Exhibit 4.13
STOCK PURCHASE AGREEMENT
AMONG
▇▇▇ ▇▇▇▇▇▇▇▇ CORPORATION,
THE LEHIGH PRESS, INC.
AND THE SHAREHOLDERS OF
THE LEHIGH PRESS, INC.
DATED AS OF SEPTEMBER 5, 2003
TABLE OF CONTENTS
PAGE
1. Definitions.............................................................................................1
2. Purchase and Sale of Company Shares....................................................................10
(a) Basic Transaction.............................................................................10
(b) Purchase Price................................................................................11
(c) Purchase Price Definitions....................................................................11
(d) Estimated Purchase Price......................................................................13
(e) Payment from Buyer to Sellers and Option Payees...............................................13
(f) Determination of Purchase Price...............................................................13
(g) Closing.......................................................................................15
(h) Deliveries at Closing.........................................................................15
3. Representations and Warranties Concerning Transaction..................................................15
(a) Sellers' Representations and Warranties.......................................................15
(b) Buyer's Representations and Warranties........................................................16
4. Representations and Warranties Concerning the Company..................................................17
(a) Organization, Qualification and Corporate Power; Corporate Records............................18
(b) Capitalization................................................................................18
(c) Noncontravention; Authorization of Transaction................................................18
(d) Brokers' Fees.................................................................................19
(e) Title to Assets...............................................................................19
(f) Subsidiaries..................................................................................19
(g) Financial Statements..........................................................................20
(h) Events Subsequent to Most Recent Fiscal Year End..............................................20
(i) Undisclosed Liabilities.......................................................................22
(j) Legal Compliance; Permits.....................................................................22
(k) Tax Matters...................................................................................22
(l) Real Property.................................................................................24
(m) Intellectual Property.........................................................................26
(n) Tangible Assets...............................................................................28
(o) Inventory.....................................................................................28
(p) Contracts.....................................................................................28
(q) Notes and Accounts Receivable; Accounts Payable...............................................29
(r) Powers of Attorney............................................................................29
(s) Insurance.....................................................................................29
(t) Litigation....................................................................................30
(u) Employees.....................................................................................30
(v) Employee Benefits.............................................................................31
(w) Guaranties....................................................................................32
(x) Environmental Matters.........................................................................33
TABLE OF CONTENTS
(continued)
PAGE
(y) Certain Business Relationships with Company...................................................34
(z) Customers and Suppliers.......................................................................34
(aa) Bank Accounts.................................................................................34
(bb) Product Quality and Warranty Claims...........................................................34
(cc) Books and Records.............................................................................35
5. Pre-Closing Covenants..................................................................................35
(a) General.......................................................................................35
(b) Notices and Consents..........................................................................35
(c) Operation of Business.........................................................................36
(d) Preservation of Business......................................................................37
(e) Access........................................................................................37
(f) Notice of Developments........................................................................38
(g) Exclusivity...................................................................................38
(h) Updates to Environmental Assessments..........................................................39
(i) Repayment of Loans and Affiliate Transactions.................................................39
(j) Indebtedness..................................................................................39
(k) Transaction Expenses..........................................................................39
(l) Assistance with Financing.....................................................................39
(m) Company Stock Options.........................................................................40
(n) Restricted Stock Agreement; Corporate Governance Agreement....................................40
(o) Lehigh Puerto Rico; Puerto Rico Asset Purchase Agreement......................................40
(p) Split Dollar Life Insurance Assignment........................................................40
(q) Buyer's Financing.............................................................................40
(r) Release of Liens..............................................................................41
(t) SERP Payments.................................................................................41
6. Post-Closing Covenants.................................................................................41
(a) General.......................................................................................41
(b) Litigation Support............................................................................41
(c) D & O Insurance...............................................................................42
(d) Severance Pay Plan............................................................................42
(e) Transition....................................................................................42
(f) Confidentiality...............................................................................42
(g) Covenant Not to Compete; Non-Solicitation.....................................................43
7. Conditions to Obligation to Close......................................................................44
(a) Conditions to Buyer's Obligation..............................................................44
(b) Conditions to Sellers' Obligation.............................................................45
8. Remedies for Breaches of this Agreement................................................................46
(a) Survival of Representations and Warranties....................................................46
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TABLE OF CONTENTS
(continued)
PAGE
(b) Indemnification Provisions for Buyer's Benefit................................................46
(c) Indemnification Provisions for Sellers' Benefit...............................................48
(d) Matters Involving Third Parties...............................................................48
(e) Direct Claims.................................................................................50
(f) Exclusive Remedy..............................................................................50
(g) Escrow Agreement..............................................................................50
(h) Adjustment to Purchase Price..................................................................50
9. Termination............................................................................................51
(a) Termination of Agreement......................................................................51
(b) Effect of Termination.........................................................................51
10. Miscellaneous..........................................................................................51
(a) Nature of Sellers' Obligations................................................................51
(b) Press Releases and Public Announcements.......................................................52
(c) No Third-Party Beneficiaries..................................................................52
(d) Entire Agreement..............................................................................52
(e) Succession and Assignment.....................................................................52
(f) Counterparts..................................................................................53
(g) Headings......................................................................................53
(h) Notices.......................................................................................53
(i) Governing Law; Jurisdiction; Waiver of Jury Trial.............................................54
(j) Amendments and Waivers........................................................................54
(k) Severability..................................................................................54
(l) Expenses......................................................................................54
(m) Construction..................................................................................55
(n) Incorporation of Exhibits, Annexes and Schedules..............................................55
(o) Governing Language............................................................................55
(p) Cooperation on Tax Matters....................................................................55
(q) Appointment of Sellers' Representative........................................................58
EXHIBIT A - Estimate of the Estimated Purchase Price
EXHIBIT B - Escrow Agreement
EXHIBIT C - Commitment Letters
EXHIBIT D - Financial Statements
EXHIBIT E - Option Termination Agreement
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EXECUTION COPY
STOCK PURCHASE AGREEMENT
This
Stock Purchase Agreement (this "AGREEMENT") dated as of September 5,
2003 by and among ▇▇▇ ▇▇▇▇▇▇▇▇ Corporation, a Delaware corporation ("BUYER"),
The Lehigh Press, Inc., a Pennsylvania corporation (the "Company"), and each of
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., individually and as Sellers'
Representative, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as trustee, and ▇▇▇▇ ▇. ▇▇▇▇▇▇ (each a Seller
and collectively, "SELLERS"). Buyer, the Company and Sellers are referred to
collectively herein as the "PARTIES."
Sellers in the aggregate own all of the outstanding capital stock of the
Company.
This Agreement contemplates a transaction in which Buyer will purchase
from Sellers and Sellers will sell to Buyer, all of the outstanding capital
stock of the Company on the terms and for the consideration set forth below.
Concurrently with the execution and delivery of this Agreement, Buyer
▇▇▇▇ ▇. ▇▇▇▇▇▇ has executed an executive agreement (the "EXECUTIVE AGREEMENT").
Concurrently with the execution and delivery of this Agreement, each
Option Payee has executed and delivered to the Company an Option Termination
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.
"ACCOUNTANTS" has the meaning set forth in SECTION 2(F)(I) below.
"ACCRUED OTHER TAXES" has the meaning set forth in SECTION 2(C)(XII)
below.
"ACCRUED OTHER TAXES ADJUSTMENT" has the meaning set forth in SECTION
2(C)(XIII) below.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of state,
local or foreign Law.
"AGREEMENT" has the meaning set forth in the preface above.
"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 or could form the basis for any
specified consequence.
"BASKET AMOUNT" has the meaning set forth in SECTION 8(B)(I)(A) below.
"BUSINESS DAY" means any day other than (a) Saturday or Sunday or (b)
any other day on which banks in
New York,
New York are permitted or required to
be closed.
"BUYER" has the meaning set forth in the preface above.
"BUYER INDEMNIFIED PARTIES" has the meaning set forth in SECTION
8(B)(I) below.
"CASH" means cash and cash equivalents of the Company (including
deposits in transit) less escrowed amounts or other restricted cash balances of
the Company and less the amounts of any unpaid checks, drafts and wire transfers
issued by the Company on or prior to the date and time of determination,
calculated in accordance with GAAP applied on a basis consistent with the
preparation of the Financial Statements.
"CLOSING" has the meaning set forth in SECTION 2(G) below.
"CLOSING DATE" has the meaning set forth in SECTION 2(G) below.
"CLOSING EBITDA" has the meaning set forth in SECTION 2(C)(IX) below.
"CLOSING FINANCIAL STATEMENTS" has the meaning set forth in SECTION
2(F)(I) below.
"CLOSING INDEBTEDNESS" has the meaning set forth in SECTION 2(C)(VI)
below.
"CLOSING NET WORKING CAPITAL" has the meaning set forth in SECTION
2(C)(I) below.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B and of any similar state Law.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITMENT LETTERS" has the meaning set forth in SECTION 3(B)(VI)
below.
"COMPANY" has the meaning set forth in the preface above.
"COMPANY SHARE" means any share of the common stock, no par value, of
the Company.
"COMPANY STOCK OPTIONS" has the meaning set forth in SECTION 4(B)
below.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of the Company that is not already generally available to
the public.
"CONFIDENTIALITY AGREEMENT" means that certain letter agreement, dated
May 2, 2003, between Buyer and the Company, as amended, restated or supplemented
from time to time.
"CONTRACTS" has the meaning set forth in SECTION 4(P) below.
"CORPORATE GOVERNANCE AGREEMENT" has the meaning set forth in SECTION
5(N) below.
"CURRENT ASSETS" has the meaning set forth in SECTION 2(C)(II) below.
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"CURRENT LIABILITIES" has the meaning set forth in SECTION 2(C)(III)
below.
"DAMAGES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, deficiencies, assessments, damages, dues, penalties,
fines, costs, liabilities, obligations, taxes, liens, losses, expenses and fees,
including court costs and reasonable attorneys' and other professionals' fees
and expenses, including such of the foregoing that relate to Direct Claims.
"DIRECT CLAIM" has the meaning set forth in SECTION 8(E) below.
"DISCLOSURE SCHEDULE" has the meaning set forth in SECTION 4 below.
"DISPUTED ITEMS" has the meaning set forth in SECTION2(F)(I) below.
"DLJMB BUYERS" means, collectively, DLJ Merchant Banking Partners II,
L.P., DLJ Merchant Banking Partners ▇▇-▇, ▇.▇., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇, ▇.▇.,
▇▇▇ Diversified Partners, L.P., DLJ Diversified Partners-A, L.P., DLJ Millennium
Partners, L.P., DLJ Millennium Partners-A, L.P., DLJ EAB Partners, L.P., and MBP
II Plan Investors, L.P.
"EBITDA" has the meaning set forth in SECTION 2(C)(X) below.
"EBITDA DEDUCTION" has the meaning set forth in SECTION 2(C)(VII)
below.
"EBITDA SHORTFALL" has the meaning set forth in SECTION 2(C)(VIII)
below.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" (as such term
is defined in ERISA Section 3(3)) and any other material employee benefit plan,
program or arrangement of any kind, including, but not limited to, any bonus or
other incentive compensation, stock option, stock purchase, stock award or other
equity-based compensation, severance, salary continuation, employee income tax
indemnity (e.g. tax gross up) plan, program or arrangement.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1).
"ENVIRONMENTAL CLAIM" means any claim, demand, action, suit, or
proceeding by any Person and/or by any federal, state or regulatory entity,
incident to (i) the Release or threatened Release of any Hazardous Substance at
or from the Real Property on or prior to the Closing Date; (ii) the ownership,
operation or use of any site or facility by the Company on or prior to the
Closing Date for the storage, treatment, generation, transportation, processing,
handling, production or disposal of any Hazardous Substance, or as a landfill or
other waste disposal site; (iii) human exposure to any Hazardous Substance; (iv)
a violation of any applicable Environmental Requirement or non-compliance with
any environmental permit relating to the ownership, operation or use of any site
or facility by the Company on or prior to the Closing Date; (v) any requests for
information, notices of claim, demand letters or other notification received by
the Buyer after the Closing Date from any Governmental Entity in connection with
any investigation or clean-up of hazardous or polluting substances sent directly
by the Company prior to the Closing Date to any site listed or formally proposed
for listing on the National
3
Priority List ("NPL") promulgated pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA") or the
Comprehensive Environmental Response, Compensation and Liability Information
System ("CERCLIS") or to any site listed on any state list of hazardous
substances sites requiring investigation or clean-up.
"ENVIRONMENTAL REQUIREMENTS" shall mean all federal, state, local and
foreign Laws, all judicial and administrative orders and determinations and all
common law concerning pollution or protection of the environment, natural
resources or human health and safety as it relates to environmental protection,
including all those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or cleanup
of any Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means each entity that is treated as a single
employer with Company for purposes of Code Section 414.
"ESCROW AGENT" has the meaning set forth in SECTION 2(H) below.
"ESCROW AGREEMENT" has the meaning set forth in SECTION 2(H) below.
"ESCROW AMOUNT" has the meaning set forth in SECTION 2(E) below.
"ESTIMATED PURCHASE PRICE" has the meaning set forth in SECTION 2(D)
below.
"EXECUTIVE AGREEMENT" has the meaning set forth in the preface above.
"FIDUCIARY" has the meaning set forth in ERISA Section 3(21).
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4(G) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GIN" has the meaning set forth in SECTION 5(B) below.
"GOVERNMENTAL ENTITY" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended.
"HAZARDOUS SUBSTANCES" means, collectively, (i) any petroleum or
petroleum products, flammable explosives, radioactive materials, radon gas, lead
based paint, friable asbestos, in any form, urea formaldehyde foam insulation,
and transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCBs), (ii) any chemicals or other
4
materials or substances which are defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Requirements and (iii) any other chemical
or other material or substance, exposure to which is prohibited, limited or
regulated by any Environmental Requirements.
"IMPROVEMENTS" has the meaning set forth in SECTION 4(L)(IV) below.
"INCOME TAX" means any federal, state, local or foreign tax, charge,
fee, impost, levy or other assessment which is based upon, measured by, or
calculated with respect to (i) net income or profits or (ii) multiple bases, if
one or more of the bases upon which the tax is based, by which it is measured,
or with respect to which it is calculated is described in clause (i), together
with any interest, penalty or addition thereto, whether disputed or not.
"INCOME TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto and including any amendment thereof.
"INDEBTEDNESS" of any Person means, without duplication, (i) the
principal of (A) indebtedness of such Person for money borrowed, (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable and (C) any
liability or obligation that should be reflected as debt in accordance with
GAAP; (ii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable and other accrued current liabilities arising
in the Ordinary Course of Business); (iii) all obligations of such Person under
leases required to be capitalized in accordance with GAAP; provided, however,
that for the purposes hereof, the leases set forth on SECTION 1(A) OF THE
DISCLOSURE SCHEDULE shall not be treated as Indebtedness; (iv) all obligations
of such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction; (v) all remaining cash
contributions due on or before October 15, 2003, to satisfy the minimum required
contributions for plan years 2002 and 2003 for any Employee Pension Benefit Plan
sponsored by such Person; provided, however, that for the purposes hereof the
Parties agree that as of the date of this Agreement, with respect to the
Company, such remaining cash contributions are equal to $610,000; (vi) all
negative Cash balances, (vii) all obligations of the type referred to in clauses
(i) through (vi) of any Persons for the payment of which such Person is
responsible or liable, directly or indirectly, as obligor, guarantor, surety or
otherwise, including guarantees of such obligations; (viii) all obligations of
the type referred to in clauses (i) through (vii) of other Persons secured by
any Lien on any property or asset of such Person (whether or not such obligation
is assumed by such Person); and (ix) any accrued but unpaid interest, fees,
penalties, premiums and the like in respect of any of the foregoing; provided,
however, except as set forth in clause (v) above, no deferred compensation or
pension liability shall be treated as Indebtedness; and provided further, the
items set forth on SECTION 1(B) OF THE DISCLOSURE SCHEDULE shall not be treated
as Indebtedness.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 8(D)(I) below.
5
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 8(D)(I)
below.
"INDEMNITY ESCROW AMOUNT" has the meaning set forth in SECTION 2(E)
below.
"INDUSTRIAL SITE RECOVERY ACT" means the New Jersey Industrial Site
Recovery Act, N.J. Stat. ▇▇▇.▇▇. 13:1K ET SEQ, and the rules and regulations
promulgated thereunder.
"INTELLECTUAL PROPERTY" means intellectual property rights arising from
or in respect of the following, whether protected, created or arising under the
laws of the United States or any other jurisdiction: (i) all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (ii) all trademarks, service marks, trade dress, logos, slogans, trade
names, fictional business names (whether registered or unregistered, including
any applications for registration of the foregoing), Internet domain names and
rights in telephone numbers, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, (iii) all copyrights and all applications, registrations and renewals
in connection therewith, (iv) all mask works and all applications, registrations
and renewals in connection therewith, (v) all trade secrets and confidential
business information (including inventions (whether or not reduced to practice),
discoveries, concepts, ideas, methods, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(vi) all computer programs, including any and all computer software
implementations of algorithms, models and methodologies (including source code,
executable code, data, databases and related documentation), (vii) all databases
and compilations including all data and collections of data, whether machine
readable or otherwise, (viii) all material advertising and promotional
materials, (ix) all other proprietary rights, and (x) all copies and tangible
embodiments thereof (in whatever form or medium).
"KNOWLEDGE" means, with respect to an individual, the actual knowledge
of such individual after reasonable inquiry of the Company's directors and
officers and, with respect to a Person (other than an individual), the actual
knowledge of any director, officer or key employee of such Person after
reasonable inquiry of such Person's directors and officers.
"LAWS" shall have the meaning ascribed to such term in SECTION 3(A)(II)
below.
"LEASED REAL PROPERTY" means all leasehold or subleasehold estates and
other rights to use or occupy any land, buildings, structures, improvements,
fixtures or other interest in real property held by the Company.
"LEASES" has the meaning set forth in SECTION 4(E)(I) below.
"LEGAL PROCEEDING" has the meaning set forth in SECTION 4(T) below.
"LEHIGH PUERTO RICO" means Lehigh Press Puerto Rico LLC together with
Lehigh Press Puerto Rico, Inc.
"LIABILITIES" has the meaning set forth in SECTION 4(I) below.
6
"LIEN" means any mortgage, pledge, lien, security interest, claim,
lease, option, right of first refusal, easement, servitude, transfer restriction
under any shareholder or similar agreement, encumbrance, charge, or any other
restriction or limitation, other than (i) statutory liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, provided an appropriate reserve therefor is reflected
on the Most Recent Balance Sheet in accordance with GAAP, (ii) purchase money
liens and (iii) mechanics', carriers', workers', repairers' and similar liens
arising in the Ordinary Course of Business that are not material to the
businesses, operations and financial condition of the property so encumbered or
the Company and that are not incurred in connection with the borrowing of money.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means any effect
or change that would be materially adverse to the business, assets, condition
(financial or otherwise), operating results or operations of the Company, taken
as a whole, or on the ability of any Party to consummate timely the transactions
contemplated hereby.
"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(G) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in SECTION
4(G) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in SECTION 4(G)
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in SECTION 4(V) below.
"NET WORKING CAPITAL" has the meaning set forth in SECTION 2(C)(IV)
below.
"NET WORKING CAPITAL DEDUCTION" has the meaning set forth in SECTION
2(C)(XI) below.
"NJDEP" has the meaning set forth in SECTION 5(B) below.
"OPTION CASH CONSIDERATION" has the meaning set forth in SECTION 5(M)
below.
"OPTION TERMINATION AGREEMENT" has the meaning set forth in SECTION
5(M) below.
"OPTION PAYEE" means any Person that holds a Company Stock Option who
has not exercised such Company Stock Option prior to the Closing Date and who is
entitled to receive a payment in connection with the cancellation of such
Person's option rights.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OWNED REAL PROPERTY" means all land, together with all buildings,
structures, improvements and fixtures located thereon and all easements and
other rights and interests appurtenant thereto, owned in fee by the Company.
7
"PARTIES" has the meaning set forth in the preface above.
"PERMITTED ENCUMBRANCES" means with respect to each parcel of Real
Property: (i) real estate taxes, assessments and other governmental levies,
fees, or charges imposed with respect to such Real Property that are (A) not due
and payable as of the Closing Date or (B) being contested in good faith and for
which adequate reserves therefor are reflected on the Most Recent Balance Sheet
in accordance with GAAP; (ii) mechanics' liens and similar liens for labor,
materials, or supplies provided with respect to such Real Property incurred in
the Ordinary Course of Business for amounts that (A) are not due and payable as
of the Closing Date or (B) are being contested in good faith which would not,
individually or in the aggregate, materially impair the use or occupancy of the
Real Property or the operation of the business of the Company as currently
conducted on such Real Property; (iii) zoning, building codes and other land use
Laws regulating the use or occupancy of such Real Property or the activities
conducted thereon that are imposed by any Governmental Entity having
jurisdiction over such Real Property and are not violated by the current use or
occupancy of such Real Property or the operation of the business of the Company
as currently conducted thereon; and (iv) easements, covenants, conditions,
restrictions and other similar matters of record affecting title to such Real
Property which do not or would not materially detract from the value of or
materially impair the use or occupancy of such Real Property in the operation of
the business of the Company as currently conducted thereon.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, any other business entity, or any
Governmental Entity.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"PUERTO RICO ASSET PURCHASE AGREEMENT" has the meaning set forth in
SECTION 5(O) below.
"PURCHASE PRICE" has the meaning set forth in SECTION 2(B) below.
"PURCHASE PRICE ESCROW AMOUNT" has the meaning set forth in SECTION
2(E) below.
"REAL PROPERTY" has the meaning set forth in SECTION 4(L)(III) below.
"REAL PROPERTY LAWS" has the meaning set forth in SECTION 4(L)(VI)
below.
"REAL PROPERTY LEASES" means all leases, subleases, licenses,
concessions and other Contracts (written or oral), including all amendments,
extensions, renewals, guaranties and other agreements with respect thereto,
pursuant to which the Company holds any Leased Real Property.
"RESTRICTED PERIOD" has the meaning set forth in SECTION 6(H)(I) below.
"RESTRICTED STOCK AGREEMENT" has the meaning set forth in SECTION 5(M)
below.
8
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SELLER INDEMNIFIED PARTIES" has the meaning set forth in SECTION 8(C)
below.
"SELLERS" has the meaning set forth in the preface above.
"SELLERS' REPRESENTATIVE" has the meaning set forth in SECTION 10(Q)
below.
"SERP PAYMENTS" has the meaning set forth in SECTION 5(T) below.
"SPECIAL BONUS PAYMENT" has the meaning set forth in SECTION 5(S)
below.
"SPECIALLY DESIGNATED EMPLOYEE" means the individual listed on SECTION
1(D) of the Disclosure Schedule.
"SPECIFIED LIENS" has the meaning set forth in SECTION 5(R) below.
"SPLIT DOLLAR LIFE INSURANCE ASSIGNMENT" has the meaning set forth in
SECTION 5(P) below.
"STRADDLE PERIOD" has the meaning set forth in SECTION 10(P)(VIII)
below.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association, or other business entity of
which (i) if a corporation, 50% or more of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), 50% or more of partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons owns a 50% or more ownership interest
in such a business entity (other than a corporation) if such Person or Persons
shall be allocated 50% or more of such business entity's gains or losses or
shall be or control any managing director or general partner of such business
entity (other than a corporation). The term "Subsidiary" shall include all
Subsidiaries of such Subsidiary.
"SWDA" has the meaning set forth in SECTION 4(X)(IV) below.
"TARGET NET WORKING CAPITAL" has the meaning set forth in SECTION
2(C)(V) below.
"TAX" or "TAXES" means (i) any federal, state, local, or foreign taxes,
charges, fees, imports, levies or other assessments, including, without
limitation, all net income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, property,
9
sales, use, transfer, registration, ad valorem, inventory, value added,
alternative or add-on minimum and estimated taxes, customs duties, fees,
assessments and charges of any kind whatsoever, (ii) all interest, penalties,
fines, additions to tax or additional amounts imposed by any taxing authority in
connection with any item described in clause (i) and (iii) any liability in
respect of any items described in clauses (i) and/or (ii) payable by reason of
contract, assumption, transferee or successor liability, operation of Law,
Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof
or any analogous or similar provision under Law) or otherwise.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement required to be filed in respect of any Taxes,
including any schedule or attachment thereto, and including any amendment
thereto.
"THIRD-PARTY CLAIM" has the meaning set forth in SECTION 8(D) below.
"TRANSACTION EXPENSES" means the aggregate amount of fees and expenses
and other payment obligations incurred by or on behalf of, or paid or to be paid
by, the Company in connection with this Agreement or any of the transactions
contemplated hereby, including, but not limited to, (i) all fees and expenses of
counsel, advisors, brokers, finders, consultants (including environmental
consultants), investment bankers, experts, actuaries, auditors and accountants,
(ii) all transaction, success or similar bonuses, or other amounts payable to
any Person in connection with or upon the consummation of the transactions
contemplated hereby whether payable on the Closing Date or thereafter, and
whether or not contingent upon continued employment with the Company for a
period following the Closing, (iii) all severance or other costs payable to any
Person in connection with the consummation of the transactions contemplated
herein unless such severance or other costs become payable only upon the
termination by the Company of such Person's employment with the Company on or
after the Closing Date, (iv) all severance and other amounts, including, but not
limited to, the SERP Payments contempated by Section 5(t) below, payable to
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇ ▇. ▇▇▇▇▇▇ pursuant to any Contract,
employee plan or other arrangement, whether payable prior to, on or after the
Closing Date (other than as set forth on SECTION 1.1(C) OF THE DISCLOSURE
SCHEDULE), (v) all costs, fees, penalties, premiums, payments or expenses
incurred or paid (A) in obtaining any approvals or consents contemplated by
SECTION 4(C) hereof, (B) in connection with the repayment of Indebtedness under
SECTION 5(J) and (C) in connection with the release and termination of Liens
under SECTION 5(R), and (vi) all fees and governmental charges described in
Section 10(p)(iv) hereof; provided, however, no amount shall be included as
Transaction Expenses to the extent that such amount is included as Indebtedness;
further, provided, however, that the fees, costs and expenses of Buyer's
financing (including with respect to the financing contemplated under the
Commitment Letters), shall not be included as Transaction Expenses.
2. PURCHASE AND SALE OF COMPANY SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, Buyer agrees to purchase from each Seller, and each Seller
agrees to sell to Buyer, all of his, her, or its Company Shares free and clear
of all Liens for the consideration specified below in this SECTION 2. The
obligation of Buyer to purchase and pay for the Company Shares at
10
Closing is subject, INTER ALIA, to the condition that all of the Company Shares
be delivered and available for purchase by Buyer on the terms set forth herein.
(b) PURCHASE PRICE. The aggregate purchase price (the "PURCHASE PRICE")
to be paid by Buyer for all of the Company Shares (including payments made to
all Option Payees with respect to the cancellation of all options to purchase
Company Shares) shall be an amount equal to One Hundred and Ten Million Dollars
($110,000,000.00): (i) MINUS an amount equal to the Closing Indebtedness; (ii)
MINUS an amount equal to the Net Working Capital Deduction; (iii) MINUS the
EBITDA Deduction, if any; (iv) MINUS the amount of all Transaction Expenses
which remain unpaid as of the Closing; and (v) MINUS an amount equal to the
Accrued Other Taxes Adjustment.
(c) PURCHASE PRICE DEFINITIONS. For purposes of calculating the
Purchase Price, the following terms shall have the following meanings:
(i) "CLOSING NET WORKING CAPITAL" means the Net Working Capital of
the Company measured as of 11:59 p.m. (Eastern Time) on the day
immediately preceding the Closing Date.
(ii) "CURRENT ASSETS" means accounts receivable, other
receivables, inventory, deposits and prepaid expenses and other current
assets, but excluding (A) Cash (including negative Cash balances), (B)
any Income Tax assets or deferred Taxes, and (C) receivables from any of
the Company's Affiliates, directors, employees, officers or Sellers and
any of their Affiliates, in each case, as is determined in accordance
with GAAP applied on a consistent basis with the preparation of the
Company's Financial Statements for the Most Recent Fiscal Year End.
(iii) "CURRENT LIABILITIES" means accounts payable, accrued
compensation, accrued other expenses, Accrued Other Taxes and other
current liabilities, but excluding (A) payables to any of the Company's
Affiliates, directors, employees, officers or Sellers and any of their
Affiliates (but only to the extent that the Company is released from such
obligations on or prior to the Closing), (B) accrued Transaction
Expenses, (C) the impact of any reclassification of any negative cash
balances to a Liability, and (D) the current portion of Indebtedness, in
each case, as is determined in accordance with GAAP applied on a
consistent basis with the preparation of the Company's Financial
Statements for the Most Recent Fiscal Year End. Current Liabilities shall
also exclude deferred compensation recorded in the amount of $94,106
representing general ledger account number 280020 and pension liabilities
related to the company's qualified and supplemental retirement plans
recorded under SFAS Statement number 87. As of the Closing Date, the
Liability for accrued bonuses shall be calculated as the pro rata portion
of the annual 2003 bonus that is included in the Company's most recent
2003 forecast, assuming the Company achieves such 2003 forecast LESS that
portion of the annual 2003 bonus that would have been allocated to
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
(iv) "NET WORKING CAPITAL" means Current Assets of the Company
less Current Liabilities of the Company.
11
(v) "TARGET NET WORKING CAPITAL" means Eight Million Three Hundred
Ninety Three Thousand Dollars ($8,393,000.00).
(vi) "CLOSING INDEBTEDNESS" means the amount of Indebtedness of
the Company, net of positive Cash balances, as of 11:59 p.m. (Eastern
Time) on the day immediately preceding the Closing Date (not taking into
account the debt incurred by the Buyer or the Company in connection with
the financing of the transactions contemplated by this Agreement).
(vii) "EBITDA DEDUCTION" shall be an amount, if any, equal to the
EBITDA Shortfall times seven and one-half (7.5); provided, however, in no
event shall such amount be in excess of Four Million One Hundred
Twenty-Five Thousand Dollars ($4,125,000).
(viii) "EBITDA SHORTFALL" shall be the amount, if any, by which
Closing EBITDA is less than Fifteen Million Eight Hundred Thousand
Dollars ($15,800,000); provided, however, in no event shall such amount
be in excess of Five Hundred Fifty Thousand Dollars ($550,000).
(ix) "CLOSING EBITDA" shall be an amount equal to the Company's
EBITDA for the twelve month period ending on the last day of the fiscal
month ended immediately prior to the Closing Date.
(x) "EBITDA", as used in calculating the Closing EBITDA and EBITDA
Shortfall, means operating profit (it being understood that bonus and
profit sharing expense shall be deducted in determining operating profit,
and gains and losses on asset sales and insurance recoveries shall be
excluded from determining operating profit): (A) plus depreciation and
amortization, (B) plus non-recurring expense items (limited to
shareholder expenses, pro forma operating leases, and normalized bonus
and profit sharing expenses as discussed between the Buyer and identified
by management of the Company which shall not exceed $3.2 million in the
aggregate for any twelve -month period, net of $277,000 SERP expense
reversal recorded in December 2002), and (C) plus any Transaction
Expenses taken into account in the determination of operating income, in
each case, as is determined in accordance with GAAP applied on a
consistent basis with preparation of the Company's Financial Statements
for the Most Recent Fiscal Year End.
(xi) "NET WORKING CAPITAL DEDUCTION" means the amount, if any, by
which Target Net Working Capital EXCEEDS Closing Net Working Capital.
(xii) "ACCRUED OTHER TAXES" means accrued Taxes of the Company as
of 11:59 p.m. (Eastern Time) on the day immediately preceding the Closing
Date (excluding Liabilities relating to Income Taxes and deferred Taxes),
which have an original due date that is on or after the Closing Date,
determined in accordance with GAAP applied on a consistent basis with the
preparation of the Company's Financial Statements for the Most Recent
Fiscal Year End.
12
(xiii) "ACCRUED OTHER TAXES ADJUSTMENT" means an amount equal to
fifty percent (50%) of Accrued Other Taxes.
(d) ESTIMATED PURCHASE PRICE. On or before the third (3rd) Business Day
preceding the Closing Date, Sellers' Representative shall furnish to Buyer a pro
forma calculation of the Purchase Price (the "ESTIMATED PURCHASE PRICE") with
reasonable detail and support substantially in the form attached hereto as
EXHIBIT A (which EXHIBIT A reflects a good faith estimate by the Sellers of the
Estimated Purchase Price on the date hereof), determined in accordance with
SECTIONS 2(B) and (C) above based upon Sellers' good faith estimate of the
Closing Indebtedness, Transaction Expenses, Closing Net Working Capital, Accrued
Other Taxes Adjustment and the EBITDA Deduction.
(e) PAYMENT FROM BUYER TO SELLERS AND OPTION PAYEES. At the Closing,
Buyer shall deliver and pay (A) an amount in cash, by wire transfer to an
account designated in writing by the Sellers' Representative for further
distribution by the Sellers' Representative to Sellers and Option Payees, equal
to the Estimated Purchase Price, less Three Million Dollars ($3,000,000) (the
"PURCHASE PRICE ESCROW AMOUNT") to be held in an interest-bearing escrow to
satisfy any amounts payable to Buyer upon the final determination of the
Purchase Price pursuant to SECTION 2(F)(II) hereof, and less Six Million Dollars
($6,000,000) (the "INDEMNITY ESCROW AMOUNT", and, together with the Purchase
Price Escrow Amount, the "ESCROW AMOUNT") to be held in an interest-bearing
escrow to satisfy any amounts payable to Buyer pursuant to SECTION 8 hereof, and
(B) an amount in cash, by wire transfer to a Company account equal to the amount
of the Transaction Expenses as estimated in determining the Estimated Purchase
Price pursuant to SECTION 2(D) above for further distribution to the Transaction
Expenses payees at the Closing.
(f) DETERMINATION OF PURCHASE PRICE.
(i) Buyer will prepare (A) a balance sheet of the Company as of
the Closing Date in accordance with GAAP applied on a consistent basis
with the preparation of the Company's balance sheet for the Most Recent
Fiscal Year End and (B) a detailed statement setting forth the Closing
Indebtedness, Closing Net Working Capital, Transaction Expenses, Accrued
Other Taxes Adjustment and EBITDA Deduction and the resulting Purchase
Price (the "CLOSING FINANCIAL STATEMENTS") of the Company as 11:59 p.m.
(Eastern Time) on the day immediately prior to the Closing Date,
determined in accordance with SECTIONS 2(B) and 2(C) above. The Closing
Financial Statements will also include a detailed statement prepared by
Buyer setting forth Buyer's determination of the EBITDA Deduction. The
Closing Financial Statements shall be fully supported by appropriate
schedules and work papers. Buyer will deliver the Closing Financial
Statements to the Sellers' Representative within sixty (60) days after
the Closing Date. The Sellers' Representative shall have thirty (30) days
following receipt of the Closing Financial Statements to give written
notice to Buyer of any objection to the Closing Financial Statements. Any
such written notice shall specify in reasonable detail those items or
amounts as to which the Sellers' Representative disagrees (the "DISPUTED
ITEMS") and Sellers' Representative shall be deemed to have agreed with
all other items and amounts contained in the Closing Financial Statements
except for such other items or amounts which are impacted by any Disputed
Item or the resolution of any Disputed
13
Item. If, within such thirty (30) day period the Sellers' Representative
has not given Buyer written notice of its objection to the Closing
Financial Statements, then the Purchase Price reflected in the Closing
Financial Statements shall be final and binding on the Parties. If the
Sellers' Representative gives such notice of objection, then the Parties
shall attempt in good faith to resolve the Disputed Items for a period
not less than ten (10) days. If the parties are unable to resolve the
Disputed Items after such ten (10) day period, then the Disputed Items
will be submitted for resolution in accordance with the terms hereof,
including SECTIONS 2(B) and (C), to the Chicago office of Deloitte &
Touche, LLP, certified public accountants, or, if Deloitte & Touche, LLP
is unwilling or unable to accept such appointment, then to a nationally
recognized independent accounting firm which is mutually agreeable to
Buyer and the Sellers' Representative (the "ACCOUNTANTS"). If Buyer and
the Sellers' Representative cannot agree on a nationally recognized
independent accounting firm to serve as the Accountants, then Buyer and
Sellers' Representative shall request the American Arbitration
Association appoint such firm, and such appointment shall be conclusive
and binding on the Parties. If the Disputed Items are submitted to the
Accountants for resolution, (A) the Accountants shall function as an
expert and not as an arbitrator; (B) each Party will furnish to the
Accountants such workpapers and other documents and information relating
to the Disputed Items as the Accountants may request and are available to
that Party (or its independent public accountants), and will be afforded
the opportunity to present to the Accountants any material relating to
the Disputed Items and to discuss the Disputed Items with the
Accountants; (C) the Accountants shall be bound by the provisions of this
SECTION 2; (D) the Accountants shall make a determination only with
respect to the Disputed Items and may not assign a value to any Disputed
Item greater than the highest value for such Disputed Item claimed by
either Party or less than the smallest value for such Disputed Item
claimed by either Party; (E) the determination by the Accountants, as set
forth in a notice delivered to both Parties by the Accountants, will be
binding and conclusive on the Parties; and (F) Buyer and Sellers will
each bear fifty percent (50%) of the fees of the Accountants for such
determination.
(ii) Not later than the fifth (5th) Business Day following the
final determination of the Purchase Price in accordance with SECTION
2(F)(I), (A) if the Purchase Price is greater than the Estimated Purchase
Price, Buyer will pay the difference thereof and the Escrow Agent will
distribute the Purchase Price Escrow Amount in accordance with the terms
of the Escrow Agreement, to an account designated by the Sellers'
Representative for further distribution by the Sellers' Representative to
Sellers and Option Payees, and (B) if the Estimated Purchase Price is
greater than the Purchase Price, then such difference shall be deducted
from the Purchase Price Escrow Amount and distributed by the Escrow Agent
to Buyer in accordance with the terms of the Escrow Agreement; PROVIDED
that (x) if the excess of the Estimated Purchase Price over the Purchase
Price is greater than the Purchase Price Escrow Amount, then Sellers
shall pay the difference thereof to Buyer in cash by wire transfer to an
account designated by Buyer, and (y) all such amounts payable by Sellers
to Buyer pursuant to clause (x) above shall be the joint and several
obligation of Sellers; PROVIDED FURTHER, that if the excess of the
Estimated Purchase Price over the Purchase Price is less than the
Purchase Price Escrow Amount, then the remainder of the Purchase Price
Escrow Amount not distributable to Buyer shall be distributed by the
Escrow Agent to the Sellers'
14
Representative for further distribution by the Sellers' Representative to
Sellers and Option Payees. Buyer and Sellers will cause the Escrow Agent
to disburse the Purchase Price Escrow Amount in accordance with the
resolution or determination of the Purchase Price as set forth herein.
(g) CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Weil, Gotshal &
▇▇▇▇▇▇ LLP in
New York,
New York commencing at 9:00 a.m. local time on the third
(3rd) Business Day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself) or such other date as Buyer and Sellers may mutually
determine (the "CLOSING DATE").
(h) DELIVERIES AT CLOSING. At the Closing, (i) Sellers will deliver to
Buyer the various certificates, instruments and documents referred to in SECTION
7(A) below, (ii) Buyer will deliver to Sellers the various certificates,
instruments and documents referred to in SECTION 7(B) below, (iii) each Seller
will deliver to Buyer stock certificates representing all of his, her, or its
Company Shares, endorsed in blank or accompanied by duly executed assignment
documents, (iv) Buyer will deliver and pay the Estimated Purchase Price, less
the Escrow Amount, as specified in SECTION 2(E) above, (v) Sellers will deliver
the Option Termination Agreements duly executed by the Option Payees, and (vi)
Buyer, the Sellers' Representative and an escrow agent to be mutually agreed to
by Sellers and Buyer (the "ESCROW AGENT") will execute and deliver the Escrow
Agreement substantially in the form attached hereto as EXHIBIT B (with such
changes as may be required by the Escrow Agent and reasonably acceptable to
Buyer and Sellers) (the "ESCROW AGREEMENT"), and Buyer will deliver and pay to
the Escrow Agent, the Escrow Amount to be held and distributed in accordance
with the terms of the Escrow Agreement.
3. REPRESENTATIONS AND WARRANTIES CONCERNING TRANSACTION.
(a) SELLERS' REPRESENTATIONS AND WARRANTIES. Each Seller, for himself,
herself or itself and not jointly and severally, represents and warrants to
Buyer that 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 himself, herself, or itself, except as set forth in ANNEX I attached
hereto.
(i) AUTHORIZATION OF TRANSACTION. Such Seller has full power,
legal capacity and authority to execute and deliver this Agreement and
each other agreement, document, instrument or certificate contemplated
herein or to be delivered in connection herewith and to perform his, her,
or its obligations hereunder and thereunder. This Agreement constitutes
the valid and legally binding obligation of such Seller, enforceable in
accordance with its terms and conditions, except that such enforcement
may be limited by (A) bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights or remedies of
creditors, or (B) by general equitable principles (whether enforcement is
sought in law or equity). The execution, delivery and performance of this
Agreement and all other agreements contemplated hereby have been duly
authorized by such Seller.
15
(ii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) conflict with, violate or result in a default under any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any Governmental Entity
(collectively, "LAWS") to which such Seller is subject or, if such Seller
is an entity, any provision of its governing documents, (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 or other
arrangement to which such Seller is a party or by which he, she, or it is
bound or to which any of his or its assets is subject, or (C) result in
the imposition or creation of a Lien upon or with respect to Company
Shares. No consent, waiver, approval, order, permit or authorization of,
or declaration or filing with, or notification to, any Person or
Governmental Entity is required on the part of such Seller in connection
with the execution and delivery of this Agreement, or any other Contract,
document, instrument or certificate contemplated herein or to be
delivered in connection herewith, or the compliance by such Seller with
any of the provisions hereof or thereof, the consummation of the
transactions contemplated hereby or the taking of any other action
contemplated hereby.
(iii) BROKERS' FEES. Such 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.
(iv) COMPANY SHARES. Such Seller holds of record and owns
beneficially the number of Company Shares set forth next to his, her, or
its name in SECTION 3(A) OF THE DISCLOSURE SCHEDULE, free and clear of
any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Liens, options,
warrants, purchase rights, Contracts, commitments, equities, claims and
demands. Except as set forth in SECTION 3(A) OF THE DISCLOSURE SCHEDULE,
such Seller is not a party to any option, warrant, purchase right, or
other Contract or commitment that could require such Seller to sell,
transfer, or otherwise dispose of any capital stock of the Company (other
than this Agreement).
(b) BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Sellers that the statements contained in this SECTION 3(B) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this SECTION
3(B)), except as set forth in ANNEX II attached hereto.
(i) ORGANIZATION OF BUYER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation (or other formation).
(ii) AUTHORIZATION OF TRANSACTION. Buyer has full power and
authority (including full corporate or other entity power and authority,
including, without limitation, the approval of the board of directors of
Buyer) to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the
16
valid and legally binding obligation of Buyer, enforceable in accordance
with its terms and conditions, except that such enforcement may be
limited by (A) bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights or remedies of
creditors, or (B) by general equitable principles (whether enforcement is
sought in law or equity). Except with respect to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act, the Industrial Site Recovery Act or any state securities Laws, Buyer
is not required to give any notice to, make any filing with, or obtain
any authorization, consent or approval of any Governmental Entity in
order for it to consummate the transactions contemplated by this
Agreement. The execution, delivery and performance of this Agreement and
all other agreements contemplated hereby have been duly authorized by
Buyer.
(iii) NONCONTRAVENTION. Except as set forth on SECTION 3(B) OF
ANNEX II, neither the execution and the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (A)
violate any Law to which 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 agreement, Contract or other arrangement to which Buyer is a
party or by which it is bound or to which any of its assets is subject.
(iv) BROKERS' FEES. Buyer does not have any liability or
obligation to pay any fees or commissions to any broker, finder or agent
with respect to the transactions contemplated by this Agreement.
(v) INVESTMENT. Buyer is not acquiring Company Shares with a view
to or for sale in connection with any distribution thereof within the
meaning of the Securities Act.
(vi) FINANCIAL RESOURCES. To the extent Buyer will not be funding
the Purchase Price from Buyer's cash on hand, Buyer has received
commitment letters executed or entered into by and between Buyer and
Credit Suisse First Boston, acting through its Cayman Islands branch, and
by and between Buyer and the DLJMB Buyers (together, the "COMMITMENT
LETTERS") which are in full force and effect, and which in accordance
with the terms thereof are in an amount necessary to fund the Purchase
Price in connection with the transactions contemplated hereby. True and
correct copies of the executed Commitment Letters are attached hereto as
EXHIBIT C. As of the date hereof, Buyer is not aware of any facts or
circumstances with respect to the Company, Buyer or its lenders under the
Commitment Letters that create a reasonable basis for Buyer to believe
that Buyer would not be able to obtain the financing contemplated by the
Commitment Letters.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. The Company
and Sellers, jointly and severally, represent and warrant to Buyer that 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, with respect to any
17
particular subsection of this SECTION 4, as set forth in the corresponding
subsection of the disclosure schedule delivered by the Company and Sellers to
Buyer on the date hereof (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this SECTION 4. For purposes of this SECTION 4 (other
than with respect to Section 4(b)--Capitalization) and any other provision in
this Agreement that refers to the representations and warranties in this SECTION
4 all references to the "Company" shall be deemed to include the Company and any
and all of its Subsidiaries.
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER; CORPORATE RECORDS.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. The Company is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the lack of such
qualification would not, individually or in the aggregate, have a Material
Adverse Effect. The Company 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. SECTION 4(A) OF THE DISCLOSURE SCHEDULE lists the directors and
officers of the Company. The stock certificate books and stock transfer records
of the Company previously made available to Buyer are true, correct and
complete.
(b) CAPITALIZATION. The entire authorized capital stock of Company
consists of 1,000,000 Company Shares, of which 195,466 Company Shares are issued
and outstanding and no Company Shares are held in treasury. All of the issued
and outstanding Company Shares have been duly authorized, are validly issued,
fully paid and nonassessable and are held of record by the respective Sellers as
set forth in SECTION 4(B) OF THE DISCLOSURE SCHEDULE. As of the date hereof,
there are 19,917 outstanding options to purchase Company Shares, which have an
aggregate option exercise price of $356,734 (the "COMPANY STOCK OPTIONS").
SECTION 4(B) OF THE DISCLOSURE SCHEDULE sets forth, with respect to each Company
Stock Option, the holder thereof, the number of Company Shares exercisable under
such Company Stock Option and the applicable exercise price per Company Share.
Except as set forth in this SECTION 4(B) or in SECTION 4(B) OF THE DISCLOSURE
SCHEDULE, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights exchange rights or other
Contracts that could require the Company to issue, sell or otherwise cause to
become outstanding any of its capital stock, and there are no securities of the
Company outstanding which upon conversion or exchange would require the
issuance, sale or transfer of any additional shares of capital stock or other
equity securities of the Company or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase shares of
capital stock or other equity securities of the Company.
(c) NONCONTRAVENTION; AUTHORIZATION OF TRANSACTION.
(i) Neither the execution and the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (A)
violate any Law to which Company is subject or any provision of the
charter or bylaws of the Company 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 material Contract or other material
arrangement to which the Company is a party or by which it is bound or to
which any of its assets is subject (or
18
result in the imposition of any Lien upon any of its assets). Except with
respect to the transfer of the Owned Real Property, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act and the Industrial Site Recovery Act, the Company is not required to
give any notice to, make any filing with, or obtain any material
authorization, consent, or approval of any Governmental Entity in order
for the Parties to consummate the transactions contemplated by this
Agreement.
(ii) The Company has full corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Company, enforceable in accordance with its terms and conditions, except
that such enforcement may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights or remedies of creditors or (B) by general equitable
principles (whether enforcement is sought in law or equity).
(d) BROKERS' FEES. Other than fees payable to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company,
L.L.C. (which will constitute Transaction Expenses to the extent unpaid as of
the Closing), the Company 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.
(e) TITLE TO ASSETS.
(i) SECTION 4(E) OF THE DISCLOSURE SCHEDULE sets forth all
material leases of properties and assets (other than with respect to
Leased Real Property) used by the Company or to which the Company is
bound or by which any of its properties or assets are bound (the
"LEASES"). The Company has delivered or otherwise made available to Buyer
true, correct and complete copies of all Leases, together with all
amendments, modifications or supplements thereto. The Company has a valid
leasehold interest under each of the Leases under which it is a lessee,
subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity, and there
is no default under any Lease by the Company or, to the Knowledge of the
Company or Sellers by any other party thereto, and no event has occurred
that with the lapse of time or the giving of notice or both would
constitute a default thereunder.
(ii) The Company has good title to, or a valid leasehold interest
in, the properties and assets, whether tangible or intangible, used by
it, located on its premises, or shown on the Most Recent Balance Sheet or
acquired after the date thereof, free and clear of all Liens, except for
properties and assets disposed of in the Ordinary Course of Business
since the date of the Most Recent Balance Sheet. Such properties and
assets comprise all of the assets necessary to operate the businesses of
the Company as presently conducted in all material respects.
(f) SUBSIDIARIES. Except as set forth in SECTION 4(F) OF THE DISCLOSURE
SCHEDULE, the Company (i) is not a general partner or limited partner of, or
party to any joint venture with any Person, and does not, directly or
indirectly, own any interest, including, without limitation any direct or
indirect equity or other investment or ownership interest in any corporation,
partnership, company, joint venture, association or other Person or (ii) does
not own
19
or have any right to acquire, directly or indirectly, any outstanding capital
stock or other equity interest of, or other investment or ownership interests
in, any Person. SECTION 4(F) OF THE DISCLOSURE SCHEDULE sets forth, with respect
to each Subsidiary, the jurisdiction in which it is incorporated or organized,
the jurisdictions, if any, in which it is qualified to do business, the number
of shares of its authorized capital stock, the number and class of shares
thereof duly issued and outstanding, the names of all stockholders or other
equity owners and the number of shares of stock owned by each stockholder or the
amount of equity owned by each equity owner. The outstanding shares of capital
stock or equity interests of each Subsidiary are validly issued, fully paid and
non-assessable, and all such shares or other equity interests represented as
being owned by the Company are owned by it free and clear of any and all Liens.
There is no existing option, warrant, call, right or Contract to which any
Subsidiary is a party requiring, and there are no convertible securities of any
Subsidiary outstanding which upon conversion would require, the issuance of any
shares of capital stock or other equity interests of any Subsidiary or other
securities convertible into shares of capital stock or other equity interests of
any Subsidiary.
(g) FINANCIAL STATEMENTS. Attached hereto as EXHIBIT D are the
following financial statements of the Company (collectively, the "FINANCIAL
STATEMENTS"): (i) audited balance sheets and statements of operations, retained
earnings and cash flow as of and for the fiscal years ended December 31, 2000,
December 31, 2001 and December 31, 2002 (the "MOST RECENT FISCAL YEAR END"); and
(ii) unaudited balance sheet and statements of income and cash flow (the "MOST
RECENT FINANCIAL STATEMENTS") as of and for the six months ended July 5, 2003
(the "MOST RECENT FISCAL MONTH END"). Except as set forth in SECTION 4(G) OF THE
DISCLOSURE Schedule, the Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP (other than with respect to the Most
Recent Financial Statements, the lack of footnotes and year-end adjustments)
applied on a consistent basis throughout the periods covered thereby and present
fairly the financial condition of the Company as of such dates and the results
of operations of the Company for such periods.
(h) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since December
31, 2002, there has not been any Material Adverse Change. Without limiting the
generality of the foregoing, since that date through the date hereof:
(i) the Company has not sold, leased, transferred, or assigned any
assets, tangible or intangible, other than the sale of inventory in the
Ordinary Course of Business;
(ii) the Company has not entered into any Contract outside the
Ordinary Course of Business;
(iii) no party (including the Company) has outside of the Ordinary
Course of Business accelerated, cancelled or terminated, nor have there
been any amendments or modifications to, any material Contract, lease or
license to which the Company is a party or by which it is bound;
(iv) the Company has not imposed any Lien upon any of its assets,
tangible or intangible;
20
(v) the Company has not made, or failed to make, any capital
expenditures outside the Ordinary Course of Business;
(vi) the Company has not made any capital investment in any other
Person;
(vii) the Company has not created, incurred, assumed or guaranteed
more than $100,000 in aggregate Indebtedness except as set forth on the
face of the Most Recent Balance Sheet;
(viii) the Company has not transferred, assigned or granted any
license or sublicense of any rights under or with respect to any
Intellectual Property;
(ix) there has been no change made or authorized in the charter or
bylaws of the Company;
(x) the Company has not issued, sold or otherwise disposed of any
of its capital stock, or granted any options, warrants or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any
of its capital stock;
(xi) the Company has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xii) the Company has not experienced any damage, destruction or
loss (whether or not covered by insurance) to any of its properties or
assets in excess of $25,000 for any single loss or $100,000 for all such
losses;
(xiii) the Company has not entered into any other transaction with
any of its directors, officers and employees outside the Ordinary Course
of Business;
(xiv) the Company has not entered into any employment Contract or
collective bargaining agreement, written or oral, or modified the terms
of any existing Contract;
(xv) the Company has not increased the compensation or benefits of
any of its directors, officers and employees, except for changes in the
Ordinary Course of Business, which, for this purpose shall not include
any increase in annual salary or similar rate of pay greater than two and
one-half percent (2 1/2%) per year or material increases in benefits not
applicable to eligible employees generally;
(xvi) the Company has not entered into, adopted, amended, modified
or terminated any bonus, profit sharing, incentive, severance, or other
plan, Contract, or commitment for the benefit of any of its directors,
officers and employees (or taken any such action with respect to any
other Employee Benefit Plan);
21
(xvii) the Company has not made any material change in any method
of accounting or accounting principles or practice, except for any such
change required by reason of a change in GAAP;
(xviii) the Company has not changed its Tax accounting or Tax
reporting principles, methods or policies;
(xix) the Company has not made or revoked any election relating to
Taxes, settled or compromised any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
Taxes;
(xx) the Company has not instituted or settled any Legal
Proceedings;
(xxi) the Company has not loaned or advanced any money to any
Person (other than advances to employees related to travel and expenses
made in the Ordinary Course of Business); and
(xxii) the Company has not committed or otherwise agreed to do any
of the foregoing.
(i) UNDISCLOSED LIABILITIES. The Company has no material liabilities,
whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated and
whether due or to become due, including any liability for Taxes and any
off-balance sheet liability (collectively, "LIABILITIES"), except for (A)
Liabilities set forth in the Most Recent Balance Sheet, (B) Liabilities
disclosed in SECTION 4(I) OF THE DISCLOSURE SCHEDULE, and (C) Liabilities which
have arisen after the Most Recent Fiscal Month End in the Ordinary Course of
Business, which are not expected to be individually, or in the aggregate,
material.
(j) LEGAL COMPLIANCE; PERMITS. The Company has complied and is in
compliance in all material respects with all Laws applicable to its business or
operations, and no Legal Proceeding has been filed or commenced against it
alleging any failure to so comply, and, to the Knowledge of the Company and
Sellers, there are no facts or circumstances that could form the Basis for any
such violation. SECTION 4(J) OF THE DISCLOSURE SCHEDULE contains a list of all
material permits, approvals, authorizations, consents, licenses or certificates
from any Governmental Entity that are required for the operation of the
businesses of the Company as presently conducted.
(k) TAX MATTERS.
(i) The Company has duly and timely filed all Income Tax Returns
and all other Tax Returns which, if properly prepared and filed, would
involve more than an immaterial amount of Tax due, that it was required
to file with the appropriate taxing authorities in all jurisdictions in
which such Tax Returns are required to be filed. All such Tax Returns
were true, correct and complete, in each case, in all material respects.
All Taxes due and owing by the Company (whether or not shown on any Tax
Return) have been fully paid and all Taxes incurred as of the date of the
Most Recent Balance Sheet but not yet due have been adequately reserved
for on the Most Recent Balance
22
Sheet (which reserves or accounts are set forth on the Company's detailed
balance sheet). There are no Liens for Taxes (other than Taxes not yet
due and payable) upon any of the assets of the Company. All required
estimated Tax payments sufficient to avoid any underpayment penalties
have been made by or on behalf of the Company. The Company has complied
in all material respects with all applicable Laws relating to the payment
and withholding of Taxes and has duly and timely withheld and paid over
to the appropriate taxing authorities all amounts to be so withheld and
paid over for all periods under all applicable Laws.
(ii) All deficiencies asserted or assessments made as a result of
any examinations by any taxing authority of the Tax Returns of the
Company have been fully paid or are being validly contested (which
contested Taxes, if any, are listed in SECTION 4(K)(II) OF THE DISCLOSURE
SCHEDULE), and there are no other audits or to the Knowledge of any
Seller or the Company, other investigations by any taxing authority in
progress other than those listed in SECTION 4(K)(II) OF THE DISCLOSURE
SCHEDULE, nor has any Seller or the Company received any notice from any
taxing authority that it intends to conduct such an audit or
investigation or that any claim for unpaid Taxes has become a Lien of any
kind against the property of the Company or is being asserted against the
Company. No issue has been raised by any taxing authority in any current
or prior examination which, by application of the same or similar
principles, could reasonably be expected to result in a proposed
deficiency for any subsequent taxable period.
(iii) SECTION 4(K)(III) OF THE DISCLOSURE SCHEDULE lists all
federal, state, local and foreign franchise, sales or Income Tax Returns
filed with respect to the Company for taxable periods ended on or after
December 31, 2000, indicates those franchise, sales and Income Tax
Returns that have been audited and indicates those franchise, sales and
Income Tax Returns that currently are the subject of audit. In addition,
SECTION 4(K)(III) OF THE DISCLOSURE SCHEDULE lists all franchise, sales
and Income Taxes paid for taxable periods ended on or after December 31,
2000. No claim has been made by a taxing authority in a jurisdiction
where the Company does not file Tax Returns such that it is or may be
subject to taxation by that jurisdiction. Buyer has received complete
copies of all franchise and Income Tax Returns and all audit reports
issued within the last three (3) years with respect to such Tax Returns.
The Company has not waived any statute of limitations in respect of Taxes
or requested or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(iv) Neither the Company nor any other Person (including any
Seller) on behalf of the Company has on or prior to the Closing Date (A)
filed a consent under Code Section 341(f) concerning collapsible
corporations, (B) agreed to or is required to make any adjustments
pursuant to Code Section 481(a) or any similar provision of law or has
any Knowledge that any taxing authority has proposed any such adjustment,
or has any application pending with any taxing authority requesting
permission for any change in accounting methods that relate to the
Company or (C) executed or entered into a closing agreement pursuant to
Code Section 7121 or any similar provision of law with respect to the
Company. Company has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). The Company
is not a party to or bound by
23
any Tax allocation, indemnity, sharing or similar arrangement or
agreement. The Company (x) is not and has not been a member of an
Affiliated Group filing a consolidated federal Income Tax Return (other
than a group the common parent of which was the Company) and (y) has no
liability for the Taxes of any Person (other than the Company) under
Treasury Regulation Section 1.1502-6 (or any similar provision of Law),
as a transferee or successor, by Contract, or otherwise. No Seller is a
foreign person within the meaning of Code Section 1445.
(v) Except as provided in SECTION 4(K)(V) OF THE DISCLOSURE
SCHEDULE, no property owned by the Company is (i) property required to be
treated as being owned by another Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in
effect immediately prior to the enactment of the Tax Reform Act of 1986,
(ii) "tax-exempt use property" within the meaning of Code Section
168(h)(1), (iii) "tax-exempt bond financed property" within the meaning
of Code Section 168(g), (iv) subject to Code Section 168(g)(1)(A) or (v)
"limited use property" within the meaning of Rev. Proc. 2001-28.
(vi) The Company is not a party to or bound by (A) any Contract,
plan or arrangement covering any Person that, individually or
collectively, could give rise to the payment of any amount that would not
be deductible by Buyer or its Affiliates by reason of Code Section 280G,
(B) any private letter ruling of the Internal Revenue Service or
comparable rulings of other taxing authorities or (C) any power of
attorney with respect to any Tax matter that is currently in force.
(vii) The Company has not constituted a "controlled corporation"
(within the meaning of Code Section 355(a)(1)(A)) in a distribution of
stock qualifying for tax-free treatment under Code Section 355 (A) in the
two (2) years prior to the date hereof or (B) in a distribution which
could otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Code Section 355(e)) in conjunction
with the transactions contemplated by this Agreement.
(viii) There is no taxable income of the Company that will be
required under applicable Tax Law to be recognized by Buyer or its
Affiliates, including the Company, for a taxable period beginning after
the Closing Date which taxable income was realized and resulted in
economic income (i.e., the receipt of cash or other property arising from
such realization) prior to the Closing Date.
(ix) SECTION 4(K)(IX) OF THE DISCLOSURE SCHEDULE sets forth the
tax basis of the fixed assets of the Company, for each of the Company's
operating divisions, as of the Most Recent Fiscal Year End as such tax
bases are reflected on the books and records of the Company.
(l) REAL PROPERTY.
(i) SECTION 4(L)(I) OF THE DISCLOSURE SCHEDULE sets forth the
address and legal description of each parcel of Owned Real Property. With
respect to each parcel of Owned Real Property:
24
(A) Except as set forth in SECTION 4(L)(I)(A) OF THE
DISCLOSURE Schedule, the Company has good and marketable fee
simple title, free and clear of all Liens, except Permitted
Encumbrances;
(B) except as set forth in SECTION 4(L)(I)(B) OF THE
DISCLOSURE SCHEDULE, the Company has not leased or otherwise
granted to any Person the right to use or occupy such Owned Real
Property or any portion thereof; and
(C) there are no outstanding options, rights of first offer
or rights of first refusal to purchase such Owned Real Property or
any portion thereof or interest therein.
(ii) SECTION 4(L)(II) OF THE DISCLOSURE SCHEDULE sets forth the
address of each parcel of Leased Real Property and a true and complete
list of all Real Property Leases for each such Leased Real Property
(including the date and name of the parties to such Real Property Lease
document). Sellers have delivered or made available to Buyer a true and
complete copy of each such Real Property Lease document and in the case
of any oral Lease, a written summary of the material terms of such Real
Property Lease. Except as set forth in SECTION 4(L)(II) OF THE DISCLOSURE
SCHEDULE, with respect to each of the Real Property Leases:
(A) such Real Property Lease is legal, valid, binding,
enforceable and in full force and effect;
(B) the transaction contemplated by this Agreement does not
require the consent of any other party to such Lease, will not
result in a breach of or default under such Real Property Lease
and will not otherwise cause such Real Property Lease to cease to
be legal, valid, binding, enforceable and in full force and effect
on identical terms following the Closing;
(C) neither the Company nor, to the Knowledge of Sellers
and the Company, any other party to the Real Property Lease is in
material breach or default under such Lease; and
(D) the Company has not subleased, licensed or otherwise
granted any Person the right to use or occupy such Leased Real
Property or any portion thereof.
(iii) The Owned Real Property identified in SECTION 4(L)(I) OF THE
DISCLOSURE SCHEDULE and the Leased Real Property identified in SECTION
4(L)(II) OF THE DISCLOSURE SCHEDULE (collectively, the "REAL PROPERTY")
comprise all of the real property used in the business of the Company;
and the Company is not a party to any agreement or option to purchase any
real property or interest therein.
(iv) All buildings, structures, fixtures, building systems and
equipment and all components thereof, included in the Real Property (the
"IMPROVEMENTS") are, in all material respects, sufficient for the
operation of the business of the Company.
25
(v) The Company has not received written notice of any
condemnation, expropriation or other proceeding in eminent domain
affecting any parcel of Real Property or any portion thereof or interest
therein.
(vi) To the Knowledge of the Company and Sellers, the Owned Real
Property is in material compliance with all applicable building, zoning,
subdivision, health and safety and other land use Laws, and all insurance
requirements affecting the Real Property (collectively, the "REAL
PROPERTY LAWS"). The Company has not received any notice of violation of
any Real Property Law and, to the Knowledge of the Company and Sellers,
there is no reasonable Basis for the issuance of any such notice or the
taking of any action for such violation.
(vii) To the Knowledge of the Company and Sellers, the current use
and occupancy of the Real Property and the operation of the business of
Company as currently conducted thereon does not violate in any material
respect any easement, covenant, condition, restriction or similar
provision in any instrument of record or other unrecorded agreement
affecting such Real Property.
(viii) To the Knowledge of the Company and Sellers, none of the
Real Property or any portion thereof is located in a flood hazard area
(as defined by the Federal Emergency Management Agency).
(m) INTELLECTUAL PROPERTY.
(i) Since December 31, 1997, the Company has not interfered with,
infringed upon, misappropriated, or violated any Intellectual Property
rights of any third Person in any material respect and, since December
31, 1997, neither the Company nor Sellers have received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that
the Company must license or refrain from using any Intellectual Property
rights of any Person). To the Knowledge of the Company and Sellers, no
Person has interfered with, infringed upon, misappropriated, or violated
any material Intellectual Property rights of the Company in any material
respect.
(ii) SECTION 4(M)(II) OF THE DISCLOSURE SCHEDULE identifies each
patent or other registration which has been issued to the Company with
respect to any of its Intellectual Property, identifies each pending
patent application or other application for registration which the
Company has made with respect to any of its Intellectual Property and
identifies each material license, sublicense, agreement, or other
permission which the Company has granted to any Person with respect to
any of its Intellectual Property (together with any exceptions). SECTION
4(M)(II) OF THE DISCLOSURE SCHEDULE also identifies each material trade
name or unregistered trademark, service ▇▇▇▇, corporate name, fictional
business name, Internet domain name and copyright used by the Company in
connection with any of its businesses. With respect to each material item
of Intellectual Property used by the Company in connection with any of
its businesses:
26
(A) the Company possesses all right, title and interest in
and to the item, free and clear of any Lien, license or other
restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(C) no Legal Proceeding is pending or, to the Knowledge of
the Company and Sellers, threatened, and no opposition,
cancellation proceeding or notice of such has been received, which
challenges the legality, validity, enforceability, use or
ownership of the item;
(D) the Company has taken reasonable steps to protect the
Company's rights in and to each item and to prevent the
unauthorized use thereof by any other person;
(E) all registrations have been effectively registered in
accordance with all applicable legal requirements and are
currently in compliance with all applicable legal requirements in
all material respects (including as to payment of maintenance fees
and the like);
(F) to the Knowledge of the Company and Sellers, there has
been no prior use of any Intellectual Property by any Person which
would confer upon such Person superior rights in the Intellectual
Property.
(iii) SECTION 4(M)(III) OF THE DISCLOSURE SCHEDULE identifies each
material item of Intellectual Property that any other Person owns and
that the Company uses pursuant to license, sublicense, agreement or
permission. With respect to each item of Intellectual Property required
to be identified in SECTION 4(M)(III) OF THE DISCLOSURE SCHEDULE:
(A) the license, sublicense, agreement or permission
covering the item is legal, valid, binding, enforceable and in
full force and effect in all material respects;
(B) no party to the license, sublicense, agreement or
permission is in material breach or default and no event has
occurred which with notice or lapse of time would constitute a
material breach or default or permit termination, modification or
acceleration thereunder;
(C) no party to the license, sublicense, agreement or
permission has repudiated any material provision thereof;
(D) the Company has not granted any sublicense or similar
right with respect to the license, sublicense, agreement or
permission; and
(E) no loss or expiration of the item is threatened,
pending or reasonably foreseeable, except for patents expiring at
the end of their statutory terms (and not as a result of any act
or omission by Sellers or the Company,
27
including without limitation, a failure by Sellers or the Company
to pay any required maintenance fees).
(n) TANGIBLE ASSETS. The buildings, machinery, equipment and other
tangible assets that the Company owns or leases, taken as a whole, are free from
material defects (patent and latent), have been maintained in accordance with
normal industry practice and are, in all material respects, in good operating
condition and repair (subject to normal wear and tear).
(o) INVENTORY. The inventory of the Company consists of raw materials
and supplies, manufactured and processed materials, work in process and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured. Adequate reserves have been reflected in the Most
Recent Balance Sheet for obsolete or otherwise unusable inventory and were
calculated in a manner consistent with past practice and in accordance with
GAAP.
(p) CONTRACTS. SECTION 4(P) OF THE DISCLOSURE SCHEDULE lists the
following oral or written contracts, agreements, instruments, notes, bonds,
indentures, leases, licenses, or binding commitments (collectively, "CONTRACTS")
to which the Company is a party as of the date hereof:
(i) any Leases the payments of which exceed $20,000 annually;
(ii) any Contract (or group of related Contracts), including
purchase orders for the purchase or sale of raw materials, commodities,
supplies, products or other personal property, or for the furnishing or
receipt of services, that involves consideration in excess of $250,000 in
the aggregate;
(iii) any Contract concerning a partnership or similar joint
venture;
(iv) any Contract (or group of related Contracts) under which it
has created, incurred, assumed, or guaranteed any Indebtedness in excess
of $100,000 or under which it has imposed a Lien on any of its assets,
tangible or intangible;
(v) any Contract containing covenants not to compete by the
Company in any line of business or with any Person in any geographical
area or any material Contracts with any Person not to compete with the
Company (other than as contained in employment agreements);
(vi) any Contract with any of Sellers or their Affiliates (other
than the Company);
(vii) any collective bargaining agreement or other Contract with
any labor union or association representing any employee of the Company;
(viii) any Contract for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $150,000 or providing material severance
benefits;
28
(ix) any Contract under which it has advanced or loaned any amount
to any of its directors, officers and employees (other than advances
relating to travel and expenses made in the Ordinary Course of Business);
(x) any Contract that relates to rebates, allowances or discounts
outside the Ordinary Course of Business;
(xi) any Contract providing for guarantee or surety by the
Company;
(xii) any Contract which provides for annual payments in excess of
$250,000 pursuant to which, to the Knowledge of the Company or Sellers,
the Company has agreed to indemnify another Person other than in
connection with the sale of the Company's products; and
(xiii) any Contract under which the Company has made advances or
loans to any other Person amounts in the aggregate exceeding $25,000.
With respect to each such Contract set forth on SECTION 4(P) OF THE
DISCLOSURE SCHEDULE: (A) the agreement is legal, valid, binding, enforceable and
in full force and effect in all material respects; (B) the Company is not, nor,
to the Knowledge of the Company or Sellers, is any other party, in material
breach or default and no event has occurred which with notice or lapse of time
would constitute a material breach or default, or permit termination,
modification or acceleration, under the Contract; and (C) no party has
repudiated any material provision of any such Contract.
(q) NOTES AND ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.
(i) All notes and accounts receivable of the Company are reflected
properly on its books and records in accordance with GAAP, and are valid
receivables subject to no setoffs or counterclaims. All accounts
receivable of the Company have arisen from bona fide transactions in the
Ordinary Course of Business.
(ii) All accounts payable of the Company reflected in the Most
Recent Balance Sheet or arising after the date thereof are the result of
bona fide transactions in accordance with GAAP applied on a consistent
basis.
(r) POWERS OF ATTORNEY. To the Knowledge of the Company and Sellers,
there are no outstanding material powers of attorney executed on behalf of the
Company.
(s) INSURANCE. SECTION 4(S) OF THE DISCLOSURE SCHEDULE sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability and workers' compensation coverage and
bond and surety arrangements) with respect to which the Company is a party, a
named insured or otherwise the beneficiary of coverage:
(i) the type of insurance coverage;
(ii) the name, address and telephone number of the agent;
29
(iii) the name of the insurer, the name of the policyholder and
the name of each covered insured;
(iv) the policy number and the period of coverage; and
(v) the premium, scope (including an indication of whether the
coverage is on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable and in full force and effect in all material
respects; (B) neither the Company nor any other party to the policy is in
material breach or default (including with respect to the payment of premiums or
the giving of notices) and no event has occurred which, with notice or the lapse
of time, would constitute such a material breach or default, or permit
termination, modification, or acceleration, under the policy; (C) no party to
the policy has repudiated any material provision thereof; (D) each are in such
amounts and provide coverage that are reasonable and customary in light of the
businesses, operations and properties of the Company; and (E) the insurer of
such policy has not threatened to cancel such policy nor has any insurer
cancelled a policy during the previous five years. SECTION 4(S) OF THE
DISCLOSURE SCHEDULE describes any material self-insurance arrangements affecting
the Company.
(t) LITIGATION. SECTION 4(T) OF THE DISCLOSURE SCHEDULE sets forth each
instance in which the Company or any of its officers, directors or employees of
the Company with respect to their business activities on behalf of the Company
(i) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge, (ii) is a defendant or, to the Knowledge of the Company and Sellers,
is threatened to be made a defendant to any action, suit, proceeding, hearing or
investigation or (iii) is a plaintiff to any material action, suit, proceeding,
hearing or investigation ("LEGAL PROCEEDING") of, in or before any Governmental
Entity.
(u) EMPLOYEES.
(i) To the Knowledge of the Company, there is no dispute between
the Company and any of its current and former employees or consultants
related to compensation, severance pay, vacation benefits, pension
benefits, or discrimination.
(ii) Except as set forth in SECTION 4(U)(II) OF THE DISCLOSURE
SCHEDULE, (A) the Company is not a party to or bound by any collective
bargaining agreement, (B) none of the Company's employees is represented
by any labor organization, (C) the Company has not experienced any strike
or material grievance, claim of unfair labor practices or other
collective bargaining dispute within the past three (3) years, and (D) to
the Knowledge of the Company and Sellers, there is no material grievance
currently pending or threatened by any employee against the Company. The
Company has not committed any material unfair labor practice. The Company
and Sellers have no Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect
to employees of Company. The Company is in compliance in all material
respects with all currently applicable Laws respecting employment, equal
employment opportunity, nondiscrimination, wages, hours and
30
occupational health and safety. The Company is and, during the term of
its current collective bargaining agreements, has been in compliance with
all of its obligations under such collective bargaining agreements,
except where any noncompliance could not reasonably result in material
liability.
(iii) Each individual who renders services to the Company who is
or has been classified by the Company as having the status of an
independent contractor or other non-employee status for any purpose
(including for purposes of Taxes and under Employee Benefit Plans) is and
has been properly so characterized.
(v) EMPLOYEE BENEFITS.
SECTION 4(V) OF THE DISCLOSURE SCHEDULE lists each Employee Benefit
Plan that the Company has any Liability, contingent or otherwise, and separately
identifies each such plan which is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA ("MULTIEMPLOYER PLAN"). Except as set forth in SECTION
4(V) OF THE DISCLOSURE SCHEDULE:
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract or fund) has been maintained, funded and administered
in accordance with the terms of such Employee Benefit Plan and complies
in form and in operation in all material respects with the applicable
requirements of ERISA, the Code and other applicable Laws;
(ii) All required reports and descriptions (including Form 5500
annual reports, summary annual reports and summary plan descriptions)
have been timely filed and/or distributed in accordance with the
applicable requirements of ERISA and the Code with respect to each such
Employee Benefit Plan. The requirements of COBRA have been met in all
material respects with respect to each such Employee Benefit Plan and
each Employee Benefit Plan maintained by an ERISA Affiliate which is an
Employee Welfare Benefit Plan subject to COBRA;
(iii) All contributions (including all employer contributions and
employee salary reduction contributions) that are due have been made
within the time periods prescribed by ERISA and the Code to each such
Employee Benefit Plan that is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date which
are not yet due have been made to each such Employee Pension Benefit Plan
or accrued in accordance with the past custom and practice of the
Company. All premiums or other payments for all periods ending on or
before the Closing Date have been paid with respect to each such Employee
Benefit Plan that is an Employee Welfare Benefit Plan;
(iv) Each such Employee Benefit Plan that is intended to meet the
requirements of a "qualified plan" under Code Section 401(a) is so
qualified, and, to the Knowledge of the Company and Sellers, there are no
facts or circumstances that could adversely affect the qualified status
of any such Employee Benefit Plan;
(v) There have been no non-exempt Prohibited Transactions with
respect to any such Employee Benefit Plan or any Employee Benefit Plan
maintained by
31
an ERISA Affiliate. To the Knowledge of the Company and the Sellers, no
Fiduciary has any Liability for material breach of fiduciary duty or any
other material failure to act or comply in connection with the investment
of the assets or administration of any such Employee Benefit Plan. No
Legal Proceeding with respect to the administration or the investment of
the assets of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or, to the Knowledge of the Company or any
Seller, threatened;
(vi) Sellers have delivered to Buyer correct and complete copies
of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most
recent annual report (Form 5500, with all applicable attachments) and all
related trust agreements, insurance contracts and other funding
arrangements that implement each such Employee Benefit Plan;
(vii) SECTION 4(V)(VII) OF THE DISCLOSURE SCHEDULE sets forth for
each Employee Benefit Plan subject to Title IV of ERISA (other than any
Multiemployer Plan) the amount, if any, by which the present value of the
projected benefit obligations of such plan as shown on the January 1,
2003 Actuarial Valuation (calculated in accordance with the actuarial
assumptions and methodologies used for GAAP financial disclosure purposes
as set forth in the Financial Statements for the Most Recent Fiscal Year
End, but adjusted for discount rates applicable as of the date hereof)
exceed the fair market value of the assets (excluding any accrued and
unpaid contributions) of such plan as of June 30, 2003;
(viii) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (A) result
in any payment becoming due to or increase any amount payable to any
current or former employee, director or consultant of the Company, (B)
require to be established or any amount to be contributed to any trust,
insurance policy or other funding vehicle for the benefit of any current
or former employee, director or consultant of the Company, or (C) result
in the acceleration of the time of payment of, vesting of or other rights
with respect to any compensation or benefits under any such Employee
Benefit Plan or any employment, consulting, severance or similar
agreement;
(ix) If the Company and all of its ERISA Affiliates made a
complete withdrawal from each Multiemployer Plan, the Company and its
ERISA Affiliates would not have any liability to such Multiemployer Plan
under Title IV of ERISA or the terms of such Multiemployer Plan; and
(x) All representations set forth in subsections (i) through (ix)
of this SECTION 4(V) with respect to any Multiemployer Plan are made only
to the extent of the Knowledge of the Company and Sellers.
(w) GUARANTIES. The Company is not a guarantor or otherwise responsible
for any Liability (including Indebtedness) of any other Person.
32
(x) ENVIRONMENTAL MATTERS.
The representations and warranties contained in this SECTION 4(X) are
the sole and exclusive representations and warranties of the Company and
Sellers, pertaining or relating to Environmental Requirements, Environmental
Claims or Hazardous Substances.
Except as disclosed in SECTION 4(X) OF THE DISCLOSURE SCHEDULE:
(i) The Company and its predecessors have complied and are in
compliance, in each case in all material respects, with all Environmental
Requirements and, to the Knowledge of the Company and Sellers, there are
no facts, circumstances or conditions that could reasonably be expected
to prevent continued compliance with Environmental Requirements. There
has been no release of Hazardous Substances at, on, under or from any
property now or formerly owned, operated, or leased by or for the Company
at concentrations exceeding those allowed by Environmental Requirements
or requiring remedial activity under Environmental Requirements.
(ii) Without limiting the generality of the foregoing, the Company
has obtained, has complied with and is in compliance with, in each case
in all material respects, all material permits, licenses and other
authorizations that are required pursuant to Environmental Requirements
for the occupation and use of its facilities and the operation of its
business; a list of all such material permits, licenses and other
authorizations is set forth on SECTION 4(X)(II) OF THE DISCLOSURE
SCHEDULE.
(iii) Since December 31, 1997, the Company has not received any
written notice, report or other information regarding any actual or
alleged material violation of Environmental Requirements, or any material
Liabilities or potential material Liabilities, including any material
investigatory, remedial or corrective obligations, relating to any of
them or its facilities arising under Environmental Requirements, and, to
the Knowledge of the Company and Sellers, no facts, circumstances or
conditions exist prior to December 31, 1997, regarding actual or alleged
violations by or Liability or potential liability of the Company or the
Subsidiaries under Environmental Requirements that individually or in the
aggregate would reasonably be expected to result in the Company incurring
material environmental Liabilities under Environmental Requirements.
(iv) Neither the Company nor any of its predecessors has treated,
stored, disposed of, arranged for or permitted the disposal of,
transported, handled or released any substance, including without
limitation any hazardous substance, or owned or operated any property or
facility (and no such property or facility is contaminated by any such
substance) in a manner that has given or would give rise to material
liabilities, including any material Liability for response costs,
corrective action costs, personal injury, property damage, natural
resources damages or attorney fees, pursuant to CERCLA, or the Solid
Waste Disposal Act, as amended ("SWDA"), or any other Environmental
Requirements.
33
(v) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any material
obligations for site investigation or cleanup, or notification to or
consent of Government Entities or third parties, pursuant to any of the
so-called "transaction-triggered" or "responsible property transfer"
Environmental Requirements, including, but not limited to the Industrial
Site Recovery Act.
(y) CERTAIN BUSINESS RELATIONSHIPS WITH COMPANY. None of Sellers, their
Affiliates and the Company's directors, officers, employees and shareholders
have been involved in any material business arrangement or relationship with
Company within the past twelve (12) months and none of the Sellers, their
Affiliates and Company's directors, officers, employees and shareholders owns
any material asset, tangible or intangible, that is used in the business of the
Company. Except as set forth in SECTION 4(Y) OF THE DISCLOSURE SCHEDULE, none of
the Company's Affiliates, officers, directors, employees, stockholders or any of
their Affiliates owns any direct or indirect interest of any kind in, or
controls or is a director, officer, employee or partner of, or consultant to, or
lender to or borrower from or has the right to participate in the profits of,
any Person which is a competitor, supplier, customer, landlord, tenant, creditor
or debtor of the Company.
(z) CUSTOMERS AND SUPPLIERS. SECTION 4(Z) OF THE DISCLOSURE SCHEDULE
lists the ten (10) largest customers of the Company's Lehigh Direct division,
the ten (10) largest customers of the Company's Lehigh Lithographers division
and the ten (10) largest suppliers of the Company for the Most Recent Fiscal
Year End and sets forth opposite the name of each such customer the dollar sales
and approximate percentage of consolidated net sales attributable to such
customer during such fiscal year and opposite the name of each such supplier the
dollar purchases attributable to such supplier. Since the date of the Most
Recent Fiscal Year End the customers listed on SECTION 4(Z) OF THE DISCLOSURE
SCHEDULE have not indicated in writing that they shall stop, or materially
decrease the rate of, buying materials, products or services from the Company.
In addition, the Company has not received any written notice from any such
supplier of any material adverse change in the price (excluding normal price
fluctuations), quality and delivery terms and conditions on which such supplier
will continue to make delivery of such item or in the financial condition of
such supplier, and, to the Knowledge of the Company and Sellers, the
consummation of the transactions contemplated by this Agreement will not cause
any of such events to happen.
(aa) BANK ACCOUNTS. SECTION 4(AA) OF THE DISCLOSURE SCHEDULE contains a
complete and correct list of the names and locations of all banks in which the
Company has accounts or safe deposit boxes and the names of all persons
authorized to draw thereon or to have access thereto, and with respect to such
accounts, the purpose for and the account number for each such account.
(bb) PRODUCT QUALITY AND WARRANTY CLAIMS. All products and services
sold, rented, leased, provided or delivered by the Company to customers on or
prior to the Closing Date conform or will conform in all material respects to
applicable Contractual commitments, express and implied warranties, product and
service specifications and quality standards, and, to the Knowledge of the
Company and Sellers, the Company does not have any Liability for replacement or
repair thereof or other damages in connection therewith, except for adjustments
34
made in the Ordinary Course of Business consistent with past practice. To the
Knowledge of the Company and Sellers, no product or service sold, leased,
rented, provided or delivered by the Company to customers on or prior to the
Closing Date pursuant to a Contract which provides for annual payments in excess
of $250,000 is subject to any guaranty, warranty or other indemnity for
consequential damages or other damages other than for the repair or replacement
thereof.
(cc) BOOKS AND RECORDS. The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions and the
assets and liabilities of the Company. The Company has not engaged in any
transaction, maintained any bank account or used any funds except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of the Company. The Company has
established and maintains disclosure controls and procedures that are
commercially reasonable and, to the Knowledge of the Company and Sellers, such
disclosure controls and procedures are effective in timely alerting the
Company's principal executive officer or its principal financial officer to
material information which such principal officers and independent auditors deem
necessary to be provided to them.
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 his, her or its commercially
reasonable efforts to take all action and to do all things necessary, proper or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in SECTION 7 below).
(b) NOTICES AND CONSENTS. The Company shall, and Sellers will cause the
Company to, give any notices to third parties and will cause the Company to use
its commercially reasonable efforts to obtain the third-party consents set forth
in or contemplated by SECTIONS 3(A) AND 4(C) (unless otherwise indicated on
SECTION 4(C) OF THE DISCLOSURE SCHEDULE). Buyer will give any notices to the
third-parties and will use commercially reasonable efforts to obtain the
third-party consents set forth on ANNEX II or contemplated by SECTION 3(B). Each
of the Parties will give any notices to, make any filings with and use their
respective commercially reasonable efforts to obtain any authorizations,
consents and approvals of Governmental Entities in connection with the matters
referred to in SECTIONS 3(A)(II), 3(B)(III) and 4(C)(I) above. Without limiting
the generality of the foregoing, within ten (10) Business Days after the date
hereof, each of the Parties will file any Notification and Report Forms and
related material that he, she or it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, or any similar reports required to be
filed with any foreign jurisdiction, will use his, her or its commercially
reasonable efforts to obtain a waiver from the applicable waiting period and
will make any further filings pursuant thereto that may be necessary, proper or
advisable in connection therewith. Notwithstanding anything to the contrary
contained in this Agreement, neither Buyer nor any of its Affiliates shall be
required to hold separate (including by trust or otherwise) or divest any of
their respective businesses or assets or agree to any limitation on the
operation or conduct of their respective businesses with respect to obtaining
such authorization, consents, approvals and waivers referred to in this SECTION
5(B). Sellers shall submit to the New Jersey Department of Environmental
Protection ("NJDEP"): (a) within five (5) Business Days
35
of execution of this Agreement, an Initial Notice under ISRA (the "GIN"); and
(b) no later than ten (10) Business Days after the execution of this Agreement,
a request for Expedited Review with supporting documentation, which shall
include, but not be limited to (i) the previously submitted December 23, 2002
Preliminary Assessment, (ii) a Negative Declaration Affidavit, and (iii) the
NJDEP Entire Site Unrestricted Use No Further Action Letter and Covenant Not to
▇▇▇ dated January 6, 2003.
(c) OPERATION OF BUSINESS. Between the date of this Agreement and the
Closing Date , the Company shall not, and Sellers will cause the Company and its
Subsidiaries not to, engage in any practice, take any action or enter into any
transaction outside the Ordinary Course of Business except for such actions and
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, except as otherwise consented to in writing by Buyer or as set
forth in SECTION 5(C) OF THE DISCLOSURE SCHEDULE or otherwise contemplated
hereby, the Company shall not, and the Sellers will cause the Company and its
Subsidiaries not to,
(i) declare, set aside or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase or
otherwise acquire any of its capital stock,
(ii) take any action out of the Ordinary Course of Business to
generate Cash or increase Net Working Capital;
(iii) change or modify its credit, collection or payment policies,
procedures or practices, including acceleration of collections of
receivables (whether or not past due) or failure to pay or delay payment
of payables or other liabilities outside the Ordinary Course of Business;
(iv) reduce the volume of production or purchases of inventory,
other than as a result of then current reasonable business demands in the
Ordinary Course of Business;
(v) transfer, issue, sell or dispose of any shares of capital
stock or other securities of the Company, or grant options, warrants,
calls or other rights to purchase or otherwise acquire capital stock or
other securities of the Company or amend any outstanding options,
warrants, calls or other such rights;
(vi) effect any recapitalization, reclassification, stock split or
like change in the capitalization of the Company;
(vii) incur, create, assume or guarantee any Indebtedness except
as set forth on SECTION 5(C)(VII) OF THE DISCLOSURE SCHEDULE;
(viii) cancel or compromise any debt or claim or waive or release
any material right of the Company except in the Ordinary Course of
Business;
(ix) permit the Company to enter into or agree to enter into any
merger or consolidation with, any Person, and not engage in any new
business or invest in, make
36
a loan, advance (other than advances to employees related to travel and
expenses made in the Ordinary Course of Business) or capital contribution
to, or otherwise acquire the securities of any other Person or to form
any new Subsidiary;
(x) make or revoke any election relating to Taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or except as may
be required by applicable Law or GAAP, make any change to any of its
methods of accounting or methods of reporting income or deductions for
Tax or accounting practice or policy from those employed in the
preparation of its Tax Return most recently filed prior to the date of
this Agreement;
(xi) agree to make any capital expenditures except for such
capital expenditures which are set forth on SECTION 5(C)(XI) OF THE
DISCLOSURE SCHEDULE;
(xii) amend or modify the Company's articles of incorporation or
by-laws;
(xiii) terminate the employment or services of any officer or key
employee of the Company;
(xiv) except as set forth on SECTION 5(C)(XIV) OF THE DISCLOSURE
SCHEDULE, adopt, enter into or amend any Employee Benefit Plan, or enter
into any employment, consulting or severance agreement, except to the
extent required to comply with applicable Law or the terms of any
contract in effect prior to the date hereof; or
(xv) otherwise engage in any practice, take any action or enter
into any transaction of the sort described in SECTION 4(H) above.
(d) PRESERVATION OF BUSINESS. The Company shall, and Sellers shall
cause the Company, to use commercially reasonable efforts to keep its business
and properties substantially intact, including its present operations, physical
facilities, working conditions, insurance policies and relationships with
lessors, licensors, suppliers, customers, employees and others having a business
relationship with the Company. Without limiting the generality of the foregoing,
except as otherwise consented to in writing by Buyer, the Company shall, and
Sellers will cause the Company to: (i) (A) maintain the books, accounts and
records of the Company in the Ordinary Course of Business and in accordance with
GAAP, (B) continue to collect accounts or trade receivables and pay accounts
payable in the Ordinary Course of Business, and (C) comply with all contractual
and other obligations applicable to the operations of the Company in the
Ordinary Course of Business; and (ii) continue to make capital expenditures in
the Ordinary Course of Business consistent with the disclosure set forth on
SECTION 5(C)(XI) OF THE DISCLOSURE SCHEDULE.
(e) ACCESS.
(i) Between the date of this Agreement and the Closing Date, the
Company shall permit, and Sellers will permit and will cause the Company
to permit, upon prior notification and approval, representatives of Buyer
(including legal counsel, accountants and other advisors) to have access
at all reasonable times, during normal
37
business hours, and in a manner so as not to interfere with the normal
business operations of the Company, to all premises, properties,
personnel, books, records (including Tax records), Contracts and
documents of or pertaining to Company. Additionally, as reasonably
requested by Buyer and subject to the approval of the Company's chief
executive officer in each instance, the Company and Sellers will
coordinate or will cause to be coordinated meetings (whether in person or
by telephone) between representatives of customers of, or suppliers to,
the Company and representatives of Buyer. All requests by Buyer for any
access, for Confidential Information, meetings with Company personnel or
the Company's customers or suppliers or inspection of the Company's
properties shall be made to the Company's CEO. Buyer hereby confirms and
agrees that it will observe the terms and conditions of the
Confidentiality Agreement, and shall be deemed the signatory to the
Confidentiality Agreement as if it had been an original signatory
thereto. Between the date of this Agreement and Closing, the Company will
provide Buyer with copies of unaudited balance sheets of the Company and
the related unaudited statements of income and cash flows for each month
end and quarter end after the date of the Most Recent Balance Sheet as
promptly as practicable, but in any event within thirty (30) calendar
days, after each such month end and quarter end, prepared in the Ordinary
Course of Business in accordance with GAAP applied on a basis consistent
with past practice.
(ii) Notwithstanding anything to the contrary set forth herein or
in any other agreement (including the Confidentiality Agreement) to which
the Parties are parties or by which they are bound, the obligations of
confidentiality contained herein and therein, as they relate to the
transactions contemplated by this Agreement, shall not apply to the tax
structure or tax treatment of such transactions, and each Party (and any
employee, representative or agent of any Party) may disclose to any and
all Persons, without limitation of any kind, the tax structure and tax
treatment of such transactions; PROVIDED, HOWEVER, that such disclosure
shall not include the name (or other identifying information not relevant
to the tax structure or tax treatment) of any Person and shall not
include information for which nondisclosure is reasonably necessary in
order to comply with applicable securities laws.
(f) NOTICE OF DEVELOPMENTS. The Company and Sellers will give prompt
written notice to Buyer of any breach of any of the representations and
warranties in SECTION 4 above. Each Party will give prompt written notice to the
others of any breach of any of his, her or its own representations and
warranties in SECTION 3 above. No disclosure by any Party pursuant to this
SECTION 5(F), however, shall be deemed to amend or supplement ANNEX I, ANNEX II
or the Disclosure Schedule or to prevent or cure any misrepresentation, breach
of warranty or breach of covenant.
(g) EXCLUSIVITY. Neither the Company nor any Seller shall (and Sellers
will cause the Company not to) (i) solicit, initiate or encourage the submission
of any proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets, of the Company (including any acquisition structured as a merger,
consolidation or share exchange), (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 any
Person to do or seek any of the foregoing, or (iii) sell,
38
transfer, assign, hypothecate, mortgage or pledge and of the Company Shares or
sell, transfer or assign all or substantially all of the assets of the Company,
or agree to do any of the foregoing.
(h) UPDATES TO ENVIRONMENTAL ASSESSMENTS. Within thirty (30) days after
the date hereof, the Company shall, and Sellers shall cause the Company to, use
its commercially reasonable efforts to obtain and have delivered to Buyer at
Buyer's expense updates of the Phase I Environmental Site Assessments previously
prepared for the Company in December 2002, copies of which have previously been
provided to Buyer.
(i) REPAYMENT OF LOANS AND AFFILIATE TRANSACTIONS. On or prior to the
Closing Date, the Company and Sellers shall cause (i) all loans or other
advances made by the Company to any of Sellers or any Affiliate of the Company
or any of Sellers, including any accrued and unpaid interest thereon, to be
repaid in full in cash or by offset to the Company, and (ii) any and all
Contracts or other arrangements between the Company and any Affiliate of the
Company or any Affiliate of any Seller, other than those listed on SECTION 5(I)
OF THE DISCLOSURE SCHEDULE, to be terminated.
(j) INDEBTEDNESS. No later than three (3) Business Days prior to the
Closing Date, the Company and Sellers shall use their commercially reasonable
efforts to deliver to Buyer (i) forms of pay-off letters (if customarily
available) in respect of all outstanding Indebtedness identified by Buyer
reasonably in advance of the Closing that is anticipated to be repaid with
financing supplied by the Buyer as part of the transactions contemplated by this
Agreement and (ii) the notice setting forth the Estimated Purchase Price.
(k) TRANSACTION EXPENSES. No later than three (3) Business Days prior
to the Closing Date, the Company and Sellers shall use their commercially
reasonable efforts to deliver to Buyer pay-off letters in respect of the
Transaction Expenses which will remain unpaid as of the Closing from any and all
third-party service providers to whom payments are required to be made by the
Company in connection with the transactions contemplated by this Agreement and
which third-party service providers customarily provide pay-off letters. The
pay-off letters shall provide that the amounts set forth therein represent
payment in full for all fees and expenses payable by the Company in connection
with the transactions contemplated by this Agreement through the Closing Date.
At or prior to the Closing either the Company or Sellers shall pay and discharge
all Transaction Expenses or such Transaction Expenses shall be deducted from the
Purchase Price in accordance with SECTION 2(B).
(l) ASSISTANCE WITH FINANCING. In order to assist with the financing of
the transactions contemplated hereby, the Company shall, to the extent requested
in writing by Buyer and at Buyer's expense, reasonably cooperate with Buyer and
use its commercially reasonable efforts to assist Buyer in obtaining the
financing contemplated under the Commitment Letters.
39
(m) COMPANY STOCK OPTIONS. To the extent such Option Termination
Agreements (as defined below) were not entered into in connection with the
execution hereof, the Company shall, and Sellers will cause the Company to,
notify all holders of Company Stock Options as soon as practicable after the
date of this Agreement that this Agreement has been approved by the board of
directors of the Company and executed by the Company and will, consistent with
the Company Stock Options between the Company and the holders of such Company
Stock Options, cause each holder of the Company Stock Options, in connection
with and contingent upon Closing hereunder, to execute and deliver an agreement
in the form attached hereto as EXHIBIT E (each an "OPTION TERMINATION
AGREEMENT") pursuant to which such holder will agree not to exercise such
Company Stock Option and to surrender and agree to the cancellation of such
Company Stock Option in exchange for the right to receive the payment specified
in the Option Termination Agreement (the "OPTION CASH CONSIDERATION").
(n) RESTRICTED STOCK AGREEMENT; CORPORATE GOVERNANCE AGREEMENT. At or
prior to the Closing, the Company shall, and the Sellers shall cause the Company
to, cause (i) the Restricted Stock Agreement (the "RESTRICTED STOCK AGREEMENT")
by and among the Company, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., dated as of
May 19, 1998, and (ii) the Agreement Regarding Corporate Governance (the
"CORPORATE GOVERNANCE AGREEMENT") by and among the Company, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., dated as of May 19, 1998, to be terminated and be of no
further force and effect and the Company to be released from all Liability
thereunder.
(o) LEHIGH PUERTO RICO; PUERTO RICO ASSET PURCHASE AGREEMENT. At or
prior to the Closing, the Company shall, and the Sellers shall cause the Company
to, cause Lehigh Puerto Rico to obtain releases, in form and substance
reasonably satisfactory to Buyer, pursuant to which Lehigh Puerto Rico and the
Company shall be fully and unconditionally released from all outstanding
Liabilities, including, but not limited to, all Liabilities created by or
arising from that certain Asset Purchase Agreement, dated as of May 15, 2000,
between Lehigh Puerto Rico and L.P.P.R., Inc. (the "PUERTO RICO ASSET PURCHASE
AGREEMENT").
(p) SPLIT DOLLAR LIFE INSURANCE ASSIGNMENT. Prior to the Closing, ▇▇▇▇
▇. ▇▇▇▇▇▇ shall cause the split dollar life insurance agreement, described more
fully on SECTION 5(P) OF THE DISCLOSURE SCHEDULE, to be terminated, and, in
connection therewith, pay to the Company in cash an amount equal to the excess
of the cash surrender value of such policy over any policy loans taken
thereunder, and, the Company shall transfer ownership of the policy to ▇▇▇▇ ▇.
▇▇▇▇▇▇ (subject to such policy loan) and release any collateral assignments and
other security, and the Company shall be fully and unconditionally released from
any Liabilities the Company may have had with respect to the split dollar life
insurance policies on the life of ▇▇▇▇ ▇. ▇▇▇▇▇▇ with respect to which such
split dollar life insurance agreements relate, including, but not limited to,
with respect to the payment of premiums for such policy (collectively, the
"SPLIT DOLLAR LIFE INSURANCE ASSIGNMENT"). At or prior to Closing, ▇▇▇▇ ▇.
▇▇▇▇▇▇ shall provide evidence, in form and substance reasonably satisfactory to
Buyer, that the Split Dollar Life Insurance Assignment has been effected.
(q) BUYER'S FINANCING. Buyer will use commercially reasonable efforts
to obtain the financing contemplated by the Commitment Letters.
40
(r) RELEASE OF LIENS. At or prior to the Closing, the Company shall,
and the Sellers shall cause the Company to, use its commercially reasonable
efforts to cause the Liens identified by Buyer reasonably in advance of the
Closing (but not including the Liens set forth on SECTION 5(R) OF THE DISCLOSURE
SCHEDULE unless Buyer's Lenders require any of such Liens to be released at the
Closing) to be released and terminated; provided that to the extent any of such
Liens secure any Indebtedness which constitutes Closing Indebtedness (the
"SPECIFIED LIENS"), Sellers shall only be obligated to use commercially
reasonable efforts to have such Liens released and terminated to the extent that
Buyer at Closing provides the funds to repay such Indebtedness. The Company
shall, and the Sellers shall cause, the Company to use its commercially
reasonable efforts to file, or cause to be filed, Form UCC-3 termination
statements and obtain, or use its commercially reasonable efforts to cause to be
obtained, any other releases, consents, waivers, or similar documents necessary
to effect the release of such Liens as and to the extent contemplated in the
previous sentence.
(s) PAYMENT OF ACCRUED BONUSES. On the day following the Closing, the
Buyer will cause the Company to pay the Specially Designated Employee an amount
equal to the Specially Designated Employee's pro-rata portion (through the date
of termination of employment) of the Company's accrued 2003 bonus (provided such
annualized bonus does not exceed $50,000) as of the Closing Date (the "Special
Bonus Payment"). The Special Bonus Payment shall not constitute a Transaction
Expense and shall not result in any reduction to the Purchase Price. Other than
the Special Bonus Payment that will be made pursuant to the previous sentence,
the Company is not required to pay any employee any portion of the Company's
accrued 2003 bonus at or prior to the Closing; however, Buyer agrees that it
shall cause the Company to pay such accrued 2003 bonuses (to the extent accrued
as of the Closing) to the Company's current employees following the end of the
2003 fiscal year in the Ordinary Course of Business but not later than 70 days
following the Closing Date. Buyer shall consult with Sellers' Representative
with respect to the allocation of such payments to such employees.
(t) SERP PAYMENTS. On the Closing Date, the Company shall pay a lump
sum payment ("SERP PAYMENT") to ▇▇▇▇▇▇▇ ▇▇▇▇ and to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., in
full satisfaction of the benefits accrued as of such date by ▇▇▇▇▇▇▇ ▇▇▇▇ under
the Company's Supplemental Executive Retirement Plan and by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇. under the supplemental retirement benefit provisions of his employment
agreement.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) GENERAL. In case at any time after the Closing any further action
is necessary 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 reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification thereof under SECTION 8 below or to the
extent that such costs and expenses would constitute Transaction Expenses).
(b) LITIGATION SUPPORT. In the event that and for so long as any Party
actively is contesting or defending against any Legal Proceeding in connection
with (i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition,
41
activity, practice, plan, occurrence, event, incident, action, failure to act or
transaction on or prior to the Closing Date involving Company, each of the other
Parties (if and only to the extent that neither (A) such other Party or Parties
are not adverse to the contesting or defending party in such Legal Proceeding
nor (B) the contesting or defending Party is entitled to indemnification
therefor under SECTION 8 below), 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.
(c) D & O INSURANCE. Buyer will cause the Company to purchase a three
(3) year extension of the Company's existing directors' and officers' insurance
policy; provided, that, the cost of such extension shall not exceed 150% of the
current annual premium of such policy; provided, however, in the event the cost
exceeds such amount, Buyer shall cause the Company to purchase as favorable a
policy as possible at such price, or, at the election of Sellers, Sellers may
pay such additional cost so that a three (3) year extension of the current
policy is purchased.
(d) SEVERANCE PAY PLAN. Buyer will cause the Company for a period of
one (1) year following the Closing to maintain a severance pay plan
substantially in the form of SECTION 6(D) OF THE DISCLOSURE SCHEDULE.
(e) TRANSITION. For a period of two (2) years following the Closing, no
Seller will, directly or indirectly, take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Company from maintaining the same
business relationships with the Company after the Closing as it maintained with
the Company prior to the Closing.
(f) CONFIDENTIALITY. Sellers will treat and hold as confidential all
Confidential Information, refrain from using any Confidential Information except
in connection with this Agreement and any other commercially reasonable
non-competition purpose (including preparation of Tax Returns) and, at the
request of Buyer, deliver promptly to Buyer or destroy all tangible embodiments
(and all copies) of Confidential Information in their possession, other than
with respect to Confidential Information being used solely for commercially
reasonable non-competition purposes (including the preparation of Tax Returns),
which may be retained for so long as such Confidential Information is being used
solely for such purposes. In the event that any Seller is requested or required
pursuant to oral or written question or request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process to disclose any Confidential Information, such Seller will
notify Buyer promptly of the request or requirement so that Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
SECTION 6(F). If, in the absence of a protective order or the receipt of a
waiver hereunder, any Seller is, on the advice of counsel, compelled to disclose
any Confidential Information to any tribunal or else stand liable for contempt,
such Seller may disclose the Confidential Information to the tribunal; PROVIDED,
HOWEVER, such Seller will use her, his or its commercially reasonable efforts to
obtain, at the reasonable request and expense of Buyer, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as Buyer will designate.
42
(g) COVENANT NOT TO COMPETE; NON-SOLICITATION.
(i) For a period of five (5) years from and after the Closing Date
(the "RESTRICTED PERIOD"), each Seller will not without the written
consent of the Company and except on behalf of the Company, directly or
indirectly, engage in, own (in whole or in part), manage, control,
participate in, work for, permit his name to be used by, consult with,
render services for, do business with or otherwise assist in any manner
or maintain any interest (whether proprietary, financial or otherwise)
in, or provide or arrange any financing for, any Person or entity
(whether as director, officer, employee, agent, representative, security
holder, equity owner, partner, member, consultant or otherwise) engaged
in any way in any businesses currently conducted by the Company;
provided, however, that ownership of less than three percent (3%) of the
outstanding stock of any publicly-traded corporation will not be deemed
engagement in any of its businesses; and, PROVIDED FURTHER, that nothing
herein shall prohibit ▇▇▇▇ ▇. ▇▇▇▇▇▇ from maintaining his ownership
interest and other relationship with L.P.P.R., Inc., so long as L.P.P.R.,
Inc. (or any of its subsidiaries or Affiliates) does not, directly or
indirectly, compete with the Company. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this
SECTION 6(G) is invalid or unenforceable, the Parties agree that the
court making the determination of invalidity or unenforceability will
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 will be
enforceable as so modified after the expiration of the time within which
the judgment may be appealed.
(ii) Without limiting the generality of SECTION 6(G)(I) above,
each Seller further agrees that during the Restricted Period, such Seller
will not, directly or indirectly, cause, solicit, induce or in any manner
encourage (A) any independent contractor, producer, customer, licensor,
supplier, agent or business partner of the Company, to terminate or
adversely change her, his or its relationship with the Company or (B) any
present employee of the Company or an employee during the Restricted
Period, to leave the employ of the Company or hire, employ or otherwise
engage any such individual; provided that the restrictions set forth in
this paragraph (ii) shall not apply to ▇▇▇▇▇▇▇ ▇▇▇▇.
(iii) The covenants and undertakings contained in this SECTION
6(G) relate to matters which are of a special, unique and extraordinary
character and a violation of any of the terms of this SECTION 6(G) will
cause irreparable injury to the parties, the amount of which will be
impossible to estimate or determine and which cannot be adequately
compensated. Therefore, Buyer will be entitled to an injunction,
restraining order or other equitable relief from any court of competent
jurisdiction in the event of any breach of this SECTION 6(G). The rights
and remedies provided by this SECTION 6(G) are cumulative and in addition
to any other rights and remedies which Buyer may have hereunder or at law
or in equity. Buyer and Sellers acknowledge that the Purchase Price
represents fair and adequate consideration for all the Company Shares and
accordingly, no portion of the Purchase Price is allocable to the
foregoing covenant.
43
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO BUYER'S OBLIGATION. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in SECTION 4
(other than the representations and warranties set forth in SECTIONS
4(A), (B) and (C)) above shall be true and correct in all material
respects at and as of the Closing Date, except to the extent that such
representations and warranties are qualified by terms such as "material",
"Material Adverse Effect," and "Material Adverse Change" in which case
such representations and warranties shall be true and correct in all
respects at and as of the Closing Date, and the representations and
warranties set forth in SECTION 3(A) and SECTIONS 4(A), (B) and (C) above
shall be true and correct in all respects at and as of the Closing Date;
(ii) the Company and Sellers shall have performed and complied
with all of their covenants hereunder in all material respects through
the Closing, except (A) to the extent that such covenants are qualified
by terms such as "material", "Material Adverse Effect," and "Material
Adverse Change" and (B) with respect to the covenants contained in
SECTIONS 5(I), (J), (K), (M), (N), (O), (P), (R) and (S) in which case
Sellers shall have performed and complied with all of such covenants in
all respects through the Closing;
(iii) the Company shall have procured all of the third-party
consents specified in SECTION 5(B) above, each of which shall be
reasonably satisfactory to Buyer in form and substance;
(iv) no action, suit or proceeding shall be pending before any
Governmental Entity wherein an unfavorable injunction, judgment, order,
decree, ruling 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, (C) affect adversely the right of Buyer to own Company
Shares and to control Company or (D) affect materially and adversely the
right of Company to own its assets and to operate its businesses (and no
such injunction, judgment, order, decree, ruling or charge shall be in
effect);
(v) Sellers shall have delivered to Buyer a certificate to the
effect that each of the conditions specified above in SECTIONS 7(A)(I)
through (III) is satisfied in all respects;
(vi) all applicable waiting periods (and any extensions thereof)
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or otherwise been
terminated;
(vii) Buyer shall have received from the Company a Certificate of
Secretary and incumbency certificate, including the following attachments
(A) Articles of Incorporation, certified as of a recent date by the
Secretary of State of the Commonwealth of Pennsylvania, (B) bylaws of the
Company, and (C) resolutions of
44
directors and shareholders, if necessary, approving this Agreement and
the transaction contemplated hereby;
(viii) Sellers shall have delivered to Buyer copies of the
certificate of good standing of Company issued on or soon before the
Closing Date by the Secretary of State (or comparable officer) of the
Commonwealth of Pennsylvania;
(ix) each Seller shall have provided Buyer with an affidavit of
non-foreign status that complies with Section 1445 of the Code;
(x) Buyer shall have received financing under and in accordance
with the terms of the Commitment Letters;
(xi) the Executive Agreement shall not have been terminated by
▇▇▇▇ ▇. ▇▇▇▇▇▇ and shall be in full force and effect;
(xii) the Closing EBITDA shall not be less than Fifteen Million
Two Hundred Fifty Thousand Dollars ($15,250,000); and
(xiii) Provided that Buyer shall have provided the funds to do so,
Buyer shall have received evidence satisfactory to Buyer that all
Indebtedness of the Company identified by Buyer reasonably in advance of
the Closing shall have been repaid and extinguished or will be repaid and
extinguished at the Closing;
(xiv) Provided that Buyer shall have provided the funds to do so,
Buyer shall have received evidence satisfactory to Buyer that all
Specified Liens on the assets and properties of the Company identified by
Buyer reasonably in advance of the Closing have been unconditionally
released and terminated;
(xv) the updates to the Phase I Environmental Site Assessments
referred to in SECTION 5(H) hereof shall have been obtained; and
(xvi) all actions to be taken by Sellers in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Buyer.
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 SELLERS' OBLIGATION. Sellers' obligation to
consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction 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, except to the extent that such representations and
warranties are qualified by terms such as
45
"material" and "Material Adverse Effect," in which case such
representations and warranties shall be true and correct in all respects
at and as of the Closing Date;
(ii) Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing, except
to the extent that such covenants are qualified by terms such as
"material" and "Material Adverse Effect," in which case Buyer shall have
performed and complied with all of such covenants in all respects through
the Closing;
(iii) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, 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 injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(iv) Buyer shall have delivered to Sellers a certificate to the
effect that each of the conditions specified above in SECTIONS 7(B)(I)
through (II) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof)
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and other similar provisions required by
any foreign jurisdiction shall have expired or otherwise been terminated.
Sellers may waive any condition specified in this SECTION 7(B) if
they execute a writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties contained in ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇ (▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇(▇), (▇), (▇), (▇) and (X) and subsection (i)(A) of SECTION 4(L) above) shall
survive the Closing hereunder and continue in full force and effect for a period
of eighteen (18) months thereafter. The representations and warranties contained
in subsection (i)(A) of SECTION 4(L) above shall survive the Closing and
continue in full force and effect for a period of five (5) years. All of the
other representations and warranties contained in this Agreement (including the
representations and warranties contained in SECTION 3 above and the
representations and warranties contained in SECTIONS 4(B), (D), (F), (K) and (X)
above) shall survive the Closing and continue in full force and effect until
thirty (30) days following the expiration of the applicable statutes of
limitations (including any extension thereto, whether automatic or permissive).
(b) INDEMNIFICATION PROVISIONS FOR BUYER'S BENEFIT.
(i) Each Seller shall, jointly and severally, indemnify, defend
and hold harmless Buyer, the Company and their respective directors,
officers, employees, stockholders, Affiliates, successors and assigns
(collectively the "BUYER INDEMNIFIED PARTIES") from and against:
46
(A) any and all Damages resulting from, arising out of or
caused by the failure of any representation or warranty contained
herein or in the Closing Certificate referred to in SECTION
7(A)(V) or the Disclosure Schedule (other than the representations
and warranties contained in SECTION 3(A)), to be true and correct
in all respects as of the date made; provided that Buyer makes a
written claim for indemnification against the Sellers pursuant to
SECTION 10(H) below within the applicable survival period, if any,
set forth in SECTION 8(A); provided further, that (x) that all
references to materiality, Material Adverse Effect and Material
Adverse Change in the representations and warranties contained in
SECTION 4 hereof shall be omitted and disregarded from this
Agreement for the purpose of determining the amount of Damages
hereunder; (y) Sellers shall not have any obligation to indemnify
any Buyer Indemnified Party from and against any Damages resulting
from or caused by the failure of any representation or warranty
contained in SECTION 4 to be true and correct in all respects as
of the date made (other than the representations and warranties
contained in SECTIONS 4(B), (D), (F), (K) and (X) and subsection
(i)(A) of SECTION 4(L) above) until the Buyer Indemnified Parties
have suffered Damages by reason of such breach in excess of an
amount equal to Five Hundred Thousand Dollars ($500,000) (the
"BASKET AMOUNT") (after which, Sellers will only be obligated to
indemnify the Buyer Indemnified Parties from and against all such
Damages to the extent such Damages exceed, in the aggregate, the
Basket Amount) and (z) the aggregate amount of all Damages for
which Sellers shall be obligated to indemnify the Buyer
Indemnified Parties with respect the failure of the
representations and warranties of Sellers contained in Section 4
to be true and correct in all respects as of the date made (other
than the representations and warranties contained in SECTIONS
4(B), (D), (F), (K) and (X) and subsection (i) (A) of SECTION 4(L)
above) shall be limited to Ten Million Dollars ($10,000,000) and,
with respect to the representations and warranties contained in
SECTION 4(X), shall be limited to fifty percent (50%) of the
Purchase Price and, further, with respect to the representations
and warranties contained in SECTIONS 4(B), (D), (F) and (K) shall
be limited to one hundred percent (100%) of the Purchase Price.
(B) any and all Damages resulting from, arising out of or
caused by the breach of any covenant or other agreement contained
in this Agreement (other than the covenants contained in SECTIONS
2(A) and SECTION 6 above);
(C) any and all Transaction Expenses (except to the extent
that such are deducted from the Purchase Price in accordance with
SECTION 2(B) or have been paid prior to the Closing); and
(D) any and all Taxes of the Company and its Subsidiaries
with respect to any Tax period ending on or prior to the Closing
Date and the pre-Closing portion of any Tax period beginning
before and ending after the Closing Date (determined as provided
in Section 10(p)(viii)), and any and all Damages with respect
thereof; provided, however, that in the case of Taxes which would
have constituted Accrued Other Taxes had such Taxes been finally
determined to
47
be due and payable as of the day before the Closing Date, such
indemnity shall not exceed the excess, if any, of (x) fifty
percent (50%) of such Taxes over (y) the Accrued Other Taxes
Adjustment, and any and all Damages with respect thereof.
(ii) Each Seller shall severally (and not jointly and severally)
indemnify, defend and hold harmless the Buyer Indemnified Parties from
and against any and all Damages resulting from, arising out of or caused
by (A) the breach of such Seller's individual covenants contained in
SECTION 2(A) or SECTION 6 above or (B) the failure of such Seller's
representations and warranties contained in SECTION 3(A) above to be true
and correct in all respects as of the date made; provided that Buyer
makes a written claim for indemnification against such Seller pursuant to
SECTION 10(H) below within the applicable survival period, if any, set
forth in SECTION 8(A).
(iii) Any Damages payable hereunder shall be (A) reduced for
Income Tax benefits actually recognized by the Buyer Indemnified Parties
as a result of the event giving rise to payments hereunder for such
Damages and increased for any Taxes actually incurred by the Buyer
Indemnified Parties as a result of the receipt of payments hereunder for
such Damages, and (B) calculated net of any insurance proceeds actually
received by Buyer or the Company in respect thereof.
(iv) Sellers shall have no recourse against the Company or its
directors, officers, employees, Affiliates, agents, attorneys,
representatives, assigns or successors for any indemnification claims
asserted by the Buyer Indemnified Parties.
(c) INDEMNIFICATION PROVISIONS FOR SELLERS' BENEFIT. In the event Buyer
breaches any of its representations, warranties and covenants contained herein
and provided that any Seller makes a written claim for indemnification against
Buyer pursuant to SECTION 10(H) below within the survival period (if there is an
applicable survival period pursuant to SECTION 8(A) above), then Buyer agrees to
indemnify, defend and hold harmless each Seller, its trustees, heirs and agents,
and any successors to Seller's interests and their trustees, heirs and agents
(the "SELLER INDEMNIFIED PARTIES") from and against the entirety of any Damages
suffered resulting from or caused by the breach.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD-PARTY CLAIM") 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 promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party
from any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is actually and materially prejudiced.
(ii) (A) Except as provided in clause (B) below, any Indemnifying
Party will have the right to assume the defense of the Third-Party Claim
with counsel of his or its choice reasonably satisfactory to the
Indemnified Party at any time within
48
thirty (30) days after the Indemnified Party has given notice of the
Third-Party Claim; provided, however, that the Indemnifying Party must
conduct the defense of the Third-Party Claim actively and diligently
thereafter in order to preserve its rights in this regard.
(B) Buyer shall have the exclusive right to control the
conduct of any Third Party Claim with respect to Taxes; PROVIDED,
HOWEVER, that, in the case of a Third Party Claim with respect to
Taxes that Sellers are liable or responsible for under SECTION 8
or otherwise, (i) Buyer shall keep the Sellers' Representative
reasonably informed and consult seriously and in good faith with
the Sellers' Representative and its tax advisors with respect to
any issue relating to such Third Party Claim; (ii) Buyer shall
promptly provide the Sellers' Representative with copies of all
correspondence, notices and other written materials received from
any taxing authorities and shall on a current basis otherwise keep
the Sellers' Representative and its tax advisors advised of
significant developments in the Third Party Claim and of
significant communications involving representatives of the taxing
authorities with respect to the Third Party Claim; (iii) the
Sellers' Representative may request that Buyer take a position in
respect of such Third Party Claim, and Buyer shall do so provided
that (A) there exists substantial authority for such position
within the meaning of the accuracy-related penalty provisions of
Section 6662 of the Code and (B) the adoption of such position
would not adversely affect the Tax liability of Buyer or any of
its Affiliates for any post-Closing period or portion thereof
(unless the Sellers' Representative agrees on behalf of Sellers to
indemnify and hold harmless Buyer and its Affiliates from and
against such adverse effect); (iv) Buyer shall provide the
Sellers' Representative with a copy of any written submission to
be sent to a taxing authority prior to the submission thereof
(with reasonable time for review by the Sellers' Representative
and its tax advisors) and shall give serious and good faith
consideration to any comments or suggested revisions that the
Sellers' representative or its tax advisors may have with respect
thereto; and (v) there shall be no settlement, resolution, or
closing or other agreement with respect thereto without the
consent of the Sellers' Representative, which consent will not be
unreasonably withheld or delayed. Notwithstanding the foregoing,
the withholding of consent will not be regarded as unreasonable if
the Sellers' Representative receives, and provides Buyer a copy
of, written advice from a tax advisor reasonably satisfactory to
Buyer that there is a significant probability that, by pursuing
the dispute further, Buyer could obtain a more favorable outcome
(taking into account both pre-Closing and post-Closing Tax periods
of the Company and its Affiliates) than that reflected in the
proposed settlement, resolution, or closing or other agreement.
(iii) So long as the Indemnifying Party has assumed and is
conducting the defense of the Third-Party Claim in accordance with
SECTION 8(D)(II) above, (A) the Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement with respect to
the Third-Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless the judgment
or proposed settlement involves only the payment in full of money damages
by one or more of the Indemnifying Parties and does not impose an
injunction or other equitable relief upon the
49
Indemnified Party and (B) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third-Party Claim without the prior written consent of the Indemnifying
Party (not to be withheld unreasonably). The Parties hereto agree to
cooperate fully with each other in connection with the defense,
negotiation or settlement of any Third Party Claim.
(iv) In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third-Party Claim in accordance with SECTION
8(D)(II) above, however, (A) the Indemnified Party may defend against and
consent to the entry of any judgment or enter into any settlement with
respect to, the Third-Party Claim in any manner he or it reasonably may
deem appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in connection therewith)
and (B) the Indemnifying Parties will remain responsible for any Damages
the Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of or caused by the Third-Party Claim to the fullest
extent provided in this SECTION 8.
(e) DIRECT CLAIMS. With respect to any claim by an Indemnified Party
for Damages not involving a Third-Party Claim (a "DIRECT CLAIM") the Indemnified
Party and Indemnifying Party shall attempt in good faith to resolve any issues
in dispute with respect to such Direct Claim following the delivery of a notice
relating to a Direct Claim. In the event the parties are unable to resolve the
issues in dispute, the Indemnified Party will be free to pursue such remedies as
may be available to the Indemnified Party on the terms and subject to the
provisions of this SECTION 8.
(f) EXCLUSIVE REMEDY. Buyer and Sellers acknowledge and agree that,
following the Closing, the foregoing indemnification provisions in this SECTION
8 shall be the exclusive remedy of the Buyer Indemnified Parties and Seller
Indemnified Parties with respect to the Company, this Agreement or the
transactions contemplated by this Agreement, except with respect to any claims
or causes of actions for fraud and/or intentional misrepresentation by a Party
and to any adjustment to the Purchase Price in accordance with SECTION 2 hereof.
Without limiting the generality of the foregoing, the Buyer Indemnified Parties
waive any statutory, equitable, or common law rights or remedies relating to any
Environmental Requirements or any Environmental Claim. Notwithstanding the
foregoing, no Party shall be precluded from bringing an action for specific
performance or other equitable remedy to require a Party to perform its
obligations under this Agreement.
(g) ESCROW AGREEMENT. Any amount in respect of Damages to which any
Buyer Indemnified Party is entitled to receive under this SECTION 8 shall
initially be disbursed from the Indemnity Escrow Amount in accordance with the
terms of the Escrow Agreement until the entire Indemnity Escrow Amount has been
disbursed.
(h) ADJUSTMENT TO PURCHASE PRICE. The Parties agree to treat all
payments made under SECTION 8 as adjustments to the Purchase Price for Tax
purposes, unless a contrary treatment is required by applicable Law.
50
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
(i) Buyer and the Sellers' Representative may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written notice
to Sellers' Representative at any time prior to the Closing (A) in the
event either the Company or any Seller has breached any representation,
warranty or covenant contained in this Agreement in any material respect,
Buyer has notified Sellers' Representative of the breach and the breach
is incapable of being cured or, if capable of being cured, has continued
without cure for a period of twenty (20) days after the notice of breach
or (B) if the Closing shall not have occurred on or before November 6,
2003 by reason of the failure of any condition precedent under SECTION
7(A) hereof (unless the failure results primarily from Buyer itself
breaching any representation, warranty or covenant contained in this
Agreement); and
(iii) Sellers' Representative may terminate this Agreement by
giving written notice to Buyer at any time prior to the Closing (A) in
the event Buyer has breached any representation, warranty or covenant
contained in this Agreement in any material respect, the Sellers'
Representative has notified Buyer of the breach and the breach is
incapable of being cured or, if capable of being cured, has continued
without cure for a period of twenty (20) days after the notice of breach
or (B) if the Closing shall not have occurred on or before November 6,
2003, by reason of the failure of any condition precedent under SECTION
7(B) hereof (unless the failure results primarily from any Seller
breaching any representation, warranty or covenant contained in this
Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in SECTION 5(E) above and SECTION 10
shall survive termination.
10. MISCELLANEOUS.
(a) NATURE OF SELLERS' OBLIGATIONS.
(i) The covenants of each Seller in SECTION 2(A) above concerning
the sale of his, her or its Company Shares to Buyer (but not with respect
to the payment of any adjustment to the Purchase Price to the extent such
adjustment exceeds the Purchase Price Escrow Amount), the representations
and warranties of each Seller in SECTION 3(A) above concerning the
transaction and the covenants of each Seller contained in SECTION 6 above
are individual obligations. This means that the particular individual
Seller making the representation, warranty or covenant shall be solely
responsible to the extent provided
51
in SECTION 8(B)(II) above for any Damages Buyer may suffer as a result of
any breach thereof.
(ii) The remainder of the representations, warranties and
covenants in this Agreement are joint and several obligations. This means
that each Seller shall be responsible to the extent provided in SECTION
8(B)(I) above for the entirety of any Damages any of the Buyer
Indemnified Parties may suffer as a result of any breach thereof.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of Buyer
and Sellers' Representative; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable Law or any
listing or trading agreement concerning its publicly traded securities (in which
case the disclosing Party will use its best efforts to advise the other Parties
of such belief and provide the other Parties with an opportunity to review and
comment upon prior to making the disclosure); provided, however, that Buyer
acknowledges and agrees that (i) (A) Buyer will issue a press release
announcing, and will subsequently file with the Securities and Exchange
Commission a current report on Form 8-K and a quarterly report on Form 10-Q that
will discuss the transactions contemplated herein, and (B) the transactions
contemplated herein may be disclosed in any offering or information memorandum
or other similar document and in any "roadshow" or syndication presentations or
other marketing materials prepared in connection with Buyer's financing of the
transactions contemplated herein; and (ii) Buyer shall afford Sellers'
Representative ample time to review and comment upon, and provide written
approval of such discussions and disclosures as contemplated by the first clause
of this SECTION 10(B) (other than Buyer's Form 8-K and Form 10-Q).
(c) NO THIRD-PARTY BENEFICIARIES. Except as set forth in SECTION 8
hereof, this Agreement shall not confer any rights or remedies upon any Person
other than the Parties and their respective successors and permitted assigns.
(d) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) and the Confidentiality Agreement constitute the entire agreement
among the Parties and supersedes any prior understandings, agreements or
representations by or among the Parties, written or oral, to the extent they
relate in any way to the subject matter hereof.
(e) 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
or its rights, interests, or obligations hereunder without the prior written
approval of Buyer and the Sellers' Representative; provided, however, that Buyer
may (i) assign any or all of its rights and interests hereunder to one or more
Affiliates or to any Person providing Buyer with financing relating to the
transactions contemplated hereby, and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of which cases
Buyer nonetheless will remain responsible for the performance of all of its
obligations hereunder) and (iii) assign its rights, whether in whole or in part,
under SECTION 6(G) or SECTION (8) hereunder to any Person that is a successor
52
(whether through stock purchase, merger, transfer of assets or otherwise) to the
Company's Lehigh Direct division or Lehigh Lithographers division.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
(g) 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.
(h) 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 (i) when delivered
personally to the recipient, (ii) one business day after being sent to the
recipient by reputable overnight courier service (charges prepaid), (iii) one
business day after being sent to the recipient by facsimile transmission or
electronic mail, or (iv) four business days after being mailed to the recipient
by certified or registered mail, return receipt requested and postage prepaid
and addressed to the intended recipient as set forth below:
If to Sellers: Copy to:
Sellers' Representative Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, P.C.
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Buyer: Copy to:
▇▇▇ ▇▇▇▇▇▇▇▇ Corporation DLJ Merchant Banking Partners II, L.P.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
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.
53
(i) GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. This Agreement
shall be governed by and construed in accordance with the domestic laws of the
State of
New York without giving effect to any choice or conflicts of law
provision or rule (whether of the State of
New York or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of
New York. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE
TO TRIAL BY JURY IN RESPECT TO ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER, OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT, OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF SUCH LEGAL PROCEEDING, SEEK TO ENFORCE THE
FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND
(IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10(I).
(j) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Sellers. No waiver by any Party of any provision of this Agreement or any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver 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.
(k) 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.
(l) EXPENSES. Each of Buyer and the Sellers will bear his, her or its
own costs and expenses (including investment banking and legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby (it being understood that any costs and expenses of Sellers
which are not paid by the Company prior to the Closing but remain as obligations
of the Company will be deducted from the Purchase Price as Transaction Expenses
as provided in SECTION 2 above). Buyer and the Company shall each pay one-half
of the filing fees in connection with the notification filing under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Buyer agrees to use its commercially reasonable efforts
to assist Sellers in minimizing any costs, fees, penalties, premiums, payments
or expenses referred to in clause (v) in the definition of "Transaction
Expenses" in SECTION 1 hereof. Buyer or its affiliates (or the Company following
the Closing) shall pay all costs, fees and expenses incurred in connection with
Buyer's financing and the Commitment Letters and Sellers shall not be liable for
any such costs, fees or expenses and such amounts shall not be treated as
Transaction Expenses or as a deduction to the Purchase Price.
54
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. 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
word "including" shall mean including without limitation.
(n) 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.
(o) GOVERNING LANGUAGE. This Agreement has been negotiated and executed
by the Parties in English. In the event any translation of this Agreement is
prepared for convenience or any other purpose, the provisions of the English
version shall prevail.
(p) COOPERATION ON TAX MATTERS.
(i) Sellers shall timely prepare or cause to be prepared and
timely file or cause to be filed all Tax Returns for the Company and any
Subsidiary which are required to be filed on or prior to the Closing
Date, and shall timely pay or cause to be paid all Taxes shown due
thereon. All such Tax Returns shall be prepared in a manner consistent
with prior practice (unless otherwise inconsistent with applicable Law).
With respect to Tax Returns required to be filed during the period
between the execution of this Agreement and the Closing, the Sellers'
Representative shall cause the Company and its Subsidiaries to provide
Buyer with copies of such completed Tax Returns at least twenty (20) days
prior to the due date for filing thereof, along with supporting
workpapers, for Buyer's review and approval (unless such twenty (20) day
period is not feasible given the date of execution of this Agreement and
the due date of the Tax Return, in which case, Sellers' Representative
shall provide copies of such Tax Returns to Buyer as soon as practicable
after execution of this Agreement), which approval shall not be
unreasonably withheld (it being understood that so long as such Tax
Returns are prepared on a basis consistent with past practice and
substantial authority exists for the taking of a position on such Tax
Returns, any withholding of Buyer's approval with respect to such Tax
Returns shall be considered unreasonable). Sellers and Buyer shall
attempt in good faith to resolve any disagreements regarding such Tax
Returns prior to the due date for filing. In the event that Sellers and
Buyer are unable to resolve any dispute with respect to such Tax Returns
at least ten (10) days prior to the due date for filing (or such shorter
period as contemplated above), such dispute shall be resolved pursuant to
SECTION 10(P)(VII), which resolution shall be binding on the Parties.
(ii) Sellers shall timely prepare or cause to be prepared and
Buyer shall cooperate in good faith in timely filing or causing to be
filed all Income Tax Returns for the Company and any Subsidiary which
relate to Tax periods ending on or prior to the Closing Date and which
are filed after the Closing Date, and, to the extent Sellers are
obligated to indemnify for such Taxes under SECTION 8; Sellers shall
timely pay or cause to be paid all Taxes shown due thereon. All such Tax
Returns shall be prepared in a
55
manner consistent with prior practice (unless otherwise inconsistent with
applicable Law). Buyer will be provided with copies of such completed Tax
Returns at least twenty (20) days prior to the due date for filing
thereof, along with supporting workpapers for Buyer's review and
approval, which approval shall not be unreasonably withheld (it being
understood that so long as such Tax Return is prepared on a basis
consistent with past practice and substantial authority exists for the
taking of a position on such Tax Return, any withholding of Buyer's
approval with respect to such Tax Return shall be considered
unreasonable). Sellers and Buyer shall attempt in good faith to resolve
any disagreements regarding such Tax Returns prior to the due date for
filing. In the event that Sellers and Buyer are unable to resolve any
dispute with respect to such Tax Returns at least ten (10) days prior to
the due date for filing, such dispute shall be resolved pursuant to
SECTION 10(P)(VII), which resolution shall be binding on the Parties.
(iii) (A) Except as provided above, following the Closing, Buyer
shall timely prepare or cause to be prepared and timely file or caused to
be filed all Tax Returns for the Company and any Subsidiary which are
required to be filed after the Closing Date. With respect to any such
Income Tax Return for a Straddle Period (as defined below), Buyer shall
prepare such Income Tax Return in a manner consistent with prior practice
(unless otherwise required by applicable Law) and permit Sellers to
review and comment on each such Income Tax Return prior to filing.
Sellers and Buyer shall attempt in good faith to resolve any
disagreements regarding such Income Tax Returns prior to the due date for
filing. In the event Sellers and Buyer are unable to resolve any dispute
with respect to such Income Tax Returns at least ten (10) days prior to
the due date for filing, such dispute shall be resolved pursuant to
SECTION 10(P)(VII), which resolution shall be binding on the Parties.
(B) In the event Buyer has the responsibility to cause to
be filed any Tax Return pursuant to SECTION 10(P)(II) or this
SECTION 10(P)(III) and to the extent, but only to the extent,
Sellers are obligated to indemnify under SECTION 8 for any Taxes
reflected on such Tax Return, Sellers' Representative, on behalf
of the Sellers, shall no later than five (5) days prior to the due
date for the payment of Taxes shown due on such Tax Return pay to
Buyer the amount of any such Taxes for which Sellers are obligated
to indemnify under Section 8, with respect to any Tax period
ending on or prior to the Closing Date and the pre-Closing portion
of any Tax period beginning before and ending after the Closing
Date. No payment pursuant to this clause (B) shall excuse Sellers
from their indemnification obligations pursuant to SECTION 8 if
the amount of Taxes as ultimately determined (on audit or
otherwise) for the periods covered by such Tax Returns exceeds the
amount of Sellers' payment under this clause (B).
(iv) Nothing contained in SECTION 10(P)(I), (II) or (III) shall
excuse the Sellers from their indemnification obligations pursuant to
SECTION 8 with respect to Taxes. Sellers shall be liable for and shall
pay (and shall indemnify and hold harmless Buyer Indemnified Parties
against) any and all sales, use, stamp, documentary, filing, recording,
transfer or similar fees or Taxes or governmental charges as levied by
any Governmental Entity (including any interest and penalties) in
connection with the
56
transactions contemplated by this Agreement (other than with respect to,
or in connection with, any financing arrangement entered into by Buyer).
(v) Any Income Tax refunds that are received by Buyer or the
Company or any Subsidiary that relate to Income Tax periods or portions
thereof ending on or before the Closing Date shall be for the account of
Sellers, and Buyer shall pay, or cause to be paid, to the Sellers'
Representative for the benefit of Sellers, as an additional amount of the
Purchase Price, any such refund net of any Taxes, costs or expenses
actually payable by Buyer or the Company with respect thereto within ten
(10) days after receipt thereof; provided, however, that Buyer shall be
entitled to retain any such refund to the extent such refund arises by
reason of the carryback of any losses, credits or other Tax attributes
generated in any Income Tax periods or portions thereof beginning after
the Closing Date.
(vi) Buyer, the Company and Sellers shall cooperate fully, as and
to the extent reasonably requested by the other Party, in connection with
the filing of Tax Returns pursuant to this SECTION 10(P) and any audit,
litigation or other proceeding with respect to Taxes for such pre-Closing
tax periods. Such cooperation shall include the retention and (upon the
other Party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. Company and Sellers agree (A) to retain all books and records
with respect to Tax matters pertinent to the Company and its Subsidiaries
relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent notified
by Buyer or Sellers, any extensions thereof) of the respective taxable
periods and to abide by all record retention agreements entered into with
any taxing authority and (B) to give the other Party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other Party so requests, Company or Sellers, as the
case may be, shall allow the other Party to take possession of such books
and records.
(vii) Any dispute as to any matter covered in this SECTION 10(P)
shall be resolved by an independent accounting firm mutually acceptable
to the Sellers' Representative and Buyer. The fees and expenses of such
accounting firm shall be borne equally by Sellers, on the one hand, and
Buyer on the other. If any dispute with respect to a Tax Return is not
resolved prior to the due date of such Tax Return, such Tax Return shall
be filed in the manner which the party responsible for preparing such Tax
Return deems correct.
(viii) In the case of any Tax period that includes (but does not
end on) the Closing Date (a "STRADDLE PERIOD"), Sellers and Buyer shall,
unless prohibited by applicable Law, close the Tax period of the Company
and its Subsidiaries as of the close of business on the Closing Date. If
applicable Law does not permit the Company or any of its Subsidiaries to
close its Tax year on the Closing Date or in any case in which a Tax is
assessed with respect to a Tax period which includes the Closing Date
(but does not begin or end on that day), the Taxes, if any, attributable
to such period shall be allocated (except as provided in the proviso to
Section 8(b)(i)(D)) (A) to Sellers for the portion of
57
such period up to and including the close of business on the Closing
Date, and (B) to Buyer for the portion of such period subsequent to the
Closing Date. Any allocation of income or deductions required to
determine any Taxes attributable to any such period shall be made by
means of a closing of the books and records of the Company and its
Subsidiaries as of the close of business on the Closing Date, provided
that exemptions, allowances or deductions that are calculated on an
annual basis (other than depreciation and amortization deductions) shall
be allocated between the portion of such period ending on the Closing
Date and the portion of such period after the Closing in proportion to
the number of days in each such portion of such period.
(ix) It is agreed that any Income Tax deductions, credits or other
Tax benefits arising from the payment or accrual of Transaction Expenses
and the Option Cash Consideration shall, to the extent permitted under
applicable Law, be reflected on the Company's Income Tax Return for the
Tax period ending on the Closing Date. For purposes of clarity, SECTION
10(P)(IX) OF THE DISCLOSURE Schedule sets forth a list of such
Transaction Expenses and Option Cash Consideration to which this SECTION
10(P)(IX) relates.
(x) Following the Closing Buyer will not permit the Company to
dispose or sell the Company's Lehigh Direct division until at least one
business day following the Closing Date. In the event such a disposition
is consummated, the Parties hereto agree that any Tax consequences
arising from such disposition shall be properly allocated to any Tax
period beginning after the Closing Date (as contemplated in Treasury
Regulation Section 1.1502-76(b)(1)(ii)(B) or otherwise) or the
Post-Closing portion of any Tax period beginning before and ending after
the Closing Date.
(q) APPOINTMENT OF SELLERS' REPRESENTATIVE. Each Seller hereby appoints
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. or, in the event ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. dies, becomes
disabled or is no longer able or willing to serve in such capacity, then ▇▇▇▇ ▇.
▇▇▇▇▇▇ (the "SELLERS' REPRESENTATIVE") to act as his, her or its agent for the
purposes of: (i) delivering to Buyer his, her or its respective Company Shares;
(ii) accepting from Buyer the payment of the immediately available funds portion
of the Purchase Price and distributing to each Seller his respective portion of
such funds; (iii) receiving any notice required or desired to be given to
Sellers by Buyer pursuant to this Agreement; (iv) changing the time, date or
place of the Closing; (v) granting any consent or waiver required or desired of
Sellers by Buyer pursuant to this Agreement; (vi) amending this Agreement; (vii)
terminating or agreeing to terminate this Agreement; (viii) authorizing the
distribution to Buyer of all or any portion of the Escrow Fund; (ix) agreeing
to, negotiating, entering into settlements and compromises of, and agreeing to
the payment to Buyer of any amounts in respect of Damages for which Buyer is
entitled to be indemnified pursuant to SECTION 8 hereof; (x) agreeing,
negotiating, entering into settlements and compromises with respect to the
calculation of the Estimated Purchase Price at Closing and to any post-Closing
adjustment to the Purchase Price, all in accordance with SECTION 2 hereof; and
(xi) executing all documents and delivering all documents contemplated by this
Agreement. Each Seller shall execute and have notarized a Power of Attorney to
the Sellers' Representative, which Power shall be irrevocable and coupled with
an interest for his appointment. A decision, act, consent or instruction of the
Sellers' Representative authorized hereunder shall constitute a decision for all
Sellers and shall be final, binding and conclusive upon each Seller, and Buyer
58
may rely upon any such decision, act, consent or instruction of the Sellers'
Representative as being the decision, act, consent or instruction of every such
Seller. Buyer is hereby relieved from any liability to any person for any acts
undertaken by Buyer in accordance with such decision, act, consent or
instruction from the Sellers' Representative.
59
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
▇▇▇ ▇▇▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President and Chief
Financial Officer
THE LEHIGH PRESS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Title:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as trustee, under the
Irrevocable Agreement of Trust between
▇▇▇▇ ▇. ▇▇▇▇▇▇ (Settlor) and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ (Trustee) dated December 22, 1998
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
EXHIBIT A
ESTIMATE OF THE ESTIMATED PURCHASE PRICE
(SEE ATTACHED)
EXHIBIT B
ESCROW AGREEMENT
(SEE ATTACHED)
EXHIBIT C
COMMITMENT LETTERS
(SEE ATTACHED)
EXHIBIT D
FINANCIAL STATEMENTS
(SEE ATTACHED)
EXHIBIT E
OPTION TERMINATION AGREEMENT
(SEE ATTACHED)