EXHIBIT 10.4
WINCUP CAPITAL CONTRIBUTION AGREEMENT
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THIS CAPITAL CONTRIBUTION AGREEMENT (this "Agreement") is made as of
this 20th day of January, 1996, by and between WINCUP HOLDINGS, INC., a
Delaware corporation ("WinCup") and WINCUP HOLDINGS, L.P., a Delaware limited
partnership (the "Partnership").
BACKGROUND
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A. Pursuant to the terms and conditions of a Limited Partnership
Agreement (the "Partnership Agreement") dated as of the date hereof, WinCup is a
general partner of the Partnership.
▇. ▇▇▇▇▇▇ desires to make an initial capital contribution of certain
assets to the Partnership, and the Partnership desires to accept such initial
capital contribution, pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and covenants hereinafter set forth, and intending
to be legally bound hereby, the parties agree as follows:
ARTICLE I
CONTRIBUTION OF ASSETS
AND ASSUMPTION OF LIABILITIES
1.1 Contribution. On the Closing Date (as hereinafter defined)
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WinCup shall contribute to the Partnership as an initial capital contribution,
and the Partnership shall accept as an initial capital contribution, all of the
tangible and intangible property and rights of WinCup used or held for use in
connection with the Foam Business (as hereinafter defined), excluding those
assets of WinCup used in the thermoforming business and acquired by ▇▇▇▇▇ River
Paper Company, Inc. ("▇▇▇▇▇ River") pursuant to that certain Asset Purchase
Agreement, dated as of October 31, 1995, among WinCup, Benchmark Holdings, Inc.
and ▇▇▇▇▇ River (the "Asset Purchase Agreement"), and including, without
limitation, the properties and rights described below and described and assigned
a preliminary estimated value in Schedule 1.1 hereto, with final values to be
assigned and provided to the Partnership within sixty (60) days after the
Closing Date, and made a part hereof (collectively, the "Transferred Assets"):
(a) All fixed assets, leasehold improvements, technology, patents,
trademarks, real property and other non-current assets associated with Wincup's
foam container and thermoform lid manufacturing operations located in Tolleson,
Arizona; El
Campo, Texas; Shreveport, Louisiana; Higginsville, Missouri; Des Plaines,
Illinois; Mount Sterling, Ohio; Stone Mountain, Georgia and other locations;
(b) The inventory, spare parts and other current assets associated
with the Foam Business;
(c) All of Wincup's contractual rights in and under the contracts
listed on Schedule 1.1(c) (the "Contracts"), copies of which have been
delivered to the Partnership; and
(d) Cash in the amount of $300,000 as well as any cash WinCup has
remaining after satisfaction in full of all payables and other expenses and
accruals of WinCup.
In addition to the foregoing, WinCup shall contribute to the Partnership
all WinCup employees associated with the Transferred Assets (collectively, the
"Transferred Employees"). A list of the Transferred Employees is contained in
Schedule 1.1(d).
1.2 Excluded Assets. WinCup will not transfer to the Partnership (a)
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any interest in any of the other assets of WinCup which are not included in the
Transferred Assets, including, without limitation, the cash (other than as set
forth in Section 1.1(d) above), cash equivalents and accounts receivable of
WinCup, and (b) the assets listed on attached Schedule 1.2.
1.3 Assumption of Liabilities.
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(a) The Partnership hereby agrees to assume, satisfy and discharge:
(i) all liabilities and obligations relating to the Transferred Assets arising
on or after the Closing Date including those relating to the Contracts; (ii)
annual (but not carried forward) employee liabilities for vacation, holiday and
sick pay in the amounts set forth on Schedule 1.3; (iii) WinCup's obligations to
▇▇▇▇▇ Paper Company under the Negotiable Secured Note described on Schedule
1.3; and (iv) lease liabilities associated with the closures, respectively, of
the distribution centers in Kent, Washington and Tinton Falls, New Jersey but
not in excess of $50,000 in the aggregate and the distribution center in Des
Plaines, Illinois, in the event it is closed, but not in excess of $150,000
(collectively, the "Assumed Liabilities").
(b) The Partnership will distribute to WinCup, in accordance with the
terms of that certain promissory note, in the original principal amount of
$1,000,000, the form of which is attached hereto as Exhibit A (the $1,000,000
Note"), the amount of $1,000,000 less any Inventory Deficiency (as hereinafter
defined) (the "Payment").
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(c) The Partnership shall also assume responsibility for claims
related to the Foam Business and covered under standard policies of commercial
general liability insurance arising from events that occurred prior to the
Closing Date but which have not been reported to and are not known to Wincup on
or before the Closing Date.
(d) As of the Closing Date, the Partnership shall assume, and WinCup
shall have no further obligation with respect to, (i) all employee related
liabilities and obligations that are payable on or after the Closing Date with
respect to Transferred Employees and their beneficiaries and dependents other
than those liabilities and obligations that arose before the Closing Date which
are not assumed pursuant to clause (ii) hereafter; and (ii) all employee related
liabilities and obligations that arose prior to the Closing Date with respect to
the Transferred Employees and their employee benefits to the extent set forth in
Article 11 of the Partnership Agreement.
(e) It is expressly acknowledged and agreed by the parties hereto
that, except for the Assumed Liabilities and the liabilities described in
Sections 1.3(c) and 1.3(d) of this Agreement, all other liabilities and
obligations of Wincup, whether or not related to the Transferred Assets, whether
now existing or arising in the future, fixed or contingent, known or unknown,
and attributable to any facts existing on or prior to the Closing Date,
including without limitation those arising out of trade accounts payable and
litigation matters, shall be and remain the liabilities and obligations of
WinCup and shall not be booked as or become a liability of the Partnership.
(f) Notwithstanding Section 1.3(a)(i) hereof or any other provision of
this Agreement, WinCup shall retain, and the Partnership will assume no
liability for, related to, arising out of, under or in respect of any Hazardous
Substances existing as of the Closing Date on, in or about the Transferred
Assets or the leased premises on which the Transferred Assets are located or any
Hazardous Emissions or Handling Hazardous Substances prior to the Closing Date
at any location (including, without limitation, remote storage, treatment,
recycling or disposal sites). For the purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:
"Hazardous Substances" means (i) those substances defined as hazardous
by Section 9601(14) of the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("CERCLA"), 42 USCA 9601 et seq., (ii) all fluids
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containing polychlorinated biphenyls, (iii) asbestos and asbestos-containing
materials, (iv) nuclear fuel and waste, (v) petroleum and petroleum products,
and (vi) all other substances regulated under Environmental Laws.
"Environmental Laws" means federal statutes and regulations
promulgated thereunder intended to provide protection for public health and the
environment, including, without limitation, CERCLA, the Clean Air Act, the Clean
Water Act, the Solid Waste Disposal Act (including the Resource Conservation and
Recovery Act), the Toxic Substances
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Control Act, their state and regulatory counterparts, and other substantially
similar foreign statutes and regulations, as the foregoing may be in effect from
time to time.
"Handling Hazardous Substances" means the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
"Hazardous Emissions" means all emissions, releases, leaks, escapes,
dumping, discharges or threatened discharges of Hazardous Substances into the
air, surface water, ground water or the ocean or on or into the land.
1.4 Value of the Transferred Assets. The parties agree that the value of
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the Transferred Assets and the allocation of such values will be as set forth,
as of the Closing Date, on Schedule 1.1 hereto.
1.5 Transfer of Assets and Assumption of the Assumed Liabilities. At the
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Closing (as hereinafter defined), WinCup and the Partnership shall execute and
deliver to each other a ▇▇▇▇ of contribution and assignment and assumption
agreement, in a form agreeable to the parties hereto and ▇▇▇▇▇ River, pursuant
to which WinCup shall transfer the Transferred Assets to the Partnership and the
Partnership shall specify the amount of and assume the Assumed Liabilities and
shall assume the other liabilities to be assumed by the Partnership under this
Agreement.
1.6 Closing.
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(a) Closing Date. The closing (the "Closing") of the transactions
contemplated hereby shall take effect as of 12:00 a.m. on January 20, 1996 (the
"Closing Date").
(b) Effect of the Closing. On and subsequent to the Closing Date, all
business transacted in connection with the Transferred Assets, and, except as
otherwise provided in this Agreement, all obligations accruing in connection
with the Transferred Assets and Assumed Liabilities, shall be for the account of
the Partnership.
1.7 Post-Closing Adjustments.
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(a) The value of the inventory (including raw materials, work in
process, finished goods, spare parts, supplies and stores inventory) contributed
by WinCup on the Closing Date shall not be less than Ten Million Three Hundred
Thousand Dollars ($10,300,000). As provided in Section 1.3(b), the Payment shall
take into account any Inventory Deficiency determined in accordance with Section
1.7(b) below.
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(b) Inventory Level Adjustment.
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(1) The Partnership caused its auditors, on November 18 and 19,
1995, to conduct a physical inventory of the inventory contributed by WinCup
pursuant to Section 1.1(b) of the Agreement, which physical inventory the
Partnership shall roll forward to the Closing Date (as rolled forward, the
"WinCup Inventory"). As promptly as practical, but in any event not more than
thirty (30) days after the Closing, the Partnership shall cause its auditors to
prepare, on the basis of such physical inventory and the rolling forward of such
physical inventory, and deliver to WinCup a draft of a statement of the "WinCup
Inventory Value" as of the commencement of business on the Closing Date (the
"Preliminary Closing Statement"). "WinCup Inventory Value" shall mean the value
of the WinCup Inventory on hand as of the Closing Date calculated as set forth
in this Section 1.7(b). WinCup Inventory on hand as of the Closing Date, as
determined by the physical inventory and rolling forward of the physical
inventory referred to above, will include items which have historically been
carried on the books of WinCup and held for sale in the ordinary course of
WinCup's business. Raw materials, WIP and finished goods inventory will be
valued at the lower of cost or market determined in accordance with generally
accepted accounting principles applied on a consistent basis. Cost for raw
materials, WIP and finished goods will be calculated to reflect raw material
prices as of the Closing Date. Supplies, store and spare parts will be valued at
cost as of the Closing Date. Finished goods inventory will be reduced for
obsolete, slow-moving or damaged inventory. Spare parts will be reduced for
obsolete spare parts. The use of the term "slow moving" with respect to
inventory shall mean all inventory in excess of the most recent total of twelve
(12) months' external customer shipments in cases before the Closing Date, which
slow moving inventory shall be valued at fifty percent (50%) of cost. The use of
the term "obsolete" with respect to inventory shall mean all inventory where the
most recent total of twelve (12) months before the Closing Date for all external
customer shipments in cases is zero, except for newly introduced products, which
obsolete inventory shall be valued at zero. The use of the term "damaged" with
respect to inventory shall mean all inventory contributed by WinCup which is
ripped, torn, defaced or squashed, which damaged inventory shall be valued at
zero. The term "obsolete" with respect to spare parts shall mean those spare
parts which are no longer used in the production process, which obsolete spare
parts shall be valued at zero.
(2) During the ten (10) days following the receipt by WinCup of
the draft of the Preliminary Closing Statement and the report of the
Partnership's auditors with respect thereto, WinCup shall be permitted to review
the working papers of the Partnership's auditors relating to the draft of the
Preliminary Closing Statement and shall have such access to the Partnership's
personnel as may be reasonably necessary to permit it to review in detail the
manner in which the draft was prepared. Before the end of such ten (10) day
period, WinCup shall give any comments or objections it has with respect to the
draft of the Preliminary Closing Statement to the Partnership. Such comments or
objections, insofar as they relate to the valuation of the WinCup Inventory,
shall be resolved without regard to any materiality standard, and the Final
Closing Statement delivered to WinCup pursuant to the provisions of the next
paragraph shall reflect such resolution.
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(3) Within ten (10) days after the expiration of such ten-day
period described in the preceding paragraph, the Partnership shall deliver to
WinCup a Final Closing Statement (the "Final Closing Statement") accompanied by
a definitive report of the Partnership's auditors with respect thereto. Within
five (5) business days after receipt of such Final Closing Statement and report,
WinCup shall deliver a letter to the Partnership stating whether they concur
with such report and their exceptions thereto, if any, together with the reasons
therefor. If such objections cannot be resolved between the Partnership and
WinCup within five (5) business days after delivery of such letter to the
Partnership by WinCup, the question or questions in dispute shall then be
submitted, as soon as practicable, to a mutually acceptable firm of independent
public accountants of nationally recognized standing, the decision of which as
to such question or questions in dispute shall be made within ten (10) days
thereafter and shall be final and binding upon the parties hereto.
(4) If the Final Closing Statement, after the resolution of all
disputes, indicates that the value of the WinCup Inventory is less than Ten
Million Three Hundred Thousand Dollars ($10,300,000) ("Inventory Deficiency"),
the Partnership shall amend the $1,000,000 Note to deduct from the payments due
thereunder the amount of such Inventory Deficiency.
(5) The fees of WinCup (including the fees of any auditors
independently retained by WinCup) incurred in connection with the preparation of
the Preliminary and Final Closing Statements shall be reimbursed by the
Partnership in accordance with Section 1.8 below. The fees of any independent
accounting firm appointed pursuant to Paragraph (3) of this Section 1.7(b) shall
be paid one-half by the Partnership and one-half by WinCup.
1.8 Reimbursement of Expenses. The Partnership shall reimburse WinCup for
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all fees and expenses incurred by WinCup for its legal counsel, accountants (for
fees associated with conducting physical inventories and preparing inventory
valuations and audited financial statements in connection with the formation of
the Partnership and excluding fees incurred in connection with the consummation
of the transactions contemplated by the Asset Purchase Agreement) and Alex.
▇▇▇▇▇ & Sons, Inc., in connection with the negotiation, documentation and
consummation of the transactions contemplated by this Agreement and the other
documents executed in connection herewith; provided, however, that the
Partnership shall be responsible for the payment of no more than $550,000 of the
fees payable to Alex. ▇▇▇▇▇ & Sons, Inc. for arranging the bank financing
entered into in connection with the transactions contemplated hereby, the
balance of which fees and all other fees payable to Alex. ▇▇▇▇▇ & Sons, Inc.
shall be the sole responsibility of WinCup. Attached hereto as Schedule 1.8 is
an itemization of all such fees and expenses paid or estimated to be due by
WinCup, all of which are deemed to be reasonable. The Partnership shall
reimburse WinCup for all such fees and expenses as promptly as practicable after
receipt by the Partnership of sufficient evidence supporting the payment by
WinCup of such fees and expenses. The estimated amounts listed on Schedule 1.8
shall be adjusted from time to time after Closing, either
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upward or downward, to the extent required to reflect the actual fees and
expenses paid by WinCup and reimburseable pursuant to this Section 1.8. To the
extent permitted under the Capital Expenditure Loans (as defined in that certain
Revolving Credit, Term Loan and Security Agreement, dated as of the date hereof,
among the Partnership, WinCup and The Bank of New York Commercial Corporation
(as Lender and as Agent)), the Partnership shall draw on amounts from such loan
and pay such drawed amounts to WinCup to reimburse WinCup for all capital
expenditures incurred by WinCup within the ninety (90) days prior to Closing and
related to any engineering projects undertaken for the benefit of the
Partnership and its business.
1.9 Retention of Books and Records; Availability of Employees.
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WinCup will retain and maintain, in an organized and retrievable manner, all
material documents and records pertaining to the Foam Business for periods prior
to the Closing Date. WinCup agrees to make available to the Partnership all
such documents and records, as well as such employees of WinCup, as may be
reasonably requested by the Partnership in order to comply with all pertinent
requests from the Internal Revenue Service and state taxing authorities which
relate to periods prior to the Closing or as the Partnership otherwise deems
necessary to the efficient operation of the Partnership's business.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF WINCUP
2.1 Representations and Warranties of WinCup. WinCup hereby represents and
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warrants to the Partnership as follows:
(a) Organization. WinCup is a duly organized and validly existing
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corporation in good standing under the laws of Delaware, its jurisdiction of
incorporation, and has all requisite corporate power and authority to own, lease
and operate its assets and to carry on its business as presently conducted and
to execute, deliver and perform its obligations under this Agreement. Except as
set forth on Schedule 2.1(a), WinCup is duly qualified and in good standing to
do business in each jurisdiction in which its Foam Business makes such
qualification necessary except where failure to so qualify has no material
adverse effect on WinCup's financial condition or the conduct of the Foam
Business. WinCup has heretofore delivered to the Partnership complete and
correct copies of its Certificate of Incorporation and Bylaws, as currently in
effect.
(b) Due Authorization and Binding Effect. This Agreement has been
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duly authorized by WinCup' s Board of Directors, has been duly executed and
delivered by WinCup and constitutes the legal and binding obligation of WinCup
enforceable in accordance with its terms except as the same may be limited by
(i) any applicable bankruptcy, insolvency, reorganization, moratorium or similar
law affecting creditors' rights
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generally or (ii) general principles of equity, whether considered in a
proceeding in equity or at law.
(c) Non-Contravention. Except as set forth in Schedule 2.1(c) and
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Schedule 2.1(t), the execution and delivery by WinCup of this Agreement does not
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and the consummation of the transactions contemplated hereby will not (i)
violate or result in a breach of any provision of the Certificate of
Incorporation or Bylaws of WinCup (ii) result in a default, or give rise to any
right of termination, modification or acceleration, or the imposition of any
Encumbrance (as hereinafter defined), whether immediately or after the giving of
notice or the passage of time, under the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, agreement, lease or other instrument
or obligation to which WinCup is a party or by which any of the Transferred
Assets may be bound, or (iii) violate any law, regulation, judgment, order or
decree applicable to WinCup or any of the Transferred Assets or the Foam
Business.
(d) Brokers and Finders. Other than as described on Schedule 2.1(d)
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attached hereto with respect to Alex. ▇▇▇▇▇ & Sons Incorporated, WinCup has not
employed any broker, finder, consultant or intermediary who would be entitled to
a broker's, finder's or similar fee or commission in connection with or upon the
consummation of the transactions contemplated in this Agreement.
(e) Title to Transferred Assets. WinCup is the sole and exclusive
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owner of the Transferred Assets and possesses good (and, with respect to owned
real estate, marketable) title thereto free and clear, except as otherwise
disclosed on Schedule 2.1(e), of any and all pledges, security interests,
mortgages, liens, conditional sales agreements, restrictions, encumbrances or
charges other than Permitted Encumbrances (as hereinafter defined) (collectively
"Encumbrances") and, except for the consents and approvals set forth in Schedule
2.1(e) hereto, has the complete and unrestricted power and unqualified right to
sell, convey, assign, transfer and deliver to the Partnership sole and exclusive
ownership of the Transferred Assets free and clear of any and all Encumbrances
other than Permitted Encumbrances. "Permitted Encumbrances" shall mean (i)
statutory liens for current taxes or assessments not yet due or delinquent; (ii)
mechanics', carriers', workers', repairers' and other similar liens arising or
incurred in the ordinary course of business relating to obligations as to which
there is no default on the part of WinCup, provided that the same shall be fully
discharged of record before the Closing; (iii) exceptions shown on the surveys
furnished by Wincup to the Partnership on or before the date hereof and agreed
to by the Partnership; and (iv) such other Encumbrances which do not materially
adversely affect the use or value of the Transferred Assets.
(f) Financial Statements. Wincup has delivered to the Partnership:
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(a) unaudited balance sheets of WinCup as at December 31, 1994, and the related
unaudited statements of income and cash flow for such fiscal year then ended
("Year-end Financial Statements") and (b) an unaudited balance sheet of WinCup
as at September 29, 1995 and the related unaudited statements of income and cash
flow for the period then ended ("Interim
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Financial Statements"). Such Year-end Financial Statements and Interim Financial
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") and fairly present the financial condition and results of
operations and cash flow of Wincup as at the respective dates of and for the
periods referred to therein.
(g) Inventory. All inventory of WinCup included within the
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Transferred Assets (i) is usable or saleable in the ordinary course of the Foam
Business (ii) is sufficient but not excessive in kind or amount for the conduct
of the Foam Business as it is presently being conducted, and (iii) is carried on
the books of WinCup reflected on the Interim Financial Statements at an amount
which reflects valuations not in excess of the lower of cost or market (FIFO)
determined in accordance with GAAP applied on a consistent basis. Schedule
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2.1(g) sets forth the locations of inventory not located at the sites identified
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in Section 1.1(a) hereof.
(h) No Material Adverse Change. Since September 24, 1995, there has
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not been any material adverse change in the financial condition of WinCup, and
no event has occurred or circumstance exists that can reasonably be expected to
result in such a material adverse change.
(i) Contracts; Materiality; No Defaults. Except as set forth on
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Schedule 2.1(i), the Contracts constitute all of the agreements or contracts
which are Material to the foam cup container business of WinCup (the "Foam
Business"). "Material" for this purpose shall mean an agreement, contract or
commitment: (i) upon which any part of the Foam Business is dependent or which,
if breached, could reasonably be expected to materially and adversely affect the
Transferred Assets or the earnings, financial condition, operations or prospects
of the Foam Business; (ii) which provides for aggregate future payments by or to
WinCup for the Foam Business of more than $50,000 in any year, except for
purchase orders or sales orders arising in the ordinary course of business, in
which case they are listed only if any party thereto may be obligated to make
future payments aggregating more than $100,000 in any year; (iii) which relates
to the Transferred Assets, extends more than one year from the date hereof and
is not cancelable by either party on 30 days' notice; (iv) which provides for
the sale or lease or other transfer, after the date hereof and other than in the
ordinary course of business, of any of the Transferred Assets; (v) which relates
to the employment, retirement or termination of the services of any employee,
officer, former officer or consultant of WinCup whose employment relates or was
related to the Foam Business; or (vi) which contains covenants pursuant to which
any person has agreed not to compete with any business conducted by the Foam
Business or not disclose to others information concerning the Transferred Assets
or the Foam Business. Except as set forth in Schedule 2.1(i), WinCup is not in
default under any of the Contracts. To WinCup's knowledge, except as set forth
in Schedule 2.1(i), each other party to any of the Contracts is not in default
and no event has occurred or circumstance exists that (with or without notice or
lapse of time) may result in a violation or breach of any of the Contracts.
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(j) Licenses and Permits. Except as set forth in Schedule 2.1(j),
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WinCup has all licenses and permits required to conduct the Foam Business as it
is presently being conducted. Schedule 2.1(j) contains a complete list of all
such licenses and permits, all of which are in full force and effect and, except
as noted on Schedule 2.1(j), all of which are assignable. Except as disclosed on
Schedule 2.1(j), WinCup has operated the Foam Business in compliance with all of
the terms and conditions set forth in such licenses and permits. Except as set
forth in Schedule 2.1(j), no investigation or review is pending with respect to
any alleged failure of WinCup to comply with the provisions of its license and
permits, and no event has occurred or condition exists which, with the giving of
notice or the passage of time, can reasonably be expected to result in any such
allegation.
(k) Litigation. Except as set forth in Schedule 2.1(k), there are no
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actions, suits, claims, investigations or proceedings (legal, administrative or
arbitrative) pending or, to the knowledge of WinCup, threatened against WinCup,
whether at law or in equity and whether civil or criminal in nature, before any
court, governmental body, commission, agency or arbitrator, domestic or foreign,
nor are there any judgments, orders or decrees of any such court, governmental
body, commission, agency or arbitrator outstanding against WinCup which have or
can reasonably be expected to have, directly or indirectly, an adverse effect on
the Transferred Assets or the earnings, financial conditions, operations or
prospects of the Foam Business, or which seek specifically to prevent, restrict
or delay consummation of the transactions contemplated hereby or fulfillment of
any of the conditions hereof.
(l) Undisclosed Liabilities. Except as set forth in Schedule 2.1(l),
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WinCup does not have, with respect to the Transferred Assets or the operations
of the Foam Business, any liabilities (whether matured or unmatured, accrued,
contingent or otherwise) which are not reflected in the Interim Financial
Statements other than those which were incurred subsequent to the date of such
financial statements in the ordinary course of business and consistent with past
practices and cannot reasonably be expected to materially and adversely affect
the Transferred Assets or the earnings, financial condition, operations or
prospects of the Foam Business.
(m) Absence of Changes. Except as set forth in Schedule 2.1(m), since
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September 24, 1995, there has not been:
(i) any change, or development involving a prospective change,
including, without limitation, any damage, destruction or loss (whether or
not covered by insurance) which adversely affects or, to the knowledge of a
WinCup, can reasonably be expected to materially and adversely affect the
Transferred Assets or the earnings, financial condition, operations or
prospects of the Foam Business;
(ii) any obligation or liability involving more than $200,000
(whether matured or unmatured, accrued, contingent, or otherwise) incurred
in the aggregate by WinCup with respect to the Transferred Assets or the
Foam Business;
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(iii) any general uniform increase in the compensation of the
employees of the Foam Business (including, without limitation, any increase
pursuant to any bonus, pension, profit sharing or other plan or
commitment);
(iv) an increase (other than normal increases consistent with
past practices and those required by law) in the compensation payable to
any employee (including officers) of the Foam Business;
(v) any amendment to any employment agreement to which any
employee of the Foam Business is a party;
(vi) any sale of any of the Transferred Assets other than in the
ordinary course of business; or
(vii) any material deterioration of relations between the Foam
Business and its suppliers or customers.
Since the date of the Interim Financial Statements, the Foam Business has been
conducted only in the ordinary and usual course and in a manner consistent with
past practices.
(n) Leases. Schedule 2.1(n) includes a complete list of each lease
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into which WinCup has entered, whether as lessor or lessee, on behalf of the
Foam Business which relates to either real or personal property, other than
monthly leases of personal property which may be cancelled upon not more than 60
days notice and require the payment of not more than $100 per month. The leases
listed in Schedule 2.1(n) are referred to herein as a "Lease" or the "Leases."
Except as set forth on Schedule 2.1(n), WinCup has not breached any such Lease
and, to the knowledge of WinCup, no other party to any Lease has breached the
Lease and no event has occurred or condition exists which, with the giving of
notice or the passage of time, can reasonably be expected to result in a default
under, or permit the termination, modification or acceleration of any Lease by
any party thereto. WinCup has good and valid leasehold title to the real estate
covered by the Leases, free and clear of all encumbrances. Complete copies of
all of the Leases have been delivered to the Partnership. Except as disclosed on
Schedule 2.1(n), the Leases can be transferred to the Partnership without the
consent of the lessors thereunder or any other person.
(o) Intellectual Property. Schedule 2.1(o) sets forth (i) a list of
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all of the intellectual property which WinCup owns and uses in connection with
the Foam Business; and (ii) a list of all of the intellectual property which
WinCup does not own but has the right to use in connection with the Foam
Business. Except as is set forth in Schedule 2.1(o), WinCup has the right to use
the intellectual property free and clear of any restrictions and its right to
such intellectual property is assignable. To the knowledge of WinCup, WinCup is
not infringing upon the rights of any person, is not aware of any claim of such
infringement, and no person is infringing upon the rights of WinCup in the
intellectual property. All letters patent, registrations and certificates issued
by any governmental agency relating to the intellectual property are valid and
subsisting and have been properly maintained. Complete copies of all documents
pursuant to which WinCup has acquired the right to use, or has licensed or
otherwise permitted any other person to use, any intellectual property have been
delivered to the Partnership.
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(p) Maintenance of Equipment. The equipment which is a part of the
------------------------
Transferred Assets has been maintained in good repair in accordance with the
usual practices in the United States of businesses similar to the Foam Business
conducted by WinCup, is in good condition, ordinary wear and tear excepted, and
is useable in the ordinary course of the Foam Business as it is presently being
conducted.
(q) Sufficiency of Transferred Assets. Except as set forth in
---------------------------------
Schedule 2.1(q), the Transferred Assets include all properties and rights of
WinCup that are necessary for the conduct of the business of the Foam Business
as it is presently being conducted.
(r) Labor and Employment Matters. Except as set forth on Schedule
----------------------------
2.1(r), there are no collective bargaining agreements or employment agreements
(other than the Contracts) to which WinCup is a party or by which it is
otherwise obligated. Except as set forth on Schedule 2.1(k), there are no
controversies, claims or grievances pending, or, to the knowledge of each
WinCup, threatened between WinCup and any employees of the Foam Business which
affect, or can reasonably be expected to have, directly or indirectly, an
adverse effect on the Transferred Assets or the earnings, financial condition,
operations or prospects of the Foam Business or relate to any specific effort to
prevent, restrict or delay consummation of the transactions contemplated by this
Agreement.
(s) Certain Practices. To the knowledge of WinCup, no shareholder,
-----------------
director or officer, employee or agent of WinCup has, directly or indirectly,
made, or agreed to make, any improper or illegal payment, gift or political
contribution to, or taken any other improper or illegal action, for the benefit
of any customer, supplier, governmental employee or other person who is or may
be in a position to assist or hinder the business of the Foam Business.
(t) Consents and Approvals. Except as set forth in Schedule 2.1(t),
----------------------
there is no requirement applicable to WinCup to make any filing with, or to
obtain any consent or approval of any Person (as hereinafter defined) as a
condition to the transfer of the Transferred Assets to the Partnership or the
consummation of the transactions contemplated by this Agreement (other than as
may be required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976).
(u) Compliance with Laws. Except as set forth in Schedule 2.1(u),
--------------------
WinCup has operated the Foam Business in compliance with all laws, regulations,
judgments, orders or decrees of any federal, state, local or foreign court or
governmental body applicable to WinCup or any of the Transferred Assets or the
Foam Business including, without limitation, those related to (i) antitrust and
trade matters, (ii) civil rights, (iii) zoning and building codes, (iv) public
health and safety, (v) worker health and safety and (vi) labor, employment and
discrimination in employment. Except as set forth on Schedule 2.1(u), no
investigation or review is pending with respect to any alleged failure by WinCup
to comply with any such law, regulation, order, judgment or decree and no event
has occurred or condition exists
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which, with the giving of notice or the passage of time, can reasonably be
expected to result in any such allegation.
(v) Receivables. The receivables associated with WinCup's Foam
-----------
Business (taking into account appropriate reserves) shall be sufficient at
Closing to pay all payables and allocated expenses and performance allowances
associated with WinCup's Foam Business.
(w) Disclosure. Neither this Agreement, nor the Year-End Financial
----------
Statements nor the Interim Financial Statements, contains an untrue statement of
a material fact. To the knowledge of WinCup no event has occurred or condition
exists which, with the giving of notice or the passage of time, can reasonably
be expected to have a material adverse effect on the Transferred Assets or the
earnings, financial condition, operations or prospects of the Foam Business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PARTNERSHIP
3.1 Representations and Warranties of the Partnership. The Partnership
-------------------------------------------------
hereby represents and warrants to WinCup as follows:
(a) Organization. The Partnership is a duly organized and validly
------------
existing limited partnership in good standing under the laws of Delaware, the
jurisdiction in which it is organized, and has all requisite power and authority
to own, lease and operate its assets and to carry on its business as presently
contemplated and to execute, deliver and perform its obligations under this
Agreement.
(b) Due Authorization and Binding Effect. This Agreement has been
------------------------------------
duly authorized by all requisite action on the part of the Partnership, has been
duly executed and delivered by the Partnership and constitutes the legal and
binding obligation of the Partnership enforceable in accordance with its terms.
(c) Compliance. The execution, delivery and performance of this
----------
Agreement by the Partnership will not conflict with, result in any breach of or
constitute a default under or cause the acceleration of, any provision of any
partnership agreement, certificate of limited partnership, judgment, decree,
law, ordinance, regulation or order to which the Partnership is a party or by
which the Partnership or any of its assets are bound or affected.
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ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions Precedent. The obligations of the Partnership and WinCup,
--------------------
respectively, to proceed with the transactions contemplated hereby are subject
to the satisfaction of the following conditions:
(a) The execution and delivery of the instruments referred to in
Section 1.5 hereof and Section 1.3 of the Agreement, dated as of October 31,
1995, between WinCup and ▇▇▇▇▇ River (the "Foam Agreement").
(b) The concurrent consummation of the closing contemplated under the
Foam Agreement.
ARTICLE V
FURTHER ASSURANCES
5.1 Further Assurances. If at any time after the Closing Date any further
------------------
assignments, conveyances or assurances in law are necessary or desirable to
vest, perfect or confirm of record in the Partnership the title to any of the
Transferred Assets, or otherwise to carry out the provisions hereof, the proper
officers and directors of WinCup shall execute and deliver any and all proper
assignments, instruments of assumption, powers of attorney and assurances in
law, and do all things necessary or proper to vest, perfect or confirm title to
such property or rights in the Partnership and otherwise to carry out the
provisions hereof.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification.
---------------
(a) Indemnification by WinCup. Subject to the limitations contained
-------------------------
in this Article VI, WinCup will indemnify and hold the Partnership harmless from
any damage, loss, liability or expense (including, without limitation,
reasonable expenses of investigation and litigation and reasonable attorneys',
accountants', and other professional fees) arising out of:
(i) a breach of any representation or warranty made by WinCup
in this Agreement;
(ii) a breach of any agreement of WinCup contained in this
Agreement;
(iii) the failure of WinCup to satisfy in full any of the
payables and allocated expenses and performance allowances associated with the
Foam Business and not assumed by the Partnership hereunder; and
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(iv) any liability or obligation of WinCup not assumed by the
Partnership pursuant to this Agreement.
(b) Indemnification by the Partnership. Subject to the limitations
----------------------------------
contained in this Article VI, the Partnership will indemnify and hold WinCup
harmless from any damage, loss, liability or expense (including, without
limitation, reasonable expenses of investigation and litigation and reasonable
attorney's, accountants' and other professional fees) arising out of:
(i) a breach of any representation or warranty made by the
Partnership in this Agreement;
(ii) a breach of any agreement of the Partnership contained in
this Agreement; and
(iii) the Assumed Liabilities and other liabilities assumed by
the Partnership under this Agreement.
(c) Third Party Claims. The obligation of an indemnifying party to
------------------
indemnify another party to this Agreement under the provisions of this Article
VI with respect to claims resulting from the assertion of liability by those not
parties to this Agreement (including governmental claims for penalties, fines
and assessments) shall be subject to the following terms and conditions:
(i) The indemnified party shall give prompt written notice to
the indemnifying party of any assertion of liability by a third party which
might give rise to a claim for indemnification based on the foregoing provisions
of this Article VI, which notice shall state the nature and basis of the
assertion and the amount thereof, to the extent known, provided, however, that
no delay on the part of the indemnified party in giving notice shall relieve the
indemnifying party of any obligation to indemnify unless (and then solely to the
extent that) the indemnifying party is prejudiced by such delay;
(ii) If any action, suit or proceeding (a "Legal Action") is
brought against an indemnified party with respect to which the indemnifying
party may have liability under the foregoing provisions of this Article VI, the
Legal Action shall be defended (such defense to include all proceedings for
appeal or review which counsel for the indemnified party shall deem appropriate)
by the indemnifying party;
(iii) Notwithstanding the provisions of the previous subsection
of this Agreement, until the indemnifying party shall have assumed the defense
of any such Legal Action, the defense shall be handled by the indemnified party.
Furthermore, (a) if the indemnified party shall have reasonably concluded that
there are likely to be defenses available to the indemnified party that are
different from or in addition to those available to the indemnifying party;
(b) if the indemnifying party fails to provide the indemnified party
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with evidence reasonably acceptable to the indemnified party that the
indemnifying party has sufficient financial resources to defend and fulfill its
indemnification obligation with respect to the Legal Action; (c) if the Legal
Action involves other than money damages and seeks injunctive or other equitable
relief; or (d) if a judgment against the indemnified party in the Legal Action
will, in the good faith opinion of the indemnified party, establish a custom or
precedent which will be materially adverse to the best interest of its
continuing business, the indemnifying party shall not be entitled to assume the
defense of the Legal Action and the defense shall be handled by the indemnified
party. If the defense of the Legal Action is handled by the indemnified party
under the provisions of this subsection, the indemnifying party shall pay all
legal and other expenses reasonably incurred by the indemnified party in
conducting such defense;
(iv) In any Legal Action initiated by a third party and defended
by the indemnifying party (a) the indemnified party shall have the right to be
represented by advisory counsel and accountants, at its own expense, (b) the
indemnifying party shall keep the indemnified party fully informed as to the
status of such Legal Action at all stages thereof, whether or not the
indemnified party is represented by its own counsel, (c) the indemnifying party
shall make available to the indemnified party, and its attorneys, accountants
and other representatives, all books and records of the indemnifying party
relating to such Legal Action and (d) the parties shall render to each other
such assistance as may be reasonably required in order to ensure the proper and
adequate defense of such Legal Action; and
(v) In any Legal Action initiated by a third party and defended
by the indemnifying party, the indemnifying party shall not make any settlement
of any claim without the written consent of the indemnified party, which consent
shall not be unreasonably withheld. Without limiting the generality of the
foregoing, it shall not be deemed unreasonable to withhold consent to a
settlement involving injunctive or other equitable relief against the
indemnified party or its assets, employees or business, or relief which the
indemnified party reasonably believes could establish a custom or precedent
which will be materially adverse to the best interests of its continuing
business.
(d) Limitations on Indemnification.
------------------------------
(i) Notwithstanding the foregoing provisions of this Article VI,
WinCup shall not be liable to the Partnership under Section 6.l(a)(i) and the
Partnership shall not be liable to WinCup under Section 6.1(b)(i), (1) with
respect to any single claim, or series of claims arising from a single
occurrence, unless and to the extent the liability under such claim or series of
claims exceeds $50,000, and thereafter the indemnified party shall be entitled
to indemnification thereunder only for the aggregate amount of such liability in
excess of $50,000 or (2) except as set forth in clause (1), unless and to the
extent the aggregate amount of liability under such Section (including any
amounts for which liability is determined under clause (1) above) exceeds
$250,000, and thereafter the indemnified party
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shall be entitled to indemnification thereunder only for the aggregate amount of
such liability in excess of $250,000.
(ii) All damages to which an indemnified party may be entitled
pursuant to the provisions of this Article VI shall be net of any insurance
coverage with respect thereto.
(e) Survival; Investigation. The representations and warranties of the
-----------------------
parties contained in Sections 2.1 and 3.1 of this Agreement and WinCup's
indemnification obligations under Section 6.1(a)(iii) shall survive any
investigation by any party and shall not terminate until eighteen (18) months
after the Closing Date. With respect to any claim asserted by the Partnership
with respect to the liabilities retained by WinCup pursuant to Section 1.3(f),
the right of indemnification provided for in Section 6.1(a)(iv) shall survive
for a period of five (5) years from the Closing Date. Notwithstanding the
provisions of the preceding sentences, any representation or warranty in respect
of which indemnification may be sought under Section 6.l(a)(i) or 6.1(b)(i) and
any claim in respect of which indemnification may be sought pursuant to Section
6.1(a)(iii) or 6.1(a)(iv) shall survive the applicable termination date set
forth in the preceding sentences if written notice, given in good faith, of a
specific breach thereof is given to the indemnifying party on or before such
termination date, whether or not liability has actually been incurred.
ARTICLE VII
MISCELLANEOUS
7.1 Governing Law. The execution, validity, construction and performance
-------------
of this Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware without regard to conflicts of laws principles.
7.2 Binding Effect. This Agreement shall be binding upon, and inure to
--------------
the benefit of, the respective heirs, successors and permitted assigns of the
parties hereto.
7.3 Entire Agreement. This Agreement and the documents contemplated by
----------------
this Agreement set forth the entire understanding of the parties with respect to
the subject matter hereof. Any previous agreements or understandings between the
parties regarding the subject matter hereof are merged into and superseded by
this Agreement.
7.4 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original and all of which, when taken together, shall
constitute one and the same instrument, binding on the parties hereto, and the
signature of any party to any counterpart shall be deemed a signature to, and
may be appended to, any other counterpart.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
WINCUP HOLDINGS, L.P.
By: WINCUP HOLDINGS, INC.,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
WINCUP HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
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