller, which
written approval will not be unreasonably withheld; PROVIDED, HOWEVER, that
any Party may make any public disclosure it believes in good faith is
required by law or regulation (in which case the disclosing Party will advise
the other Parties prior to making the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements or representations by or among
the Parties, written or oral, that may have related in any way to the subject
matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his, her or its rights, interests or obligations hereunder without the
prior written approval of the Buyer and the Seller; PROVIDED, HOWEVER, that the
Buyer may (i) assign any or all of its rights and interests hereunder to a
wholly-owned Subsidiary and (ii) assign its rights to indemnity hereunder as
additional collateral to its lenders.
(e) FACSIMILE/COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. A facsimile,
telecopy or other reproduction of this Agreement may be executed by one or more
parties hereto, and an executed copy of this Agreement may be delivered by one
or more parties hereto by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be considered valid,
binding and effective for all purposes. At the request of any Party hereto,
all parties hereto agree to execute an original of this Agreement as well as
any facsimile, telecopy or other reproduction hereof.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly given if (and then
two Business Days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
37
43
If to ▇▇▇▇▇▇ or the Seller:
C/O Sovereign Specialty Chemicals, Inc.
▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Financial Officer
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyer:
▇▇▇▇▇ Industries, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President and Chief Executive Officer
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇.▇. ▇▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Partner
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
38
44
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, facsimile, ordinary mail or electronic
mail), but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is
received by the individual for whom it is intended. Any Party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in the
manner herein set forth.
(h) SUBMISSION TO JURISDICTION. This Agreement and the rights and
obligations of the Seller and the Buyer hereunder shall be construed in
accordance with and be governed by the laws (and not the conflict of laws) of
the State of Delaware. Except as provided in SECTION 8(i), any legal action
or proceeding against the Seller with respect to this Agreement may be
brought and enforced in a federal or state court located in the Northern
District of Illinois, and by execution and delivery of this Agreement, each
of the Seller and the Buyer hereby irrevocably accepts for itself and in
respect of its property, generally, irrevocably and unconditionally, the
jurisdiction of the aforesaid courts. Each of the Seller and the Buyer agree
that a judgment, after exhaustion of all available appeals, in any such
action or proceedings shall be conclusive and binding upon them, and may be
enforced in any other jurisdiction by a suit upon such judgment, a certified
copy of which shall be conclusive evidenced of this judgment. The Seller
hereby irrevocably designates, appoints and empowers CT Corporation System,
with offices on the date hereof at ▇▇▇ ▇. ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, so long as this Agreement is outstanding, as its designee, appointee
and Agent with respect to any action or proceeding to receive, accept and
acknowledge for and on its behalf, and in respect of its property, service of
any mid all legal process, summons, notices and documents which may be served
in any such action or proceeding and agree that the failure of any such agent
to give any advice or any service of process to the Seller shall not impair
or affect the validity of such service or of any judgment based thereon. If
for any reason such designee, appointee and agent shall cease to be available
to act as such, the Seller agree to designate a new designee, appointee and
agent in the State of Illinois on the terms and for the purposes of this
provision satisfactory to the Buyer. Each of the Seller and the Buyer
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the
Seller or Buyer, as the case may be, at its address set forth in SECTION
10(g) hereof, such service to become effective 30 days after such mailing.
Nothing herein shall affect the right of the Buyer to serve process or to
commence legal proceedings or otherwise proceed against the Seller in any
other manner permitted by law. Each of the Seller and the Buyer hereby
waives irrevocably, to the fullest extent permitted by law, any objection to
the laying of venue in Chicago, Illinois or any claim of inconvenient forum
in respect of any such action in Chicago, Illinois to which it might
otherwise now or hereafter be entitled in any actions arising out of or based
on this Agreement.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
39
45
(j) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction. If the final judgment
of a court of competent jurisdiction declares that any term or provision
hereof is invalid or unenforceable, the Parties agree that the court making
the determination of invalidity or unenforceability shall have the power to
reduce the scope, duration or area of the term or provision, to delete
specific words or phrases or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be appealed.
(k) EXPENSES. Each of the Parties and ▇▇▇▇▇▇ will bear his, her
or its own costs and expenses (including legal fees and expenses and
investment banking fees) incurred in connection with this Agreement and the
transactions contemplated hereby. Except as paid out of cash of ▇▇▇▇▇▇ prior
to the Closing Date, the Seller acknowledges and agrees that ▇▇▇▇▇▇ has not
borne or will bear any of the Seller's costs and expenses (including any of
its legal fees and expenses and investment banking fees or liability for (or
otherwise associated with) stay-on bonuses) in connection with this Agreement
or any of the transactions contemplated hereby.
(l) CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against any
Party. Any reference to any federal, state, local or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The Parties intend that
each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty or covenant relating to the same subject matter as any other
representation, warranty or covenant (regardless of the relative levels of
specificity) which the Party has not breached, it shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty or covenant.
(m) INCORPORATION OF EXHIBITS, ANNEXES AND SCHEDULES. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(n) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter, in addition to any other
remedy to which they may be entitled, at law or in equity.
40
46
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
BUYER:
▇▇▇▇▇ INDUSTRIES, INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------
Title: PRESIDENT & CEO
------------------------
▇▇▇▇▇▇:
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Title: CHAIRMAN
------------------------
SELLER:
SOVEREIGN SPECIALTY CHEMICALS, INC.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Title: CHAIRMAN, PRESIDENT AND CEO
------------------------
41
47
SCHEDULE 4(c)
AUTHORITY, APPROVALS AND CONSENTS
1. Consent of RTC Properties, Inc. under the Agreement of Lease dated
December 1, 1988 between RTC Properties, Inc. and ▇▇▇▇▇▇.*
- Extension and First Amendment of Lease dated January 13, 1994 between
RTC Properties, Inc. and ▇▇▇▇▇▇.
- Extension and Second Amendment of Lease dated January 23, 1995 between
RTC Properties, Inc. and ▇▇▇▇▇▇.
- Extension and Third Amendment of Lease dated March 26, 1997 between
RTC Properties, Inc. and ▇▇▇▇▇▇.
2. Consent of the Childs Family Trust u/t/a and ▇.▇. ▇▇▇▇▇▇▇ Family Trust
u/t/a under the Standard Industrial/Commercial Single-Tenant Lease-Gross
dated June 22, 1994 between The Childs Family Trust u/t/a of April 30, 1981
and The ▇.▇. ▇▇▇▇▇▇▇ Family Trust u/t/a of March 3, 1981 dba LANDCO and
▇▇▇▇▇▇.*
3. Consent of Chase Manhattan Bank pursuant to that certain Amended and
Restated Credit Agreement dated August 5, 1997 pursuant to which ▇▇▇▇▇▇ is
a party.
GENERAL
Amendments to or filings with respect to permits may have to be made as a
result of consummation of the Closing.
48
SCHEDULE 4(d)
SUBSIDIARIES
▇▇▇▇▇▇ Products Company, Inc. owns one (1) share of Pine ▇▇▇▇▇▇▇ Golf Estates,
Inc./Stock Certificate NO. 1445 issued April 29, 1986. This share is owned in
connection with a country club membership.
49
SCHEDULE 4(e)
EXCEPTIONS TO FINANCIAL STATEMENTS
The Financial Statements fairly present the financial condition of ▇▇▇▇▇▇
except as set forth below:
1. The Most Recent Financial Statements (the period from August 5,
1997 thorough December 31, 1997) which have been prepared in accordance with
GAAP may not be consistent with prior periods.
2. The Most Recent Financial Statements have been prepared on
Sovereign's basis of accounting in accordance with GAAP. However, the Financial
Statements prior to August 5, 1997 (i.e., during the ownership by ▇▇▇▇▇▇▇ PLC)
(the "▇▇▇▇▇▇▇ Financial Statements"), were accounted for on ▇▇▇▇▇▇▇ PLC's basis
of accounting (i.e., based on ▇▇▇▇▇▇▇ PLC's cost of its acquisition) and
reflecting ▇▇▇▇▇▇▇ PLC's accounting policies and procedures.
3. The information contained in the ▇▇▇▇▇▇▇ Financial Statements was
prepared based on ▇▇▇▇▇▇'▇ internal accounting records and do not include (i)
United States/United Kingdom GAAP adjustments and (ii) push-down accounting for
goodwill, debt and income taxes.
4. Certain of the expenses recognized by ▇▇▇▇▇▇ as allocated by
▇▇▇▇▇▇▇ PLC in the ▇▇▇▇▇▇▇ Financial Statements may or may not reflect the
true operating expenses that ▇▇▇▇▇▇ would have incurred had it operated as a
stand-alone entity during such time periods.
50
SCHEDULE 4(f)
CERTAIN EVENTS
4(e)(ii) Bayshore Vinyl Compounds Inc. supply contract for vinyl dated
January 1, 1998.
4(e)(iii) Termination of contract with AlphaGary Corporation pursuant to
settlement letter dated February 4, 1998.
51
SCHEDULE 4(h)
TAX MATTERS
1. Prior to August 5, 1997, ▇▇▇▇▇▇ was included in the consolidated federal
income tax returns filed by the group of ▇▇▇▇▇▇▇ Inc. Prior to January 1,
1996, ▇▇▇▇▇▇ was included in an affiliated group filing consolidated
federal income tax returns of which Evode U.S.A., Inc. was the common
parent (the "EVODE GROUP").
2. The Evode Group's federal income tax returns have been audited through the
period ending December 31, 1993. Amended California, Florida, New Jersey,
and North Carolina state income tax returns reflecting those adjustments
are being prepared for ▇▇▇▇▇▇ for the year ended October 31, 1992.
3. The statute of limitations for ▇▇▇▇▇▇▇ Inc.'s consolidated federal tax
return for the year ended December 31, 1993 has been extended to
December 31, 1997.
52
SCHEDULE 4(j)
REAL PROPERTY
OWNED BY ▇▇▇▇▇▇
1. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
LEASED BY ▇▇▇▇▇▇
1. Standard Industrial/Commercial Single-Tenant Lease-Gross dated June
22, 1994 between The Childs Family Trust u/t/a of 4/30/81 and The ▇.▇.
▇▇▇▇▇▇▇ Family Trust u/t/a of 3/5/81 dba LANDCO and ▇▇▇▇▇▇.
2. Agreement of Lease dated December 1, 1988 between RTC Properties, Inc.
and ▇▇▇▇▇▇.
- Extension and First Amendment of Lease dated January 13, 1994
between RTC Properties, Inc. and ▇▇▇▇▇▇.
- Extension and Second Amendment of Lease dated January 23, 1995
between RTC Properties, Inc. and ▇▇▇▇▇▇.
- Extension and Third Amendment of Lease dated March 27, 1997
between RTC Properties, Inc. and ▇▇▇▇▇▇.
53
SCHEDULE 4(k)
INTELLECTUAL PROPERTY
PATENTS:
None.
TRADEMARKS
- DOCKSIDERS & DESIGN
US Trademark Registration No. 1,372,591
Registered November 26, 1985
Expires November 26, 2005
- MAXXI-TREAD
US Trademark Registration No. 1,355,586
Registered August 20, 1985
Expires August 20, 2005
- ▇▇▇▇▇▇ FRICTION GRIP
US Trademark Registration No. 861,475
Registered December 3, 1968
Renewed September 19, 1989
- ▇▇▇▇▇▇ & DESIGN
US Trademark Registration No. 1,810,789
Registered December 14, 1993
Expires December 14, 2003
- ▇▇▇▇▇▇
US Trademark Registration No. 1,851,484
Registered August 30, 1994
Expires August 30, 2004
- MIRROR-FINISH
US Trademark Registration No. 1,782,795
Registered July 20, 1993
Expires July 20, 2003
54
- RUBBERLYTE
US Trademark Registration No. 1,524,506
Registered February 14, 1989
Expires February 14, 2009
- RUBBERMYTE
US Trademark Registration No. 1,641,500
Registered July 23, 1991
Expires July 23, 2001
- UNICOLOR
US Trademark Registration No. 1,829,424
Registered April 5, 1994
Expires April 5, 2004
LICENSES
- Pursuant to the Tamms Supply Agreement dated March 4, 1997, ▇▇▇▇▇▇ granted
Tamms Acquisition Corporation a royalty-free license to use the polymer and
know-how to manufacture certain waterstop products.
- Pursuant to the Segue Manufacturing, Distribution and Sales Sublicensing
Agreement dated November 5, 1997, Segue, Inc. granted ▇▇▇▇▇▇ a sublicense
to manufacture, distribute, sell and export the Step Loc II carpet base.
- Pursuant to the License Agreement dated December 5, 1997 with Future
Industries Corporation, Future licensed to ▇▇▇▇▇▇ the right to manufacturer
and sell flexible transition mouldings.
55
SCHEDULE 4(l)
WARRANTIES
None. See attached for a description of warranty
claims against ▇▇▇▇▇▇ in the aggregate amount of $34,460.
56
SCHEDULE 4(m)
MATERIAL CONTRACTS
1. Supply Agreement dated March 4, 1997 between ▇▇▇▇▇▇ and Tamms Acquisition
Corporation.
2. In connection with finding a buyer for ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ plc and Seller
entered into various confidentiality agreements with potential buyers.
Although these agreements are not in the name of ▇▇▇▇▇▇, Seller has the
right and will cause ▇▇▇▇▇▇▇ plc to reasonably cooperate with ▇▇▇▇▇▇ at
▇▇▇▇▇▇'▇ expense in enforcing such agreements for the benefit of ▇▇▇▇▇▇.
3. The Biltrite Corporation Contract dated December 14, 1994 for the supply to
▇▇▇▇▇▇ of Private-label rubber stamp stair treads products.
4. Master Truck Leases with ▇▇▇▇▇ Rental Systems and ▇▇▇▇▇▇▇ Leasing Corp.
5. Bayshore Vinyl Compounds Inc. supply contract to ▇▇▇▇▇▇ for PVC Compound.
6. Purchase Order with OSI Sealants, Inc., an affiliate of ▇▇▇▇▇▇.
7 Undertaking dated August 5, 1997 by ▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇▇▇ Industries, Inc.
and ▇▇▇▇▇▇▇ Construction Chemicals North America, Inc. in favor of ATO
▇▇▇▇▇▇▇ ▇.▇.
8. Segue Manufacturing, Distribution and Sales Sublicensing Agreement dated
November 5, 1997, between Segue, Inc. and ▇▇▇▇▇▇.
9. Supply Agreement dated April 21, 1997 between American Biltrite (Canada)
Ltd. and ▇▇▇▇▇▇.
10 Non-Firm Electric Service Agreement dated May 20, 1996, between Florida
Power Corporation and ▇▇▇▇▇▇.
11. StarNet Sales Agreement dated December 5, 1996, between StarNet Commercial
Flooring, Inc. and ▇▇▇▇▇▇.
12. Non-Disclosure Agreement dated July 21, 1995, between ▇▇▇▇▇▇ Plastics
Corporation and ▇▇▇▇▇▇.
13 Non-Disclosure Agreement dated July 21, 1995, between Polymer Recovery
Corporation and ▇▇▇▇▇▇.
14 Non-Disclosure Agreement with ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated
January 29, 1991.
SEE ALSO SCHEDULES 4(c) AND 4(p).
57
SCHEDULE 4(n)
INSURANCE
Insurance provided by ▇▇▇▇▇▇▇ Inc. prior to August 5, 1997:
CLASS INSURER POLICY NO.
----- ------- ----------
All Risks Royal & Sun Alliance 0741/89
Global Primary Liability Royal Insurance As applicable
Global DIC/DIL Royal & Sun Alliance YMM 817193
Excess Layers AIG Europe & Others 3200799696
Zurich Ins. & Others 16/50962896
XL Europe XLEXS-1
Fidelity Guarantee AIG Europe 3171007393
Directors & Officers AIG Europe 33001182
Liability
The All Risks and Primary Liability policies are part of Global programs with
local policies being issued by Royal & Sun Alliance, an affiliate of ▇▇▇▇▇▇▇
plc. Master policies in the UK provide DIC/DIL cover above the local policies
Insurance provided by Seller on and after August 5, 1997 is listed on the
attached Summary of Insurance.
58
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
PROPERTY
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: National Union Fire Insurance Company of Pittsburgh, PA
POLICY NO.: ST2604484
TERM: August 4, 1997 to August 4, 1998
COVERAGE: Property
LIMIT: $29,246,701 Limit on:
Real and Personal Property,
Business Interruption,
Extra Expense,
Contingent Business Interruption,
Contingent Extra Expense for Chemical Manufacturers
$29,246,701 Boiler & Machinery Limit of Liability
BOILER & MACHINERY SUBLIMITS:
-----------------------------
$ 50,000 Expediting Expenses Per Occurrence
$ 50,000 Hazardous Substances Per Occurrence
$ 50,000 Ammonia Contamination Per Occurrence
$ 50,000 Water Damage Per Occurrence
DEDUCTIBLES
(PER OCCURRENCE): $ 15,000 Property EXCEPT
$ 25,000 Earthquake
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
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59
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
PROPERTY
DEDUCTIBLES
(PER OCCURRENCE)
CONT.: $ 25,000 @ Locations:
- ▇▇▇▇▇▇ Products, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ Earthquake - Business Interruption - 360 Hours
$ 25,000 Flood (Property Damage)
FLOOD ZONE A (PROPERTY DAMAGE):
-------------------------------
2% of TIV at risk, but not less than $500,000
Contents/$500,000 Bldgs.
FLOOD ZONE B (BUSINESS INTERRUPTION): - 360 Hours
-------------------------------------
Windstorm:
2% of TIV at risk, but not less than $25,000
120 Hours Business Interruption
120 Hours Contingent Business Interruption
120 Hours Extra Expense
120 Hours Contingent Extra Expense
$ 5,000 Transit
$ 5,000 Fine Arts
$ 5,000 EDP Equipment/Media
BOILER & MACHINERY DEDUCTIBLES:
-------------------------------
$ 15,000 Property Damage
120 Hours Business Interruption/Extra Expense
SUBLIMTS: $15,000,000 Annual Aggregate - Earthquake
$ 1,000,000 Annual Aggregate - California Earthquake
Excluding Unnamed or Newly Acquired Property
$15,000,000 Annual Aggregate - Flood
$10,000,000 Annual Aggregate - Flood Zone A
25% Annual Aggregate - Debris Removal - The greater
of or $1,000,000
$ 25,000 Annual Aggregate - Pollution - Real & Personal
Property
$ 25,000 Annual Aggregate - Business Interruption -
Pollution
$ 1,000,000 Per Occurrence - EDP Equipment/Media
$ 1,000,000 Per Occurrence - Transit
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
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60
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
PROPERTY
SUBLIMITS CONT.: $ 1,000,000 Per Occurrence - Newly Acquired Real &
Personal Property with One Hundred and Eighty
(180) day reporting excluding Flood and
Earthquake
$ 1,000,000 Per Occurrence - Valuable Papers
$ 500,000 Per Occurrence - Personal Property at Unnamed
Locations excluding Flood and Earthquake
$ 1,000,000 Per Occurrence - Demolition
$ 1,000,000 Per Occurrence - Increased Cost of
Construction
$ 1,000,000 Per Occurrence - Contingent Liability from the
operation of building laws combined property
damage/business Interruption
$ 5,000,000 Per Occurrence - Off Premises Power
Directly Supplying (Combined Property Damage/
Business Interruption)
$ 5,000,000 Extra Expense
COVERAGE
EXTENSIONS: $ 500,000 Newly Acquired EDP Equipment with One Hundred
(100) Day Reporting Excluding Flood and
Earthquake
$ 250,000 Exhibition Floater
$ 10,000 Trees, Shrubs and Plants
$ 1,000,000 Unscheduled Contingent Business Interruption
$ 25,000 Fire Department Service Charges
$ 1,000,000 Expediting Expense Property
$ 1,000,000 Temporary Removal
$ 100,000 Inventory and Appraisals
14 Days Interruption by Civil Authority
$ 1,000,000 Rents and Rental Values/Lease Hold Interest
$ 1,000,000 Fine Arts
VALUATION: Property - Replacement Cost
Business Interruption - Actual Loss Sustained
Stock - Manufacturer's Selling Price
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
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61
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
STATEMENT OF VALUES
▇▇▇▇▇▇ PRODUCTS COMPANY
$ 12,702,990 Buildings, Machinery, Plant, Equipment and
other Contents
$ 3,050,000 Stock/Inventory
$ 13,493,711 Business Interruption
-----------
$ 29,246,701
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
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62
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
MOTOR TRUCK CARGO
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: Hartford Fire Insurance Company
POLICY NO.: 57MS FI6500
TERM: October 14, 1997 to October 14, 1998
COVERAGE: Motor Truck Cargo
Risks of direct physical loss subject to policy terms, conditions
and exclusions
LIMIT: $ 100,000 Limit - Any One Truck
DEDUCTIBLE: $ 2,500
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
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63
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
GENERAL LIABILITY/POLLUTION LIABILITY
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: American Int'l Specialty Lines Ins. Co. (Non-Admitted)
AIG Group
POLICY NO.: 819 06 56
TERM: August 4, 1997 to August 4, 1998
COVERAGE: General Liability/Pollution Liability
LIMIT: $ 2,000,000 General Aggregate Limit (Other than Prods/Comp. Ops)
$ 2,000,000 Products/Completed Operations Aggregate Limit
$ 1,000,000 Personal & Advertising Injury Limit
$ 1,000,000 Pollution Legal Liability
$ 1,000,000 Each Occurrence Limit (Coverages A, B, & C only)
$ 100,000 Fire Damage Limit
$ 10,000 Medical Expense
DEDUCTIBLE: $ 50,000 Deductible per loss applies to Coverage D
(Pollution Legal Liability)
SPECIAL
CONDITIONS: Applicable to Coverages A, B, C:
- Total Pollution Exclusion
- Exclusion - Waste Disposal Sites
- Testing E&O Exclusion
- Radioactive Matter Exclusion
- Lead Exclusion
- Asbestos Exclusion
- Nuclear Energy Liability Exclusion
- Professional Liability Exclusion - All Professional Services
- Owned Underground Storage Tank Removal
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
64
SOVEREIGN SPECIALTY CHEMICAL, INC.
GENERAL LIABILITY/POLLUTION LIABILITY
SPECIAL
CONDITIONS: - Owned Disposal Site Exclusion
- Employment Related Practice Exclusion
- Employee Bodily Injury Exclusion
- Blanket Additional Insured Endorsement
- Cancellation notice - 60 days except for non-pay
- Knowledge of Occurrence/Notice of Occurrence/Unintentional
E&O
- Cross Suits Exclusion
- Amendment to Pollution Exclusion with Products Exception
APPLICABLE TO COVERAGE D (POLLUTION):
------------------------------------
- Third party claims for off-site cleanup of new conditions,
bodily injury and property damage.
- Retroactive Date: 8/1/97
- Covered manufacturing locations:
- Eutis, FL
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
65
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
COMMERCIAL AUTOMOBILE
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: AIG Environmental (AIG Group)
POLICY NO.: CA2772058
TERM: August 4, 1997 to August 4, 1998
COVERAGE: Commercial Automobile
LIMIT: $ 1,000,000 Combined Bodily Injury and Property Damage
$ 1,000,000 Uninsured/Underinsured Motorists
Statutory Personal Injury Protection
$ 10,000 Medical Payments
$ 1,000 Ded. Comprehensive and Collision on Private
Passenger Types
$ 1,000 Ded. Comprehensive and Collision on XHvy
Trucks
SPECIAL
CONDITIONS: Automobile Endorsements:
- Applicable State Forms
- Drive Other Car Coverage
- MCS-90
- Composite Rate Endorsement
- Broad Form Named Insured
- Knowledge/Notice/Unintentional E&O/Cross Liability
Endorsement
- Independent Counsel Endorsement
- Misdelivery of Liquid Products
VEHICLES: 9 Private Passenger
5 Heavy Tractors
8 Trailers
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
66
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
UMBRELLA LIABILITY
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: National Union Fire Insurance Company of Pittsburgh, PA
POLICY NO.: BE3570117
TERM: August 4, 1997 to August 4, 1998
COVERAGE: Umbrella Liability
LIMIT: $ 50,000,000 Each Occurrence for Bodily Injury and
Property Damage
$ 50,000,000 General Aggregate
$ 50,000,000 Products/Completed Operations Aggregate
DEDUCTIBLE: $ 25,000 Self-Insured Retention each occurrence that
is not covered by Underlying Insurance
SPECIAL
CONDITIONS: - Named Peril & Time Element (7/21) Pollution excess of a
$1,000,000 indemnity payments only retention each occurrence
without aggregate
- Follow form Incidental Medical Malpractice Liability
Endorsement
- Follow form Employee Benefits Liability
- Uninsured Motorists Coverage Option
- Follow form Foreign Liability
- Notice of Occurrence
- Knowledge of Occurrence
- Unintentional Errors & Omissions
- MCS 90 as required
It is also agreed that with respects to pollution liability
coverage provided in the primary General Liability policy,
defense expense is in addition to the limit of liability, subject
to a sublimit of $250,000 annual aggregate. This policy will
recognize this fact and drop down over the possible reduced
limit in the event of a loss(es) that would be covered under
Named Peril and Time Element Pollution Endorsement.
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
67
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
EXCESS LIABILITY
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: Zurich American Insurance Group
POLICY NO.: EUO 2809339-N
TERM: August 4, 1997 to August 4, 1998
COVERAGE: Excess Liability
LIMIT: $50,000,000 Per Occurrence
$50,000,000 Products/Completed Operations Aggregate
$50,000,000 General Aggregate except for Auto
Excess of
$50,000,000 Underlying Umbrella Policy
ADDITIONAL
ENDORSEMENTS: - Form - Pay on Behalf of
- Delete Non-Concurrency wording in Section III (a) (ii) and
VII.2
- Delete Item 7 of Declaration Page
- 90 Days Notice of Cancellation
- Lead Exclusion
General Aggregate applies separately in excess of each
aggregate limit provided by the policy of policies listed in the
schedule of underlying insurances, but Zurich will not provide
unaggregated limits except for auto.
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
68
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
POLLUTION LEGAL LIABILITY
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: American International Specialty Lines Insurance Company
POLICY NO.: PLS-8193264
TERM: August 4, 1997 to August 4, 2002
COVERAGE: Pollution Legal Liability
LIMIT: $ 5,000,000 Each Incident Limit
$ 5,000,000 Coverage Section Aggregate
$ 5,000,000 Policy Aggregate Limit
DEDUCTIBLE: $ 500,000
SPECIAL
CONDITIONS: Coverage Sections:
C - 3rd Party Claims for On-Site Cleanup of Pre-Existing
Conditions
G - 3rd Party Claims for Off-Site Cleanup of Pre-Existing
Conditions
I - 3rd Party Claims for Off-Site Property Damage
J - 3rd Party Claims for Off-Site Bodily Injury
Covered Location Only:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇▇
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
69
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
POLLUTION LEGAL LIABILITY
SUDDEN AND GRADUAL POLLUTION WILL BE COVERED USING AMERICAN INTERNATIONAL
SPECIALTY LINES INSURANCE COMPANY (AISLIC) FORM #67852 (5/97) MODIFIED AS
FOLLOWS:
1. No coverage will be provided for any underground storage tank(s) until
satisfactory integrity testing results (AISLIC acceptable method)
certifying that the tanks are tight to the NFPA standard of plus/minus 0.05
gph, are received, approved and on file with the underwriter. Coverage will
only be provided for those underground storage tanks specifically scheduled
onto the policy by endorsement.
2. No coverage will be provided for loss arising out of pollution conditions
at or emanating from the covered locations occurring after August 4, 1997
(inception of the EAGLE policy bound by AIG Environmental's NYC
underwriting office).
3. No coverage will be provided for loss arising out of pollution conditions
at the ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇▇ site as identified in the October
1996 Environmental Review performed by Delta Environmental:
- lead contamination of soil and groundwater associated with the
former cooling water discharge
- lead and cadmium contamination of soil and groundwater related to
baghouse operations
- soil and groundwater contamination arising out of the former
practice of using waste oil for on-site dust control
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
70
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
COMMERCIAL CRIME COVERAGE
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: National Union Fire Insurance Company of Pittsburgh, PA
POLICY NO.: 486 09 92
TERM: August 4, 1997 to August 4, 1998
COVERAGE: Commercial Crime Coverage
LIMIT: $ 1,000,000 Limit of Liability (Insuring Agreements I-V)
DEDUCTIBLE: $ 25,000 Retention
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
71
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
PENSION TRUST LIABILITY
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: National Union Fire Insurance Company of Pittsburgh, PA
POLICY NO.: 486 09 94
TERM: August 4, 1997 to August 4, 1998
COVERAGE: Pension Trust Liability
LIMIT: $ 1,000,000 Limit of Liability
DEDUCTIBLE: $ 10,000 Retention
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
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72
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
DIRECTORS' & OFFICERS' LIABILITY
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: National Union Fire Insurance Company of Pittsburgh, PA
POLICY NO.: ▇▇▇-▇▇-▇▇
TERM: August 4, 1997 to August 4, 1998
COVERAGE: Directors' & Officers' Liability
LIMIT: $ 5,000,000 Limit of Liability
DEDUCTIBLE: $ 100,000 Retention
SPECIAL
CONDITIONS: - Coinsurance (Security Claims): 00%
- Continuity Dates: Coverage A&B : 7/10/97
Coverage B(i): 7/10/97
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
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73
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
CORPORATE KIDNAP & ▇▇▇▇▇▇/EXTORTION INSURANCE
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: National Union Fire Insurance Company of Pittsburgh, PA
POLICY NO.: 646-6294
TERM: August 4, 1997 to August 4, 1998
COVERAGE: Corporate Kidnap & ▇▇▇▇▇▇/Extortion Insurance
LIMIT: $ 1,000,000 Each Loss
$ Unlimited Each Policy Year Aggregate
DEDUCTIBLE: Nil
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
74
▇▇▇▇▇▇ PRODUCTS COMPANY, INC.
WORKERS' COMPENSATION/EMPLOYERS LIABILITY
NAMED
INSURED: ▇▇▇▇▇▇ Products Company, Inc., A New Jersey Corporation
COMPANY: American Home Assurance Co. (AIG Group)
POLICY NO.: ▇▇▇▇▇▇▇▇▇
TERM: August 4, 1997 to August 4, 1998
COVERAGE: Workers' Compensation/Employers Liability
LIMIT: Statutory Benefits in State of Hire
Employers Liability:
$ 1,000,000 Each Accident
$ 1,000,000 Disease - Policy Limit
$ 1,000,000 Disease - Each Employee
(Stop Gap Employers Liability applies in Monopolistic States)
SPECIAL
CONDITIONS: Terms & Conditions:
- Voluntary Compensation
- Foreign Voluntary Compensation
- Bodily Injury from Endemic Disease
- $100,000 limit per employee Repatriation Expense
- Federal Employers Liability Act Coverage included
- ▇▇▇▇▇▇▇▇▇ & Harbor Workers Compensation Coverage
- Defense Base Act Coverage
- Maritime Employers Liability
- Federal Acts
- All Executive Officers covered for Bodily Injury
- 60 Day Notice of Cancellation except for non-pay
THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY. IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
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75
SCHEDULE 4(o)
LITIGATION
PENDING LITIGATION:
- ▇▇▇▇ ▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ PRODUCTS COMPANY, INC., ET AL.
- BADALIANS ▇. ▇▇▇▇▇▇ CONSTRUCTION, INC., ET AL. V. UNITED STATES
MINERAL PRODUCTS COMPANY ▇. ▇▇▇▇▇'▇, INC. ▇. ▇▇▇▇▇▇ PRODUCTS COMPANY,
INC. ET. AL.
- ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ CONSTRUCTION, INC., ET. AL. V. UNITED STATES MINERAL
PRODUCTS COMPANY ▇. ▇▇▇▇▇'▇, INC. ▇. ▇▇▇▇▇▇ PRODUCTS COMPANY, INC. ET.
AL.
- ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ CONSTRUCTION, INC., ET. AL. V. UNITED STATES MINERAL
PRODUCTS COMPANY ▇. ▇▇▇▇▇'▇, INC. ▇. ▇▇▇▇▇▇ PRODUCTS COMPANY, INC. ET.
AL.
- O'▇▇▇▇ ▇. ▇▇▇▇▇▇ CONSTRUCTION, INC, ET AL. V. UNITED STATES MINERAL
PRODUCTS COMPANY ▇. ▇▇▇▇▇'▇, INC. ▇. ▇▇▇▇▇▇ PRODUCTS COMPANY, INC. ET.
AL..
- ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ CONSTRUCTION, INC, ET AL. V. UNITED STATES MINERAL
PRODUCTS COMPANY ▇. ▇▇▇▇▇'▇, INC. ▇. ▇▇▇▇▇▇ PRODUCTS COMPANY, INC. ET.
AL..
THREATENED LITIGATION:
None.
76
SCHEDULE 4(p)
EMPLOYEES; LABOR RELATIONS
Agreement dated November 16, 1995 between ▇▇▇▇▇▇ and the Glass, Molders,
Pottery, Plastics and Allied Workers International Union (AFL-CIO, CLC) and its
Local Union No. 211 Eustis, Florida
Effective Date: December 1, 1995 through December 31, 1998.
▇▇▇▇▇▇ has approximately 120 employees.
77
SCHEDULE 4(q)
EMPLOYEE BENEFIT PLANS
A. BENEFIT PLANS
SOVEREIGN
1. Sovereign 401(k) Plan
2. Healthcare
- Medical (pre-tax employee contributions)
- Dental (pre-tax employee contributions)
- Prescription Drug
3. Flexible Spending Plans (pre-tax)
- Healthcare
- Dependent Care
4. Life Insurance
- Company provided (2x annual salary up to $50,000 maximum)
- Matching ADD
- Optional Life
- Optional Dependent Life
- Optional ADD
- Optional Dependent ADD
5. Long-Term Disability
6. Employee Assistance Plan
7. Workers Compensation
8. Tuition Assistance
9. Business Travel Accident Insurance
▇▇▇▇▇▇
1. Bonus and Sales Incentive Plans
78
2. Short-Term Disability Income (Salary Continuance)
3. Company cars
4. Severance
5. Vacation/Holidays
6. Leave of Absence (jury duty, bereavement, personal days)
B. COMPLIANCE
▇▇▇▇▇▇ has a ▇▇▇▇▇▇▇▇▇ policy. There is neither a written plan document
nor a summary plan description for these policies. These policies have
been reported on the annual Form 5500 filed by ▇▇▇▇▇▇▇ Inc. Generally, the
policy is one week of severance per year of service with ▇▇▇▇▇▇.
79
SCHEDULE 4(r)
ENVIRONMENTAL MATTERS
All matters disclosed in or arising out of facts and circumstances discussed in
the following environmental reports:
- Environmental Review
▇▇▇▇▇▇ Products Company, Inc.
Eustis, Florida
Delta Project No. E096-068
Prepared by Delta Environmental Consultants, Inc.
October 1996
- Environmental Review
▇▇▇▇▇▇ Products Company, Inc. &
▇▇▇▇▇▇▇ Construction Chemicals North America, Inc.
Leased Warehouses/Richmond, Washington/
South Kearny, New Jersey/Rancho Cucamonga, California
Delta Project No. E096-068
Prepared by Delta Environmental Consultants, Inc.
October 1996
- Environmental Review
▇▇▇▇▇▇ Products Company, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Project No. 771463.0204
Prepared by IT Corporation
Submitted to Sovereign Specialty Chemicals, L.P.
July 1997
▇▇▇▇▇▇ PERMITS
- Lake County (Florida) Occupational License No. 501-0000033
- See letter from the Florida Department of Environmental Regulation
dated February 5, 1992 re: Plastic Extruding Baghouse (no air permit
required).
- See letter from the Florida Department of Environmental Regulation
dated April 7, 1992 re: Lake County - IW/▇▇▇▇▇▇ Products Company/
Closed Loop Cooling System/Request for Exemption (no water permit
required).
80
OSHA
The following issues are being addressed at the ▇▇▇▇▇▇ facility:
- The use of flexible electrical cable will be replaced with fixed conduit or
other compliant device to the extent required by OSHA regulations.
81
SCHEDULE 4(t)
TRANSACTIONS WITH AFFILIATES
▇▇▇▇▇▇ has an arrangement with the AlphaGary Corporation, an affiliate of
▇▇▇▇▇▇▇ Inc. pursuant to which ▇▇▇▇▇▇ purchases plastic from AlphaGary on a
purchase order basis. There is no obligation on the part of either party to
continue this arrangement. AlphaGary had tried to require ▇▇▇▇▇▇ to buy its
plastic requirements for 1998 from AlphaGary based on an alleged oral
agreement. This arrangement is now being settled by ▇▇▇▇▇▇'▇ purchase of up to
$81,415.81 worth of inventory from AlphaGary pursuant to a letter agreement
dated February 4, 1998.
OSI Sealants, Inc. is a customer of ▇▇▇▇▇▇.
82
SCHEDULE 6(g)
LIST OF EMPLOYEES
[PREVIOUSLY PROVIDED]
83
SCHEDULE 6(i)
SEVERANCE POLICY
One week of severance pay is provided for each year of service with ▇▇▇▇▇▇.