Name of Person Filing: Date Completed:
Warner ▇. ▇▇▇▇▇ March 6, 1998
ATTACHMENT NO. 1
STOCK PURCHASE AGREEMENT
BETWEEN
▇▇▇▇▇ COMPANY
AND
THE SHAREHOLDERS OF
MONSEY PRODUCTS CO.
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
ARTICLE 1-DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"Acquired Companies". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"Applicable Contract" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"Balance Sheet" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"BEST EFFORTS". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"Breach". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Buyer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Closing Date". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Consent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Contemplated Transactions" . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Contract". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Damages" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Employment Agreements" . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Encumbrance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Environment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Environmental, Health, and Safety Liabilities" . . . . . . . . . . . . . . . .2
"Environmental Law" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"Facilities". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"GAAP". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"Governmental Authorization". . . . . . . . . . . . . . . . . . . . . . . . . .4
"Governmental Body" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"Hazardous Activity". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"Hazardous Materials" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .▇
"▇▇▇ ▇▇▇" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"Intellectual Property Assets". . . . . . . . . . . . . . . . . . . . . . . . .4
"IRC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"IRS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"Legal Requirement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
"Noncompetition Agreements" . . . . . . . . . . . . . . . . . . . . . . . . . .5
"Occupational Safety and Health Law" . . . . . . . . . . . . . . . . . . . . .5
"Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
"Ordinary Course of Business" . . . . . . . . . . . . . . . . . . . . . . . . .5
"Organizational Documents" . . . . . . . . . . . . . . . . . . . . . . . . . .5
"Person". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
"Principal Executives". . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
i
"Proceeding". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
"Related Person". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
"Release" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"Representative" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"Securities Act". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"Sellers" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"Sellers' Knowledge". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"Shares". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"Shareholders Agreement". . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"SUBSIDIARY". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"TAX" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"Tax Return" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
"Threat of Release" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
"Threatened". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE 2-SALE AND TRANSFER OF SHARES; CLOSING . . . . . . . . . . . . . . . . . . .7
2.1 SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.2 PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.3 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.4 CLOSING OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
ARTICLE 3-REPRESENTATIONS AND WARRANTIES OF SELLERS. . . . . . . . . . . . . . . . .9
3.1 ORGANIZATION AND GOOD STANDING . . . . . . . . . . . . . . . . . . . . . .9
3.2 AUTHORITY; NO CONFLICT . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.3 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. . . . . . . . . . . . . . . . . . . . 11
3.7 PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.8 CONDITION AND SUFFICIENCY OF ASSETS. . . . . . . . . . . . . . . . . . . 13
3.9 ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10 INVENTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.11 NO UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 14
3.12 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . 15
3.14 EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15 COMPLIANCE WITH LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . 18
3.16 LEGAL PROCEEDINGS; ORDERS. . . . . . . . . . . . . . . . . . . . . . . . 18
3.17 ABSENCE OF CERTAIN CHANGES AND EVENTS. . . . . . . . . . . . . . . . . . 18
3.18 CONTRACTS; NO DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.19 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.20 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.21 EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.22 LABOR RELATIONS; COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . 24
ii
3.23 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Intellectual Property Assets. . . . . . . . . . . . . . . . . . . . 25
(b) Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Know-How Necessary for the Business . . . . . . . . . . . . . . . . 25
(d) Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(e) Trademarks and Copyrights . . . . . . . . . . . . . . . . . . . . . 26
(f) Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.24 NO IMPROPER PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.25 RELATIONSHIPS WITH RELATED PERSONS . . . . . . . . . . . . . . . . . . . 28
ARTICLE 4-REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . . . . . 29
4.1 ORGANIZATION AND GOOD STANDING . . . . . . . . . . . . . . . . . . . . . 29
4.2 AUTHORITY; NO CONFLICT . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.3 INVESTMENT INTENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.4 CERTAIN PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 5-COVENANTS OF SELLERS PRIOR TO CLOSING DATE . . . . . . . . . . . . . . . 30
5.1 ACCESS AND INVESTIGATION . . . . . . . . . . . . . . . . . . . . . . . . 30
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED
COMPANIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.3 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.4 REQUIRED APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.5 NOTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS . . . . . . . . . . . . . . . 32
5.7 NO SOLICITATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.8 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 6-COVENANTS OF BUYER PRIOR TO CLOSING DATE . . . . . . . . . . . . . . . . 33
6.1 APPROVALS OF GOVERNMENTAL BODIES . . . . . . . . . . . . . . . . . . . . 33
6.2 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 7-CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. . . . . . . . . . . 33
7.1 ACCURACY OF REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 34
7.2 SELLERS' PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.4 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.5 ADDITIONAL DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.6 NO PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.7 NO CLAIM REGARDING STOCK OWNERSHIP OR
SALE PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.8 NO PROHIBITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.9 HSR ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.10 FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.11 TERMINATION OF AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 36
iii
7.12 ▇▇▇▇▇▇ INVESTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 8-CONDITIONS PRECEDENT TO SELLERS' OBLIGATION
TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.1 ACCURACY OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 36
8.2 BUYER'S PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.4 ADDITIONAL DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5 NO INJUNCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 9-TERMINATION. . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.1 TERMINATION EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 10-INDEMNIFICATION; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 38
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT
AFFECTED BY KNOWLEDGE . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS . . . . . . . . . . . 39
10.3 HOLDBACK ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER . . . . . . . . . . . . 40
10.5 TIME LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.6 LIMITATIONS ON AMOUNT--SELLERS. . . . . . . . . . . . . . . . . . . . . 41
10.7 LIMITATIONS ON AMOUNT--BUYER. . . . . . . . . . . . . . . . . . . . . . 41
10.8 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS . . . . . . . . . . . 42
10.9 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS . . . . . . . . . . . . . . 43
10.10 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 11-GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2 PUBLIC ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4 RELEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.5 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.6 JURISDICTION; SERVICE OF PROCESS. . . . . . . . . . . . . . . . . . . . 47
11.7 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.8 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.9 ENTIRE AGREEMENT AND MODIFICATION . . . . . . . . . . . . . . . . . . . 47
11.10 SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.11 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. . . . . . . . . . . 48
11.12 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.13 SECTION HEADINGS, CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . 49
11.14 APPOINTMENT OF SELLERS' REPRESENTATIVE. . . . . . . . . . . . . . . . . 49
11.15 TIME OF ESSENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.16 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.17 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
iv
EXHIBITS
2.4(a)(ii) Employment Agreement
2.4(a)(iii) Non-Competition Agreement
7.12 Terms of ▇▇▇▇▇▇ Investment
10.3 Custodial Agreement
v
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of February
27, 1998, by ▇▇▇▇▇ Company, a California corporation, or its designee ("Buyer")
and the individual persons listed on Schedule A (collectively, the "Sellers").
RECITALS
A. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (collectively, the "Principal Executives") are each a
principal executive officer and/or a principal shareholder of Monsey Products
Co., a Pennsylvania corporation (the "Company"), and together with those
additional Sellers listed on Schedule A, own all of the issued and outstanding
capital stock of the Company; and
▇. ▇▇▇▇▇▇▇ desire to sell, and Buyer desires to purchase, all of the
Company's issued and outstanding shares of capital stock (the "Shares") for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUIRED COMPANIES"-- the Company and its Subsidiaries, collectively.
"APPLICABLE CONTRACT" -- any Contract (a) under which any Acquired
Company has or may acquire any rights, (b) under which any Acquired Company has
or may become subject to any obligation or liability, or (c) by which any
Acquired Company or any of the assets owned or used by it is or may become
bound.
"BALANCE SHEET" -- as defined in Section 3.4.
"BEST EFFORTS" -- the efforts that a prudent Person desirous of achieving
a result would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible.
1
"BREACH" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in or breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other provision, and the
term "Breach" means any such inaccuracy, breach or failure.
"BUYER" -- as defined in the first paragraph of this Agreement.
"CLOSING" -- as defined in Section 2.3.
"CLOSING DATE" -- the date and time as of which the Closing actually
takes place.
"COMPANY" -- as defined in the Recitals of this Agreement.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including (a) the sale of the Shares by Sellers to Buyer, (b)
the execution, delivery, and performance of the Employment Agreements and the
Noncompetition Agreements, (c) the performance by Buyer and Sellers of their
respective covenants and obligations under this Agreement, and (d) Buyer's
acquisition and ownership of the Shares and exercise of control over the
Acquired Companies.
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" -- as defined in Section 10.2.1.
"EMPLOYMENT AGREEMENTS" -- as defined in Section 2.4(a)(ii).
"ENCUMBRANCE" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any voting, transfer,
receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
2
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to any violation of any Environmental Law or Occupational Safety and
Health Law or any discharge, disposal or other Release of Hazardous Material
into the Environment.
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"FACILITIES" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by any Acquired Company and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by any Acquired
Company.
3
"GAAP"--generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued or granted by or under the authority of
any Governmental Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY"-- any:
(a) nation, state, territory, province, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, provincial, territorial, local, municipal,
foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"HAZARDOUS ACTIVITY" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant or deleterious substance
under or pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof or
synthetic substitutes therefor and asbestos or asbestos-containing materials.
"HSR ACT" -- the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.23.
4
"IRC" -- the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"LEGAL REQUIREMENT" -- any applicable federal, state, provincial,
territorial, local, municipal, foreign, international, multinational, or other
administrative order, constitution, law, ordinance, principle of common law,
regulation, statute, or treaty.
"NONCOMPETITION AGREEMENTS" -- as defined in Section 2.4(a)(iii).
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any governmental program designed to provide safe and
healthful working conditions.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PRINCIPAL EXECUTIVES" means ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
5
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family; and
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family.
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person; and
(b) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse and (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS" -- as defined in the first paragraph of this Agreement.
"SELLERS' KNOWLEDGE"-- shall mean the actual knowledge of any of the
Principal Executives, except that with regard to Section 3.20, it shall mean the
actual knowledge of ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
"SHARES" -- as defined in the Recitals of this Agreement.
6
"SHAREHOLDERS AGREEMENT" -- the Shareholders Agreement dated March 15,
1996 by and between each of the shareholders of the Company.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"TAX" -- means any federal, state, local, provincial, territorial or
foreign income, capital gain, gross receipts, license, excise, customs, duties,
franchise, profits, capital, sales, use, transfer, goods or services or value
added tax, including any interest, penalty, or addition thereto, whether
disputed or not.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment
of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED" -- a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
lead a prudent Person having knowledge of the event or circumstances to conclude
that such a claim, Proceeding, dispute, action, or other matter is likely to be
asserted, commenced or taken.
ARTICLE 2
SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES.
Subject to the terms and conditions of this Agreement, at the Closing,
Sellers will sell and transfer the Shares to Buyer, and Buyer will purchase the
Shares from Sellers.
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2.2 PURCHASE PRICE.
The purchase price (the "Stock Purchase Price") for the Shares will be
$42,750,000 subject to a holdback of $2 million of the Stock Purchase Price (the
"Holdback") which Buyers may cause to be retained as security for Sellers'
indemnification obligations, as set forth in Section 10.3 below. The Stock
Purchase Price will be allocated among the Sellers as set forth on Schedule A.
2.3 CLOSING.
The purchase and sale (the "Closing") provided for in this Agreement will
occur at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ as soon as possible following the
satisfaction of all conditions hereto but not later than April 7, 1998, or 5
business days after the date on which the applicable waiting periods under the
HSR Act have expired or been terminated (the "Closing Date").
2.4 CLOSING OBLIGATIONS.
At the Closing:
(a) the Sellers will deliver to Buyer:
(i) certificates evidencing the Shares, duly endorsed (or
accompanied by duly executed and irrevocable stock powers), for transfer to
Buyer, which shall be effective to transfer all of the Sellers' right, title and
interest in and to the Shares, free and clear of all Encumbrances;
(ii) employment agreements in the form of, or containing the
material terms set forth in, Exhibit 2.4(a)(ii), executed by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (collectively, the "Employment Agreements");
(iii) noncompetition agreements in the form of Exhibit
2.4(a)(iii), executed by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (collectively,
the "Noncompetition Agreements");
(iv) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers' representations and warranties in this
Agreement were accurate in all respects as of the date of this Agreement and are
accurate in all respects as of the Closing Date as if made on the Closing Date;
and
(v) such other documents, instruments and agreements that Buyer
may reasonably request no later than two business days prior to the Closing, and
which Sellers have the power to deliver, in order to consummate the Contemplated
Transaction.
(b) Buyer will deliver to Sellers:
8
(i) $40,750,000 in cash payable by bank cashier's or certified
check payable to the order of Seller Representative, or by wire transfer to
accounts specified by the Sellers' Representative not later than 3 days before
the Closing Date;
(ii) $2,000,000 in cash as the Holdback payable by bank
cashier's check payable to the order of the Custodian, or by wire transfer to
accounts specified by the Custodian.
(iii) $1,296,000 in cash payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, by bank
cashier's check payable to his order or by wire transfer to accounts specified
by him not later than 3 days before the Closing Date;
(iv) a certificate executed by Buyer to the effect that, except
as otherwise stated in such certificate, each of Buyer's representations and
warranties in this Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date as if made on
the Closing Date; and
(v) the Employment Agreements, executed by Buyer.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers, jointly and severally represent and warrant to Buyer as
follows, as of the date hereof (provided that Sellers' representations and
warranties set forth in Section 3.26 of this Agreement shall be only the several
representations and warranties of such Sellers):
3.1 ORGANIZATION AND GOOD STANDING
(a) Schedule 3.1 contains a complete and accurate list for each
Acquired Company of its name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held by
each). Each Acquired Company is a corporation duly organized, validly existing,
and in good standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. Each
Acquired Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification.
9
(b) Sellers have delivered to Buyer copies of the Organizational
Documents of each Acquired Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms.
Upon the execution and delivery by Sellers of the Employment Agreements and the
Noncompetition Agreements (collectively, the "Sellers' Closing Documents"), the
Sellers' Closing Documents will constitute the legal, valid, and binding
obligations of Sellers, enforceable against Sellers in accordance with their
respective terms. Each Seller has the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and the Sellers'
Closing Documents and to perform their obligations under this Agreement and the
Sellers' Closing Documents.
(b) Except as set forth on Schedule 3.2, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of the Acquired Companies, or
(B) any resolution adopted by the board of directors or the stockholders of any
Acquired Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which any Acquired Company or Sellers, or
any of the assets owned or used by any Acquired Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by any Acquired Company or that otherwise relates to
the business of, or any of the assets owned or used by, any Acquired Company;
(iv) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by any Acquired Company.
10
Except as set forth on Schedule 3.2, no Seller or Acquired Company is or will be
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of:
(a) 3,000,000 shares of Common stock, par value $1.00 per share, of
which only 2,505,000 shares are issued and outstanding; and
(b) 14,000 shares of Preferred stock, par value $100 per share, of
which no shares are issued and outstanding.
With the exception of the Shares (which are owned by Sellers), all of the
outstanding equity securities and other securities of each Acquired Company are
owned of record and beneficially by one or more of the Acquired Companies, free
and clear of all Encumbrances. No legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of any
Acquired Company. All of the outstanding equity securities of each Acquired
Company have been duly authorized and validly issued and are fully paid and
nonassessable. There is no security or other instrument convertible into or
exchangeable for capital stock of the Company. There is no commitment, plan or
arrangement to issue, and no outstanding option, warrant, call, registration
right, convertible security, arrangement, agreement or commitment or other right
calling for the issuance of, any share of capital stock of the Company. There
are no voting trusts or other understandings with respect to the voting of the
capital stock of the Company. There are no Contracts relating to the issuance,
sale, or transfer of any equity securities or other securities of any Acquired
Company. None of the outstanding equity securities or other securities of any
Acquired Company was issued in violation of the Securities Act or any other
Legal Requirement. No Acquired Company owns, or has any Contract to acquire,
any equity securities or other securities of any Person (other than Acquired
Companies) or any direct or indirect equity or ownership interest in any other
business. All of the voting trusts and shareholder agreements set forth on
Schedule 3.3 will be terminated as of the Closing Date.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) audited consolidated balance sheets
of the Acquired Companies as at December 31, 1997 (the "Balance Sheet"),
December 31, 1996 and December 31, 1995 and the related audited consolidated
statements of income, changes in stockholders' equity, and cash flow for each of
the fiscal years then ended, together with the report thereon of Ernst & Young,
LLP independent certified public accountants. Such financial statements and
11
notes fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Acquired Companies as at
the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP. The financial statements referred to
in this Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved. No financial statements of any
Person other than the Acquired Companies are required by GAAP to be included in
the consolidated financial statements of the Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other records
of the Acquired Companies, all of which have been made available to Buyer, are
complete and correct and have been maintained in accordance with sound business
practices and the requirements of law. The minute books of the Acquired
Companies are accurate, and no meeting of any such stockholders or Board of
Directors has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
(a) Schedule 3.6 contains a complete and accurate list of all real
property, leaseholds (including all rights or options of the Sellers or Acquired
Companies to acquire any real property) by any Acquired Company (collectively,
the "Real Property"). Sellers have delivered or made available to Buyer copies
of the deeds and other instruments (as recorded) by which the Acquired Companies
acquired such real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of Sellers or the
Acquired Companies and relating to such property or interests. Sellers have
delivered or made available to Buyer true and correct copies of all such leases
or real estate leased to any Acquired Company and of title insurance policies
(if any) with respect to leased real property. Schedule 3.6 accurately sets
forth the lease payments required to be paid by any Acquired Company under each
lease agreement and the expiration date of such lease agreement. To Sellers'
knowledge, all such leases are valid and in full force and effect, and each
Acquired Company has performed in all material respects all obligations required
to be performed by them under such leases. Except as set forth on Schedule 3.6,
neither the execution of this Agreement nor the consummation of the transactions
contemplated hereby will constitute a default by any Acquired Company under any
lease described on Schedule 3.6, and, except as set forth on Schedule 3.6, no
consent, approval, or waiver by any lessor under any lease is needed to
consummate the Contemplated Transactions. Except as disclosed on Schedule 3.6A,
the Acquired Companies have good and marketable title to, or a valid and binding
leasehold interest in, all of the Real Property, free and clear of all
Encumbrances and are not, in the case of real property, subject to any rights of
way, building use restrictions, exceptions, variances, reservations, or
limitations of any nature not set forth in the title policies set forth on
Schedule 3.6A.
12
(b) To Sellers' knowledge, the Real Property is in reasonably good
condition and repair (ordinary wear and tear excepted). All necessary occupancy
and other certificates and permits for the lawful use and occupancy thereof and
the equipment thereon have been issued. Except as set forth in Schedule 3.6B,
none of the facilities used in connection with the business of any Acquired
Company violates the provisions of any applicable building code, fire
regulation, building restriction or other Governmental Authorization, and each
such facility is zoned so as to permit the commercial uses intended by the
Company, and there are no outstanding variances or special use permits affecting
any of the facilities or the uses thereof by any Acquired Company. All
buildings, plants, and structures owned by the Acquired Companies lie wholly
within the boundaries of the real property owned by the Acquired Companies and
do not encroach upon the property of, or otherwise conflict with the property
rights of, any other Person.
3.7 PERSONAL PROPERTY
Schedule 3.7 contains a list of property ("Personal Property") owned by
the Acquired Companies, with a value greater than $5,000 for any single item,
other than those items acquired or disposed of in the ordinary course of
business since the date hereof. To Sellers' knowledge, except as shown in
Schedule 3.7, each item included in the Personal Property, and all other items
of personal property presently being used in the business of the Acquired
Companies, is in good maintenance, operating condition and repair (ordinary wear
and tear excepted) and is available for immediate use in the business or
operations of the Acquired Companies.
3.8 CONDITION AND SUFFICIENCY OF ASSETS
To Sellers' knowledge, except as set forth on Schedule 3.8, the
buildings, plants, structures, and equipment presently being used in the
business of the Acquired Companies are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they are being put,
and none of such buildings, plants, structures, or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The building, plants, structures, and
equipment of the Acquired Companies are sufficient for the continued conduct of
the Acquired Companies' businesses after the Closing in substantially the same
manner as conducted prior to the Closing.
3.9 ACCOUNTS RECEIVABLE
All accounts receivable of the Acquired Companies that are reflected on
the Balance Sheet or on the accounting records of the Acquired Companies as of
the Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date, the Accounts Receivable are or will be as of the Closing
13
Date current and collectible net of the aggregate reserves made for the Accounts
Receivable and shown on the Balance Sheet or on the accounting records of the
Acquired Companies as of the Closing Date, as the case may be. Such reserves
have been calculated consistent with the Company's past practice for the
preparation of internal financial statements and have been established in
accordance with generally accepted accounting principles consistently applied,
and Sellers believe the amount of the reserves is adequate to cover
non-collection of the Accounts Receivable in light of the Acquired Companies'
past practice. Subject to such reserves, each of the Accounts Receivable either
has been or will be collected in full, without any set-off, within the later of
150 days after the day on which it first becomes due and payable or December 31,
1998; provided that all payments received by the Company from a customer with
respect to any Accounts Receivable shall be applied to the oldest remaining
Accounts Receivable in the order in which they arose, unless the customer
indicates otherwise as a result of a dispute with respect to a particular
invoice. There is no contest, claim, or right of set-off, other than returns
and offsets (such as for freight and commissions) in the Ordinary Course of
Business, under any Contract with any obligor of an Accounts Receivable relating
to the amount or validity of such Accounts Receivable. Schedule 3.9 contains a
complete and accurate list of all Accounts Receivable as of the date of the
Balance Sheet, which list sets forth the aging of such Accounts Receivable.
3.10 INVENTORY
All inventory of the Acquired Companies as set forth on inventory dated
December 31, 1997 and existing on the Closing Date consists of a quality and
quantity usable and salable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Balance Sheet or on
the accounting records of the Acquired Companies as of the Closing Date, as the
case may be. All inventories not written off have been priced at the lower of
cost or market on a last in, first out basis (except for inventories of the
Company's Canadian subsidiary which are determined on a first-in, first-out
basis). The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of the Acquired Companies.
3.11 NO UNDISCLOSED LIABILITIES
Except as set forth on Schedule 3.11, the Acquired Companies have no
liabilities or obligations of any nature (whether absolute, accrued or
contingent) required to be reserved against on the Balance Sheet or disclosed in
the notes thereto, in accordance with GAAP, which are not adequately reserved
against or disclosed, except for current liabilities incurred in the Ordinary
Course of Business since the date thereof.
3.12 TAXES
14
(a) The Acquired Companies have filed or caused to be filed (on a
timely basis) since 1992 all income Tax Returns that are or were required to be
filed by or with respect to any of them, either separately or as a member of a
group of corporations, pursuant to applicable Legal Requirements. Sellers have
delivered or made available to Buyer copies of, and Schedule 3.12 contains a
complete and accurate list of, all such Tax Returns filed since 1991. The
Acquired Companies have paid, or made provision for the payment of, all Taxes
that have or may have become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment or reassessment received by Sellers or any Acquired
Company, except such Taxes, if any, as are listed in Schedule 3.12 and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the Balance Sheet.
(b) The United States federal and state and Canadian federal,
provincial or territorial income Tax Returns of each Acquired Company subject to
such Taxes have been audited by the IRS or relevant state or Canadian federal,
provincial or territorial tax authorities or are closed by the applicable
statute of limitations for all taxable years through 1991. Schedule 3.12
contains a complete and accurate list of all audits of all such Tax Returns,
including a reasonably detailed description of the nature and outcome of each
audit. All deficiencies or claims proposed as a result of such audits have been
paid, reserved against, settled, or, as described on Schedule 3.12, are being
contested in good faith by appropriate proceedings. Schedule 3.12 describes all
adjustments to the United States federal and state or Canadian federal,
provincial and territorial income Tax Returns filed by any Acquired Company or
any group of corporations including any Acquired Company for all taxable years
since 1991, and the resulting deficiencies proposed by the IRS or Canadian
taxing authority. Except as described on Schedule 3.12, no Seller or Acquired
Company has given or been requested to give waivers or extensions (or is or
would be subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of any Acquired Company
or for which any Acquired Company may be liable. No claim has ever been made by
an authority in a jurisdiction where any Acquired Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the assets of any Acquired Company that
arose in connection with any failure (or alleged failure) to pay any Tax.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of each Acquired Company are adequate (determined in accordance
with GAAP) and are at least equal to that Acquired Company's liability for
Taxes. Sellers have not been advised or notified of any proposed tax assessment
or reassessment against any Acquired Company except as disclosed in the Balance
Sheet or on Schedule 3.12. No consent to the application of Section 341(f)(2)
of the IRC has been filed with respect to any property or assets held, acquired,
or to be acquired by any Acquired Company. All Taxes that any Acquired Company
is or was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person. The Shares are not, and are not deemed to
be, "taxable Canadian property" for purposes of the Income Tax Act [Canada].
15
(d) All income Tax Returns filed by (or that include on a consolidated
basis) any Acquired Company are true, correct, and complete. No Acquired
Company is currently the beneficiary of any extension of time with which to file
any income Tax Return (it being understood that, prior to the Closing Date,
extensions of time with respect to the 1997 year will be obtained). None of the
Acquired Companies (i) has been a member of any affiliated group within the
meaning of Section 1504 of the IRC (or any similar group defined under a similar
provision of state, local or foreign law) filing a consolidated income Tax
Return (other than a group the common parent of which is the Company or a
Canadian subsidiary of the Company) or (ii) has any liability for the taxes of
any Person (other than the Acquired Companies) under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise.
(e) During the consistency period (as defined in Section 338(h)(4) of
the IRC with respect to the sale of the Shares to Buyer), no Acquired Company or
target affiliate (as defined in Section 338(h)(6) of the IRC with respect to the
sale of the Shares to Buyer) has sold or will sell any property or assets to
Buyer or to any member of the affiliated group (as defined in Section 338(h)(5)
of the IRC) that includes Buyer. Schedule 3.12 lists all such target
affiliates.
3.13 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition (financial or otherwise) of any Acquired Company, and, to Sellers'
knowledge, no event has occurred or circumstance exists that may result in such
a material adverse change; it being understood that any changes consistent with
historical seasonal adjustments shall not constitute a material adverse change.
Except as otherwise disclosed on Schedule 3.13, since the date of the Balance
Sheet, the Acquired Companies have not taken any actions that would be
prohibited under Section 5.3 hereof after the date of this Agreement.
3.14 EMPLOYEE BENEFITS
(a) Schedule 3.14 lists all "employee benefit plans," as such term is
defined in ERISA Section 3(3), including (i) all bonus, profit sharing,
incentive, deferred compensation, retirement, pension, severance, life
insurance, and other similar fringe or employee benefit plans, programs or
arrangements, and (ii) any applicable employment, consulting or compensation
agreements, written or otherwise (collectively, the "Employee Plans"),created,
entered into, maintained or contributed to by Sellers or the Acquired Companies
for the benefit or welfare of any current or former director, officer or
employee of any of the Acquired Companies or their ERISA Affiliates (meaning,
with respect to an Acquired Company, any other Person that, together with the
Company, would be treated as a single employer under IRC Section 414). None of
the Employee Plans is a Canadian pension plan (other than the Canada/Quebec
Pension Plan).
16
(b) Except as set forth on Schedule 3.14, no Acquired Company or its
ERISA Affiliate has been a participating employer in any "Multiemployer Plan"
within the meaning of Section 3(37) of ERISA, or any plan maintained by more
than one employer, within the last six years (collectively, the "Multiemployer
Plans").
(c) All Employee Plans (other than the Multiemployer Plans) have been
registered or administered in compliance with their terms, and, where
applicable, ERISA, the Code (and the regulations and published authorities
thereunder) and any applicable Canadian Legal Requirements.
(d) With respect to each Employee Plan (other than the Multiemployer
Plans), (i) no "reportable event," as defined in Section 4043 of ERISA, exists
that would constitute grounds for termination of such Employee Plan by the
Pension Benefit Guaranty Corporation ("PBGC") or for the appointment by the
appropriate United States District Court of a trustee to administer such
Employee Plan, in each case as contemplated by Section 4042 of ERISA; (ii)
neither the Acquired Companies, nor any fiduciary, trustee, or administrator of
any such Employee Plan has engaged in a "prohibited transaction" as defined in
Section 4975 of the Code or a "prohibited transaction" as defined in Section 406
of ERISA that could reasonably be expected to subject any Acquired Company to
any material tax imposed by Section 4975 of the Code or any material penalty
imposed by Section 502 of ERISA; and (iii) to Sellers' Knowledge there is no
current matter, including, without limitation, any matter involving the
administration and operation of the Employee Plans, which could reasonably be
expected to result in any Employee Plan being deemed to be not in compliance
with the pertinent provisions of any law, regulation or ruling applicable
thereto and which could reasonably be expected to impose any material liability
upon any of the Acquired Companies.
(e) With respect to each Employee Plan which is a Multiemployer Plan
listed on Schedule 3.14 or in which any Acquired Company contributes or has
contributed, (i) no Acquired Company has made a complete withdrawal or a partial
withdrawal or has received any notice of any claim or demand for withdrawal
liability against any of them; (ii) no Acquired Company has received any notice
that any such Multiemployer Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of any excise tax, or that any such Multiemployer Plan is or may
become insolvent; (iii) no Acquired Company has failed to make any required
contributions to any such Multiemployer Plan; (iv) to Sellers' knowledge, no
such Multiemployer Plan is a party to any pending merger or asset or liability
transfer; and (v), to Sellers knowledge ,there are no PBGC proceedings against
any such Multiemployer Plan.
(f) Each Employee Plan (other than the Multiemployer Plans) which is
intended to be a qualified plan within the meaning of IRC Section 401(a) (a
"Qualified Plan") is qualified in form and operation under Sections 401(a) and
501(a) of the Code and the regulations and
17
published authorities thereunder, and no event has occurred which will or could
give rise to disqualification of any such Qualified Plan under such Sections of
the IRC. All amendments to such Qualified Plans comply with the requirements of
Section 204(h) of ERISA. Each of the Acquired Companies has made when due all
contributions due to date under or with respect to the Employee Plans. Sellers
have furnished to Buyer for each such Qualified Plan complete and correct copies
of the Form 5500 series which was filed in each of the most recent three plan
years, and the most recent determination letter from the Internal Revenue
Service. The Acquired Companies have made no commitment, and have no
obligation, to establish a supplemental executive retirement plan or any other
Employee Plan which is not listed on Schedule 3.14.
(g) With respect to all material group health plans (other than the
Multiemployer Plans) applicable to employees of the Acquired Companies, all such
plans have been operated in substantial compliance with the group health plan
continuation coverage requirements of Section 4980B of the Code ("COBRA") and
Canadian Legal Requirements, to the extent such requirements are applicable, and
except as set forth on Schedule 3.14, no such Plan in Canada provides for
post-retirement benefits.
(h) All expenses and liabilities relating to the Employee Plans have
been, and will on the Closing Date be, fully and properly accrued on the
Acquired Companies' books and records (other than expenses or liabilities that
are paid in the normal course of the Acquired Companies' accounts payable
procedures and are accordingly not accrued) and disclosed in accordance with
generally accepted accounting principles and, where applicable, in Employee Plan
financial statements. Prior to the Closing Date, no event will have occurred,
and on such Closing Date, there will exist no condition or set of circumstances,
which will result in any liability on behalf of any of the Acquired Companies as
a result of the acquisition of share pursuant to this Agreement on or after the
Closing Date under any provision of ERISA, the IRC or applicable Canadian Legal
Requirements, which may impose liability on any of the Acquired Companies.
(i) The Acquired Companies have made all contributions due to date
under or with respect to the Employee Plans listed on Schedule 3.14 necessary to
meet the applicable minimum funding requirements of ERISA or applicable Canadian
Legal Requirements with respect to such Employee Plans (other than the
Multiemployer Plans).
3.15 COMPLIANCE WITH LEGAL REQUIREMENTS
Except as set forth on Schedule 3.15:
(a) each Acquired Company is in full compliance with each Legal
Requirement that is applicable to it or to the conduct or operation of its
business or the ownership or use of any of its assets;
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(b) to Sellers' Knowledge, no event has occurred or circumstance
exists that (with or without notice or lapse of time) may constitute or result
in a violation by any Acquired Company of, or a failure on the part of any
Acquired Company to comply with, any Legal Requirement; and
(c) no Acquired Company has received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of any Acquired Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
Each Acquired Company is in possession of Governmental Authorizations necessary
to permit each Acquired Company to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets.
3.16 LEGAL PROCEEDINGS; ORDERS
Except as set forth on Schedule 3.16, there is no pending Proceeding in
which any Acquired Company (i) is subject to any outstanding Order, (ii) is a
party or (iii) to the Knowledge of any of the Sellers, is Threatened to be made
a party. Except as set forth on Schedule 3.16, to Sellers' Knowledge, no event
has occurred, and no circumstance exists that may give rise to a basis for any
such Proceeding, and no Seller or Acquired Company otherwise has reason to
believe that any such Proceeding may be brought or threatened against any of the
Acquired Companies.
3.17 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Schedule 3.17, since the date of the Balance
Sheet, the Acquired Companies have operated their businesses only in the
Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
any Acquired Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by any Acquired Company of any shares of any such capital
stock; or declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired Company
(other than the termination of the Shareholder Agreement contemplated by Section
7.12 hereof);
19
(c) payment or increase by any Acquired Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer, or
employee (except for payments of existing salaries to employees in the Ordinary
Course of Business) or entry into any employment, severance, or similar Contract
with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Acquired Company;
(e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition or prospects of
the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, joint venture, credit, or similar
agreement, or (ii) any Contract or transaction involving a total remaining
commitment by or to any Acquired Company of at least $5,000 (other than pursuant
to the Company's capital expenditure program which has been approved by Buyer);
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of any Acquired
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of any Acquired Company, including the sale,
lease, or other disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to any
Acquired Company in excess of $5,000 (other than pursuant to adjustments with
customers in the Ordinary Course of Business);
(i) material change in the accounting methods used by any Acquired
Company; or
(j) agreement, whether oral or written, by any Acquired Company to do
any of the foregoing.
3.18 CONTRACTS; NO DEFAULTS
(a) Schedule 3.18 contains a complete and accurate list, and Sellers
have delivered to Buyer true and complete copies, of:
(i) each written Applicable Contract that involves performance
of services or delivery of goods or materials by one or more Acquired Companies
of an amount or value greater than $10,000 (or greater than $25,000 for
equipment leases);
20
(ii) each written Applicable Contract that involves performance
of services or delivery of goods or materials to one or more Acquired Companies
of an amount or value greater than $5,000;
(iii) each written Applicable Contract that was not entered into
in the Ordinary Course of Business and that involves expenditures or receipts of
one or more Acquired Companies greater than $1,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other written Applicable
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than $5,000 and with terms of less than
one year);
(v) each collective bargaining agreement and other written
Applicable Contract to or with any labor union or other employee representative
of a group of employees;
(vi) each joint venture, partnership, and other written
Applicable Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by any Acquired Company with any other Person;
(vii) each written Applicable Contract for or with sales
representatives, manufacturing representatives, consultants, advisors or
finders;
(viii) each written Applicable Contract containing covenants that
in any way purport to restrict the business activity of any Acquired Company or
any Affiliate of an Acquired Company or limit the freedom of any Acquired
Company or any Affiliate of an Acquired Company to engage in any line of
business or to compete with any Person;
(ix) each written Applicable Contract for capital expenditures
in excess of $50,000; and
(x) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
No Acquired Company is party to an oral contract which would be
reasonably likely to have a material adverse effect on the business, financial
condition, operations, results of operations or future prospects of any of the
Acquired Companies.
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(b) Except as set forth on Schedule 3.18, each Contract identified or
required to be identified on Schedule 3.18 is in full force and effect and is
valid and enforceable in accordance with its terms.
(c) Except as set forth on Schedule 3.18:
(i) to Sellers' Knowledge, each Acquired Company is in full
compliance with all applicable terms and requirements of each Contract under
which such Acquired Company has or had any obligation or liability or by which
such Acquired Company or any of the assets owned or used by such Acquired
Company is or was bound;
(ii) to Sellers' Knowledge, each other Person that has or had
any obligation or liability under any Contract under which an Acquired Company
has or had any rights is in full compliance with all applicable terms and
requirements of such Contract;
(iii) to Sellers' Knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give any
Acquired Company or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract;
(iv) no Acquired Company has given to or received from any other
Person any notice or other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach of, or default
under, any Contract; and
(v) no Acquired Company has paid any amounts under any current
or expired bonus or profit sharing plan except in accordance with the terms and
calculations provided for by such plans.
(d) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to any
Acquired Company under current or completed Contracts with any Person and such
Person has made written demand for such renegotiation.
(e) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Acquired Companies have been entered
into in the Ordinary Course of Business and have been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or, to Sellers' Knowledge,
would be in violation of any Legal Requirement.
3.19 INSURANCE
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Schedule 3.19 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) to which any of
the Acquired Companies is a party or a named insured at any time within the past
10 years:
(a) the name, address and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was on
a claims made, occurrence or other basis) and amount (including a description of
how deductibles and ceilings are calculated and operate) of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy, (A) the policy is legal,
valid, binding and in full force and effect; (B) none of the Acquired Companies
nor any other party to the policy is in 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 breach
or default, or permit termination, modification, or acceleration, under the
policy; and (C) no party to the policy has repudiated any provision thereof.
Each of the Acquired Companies has been covered during the past 10 years by
insurance in scope and amount customary and reasonable for the businesses in
which they have been engaged during such period. Schedule 3.19 describes any
self-insurance arrangements affecting any of the Acquired Companies. No
Acquired Company is a party to any insurance policy which covers the current
period with respect to liability for asbestos.
3.20 ENVIRONMENTAL MATTERS
Except as set forth on Schedule 3.20:
(a) To Sellers' Knowledge, each Acquired Company is not in violation
of or liable under, any Environmental Law. No Seller nor, to Sellers'
Knowledge, any Acquired Company has received any actual or Threatened order,
notice, or other written communication from (i) any Governmental Body or private
citizen acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any current, actual or alleged violation or
failure to comply with any Environmental Law, or of any current, actual or
Threatened obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities with respect to
23
any of the Facilities or any other properties or assets (whether real, personal,
or mixed) in which Sellers or any Acquired Company has had an interest, or with
respect to any property or Facility at or to which Hazardous Materials were
generated, disposed of or otherwise released by any Acquired Company, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received, nor, to Sellers' Knowledge, is
there any basis to expect that any Acquired Company may receive such Threatened
order, notice or communication.
(b) There are no pending or, to the Sellers' Knowledge, Threatened
claims or Encumbrances resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which Sellers or any Acquired Company has
or had an interest.
(c) No Seller nor, to Seller's Knowledge, any Acquired Company has
received, any citation, directive, inquiry, notice, Order, summons, warning, or
other written communication that relates to any alleged or actual violation or
failure to comply with any Environmental Law, or of any alleged or actual
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which Sellers or any Acquired
Company had an interest, or with respect to any property or facility to which
Hazardous Materials generated, disposed or otherwise released by or on behalf of
any Acquired Company, nor, to Sellers' Knowledge, is there any reasonable basis
to expect that any Acquired Company may receive such Threatened order, notice or
communication.
(d) To Sellers' Knowledge, no Acquired Company, or any other Person
for whose conduct they are or may be held responsible, has any Environmental,
Health, and Safety Liabilities with respect to the Facilities or with respect to
any other properties and assets (whether real, personal, or mixed) in which any
Acquired Company (or any predecessor), has or had an interest, or at any
property geologically or hydrologically adjoining the Facilities.
(e) To Sellers' Knowledge, there are no Hazardous Materials present on
or in the Environment at the Facilities other than in the Ordinary Course of
Business and not in violation of any Environmental Law, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities and, to Sellers' Knowledge, no Hazardous
Materials have migrated from any Facility of any adjoining property. To
Sellers' Knowledge, no Acquired Company, any other Person for whose conduct they
are or may be held responsible, or any other Person, has permitted or conducted,
or is aware of, any Hazardous Activity conducted with respect to the Facilities
or any other properties or assets (whether real, personal, or mixed) in
24
which Sellers or any Acquired Company has or had an interest except in
compliance with all applicable Environmental Laws.
(f) To Sellers' Knowledge, there has been no Release or Threat of
Release, of any Hazardous Materials that would require cleanup or other
remediation under applicable Environmental Laws at or from the Facilities or any
similar Release or Threat of Release of any Hazardous Materials by or on behalf
of any Acquired Company, or from or by any other properties and assets (whether
real, personal, or mixed) in which any Acquired Company has or had an interest.
(g) Sellers have made available to Buyer for inspection and copying
true and complete copies and results of any reports, studies, analyses, tests,
or monitoring possessed or initiated by Sellers or any Acquired Company
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by any Acquired Company with Environmental
Laws.
3.21 EMPLOYEES
(a) Schedule 3.21 contains a complete and accurate list of (i) the
following information for each employee, director, consultant, advisor or finder
(collectively, "Employees") of the Acquired Companies, including each Employee
on leave of absence or layoff status: employer; name; job title; current
compensation paid or payable (whether in the form of salaries, bonuses,
commissions or other supplemental compensation now or hereafter payable);
vacation accrued; and service credited for purposes of vesting and eligibility
to participate under any Acquired Company's pension, retirement, profit-sharing,
severance pay, insurance, medical, welfare, or vacation plan, or other Employee
Plan; provided that job titles shall be provided only for such Employees with
annual compensation in excess of $75,000 and (ii) each sales or manufacturer
representative, together with their compensation or commission schedules.
(b) To Sellers' Knowledge, no employee, past or current, intends to
assert a claim against any Acquired Company of any kind whatsoever (assuming the
Acquired Company fulfills all its obligations to each such employee from and
after the Closing Date).
3.22 LABOR RELATIONS; COMPLIANCE
Except as set forth in Schedule 3.22, there is no presently pending or
existing, and to Sellers' Knowledge, there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process or (b) any
Proceeding against or affecting any Acquired Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any
25
comparable Canadian Governmental Body (Federal or Provincial), organizational
activity, or other labor or employment dispute against or affecting any of the
Acquired Companies or their premises. To the Knowledge of Sellers, no event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other material labor dispute or other material labor or employment
law dispute. There is no lockout of any employees by any Acquired Company, and
no such action is contemplated by any Acquired Company. Each Acquired Company
has complied in all material respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing.
3.23 INTELLECTUAL PROPERTY
(a) INTELLECTUAL PROPERTY ASSETS -- The term "Intellectual Property
Assets" consists of:
(i) the Acquired Companies' names, all fictional business
names, trading names, trade dress, registered and unregistered trademarks,
service marks, industrial designs, applications and registrations therefore
(collectively, "Marks");
(ii) all patents and patent applications (collectively,
"Patents");
(iii) all copyrights in both published works and unpublished
works (collectively, "Copyrights");
(iv) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process technology,
plans, drawings, and blue prints (collectively, "Trade Secrets"); and
(v) all Intellectual Property Assets licensed by an Acquired
Company as licensee owned or used by any Acquired Company.
(b) AGREEMENTS -- Schedule 3.23 contains a complete and accurate list
and summary description, including any royalties paid or received by the
Acquired Companies, of all Contracts to date relating to the Intellectual
Property Assets to which any Acquired Company is a party or by which any
Acquired Company is bound, except for any license implied by the sale of a
product and perpetual, paid-up licenses for commonly available software programs
with a value of less than $10,000 under which an Acquired Company is the
licensee. There are no outstanding and, to Sellers' Knowledge, no Threatened
disputes or disagreements with respect to any such Contract.
(c) KNOW-HOW NECESSARY FOR THE BUSINESS
26
(i) To Sellers' Knowledge, the Intellectual Property Assets are
all those necessary for the operation of the Acquired Companies' businesses as
they are currently conducted. One or more of the Acquired Companies is the
owner of all right, title, and interest in and to each of the Intellectual
Property Assets, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims (except subject to the PNC Bank
Loan), and has the right to use without payment to a third party all of the
Intellectual Property Assets.
(ii) Except as set forth on Schedule 3.23, all current employees
of each Acquired Company have executed written Contracts with one or more of the
Acquired Companies that assign to one or more of the Acquired Companies all
rights to any inventions, improvements, discoveries, copyrights or information
relating to the business of any Acquired Company and that, with respect to
Canadian employees, provide waivers of all moral rights in the Intellectual
Property Assets where necessary and appropriate.
(d) PATENTS
(i) Schedule 3.23 contains a complete and accurate list and
summary description of all Patents to date. One or more of the Acquired
Companies is the owner of all right, title, and interest in and to each of the
Patents, free and clear of all liens, security interests, charges, encumbrances,
entities, and other adverse claims.
(ii) All of the issued Patents are currently in compliance with
formal legal requirements (including payment of filing, examination, and
maintenance fees and proofs of working or use), are subsisting and have not been
adjudged invalid or unenforceable in whole or in part and, to Sellers'
Knowledge, are valid and enforceable.
(iii) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To Sellers' Knowledge, there
is no potentially interfering patent or patent application of any third party.
(iv) To Sellers' Knowledge, no Patent is infringed or has been
challenged or threatened in any way and, except as set forth in Schedule 3.23,
none of the products manufactured and sold, nor any process or know-how used, by
any Acquired Company infringes or is alleged to infringe any patent or other
proprietary right of any other Person.
(e) TRADEMARKS AND COPYRIGHTS
(i) Schedule 3.23 contains a complete and accurate list and
summary description of all Marks and Copyrights. One or more of the Acquired
Companies is the owner of all right, title, and interest in and to each of the
Marks and Copyrights, free and clear of all
27
liens, security interests, charges, encumbrances, equities, and other adverse
claims (except subject to the PNC Bank Loan).
(ii) All Marks that are presently in use by one or more of the
Acquired Companies have been registered with the United States Patent and
Trademark Office and are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability, as appropriate, and renewal applications). All of the
Copyrights have been registered and are currently in compliance with formal
legal requirements. All of the Marks are valid and enforceable.
(iii) To Sellers' Knowledge, no ▇▇▇▇ is now involved in any
opposition, invalidation, or cancellation and no such action is Threatened by
any third party with respect to any of the Marks.
(iv) To Sellers' Knowledge, there is no interfering trademark or
trademark application of any third party.
(v) To Sellers' Knowledge, no ▇▇▇▇ or Copyright is infringed
or, to Sellers' Knowledge, has been challenged or threatened in any way and none
of the Marks or the subject matter of any of the Copyrights used by any Acquired
Company infringes or is alleged to infringe any trade name, trademark, service
▇▇▇▇ or copyright of any third party.
(vi) All labeling and packaging displaying a registered ▇▇▇▇
▇▇▇▇ the proper registration notice, as required by the law of the particular
jurisdiction in which the ▇▇▇▇ is registered. All copyrighted works comply with
the law governing marking in force in the particular jurisdiction.
(f) TRADE SECRETS
(i) With respect to each Trade Secret, the documentation, if
any, relating to such Trade Secret is current, accurate, and sufficient in
detail and content to identify and explain it and to allow its full and proper
use without reliance on the knowledge or memory of any individual.
(ii) Sellers and the Acquired Companies have taken all
reasonable precautions to protect the secrecy, confidentiality, and value of
their Trade Secrets.
(iii) One or more of the Acquired Companies owns, and to the best
of Sellers' Knowledge, has the full right to use the Trade Secrets. The Trade
Secrets, to Sellers' Knowledge, have not been used, divulged, or appropriated
either for the benefit of any Person (other than one or more of the Acquired
Companies) or to the detriment of the Acquired
28
Companies. No Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
3.24 NO IMPROPER PAYMENTS
None of the Acquired Companies, nor, to Sellers' Knowledge, any of their
respective Representatives, for or on behalf of the Acquired Companies, has at
any time: (i) made any payment to any state, federal, commonwealth,
territorial, or foreign governmental officer or official or other person charged
with similar public or quasi-public duties, other than payments required or
allowed by applicable law; (ii) made any material payment outside the ordinary
course of business to any purchasing or selling agent, or person charged with
similar duties, of any entity to which any of the Acquired Companies buys or has
bought, products or services, for the purpose of influencing such agent or
person to buy products or services from, or sell products or services to, any of
the Acquired Companies; or (iii) engaged in any transaction or maintained any
account for, or used any funds of, any of the Acquired Companies, except for
transactions that have been and are reflected in the normally maintained books
and records of the Acquired Companies.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth on Schedule 3.25, no Seller or any Related Person of
Sellers or of any Acquired Company has any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), used in or
pertaining to the Acquired Companies' businesses. No Seller or any Related
Person of Sellers or of any Acquired Company has owned (of record or as a
beneficial owner) an equity interest or any other financial or profit interest
in, a Person that has (i) had business dealings or a material financial interest
in any transaction with any Acquired Company, or (ii) engaged in competition
with any Acquired Company with respect to any line of the products or services
of such Acquired Company (a "Competing Business") in any market presently served
by such Acquired Company except for less than 1% of the outstanding capital
stock of any Competing Business that is publicly traded. Except as set forth on
Schedule 3.25, no Seller or any Related Person of Sellers or of any Acquired
Company is a party to any Contract with, or has any claim or right against, any
Acquired Company.
3.26 TITLE TO SHARES
Sellers are and will be on the Closing Date the record and beneficial
owners and holders of the Shares, free and clear of all Encumbrances. The
Sellers own the shares beneficially and of record in the amounts set forth on
Schedule 3.26 free and clear of any Encumbrances, options, conditional sales
agreements or rights to purchase or otherwise acquire, options or warrants of
any nature, whether imposed by agreement, understanding or otherwise, with no
restriction on transfer or disposition thereof, except as imposed by applicable
Legal Requirements and as set forth on Schedule 3.26. The Shares listed on
Schedule 3.26 opposite each Sellers' name are all
29
of the shares of the Company's outstanding capital stock. At the Closing, upon
consummation of the transactions and the performance of the actions contemplated
herein, all beneficial and record ownership of the Shares will pass to Buyer,
and Buyer will acquire good and valid title to the Shares, free and clear of all
Encumbrances.
3.27 CUSTOMERS AND SUPPLIERS
Schedule 3.27 sets forth the names of the ten largest customers and the
ten largest suppliers of each Acquired Company during the twelve-month period
ending November 30, 1997 (based on the dollar amount of sales or purchases), and
any sole-source suppliers of significant goods or services to the Acquired
Companies with respect to which practicable alternative sources of supply are
not readily available on comparable terms and conditions. Except as set forth
on Schedule 3.27, to Sellers' Knowledge none of the customers or suppliers
listed on Schedule 3.27 intends to terminate or not renew any contract or
agreement, or otherwise materially alter its relationship, with any Acquired
Company.
3.28 DISCLOSURE AND DISCLOSURE SCHEDULES
(a) The representations and warranties of Sellers in this Agreement
and the Schedules and the certificates and other documents delivered or to be
delivered by Sellers to Buyer pursuant to this Agreement do not and will not
contain any untrue statement of a material fact and do not and will not omit to
state a material fact necessary to make the statements made herein or therein in
the light of the circumstances under which they were made, not misleading.
(b) Except as set forth on Schedule 3.28, there is no fact known to
Sellers that has specific application to Sellers or any Acquired Company (other
than general economic or industry conditions) and that materially adversely
affects or, as far as Sellers can reasonably foresee, materially threatens the
assets, business, prospects, financial condition or results of operations of the
Acquired Companies (on a consolidated basis) that has not been set forth in this
Agreement or the Schedules hereto.
3.29 DUE INQUIRY
With respect to each representation and warranty contained herein that is
to Sellers' Knowledge, the Principal Executives have made due inquiry of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and, as to Section 3.20, ▇▇▇▇ ▇▇▇▇▇.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
30
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Employment Agreements
(collectively, the "Buyer's Closing Documents"), the Buyer's Closing Documents
will constitute the legal, valid, and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms. Buyer has the absolute
and unrestricted right, power, and authority to execute and deliver this
Agreement and the Buyer's Closing Documents and to perform its obligations under
this Agreement and the Buyer's Closing Documents.
(b) Except as set forth on Schedule 4.2, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will give any Person the right to prevent, delay, or
otherwise interfere with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which Buyer
may be bound.
Except as set forth on Schedule 4.2, Buyer is not and will not be
required to obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS
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There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.
ARTICLE 5
COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers will,
and will cause each Acquired Company and its Representatives to, (a) afford
Buyer and its designees and their Representatives and underwriters, and
prospective lenders and their Representatives (collectively, "Buyer's Advisors")
reasonable access to each Acquired Company's personnel, properties (including
subsurface testing), contracts, books and records, and other documents and data,
(b) furnish Buyer and Buyer's Advisors with copies of all such contracts, books
and records, and other existing documents and data as Buyer may reasonably
request with reasonable notice, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, Sellers will,
and will cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the Ordinary
Course of Business;
(b) use their Best Efforts to preserve intact the current business
organization of such Acquired Company, keep available the services of the
current officers, employees, and agents of such Acquired Company, and maintain
the relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with such Acquired
Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status of
the business, operations, and finances of such Acquired Company.
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5.3 NEGATIVE COVENANTS
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Sellers will not, and will cause
each Acquired Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.17 is likely to occur. The Acquired Companies will not pay 1997 year-end
bonuses to the Principal Executives, and shall limit the aggregate compensation
paid to the Principal Executives for the 1997 fiscal year to approximately $1.6
million.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers
will, and will cause each Acquired Company to, make all filings required by
Legal Requirements to be made by them in order to consummate the Contemplated
Transactions (including all filings under the HSR Act and any filings required
to be made in Canada). Between the date of this Agreement and the Closing Date,
Sellers will, and will cause each Acquired Company to, (a) cooperate with Buyer
with respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all consents identified in Schedule 4.2
(including taking all actions requested by Buyer to cause early termination of
any applicable waiting period under the HSR Act). Sellers will pay one-half of
any required fees for one filing under the HSR Act.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each Seller will
promptly notify Buyer in writing if such Seller or any Acquired Company becomes
aware of any fact or condition that causes or constitutes a Breach of any of
Sellers' representations and warranties as of the date of this Agreement, or if
such Seller or any Acquired Company becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Schedules if the Schedules were
dated the date of the occurrence or discovery of any such fact or condition,
Sellers will promptly deliver to Buyer a supplement to the Schedules specifying
such change. During the same period, each Seller will promptly notify Buyer of
the occurrence of any Breach of any covenant of Sellers in this Section 5 or of
the occurrence of any event that may make the satisfaction of the conditions in
Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
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Except as expressly provided in this Agreement, Sellers will cause all
indebtedness owed to an Acquired Company by any Seller or any Related Person of
any Seller to be paid in full prior to Closing.
5.7 NO SOLICITATION
Until the Closing Date or such time, if any, as this Agreement is
terminated pursuant to Section 9, Sellers will not, and will cause each Acquired
Company and each of their Representatives not to, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets (other than in
the Ordinary Course of Business) of any Acquired Company, or any of the capital
stock of any Acquired Company, or any merger, consolidation, business
combination, or similar transaction involving any Acquired Company. Sellers
will immediately advise Buyer of, and communicate to Buyer the terms of, any
such inquiry or proposal the Sellers or the Company may receive or of which the
Sellers or the Company may become aware.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers will use
their Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
5.9 ESTOPPEL CERTIFICATES; TITLE MATTERS
Between the date hereof and the Closing Date:
(a) Sellers will cause the Company to use its Best Efforts to obtain
from each lessor from which the Acquired Companies lease any real property or
material real property designated by Buyer and each lender having a lien
encumbering any of the Acquired Companies' properties: (i) the written consent
of such lessor and/or lender to the transactions contemplated hereby, except to
the extent such consent is not required; and (ii) an estoppel certificate
reasonably satisfactory in form and substance to Buyer as to the continuing
validity of such lease or extension of credit and the absence of any basis for
termination thereof; and
(b) Sellers will cause the Company to use its Best Efforts to obtain
title insurance commitments, riders or endorsements regarding the Acquired
Companies' Real Property in form and substance reasonably satisfactory to Buyer.
ARTICLE 6
COVENANTS OF BUYER PRIOR TO CLOSING DATE
34
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will,
and will cause each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to consummate the Contemplated
Transactions (including all filings under the HSR Act and any filings required
to be made in Canada ). Between the date of this Agreement and the Closing
Date, Buyer will, and will cause each Related Person to, cooperate with Sellers
with respect to all filings that Sellers are required by Legal Requirements to
make in connection with the Contemplated Transactions, and (ii) cooperate with
Sellers in obtaining all consents identified in Schedule 3.2; provided that this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business. Buyer will pay one-half of any required filing fees.
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of
this Agreement and the Closing Date, Buyer will use its Best Efforts to cause
the conditions in Sections 7 and 8 to be satisfied.
ARTICLE 7
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of the Sellers' representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Schedules.
(b) Each of Sellers' representations and warranties in Sections 3.3,
3.4, 3.13, the last paragraph of Section 3.18(a), and 3.28 must have been
accurate in all respects as of the date of this Agreement, and must be accurate
in all respects as of the Closing Date as if made on the Closing Date, without
giving effect to any supplement to the Schedules.
(c) Since the date of the Agreement, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of any Acquired Company,
35
and no event has occurred or circumstance exists that may result in such a
material adverse change.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered pursuant to Section 2.4
must have been delivered (including the Employment Agreements), and each of the
other covenants and obligations in Sections 5.4 and 5.8 must have been performed
and complied with in all respects.
7.3 CONSENTS
Each of the Consents identified on Schedule 4.2, must have been obtained
and must be in full force and effect.
7.4 FINANCIAL STATEMENTS
Buyer shall have received the Acquired Company's audited financial
statements for the 1997 fiscal year.
7.5 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of ▇▇▇▇ ▇. ▇'▇▇▇▇▇, Esq., dated the Closing Date, as
set forth in Exhibit 7.5, reasonably acceptable to Buyer; and
(b) such other documents as Buyer may reasonably request for the
purpose of evidencing the satisfaction of any condition referred to in this
Section 7.
7.6 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated
36
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.7 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, any of the Acquired Companies,
or (b) is entitled to all or any portion of the Stock Purchase Price payable for
the Shares.
7.8 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise formally proposed by or before any Governmental Body.
7.9 HSR ACT
All applicable waiting periods with respect to the HSR Act (including any
extensions thereof) shall have expired or been terminated.
7.10 FINANCING
There shall be available to Buyer high-yield financing at an interest
rate of 11% per annum or lower in an amount sufficient to fund its obligations
hereunder.
7.11 TERMINATION OF AGREEMENTS
The Shareholders Agreement and the Acquired Companies' bank loan with PNC
Bank, National Association dated July 26, 1996, as amended ("PNC Bank Loan)
shall have been terminated.
7.12 ▇▇▇▇▇▇ INVESTMENT
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. shall have made an investment in Buyer
substantially on the terms set forth on Exhibit 7.12.
ARTICLE 8
37
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by the Sellers' Representative, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4 (including the Employment Agreements)
and must have made the cash payments required to be made by Buyer pursuant to
Section 2.4(b).
8.3 CONSENTS
Each of the Consents identified in Schedule 4.2 must have been obtained
and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused to be delivered to the Sellers' Representative
such documents as the Sellers' Representative may reasonably request for the
purpose of evidencing the satisfaction of any condition referred to in this
Section 8.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Shares by Sellers to Buyer, and
(b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
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8.6 HSR ACT
All applicable waiting periods with respect to the HSR Act (including any
extensions thereof) shall have expired or been terminated.
ARTICLE 9
TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or the Sellers' Representative if a material
Breach of any provision of this Agreement has been committed by the other party
and such Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by the Sellers' Representative, if any of the
conditions in Section 8 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Sellers to comply with their obligations under this Agreement)
and the Sellers' Representative has not waived such condition on or before the
Closing Date;
(c) by mutual consent of Buyer and the Sellers' Representative;
(d) by either Buyer or the Sellers' Representative if the Closing has
not occurred (other than through the failure of any party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement) on or
before April 7, 1998, or such date (i) as extended by Section 2.3 hereof, or
(ii) as the parties may otherwise agree upon in writing; or
(e) by the Sellers' Representative if all of the conditions in Section
7 have been satisfied and Buyer has failed to consummate the Contemplated
Transactions on the Closing Date; or
(f) by Buyer if all of the conditions in Section 8 have been satisfied
and Sellers have failed to consummate the Contemplated Transactions on the
Closing Date.
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9.2 EFFECT OF TERMINATION
(a) Nothing in this Agreement shall affect the right of any party to
seek injunctive relief to enforce the terms of this Agreement. If this
Agreement is terminated pursuant to Section 9.1, all further obligations of the
parties under this Agreement will terminate, except that the obligations in
Sections 11.1 and 11.3 will survive.
(b) In the event all of Buyer's conditions to close this Agreement as
set forth in Section 7 are satisfied or waived, and all of Sellers' conditions
to close the Agreement as set forth in Section 8 are satisfied, and Sellers fail
to close, Sellers shall pay Buyer its expenses incurred in connection with this
transaction, not to exceed $1 million. In the event all of Sellers's conditions
to close this Agreement as set forth in Section 7 are satisfied or waived, and
all of Buyer's conditions to close the Agreement as set forth in Section 8 are
satisfied, and Buyer fails to close, Buyer shall pay Sellers their expenses
incurred in connection with this transaction, not to exceed $1 million. The
foregoing is agreed by the parties to constitute liquidated damages, and no
party shall be entitled to any other monetary damages in the event this
Agreement is terminated and fails to close.
ARTICLE 10
INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the Schedules hereto, the supplements to the Schedules, the
certificate delivered pursuant to Section 2.4(a)(iv), and any other certificate
or document provided for or contemplated by this Agreement will survive the
Closing.
Buyer's right to indemnification, payment of Damages or other remedy
based on such representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with respect to, whether before or
after the execution and delivery of this Agreement or the Closing Date by Buyer
with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations. Notwithstanding
anything contained in this Section 10 to the contrary, if prior to Closing,
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇ has actual
knowledge of specific facts that would cause one or more of the representations
and warranties made by Sellers in this Agreement not to be true as of the date
made, then Buyer shall have no right or remedy after the Closing with respect to
any claim under Section 10.2 by reason thereof, and shall be
40
deemed to have waived its rights to indemnification under Section 10.2 in
respect thereof to such extent.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers, jointly and severally, will indemnify and hold harmless Buyer,
the Acquired Companies, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (not including incidental or consequential damages), expense
(including costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(i) any Breach of any representation or warranty made by
Sellers in this Agreement, the Schedules or any other certificate or document
delivered by Sellers pursuant to this Agreement as if such representation or
warranty were made on and as of the Closing Date (other than those made as of a
specified date, which are deemed to be made as of such date);
(ii) any Breach by a Seller of any covenant or obligation of
such Seller in this Agreement;
(iii) any product shipped or manufactured by, or any services
provided by, any Acquired Company prior to the Closing Date;
(iv) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any Seller or any Acquired
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.2 will be limited to those set forth in
Section 10.6 hereof.
10.3 HOLDBACK ACCOUNT
41
(a) At the Closing Buyer will deposit the Holdback with Nations Bank,
or other mutually acceptable financial institution, as Custodian (the
"Custodian") under the terms of a Custodial Agreement (the "Custodial
Agreement") among the Sellers' Representative, Buyer and the Custodian in
substantially the form attached hereto as Exhibit 10.3, with such changes
therein as are required by the Custodian to serve in such capacity and are
reasonably acceptable to the Buyer and the Sellers' Representative. The
Custodian shall hold the Holdback Account to secure such indemnification
obligations of the Sellers under this Agreement. The Buyer shall proceed first
to satisfy its claims for indemnification from the Holdback Account before it
shall be entitled to proceed against any of the Sellers. Any portion of the
Holdback Account necessary to satisfy the Sellers' indemnification obligations
shall be disbursed to the Buyer in accordance with the procedures set forth in
the Custodial Agreement. Funds in the Holdback Account that are not required to
satisfy the Sellers' indemnification obligations shall be disbursed to the
Sellers as follows:
(i) one-half (1/2) shall be disbursed to the Sellers in
accordance with the Custodial Agreement on the first anniversary of the Closing
Date, less any amounts required to be paid to the Buyer to indemnify it against
all of the Buyer's Damages with respect to such matters;
(ii) Any funds remaining in the Holdback Account after the
Sellers' obligations have been fully satisfied in accordance with this Agreement
shall be disbursed to the Sellers in accordance with the procedures set forth in
the Custodial Agreement.
(b) The Holdback Account shall be administered in accordance with the
Custodial Agreement. All interest on, or other earnings of, the Holdback
Account, shall be deemed as income of the Sellers and not the Holdback Account
or the Buyer, and the Sellers shall pay any taxes attributable to such income.
All interest on, or other earnings of, the Holdback Account shall be distributed
to the Sellers in accordance with the Custodial Agreement.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers
the amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement, or (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
10.5 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and
42
complied with prior to the Closing Date, (i) unless, with respect to all
representations, warranties, covenants or obligations, other than those in
Sections 3.3, 3.12, 3.20 and 3.26, on or before the second anniversary of the
Closing Date, Buyer notifies Sellers' Representatives of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Buyer; and (ii) unless, with respect to representations and warranties in
Section 3.12 or Section 3.20, on or before the sooner of the sixth anniversary
of the Closing Date or the expiration of the applicable statute of limitations,
Buyer notifies Sellers' Representative of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Buyer. A claim
with respect to Section 3.3 or 3.26 may be made at any time.
If the Closing occurs, Buyer will have no liability (for indemnification
or otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before the second anniversary of the Closing Date, Sellers notify Buyer of
a claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Sellers.
Any matter as to which a claim has been asserted by notice to the other
party that is pending or unresolved at the end of any applicable limitation
period shall continue to be covered notwithstanding the foregoing provisions of
this Section 10.5 or any applicable statute of limitations (which the parties
hereby waive) until such matter is finally terminated or otherwise resolved by
the parties or by a court of competent jurisdiction and any amounts payable
hereunder are finally determined and paid.
10.6 LIMITATIONS ON AMOUNT--SELLERS
(a) Any joint and several liability of the Sellers arising under this
Agreement is limited to the total amount of gross proceeds any individual Seller
receives in connection with the Contemplated Transactions.
(b) Sellers will have no liability (for indemnification or otherwise)
with respect to the matters described in Section 10.2 until the total of all
Damages with respect to such matters exceeds $250,000, and then only for the
amount by which such Damages exceed $100,000; provided, however, that individual
claims of Five Thousand Dollars ($5,000) or less shall not be aggregated for
purposes of calculating either threshold set forth above; and PROVIDED FURTHER
that Sellers will have no liability for Damages in excess of $8 million.
(c) Section 10.6(b) will not apply to fraud and Sellers will be
jointly and severally liable for all Damages with respect to such fraud.
10.7 LIMITATIONS ON AMOUNT--BUYER
Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a) or (b) of Section 10.4 until the
total of all Damages with respect to such matters exceeds $250,000, and then
only for the amount by which such Damages exceed
43
$100,000; provided, however, that individual claims of Five Thousand Dollars
($5,000) or less shall not be aggregated for purposes of calculating either
threshold set forth above. However, this Section 10.7 will not apply to fraud
and Buyer shall be liable for all Damages with respect to such fraud.
10.8 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Within 10 days after receipt by an indemnified party under Section
10.2 or 10.4 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
(b) If any Proceeding referred to in Section 10.8(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate due to
the potential conflict of interest between them, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 10 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (A) there is
no finding or admission of any violation of Legal Requirements or any violation
of the rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and (ii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. In all cases in which
the indemnifying party shall assume the defense, the indemnified party shall
have the right to participate in the defense of such claim or action through
counsel of its own choice at its own expense, provided, however, if indemnifying
party agrees to assume the defense of the claim or action subject to a
reservation of rights that the loss or claim is not subject to indemnification
or fails to waive in writing any right to disclaim coverage for all or any
portion of the loss or claim (it being understood that indemnifying party need
not waive the right to contest the merits of the alleged loss or claim), the
indemnified party shall have the right to select independent counsel of its own
choosing to defend the claim or action and the
44
Indemnifying Party shall have responsibility to pay reasonable attorneys' fees
and costs of such defense. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within
thirty days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) TAX MATTERS. Subject to Section 10(b) above, the Sellers
shall have the right to assume, at the Sellers' expense, the handling,
disposition and/or settlement of any issues raised in any official inquiry,
examination or proceeding of or with taxing authorities as respect Taxes due for
period prior to the Closing which the Sellers have liability for either directly
or under this Agreement, which by way of indemnity or otherwise, provided that
Buyer shall have the right to directly and/or through its designated
representatives, (i) to participate, at its own expense, in any such inquiry,
examination or proceeding and to review in advance and comment upon all
submissions made by the Sellers in the course thereof and (ii) to approve the
Sellers' disposition, handling or settlement of any issue if such disposition,
handling or settlement will or might reasonably be expected to result in an
increase in Taxes of the Company, any successor thereof or any consolidated
group which includes the Company, for any period ending after the Closing. If,
with respect to any such official inquiry, examination or proceeding described
above, the Sellers elect not to exercise control over the handling, disposition
and/or settlement thereof, then the Buyer and/or the Company shall have the
right to do so without limiting the obligations of the Sellers to provide
indemnity hereunder.
10.9 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
10.10 ARBITRATION
(a) If any dispute or controversy shall arise among the parties hereto
as to any matter arising out of or in connection with the Holdback, the parties
shall attempt in good faith to resolve such controversy by mutual agreement. If
such dispute or controversy cannot be so resolved, it shall be resolved solely
in accordance with the provisions of this Section 10.10.
(b) Any dispute, controversy or claim between or among the parties
hereto (the "Disputing Parties"), arising out of or related to the Holdback
shall, except as provided in this Section 10.9, be settled by a single
arbitrator by arbitration in Delaware in accordance with the Commercial
Arbitration Rules of the American Arbitration Association as amended from time
to time and as modified by this Agreement.
(c) The arbitrator shall be selected by the Disputing Parties within
15 days after demand for arbitration is made by a Disputing Party. If the
Disputing Parties are unable to agree on an arbitrator within such period, then
each Disputing Party shall select one arbitrator, and
45
each such arbitrator shall select a third arbitrator and the dispute shall be
settled by the panel consisting of such three arbitrators (such panel, or the
single arbitrator agreed to both parties, as the case may be, being hereinafter
referred to as the "Arbiter"). Each arbitrator possesses substantive legal
experience with respect to the principal issues on dispute.
(d) Except as may otherwise be agreed in writing by the Disputing
Parties or as ordered by the Arbiter upon substantial justification, the
hearings of the dispute shall be held and concluded within 90 days of submission
of the dispute to arbitration. The Arbiter shall render its final award within
30 days.
(e) The Arbiter shall not alter or disregard any express provision of
this Agreement. Any arbitration award in accordance with this Section 10.10
shall be final and binding upon the parties and judgment thereon may be entered
in any court having jurisdiction over such party. The Arbiter is hereby
authorized to award the winning party the costs (including reasonable attorney's
fees and expenses) of any such arbitration.
ARTICLE 11
GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives and
counsel. Sellers will pay all amounts payable to BT ▇▇▇▇ ▇▇▇▇▇ Incorporated in
connection with this Agreement and the Contemplated Transactions; it being
understood that Buyer will pay all amounts owed to BT ▇▇▇▇ ▇▇▇▇▇ Incorporated in
connection with obtaining its financing in connection with this Agreement and
the Contemplated Transactions. Sellers will cause the Acquired Companies not to
incur any out-of-pocket expenses in connection with this Agreement except for
professional fees of the Company incurred in connection with the Company's 1997
audited financial statements. In the event of termination of this Agreement,
the obligation of each party to pay its own expenses will survive.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer determines after consultation with the Sellers'
Representative. Unless consented to by Buyer in advance or required by Legal
Requirements, prior to the Closing Sellers shall, and shall cause the Acquired
Companies to, keep this Agreement strictly confidential and may not make any
disclosure of this Agreement to any Person. The Sellers' Representative and
Buyer will consult with each other concerning the means by which the Acquired
Companies' employees, customers,
46
and suppliers and others having dealings with the Acquired Companies will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
11.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and
Sellers will maintain in confidence, and will cause the directors, officers,
employees, agents, and advisors of Buyer and the Acquired Companies to maintain
in confidence, written, oral, or other information obtained in confidence from
another party or an Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, the Sellers' waive,
and will upon Buyer's request cause the Acquired Companies to waive, any cause
of action, right, or claim arising out of the access of Buyer or its
representatives to any trade secrets or other confidential information of the
Acquired Companies except for the intentional competitive misuse by Buyer of
such trade secrets or confidential information.
11.4 RELEASE
(a) Each Seller, on behalf of himself and each of his Related Persons,
hereby releases and forever discharges the Buyer, the Company and each of the
other Acquired Companies, and each of their respective individual, joint or
mutual, past, present and future Representatives, affiliates, stockholders,
controlling persons, Subsidiaries, successors and assigns (individually, a
"Releasee" and collectively, "Releasees") from any and all claims, demands,
Proceedings, causes of action, Orders, obligations, contracts, agreements, debts
and liabilities whatsoever, whether known or unknown, at law and in equity,
which each of the Sellers or any of their respective Related Persons now has,
have ever had or may hereafter have against the respective Releasees arising at
or prior to the Closing Date or on account of or arising out of any matter,
cause or event occurring at or prior to the Closing Date; it being understood
that this Section 11.4 does not apply to any rights of any Releasee specifically
arising under the Employment Agreements, the Non-Competition Agreements or this
Agreement.
(b) Each Seller hereby irrevocably covenants to refrain from, directly
or indirectly, asserting any claim or demand, or commencing, instituting or
causing to be commenced, any proceeding of any kind against any Releasee, based
upon any matter released hereby.
47
(c) Without in any way limiting any of the rights and remedies
otherwise set forth in this Agreement, each Seller, jointly and severally, shall
indemnify and hold harmless each Releasee from and against all loss, liability,
claim, damage (including incidental and consequential damages) or expense
(including costs of investigation and defense and reasonable attorneys' fees)
whether or not involving third party claims, arising directly or indirectly from
or in connection with (i) the assertion by or on behalf of the Sellers or any of
their Related Persons of any claim or other matter purported to be released
hereby and (ii) the assertion by any third party of any claim or demand against
any Releasee which claim or demand arises directly or indirectly from, or in
connection with, any assertion by or on behalf of the Sellers or any of their
Related Persons against such third party of any claims or other matters
purported to be released hereby.
11.5 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers: Monsey Products Company
Cold ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., President and CEO
Facsimile No.: 610/933-4598
with a copy to:
▇▇▇▇ ▇. ▇'▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: 215/564-2565
Buyer: ▇▇▇▇▇ Group of Companies
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: 213/583-8582
48
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: 213/687-3702
11.6 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement shall be brought against any of the
parties in the courts of the State of Delaware, and each of the parties consents
to the jurisdiction of such courts (and of the appropriate appellate courts) in
any such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
11.7 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.8 WAIVER
Neither the failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement or the documents referred to in this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise
of any other right, power, or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one party, in whole
or in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
11.9 ENTIRE AGREEMENT AND MODIFICATION
This Agreement constitutes the entire agreement with respect to its
subject matter hereof and supersedes all prior agreements with respect thereto,
including the Letter of Intent, dated
49
December 9, 1997, as amended, among the Buyer, the Company and the Principal
Executives, and no statements, representations, warranties (express or implied),
writings, understandings or agreements of any party or of any representative of
any party, in the negotiations leading to the execution and delivery of this
Agreement or at any other time, which are not expressed herein or in any such
other agreement, instrument or document executed and delivered hereto, shall be
binding. All exhibits referred to in this Agreement are hereby incorporated by
reference and made a part of this Agreement. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
11.10 SCHEDULES
(a) The disclosures in the Schedules, and those in any Supplement
thereto, must relate only to the representations and warranties in the Section
of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Schedules (other than an exception
expressly set forth as such in the Schedules with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
11.11 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, provided that no party may assign, delegate or otherwise transfer any
of its rights or obligations under this Agreement without the consent of the
other parties hereto; provided, further, that Buyer may assign this Agreement in
whole or in part (i) to any wholly-owned Subsidiary of the Buyer, (ii) any
lender to the Buyer, any subsidiary or affiliate thereof or any agent on behalf
thereof as security for obligations to such lender in respect of its financing
arrangements.
(b) If, prior to the Closing, the Buyer enters into an agreement to
sell a substantial portion of the Acquired Companies' assets or business to a
third party, then the Sellers agree to provide to such third party the benefits
of Sections 5.1 and 5.4.
(c) Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied, is intended to confer
on any Person other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
50
11.12 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
11.13 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.14 APPOINTMENT OF SELLERS' REPRESENTATIVE
The Buyer and each of the Sellers acknowledge and agree that ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ has been, or will be, appointed by the Sellers to act as the Sellers'
representative (the "Sellers' Representative") under this Agreement and the
Custodial Agreement pursuant to an agreement, dated the date of Closing, among
each of the Sellers and the Sellers' Representative, and that Buyer and the
Custodian may rely upon any action taken by such person in his capacity as the
Sellers' Representative under this Agreement and the Custodial Agreement for the
purpose of taking all such actions, exercising all such powers, making all such
determinations and receiving and sending all such notices and other information
permitted or required to be made, taken, received or sent by this Agreement.
Each Seller ratifies and confirms and agrees to ratify and confirm any action
taken by the Sellers' Representative on behalf of any Seller pursuant to this
Agreement or the Custodial Agreement that is consistent with the Sellers'
Representative's authority as described herein. All references to the Sellers'
Representative refer to him in his capacity as representative of the Sellers and
not to him in his individual capacity.
11.15 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
11.16 GOVERNING LAW
This Agreement will be governed by the laws of the State of Delaware
without regard to conflicts of laws principles.
11.17 COUNTERPARTS
51
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
52
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
Buyer:
▇▇▇▇▇ COMPANY
a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
Sellers:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
/s/ ▇. ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
*
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
*
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
*
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
*
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
*
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
53
*
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
*
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
*
------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
*
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
*
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
*
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
*
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
*
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Canadian Venture Capital
BY: *
------------------------------------
*
------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
*
------------------------------------
▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇▇
54
*
------------------------------------
▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇▇
*
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
*
------------------------------------
▇▇▇▇ ▇▇▇▇
*
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
*
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Waywell Management
BY: *
------------------------------------
*
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------
** By Power of Attorney, a copy of which is attached.
/s/ ▇. ▇. ▇▇▇▇▇▇ , as attorney in fact
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. , as attorney in fact
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
55
MONSEY PRODUCTS CO.
LIST OF SHAREHOLDERS
COMMON STOCK
Name Certificate No. Total Shares
---- --------------- ------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. C-30 841,176
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III C-2, C-24 35,154
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ C-3, C-25 35,154
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ C-4, C-26 35,154
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ C-5, C-27 35,154
▇▇▇▇ ▇. ▇▇▇▇▇ C-6, C-28 35,154
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ C-7, C-29 35,154
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ C-8 371,650
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. C-9 15,850
▇▇▇▇▇ ▇. ▇▇▇▇▇ C-10 15,850
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ C-11 15,850
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ C-12 15,850
▇▇▇▇ ▇. ▇▇▇▇▇▇ C-13 15,850
Canadian Venture Capital C-14 200,000
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ C-15 86,667
▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇▇ C-16 86,667
▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇▇ C-17 38,666
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ C-18 130,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ C-19 130,000
▇▇▇▇ ▇▇▇▇ C-21 66,668
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ C-22 43,332
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ C-23 20,000
Waywell Management C-31 100,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ C-32 100,000
---------
2,505,000
---------
---------
56
