ACQUISITION AGREEMENT
by and between
ESCO ELECTRONICS CORPORATION.
Buyer,
and
SCHAWK, INC.
Seller.
Dated December 18, 1996
TABLE OF CONTENTS
ACQUISITION AGREEMENT
SECTION PAGE
ARTICLE I DEFINITIONS 1
ARTICLE II PURCHASE AND SALE OF PURCHASED ASSETS 9
2.1 Assets to be Purchased 9
2.2 Assumed Liabilities 9
2.3 Consideration 9
2.4 Allocation of Consideration 9
2.5 Closing 9
2.6 Deliveries of Seller at Closing 10
2.7 Deliveries of Buyer at Closing 10
2.8 Determination of Closing Working Capital 10
2.9Post-Closing Adjustment 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER 11
3.1 Corporate Existence and Power of Seller12
3.2 Approval and Enforceability of Agreement 12
3.3 Financial Statements 12
3.4 Events Subsequent to September 30, 199613
3.5 Inventories 14
3.6 Accounts and Notes Receivable 14
3.7 Undisclosed Liabilities 14
3.8 Taxes 15
3.9 Real Property Owned 16
3.10 Personal Property and Capital Stock Owned 18
3.11 Real and Personal Property Leased from Seller Group
Persons 18
3.12 Real and Personal Property Leased to a Seller Group
Person 18
3.13 Intellectual Property 19
3.14 Necessary Property and Transfer of Purchased Assets 19
3.15 Use and Condition of Property 20
3.16 Licenses and Permits 20
3.17 ▇▇▇▇▇▇▇▇▇--▇▇▇▇▇▇▇▇▇▇ ▇▇
3.18 Contracts--Validity, Etc. 21
3.19 No Breach of Law or Governing Documents 22
3.20 Litigation and Arbitration 22
3.21 Officers, Directors, Employees and Consultants 22
3.22 Indebtedness to and from Officers, Directors and
Others 23
3.23 Outside Financial Interests 23
3.24 Payments, Compensation and Perquisites of Agents and
Employees 23
3.25 Labor Agreements and Employment Agreements23
3.26 Employee Benefit Plans 24
3.27 Terminated Plans 25
3.28 Overtime, Back Wages, Vacation and Minimum Wages 25
3.29 Discrimination, Workers Compensation and Occupational
Safety and Health 26
3.30 Alien Employment Eligibility 26
3.31 Labor Disputes; Unfair Labor Practices26
3.32 Insurance Policies 26
3.33 Guarantees 27
3.34 Product Warranties 27
3.35 Product Liability Claims 27
3.36 Product Safety Authorities 27
3.37 Environmental Matters 27
3.38 Broker's Fees 29
3.39 Foreign Assets 29
3.40 Absence of Sensitive Payments 29
3.41 Trade Regulation Law 30
3.42 Truthfulness 30
3.43 Bank Accounts of Purchased Entities 30
3.44 Books and Records 30
3.45 Affiliates 30
3.46 Ownership of Assets 30
3.47 No Marks on Equipment or Inventory 30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 31
4.1 Corporate Existence of Buyer 31
4.2 Approval of Agreement 31
4.3 No Breach of Articles or Indentures 31
ARTICLE V CERTAIN COVENANTS 31
5.1 Operation of the Business 32
5.2 Preservation of Business 33
5.3 Insurance and Maintenance of Property 33
5.4 Full Access 33
5.5 Books, Records and Financial Statements33
5.6 WARN Act 33
5.7 Other Government Filings 34
5.8 Tax Matters 34
5.9 Change of Name 35
5.10 Escrow 35
5.11 Supplements to Schedules 35
5.12 Adverse Changes 36
ARTICLE VI COVENANT NOT TO COMPETE 36
6.1 Covenant Not to Compete 36
6.2 Restriction on Employment 37
6.3 Confidentiality 37
6.4 Remedies 37
6.5 Permitted Investments 37
6.6 Access to Properties and Records 38
ARTICLE VII CONDITIONS TO BUYER'S OBLIGATIONS 38
7.1 Representations and Warranties of Seller 38
7.2 Performance of this Agreement 38
7.3 No Material Adverse Change 38
7.4 Certificate of Seller 38
7.5 Opinion of Counsel 39
7.6 No Lawsuits 39
7.7 No Restrictions 39
7.8 Consents 39
7.9 Releases 39
7.10 Documents 39
7.11 [RESERVED] 39
7.12 Title Insurance 40
7.13 Compliance with Applicable Law 40
7.14 Due Diligence 41
7.15 Foreign Closings 41
7.16 Further Assurances 41
ARTICLE VIII CONDITIONS TO SELLER'S OBLIGATIONS 41
8.1 Representations and Warranties of Buyer41
8.2 Performance of this Agreement 41
8.3 Certificate of Buyer 41
8.4 Opinion of Counsel 41
8.5 Payment of Purchase Price 41
8.6 Documents 42
8.7 Further Assurances 42
ARTICLE IX INDEMNIFICATION 42
9.1 Indemnification of Buyer42
9.2 Indemnification of Seller 42
9.3 Survival 43
9.4 Limitations 43
9.5 Notice of Claim 43
9.6 Rights to Contest Claims of Third Persons 43
9.7 Exclusive Remedy 44
9.8 Tax Indemnification 44
9.9 Mitigation of Losses 44
ARTICLE X DISPUTE RESOLUTION 45
10.1 Scope; Initiation 45
10.2 Negotiations Between Executives 45
10.3 Binding Arbitration 45
10.4 Confidentiality Notice 46
ARTICLE XI MISCELLANEOUS 47
11.1 Changes to Structure 47
11.2 Termination of Agreement 47
11.3 Manner and Effect of Termination 47
11.4 Non-Disclosure of Information 47
11.5 Bulk Sales 48
11.6 Contents of Agreement, Parties in Interest,
Assignment 48
11.7 Severability 48
11.8 Counterparts 48
11.9 Interpretation 48
11.10 Governing Law 49
11.11 Payment of Fees and Expenses 49
11.12 Notice 49
11.13 Additional Agreements 50
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the Agreement ) is made this
18th day of December, 1996, by and between ESCO Electronics
Corporation, a Missouri corporation ( Buyer ), and Schawk, Inc.,
a Delaware corporation ( Seller ). Defined terms are set forth in
Article I.
RECITALS
A. The Buyer Companies desire to purchase from Seller and
the other Seller Group Persons the Purchased Assets and to assume
the Assumed Liabilities, on the following terms and conditions.
B. Seller and the other Seller Group Persons desire to
sell to the Buyer Companies the Purchased Assets and to assign to
the Buyer Companies the Assumed Liabilities, on the following terms
and conditions.
NOW, THEREFORE, in consideration of the foregoing recitals
and the mutual covenants, representations, warranties, conditions,
and agreement hereinafter expressed, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Affiliate means a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or
is under common control with, the Person referred to. In this
definition, control means the possession, direct or indirect, of
the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of securities, by
contract, or otherwise.
Affiliated Group has the meaning set forth in Section 1504
of the Code.
Arbiter means the individual appointed under Section
2.8(b).
Assets means all assets and property and associated rights
and interests, real, personal, and mixed, tangible and intangible,
of whatever kind, owned or used by a Seller Group Person in
connection with the Business. Without limiting the generality of
the foregoing, the Assets include the following items:
(a) All assets reflected and/or described on the
Balance Sheet, except any such assets which have been disposed of
in the Ordinary Course of the Business since the Balance Sheet
Date;
(b) all assets owned or used by a Seller Group Person
in connection with the Business which have been fully depreciated
or written off;
(c) all assets acquired by a Seller Group Person in
connection with the Business since the Balance Sheet Date;
(d) all accounts receivable of a Seller Group Person
in connection with the Business;
(e) all inventories of a Seller Group Person in
connection with the Business, including but not limited to all raw
materials, finished goods, component parts and work in process;
(f) all Contracts of a Seller Group Person with
suppliers or customers in connection with the Business;
(g) all machinery, equipment, supplies and tools of
a Seller Group Person used in connection with the Business;
(h) all vehicles of a Seller Group Person used in
connection with the Business; (including without limitation any
helicopters or other aircrafts);
(i) all parcels of real property of a Seller Group
Person used in connection with the Business, including without
limitation all buildings, plants, warehouses, facilities and other
improvements and fixtures thereon and appurtenances thereto;
(j) all permits, approvals, licenses and
certifications issued to a Seller Group Person by a Government or
by a private testing or certifying authority in connection with
the Business, to the extent assignable under the terms thereof and
applicable Law;
(k) all transferable rights of Seller or its
Affiliates to tax exemptions in connection with the Business,
including without limitation the Puerto Rico Grant;
(l) all Intellectual Property and documentation
thereof and the right and power to assert, defend and recover title
thereto in the same manner and to the same extent as a Seller Group
Person could or could cause to be done if the transactions
contemplated hereby did not occur, and the right to recover for
past damages on account of the infringement, misuse, or theft
thereof;
(m) all records, including business, computer,
engineering, and other records, and all associated documents,
discs, tapes, and other storage or record keeping media of any
Seller Group Person prepared or held in connection with the
Business, including but not limited to all sales data, customer
lists, accounts, bids, contracts, supplier records, and other data
and information of the Business, excluding corporate minute books
of the Seller Companies;
(n) all rights and claims against others under
Contracts;
(o) all interests in any capital stock of the
Purchased Entities; and
(p) all other claims against others, rights, and
choses in action, liquidated or unliquidated, of a Seller Group
Person arising from the Business, including those arising under
insurance policies.
Assignment and Assumption Agreement means the form of
instrument attached as Exhibit A.
Assumed Executory and Other Agreements means (i) the
Contracts described in the Schedules hereto, subject to Buyer s
right of review and approval under Section 5.11 of such Schedules;
(ii) executory contracts, agreements or other commitments existing
on the date hereof and not required to be disclosed in said
Schedules; (iii) executory contracts, agreements or other
commitments between the date hereof and the Closing, in accordance
with the provisions hereof; (iv) executory warranties, agreements
and commitments in respect to product liability and product support
arising out of the sale of goods and inventory or the rendition of
services by the Business; provided, however, Assumed Executory and
Other Agreements shall not include that certain Consulting
Agreement between Seller and Plastic Molded Concepts, Inc.
involving consulting services from ▇▇▇▇ ▇▇▇▇▇▇.
Assumed Liabilities means Liabilities of a Non-Purchased
Entity, to the extent the Liabilities are:
(a) incurred in the Ordinary Course of the Business
and to the extent they are:
(i) Liabilities that are (A) quantified on the
Closing Balance Sheet, and if incurred on or before the Balance
Sheet Date, quantified on the Balance Sheet, and (B) if incurred
after the date of this Agreement, incurred in compliance with this
Agreement; provided, however, that Liabilities quantified on the
Closing Balance Sheet shall not include Liabilities owed by Seller
to Plastic Molded Concepts, Inc.; or
(ii) Liabilities which exist at or accrue
following the Closing Date under Assumed Executory and Other
Agreements; or
(b) specifically identified on Exhibit I to the
Assignment and Assumption Agreement.
Balance Sheet means the unaudited, consolidated, and
consolidating balance sheet of the Business as of September 30,
1996, and all notes and schedules thereto, attached on Schedule
3.3.
Balance Sheet Date means the date of the Balance Sheet.
▇▇▇▇ of Sale means the form of instrument attached as
Exhibit B.
Business means the business and operations of any and all
Seller Group Persons reflected in the Confidential Memorandum and
referred to therein as The Plastics Group of Seller.
Business Condition of a Person or business means the
business, assets, results of operations, or condition (financial
or otherwise) of such Person or business.
Buyer has the meaning set forth in the Preamble.
Buyer Company means one of the corporations identified on
Schedule 2.1 or a corporation to which Buyer has assigned certain
of its rights pursuant to Section 11.6.
Buyer Companies means all of the corporations identified
on Schedule 2.1.
Cash and Cash Equivalents means, at any time, any assets
which are in the form of, or are readily convertible into money,
including, without limitation, cash, checks and other negotiable
instruments, deposits with any bank or financial institution
(whether as demand deposits or time deposits and whether or not
evidenced by certificates of deposit), and readily marketable
securities of any type.
Closing means the consummation of the transactions
contemplated by this Agreement.
Closing Audit has the meaning specified in Section 2.8(a)
hereof.
Closing Balance Sheet means the balance sheet prepared
pursuant to Section 2.8(a).
Closing Date means January 31, 1997 or, if the conditions
to Closing are not by then satisfied, on such date following
satisfaction of such conditions (other than conditions to be
satisfied at Closing according to the terms hereof) as the Parties
may agree in writing but not later than February 15, 1997 or, if
any conditions are not satisfied as a result of factors beyond the
control of either Party, not later than March 31, 1997.
COBRA means the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
Code means the Internal Revenue Code of 1986, as from time
to time amended.
Confidential Memorandum means the confidential memorandum
relating to the Plastics Group of Seller dated September, 1996.
Consideration has the meaning set forth in Section 2.3
hereof.
Contract means any contract, agreement, arrangement,
understanding, lease, indenture, evidence of indebtedness, binding
commitment or instrument, purchase order, or offer, written or
oral, entered into or made by or on behalf of any Seller Group
Person, or to which any Seller Group Person is a party, or by which
it or its property is bound, in connection with the Business.
Court means any court, grand jury, administrative or
regulatory body, Government agency, arbitration or mediation panel
or similar body.
Covenant Not to Compete means the obligations of the Non-
Purchased Entities under Article VI.
Dollars or $ means United States Dollars.
Effective Time means the effective time of the Closing,
which shall be as of the close of business on the Closing Date.
Employee means any employee of any Seller Group Person in
connection with the Business, including any retired, laid-off, on-
leave, former or terminated employee.
Employee Plan/Agreement has the meaning set forth in
Section 3.26 hereof.
Environmental Law means any current or past Law relating
to the protection of health or the environment, including without
limitation: the Clean Air Act, the Federal Water Pollution Control
Act, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Toxic
Substance Control Act, any comparable state or foreign Law, and
the common law, including the law of nuisance and strict liability.
Environmental Permits means all permits, registrations,
approvals and licenses, and all filings with and submissions to
any Government or other authority, required by any Environmental
Law.
Environmental Property means all assets and property
currently or previously owned, leased, operated or used by any
Seller Group Person or any entity previously owned by a Seller
Group Person for which Successor liability may exist.
ERISA means the Employee Retirement Income Security Act of
1974, as amended.
Escrow Agreement means the form of agreement attached as
Exhibit C.
Excluded Assets means (i) the PMC Note, (ii) Cash and Cash
Equivalents, (iii) any office equipment, computers or similar items
which are located at Seller s headquarters at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and neither necessary for the operation of the
Business nor included on the Balance Sheet or in the Confidential
Memorandum, (iv) any computer software relating to Seller s option
program or dividend program that is neither necessary for payment
of compensation to Employees in Puerto Rico or the operation of the
Business nor included on the Balance Sheet or in the Confidential
Memorandum, and (v) computer software and hardware relating to
Seller s Tek Pak Division on PIC-based computer software on General
Automation hardware (the Tek Pak Software and Hardware ),
provided, that Seller shall upon Closing license to Buyer, at no
cost to Buyer, the Tek Pak Software and Hardware for so long as
such Tek Pak Software and Hardware is required to operate the
Business in an efficient manner, and such license shall be included
in the Intellectual Property.
Excluded Liabilities means all Liabilities of any Seller
Group Person other than the Assumed Liabilities.
Existing Names has the meaning set forth in Section 5.9
hereof.
Final Purchase Price means the Purchase Price following
adjustment pursuant to Section 2.9.
Financial Statements means the Balance Sheet, the Other
Statements, and the Other Financial Statements.
GAAP means U.S. generally accepted accounting principles
applied on a consistent basis.
Government means the United States of America, any other
nation or sovereign state, the European Union, any federal,
bilateral or multilateral governmental authority, the Commonwealth
of Puerto Rico, any state, possession, territory, county, district,
city or other governmental unit or subdivision, and any branch,
agency, or judicial body of any of the foregoing.
Government Contract means any prime contract, subcontract,
teaming agreement or arrangement, joint venture, basic ordering
agreement, letter contract, purchase order, delivery order, change
order, or other arrangement of any kind in writing, (A) between a
Seller Group Person, in connection with the Business, and (i) a
Government, (ii) any prime contractor of a Government, (iii) any
subcontractor with respect to any contract described in clauses
(i) or (ii) above, or (B) to which a Seller Group Person, in
connection with the Business, is a party, or by which it is bound
and which is financed by a Government and subject to the rules and
regulations of such Government concerning procurement.
Hazardous Materials means any pollutants, contaminants,
hazardous substances, hazardous chemicals, toxic substances,
hazardous wastes, infectious wastes, radioactive materials,
petroleum including crude oil or any fraction thereof, asbestos
fibers, or solid wastes or other hazardous materials.
HSR Act means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976 (incorporated as Section 7A of the ▇▇▇▇▇▇▇ Act), as
amended.
Intellectual Property means all of the following (in
whatever form or medium) which are owned by or licensed to any
Seller Group Person in connection with the Business: patents,
trademarks, service marks, trade names, corporate names,
copyrights, and copyrighted works; registrations thereof and
applications therefor; trade secrets, software (whether in source
code or object code), firmware, mask works, programs, inventions,
discoveries, proprietary processes, and items of proprietary know-
how, information, data or intellectual property; proprietary
prospect lists, customer lists, projections, analyses, and market
studies; and licenses, sublicenses, assignments, and agreements in
respect of any of the foregoing; provided, however, that
Intellectual Property shall not include trademarks, service marks,
trade names or corporate names for Schawk, Inc. or Schawk
Graphics.
Law means any statute, law, treaty, ordinance, rule,
regulation, instrument, directive, decree, order, or injunction of
any Government, quasi-governmental authority, or Court, and
includes any rule or regulation of any regulatory or self-
regulatory authority compliance with which is required by law.
Liability means any liability and/or obligation, whether
or not required to be reflected on the financial statements of a
business.
Lien means any lien, security interest, mortgage, option,
lease, tenancy, occupancy, covenant, condition, easement,
agreement, pledge, hypothecation, charge, claim, restriction, or
other encumbrance of every kind and nature.
Non-Purchased Entities means all Seller Group Persons
which are not a Purchased Entity.
Notice of Dispute means a notice to Buyer delivered
pursuant to Section 2.8(b), specifying in reasonable detail all
points of disagreement with the computation of Working Capital set
forth on the Closing Balance Sheet.
Order means an order, judgment, writ, injunction, award or
decree of any Court or Government.
Ordinary Course means, with respect to the Business, only
the ordinary course of commercial operations customarily engaged
in by such Business consistent with past practices, and
specifically does not include (a) activity (i) involving the
purchase or sale of such business or of any product line or
business unit, (ii) involving modification or adoption of any
Employee Plan/Agreement or (iii) which requires approval by the
board of directors or shareholders of a corporation engaged in such
business, or (b) the incurrence of any liability for any tort or
any breach or violation of or default under any Contract or Law.
Other Financial Statements means the unaudited
consolidated, and consolidating balance sheets of the Seller as of
September 30, 1996, and the audited consolidated, and consolidating
balance sheets of the Seller as of December 31, 1995, 1994, and
1993 and the related statements of earnings, stockholders' equity
and cash flows for the periods then ended, together with all notes
or schedules thereto, attached on Schedule 3.3.
Other Statements means the balance sheets, statements of
earnings and cash flows of the Business, other than the Balance
Sheet, as of September 30, 1996, and December 31, 1995, 1994, and
1993, and all notes and schedules thereto, attached on Schedule
3.3.
Party means either Buyer or Seller, and Parties means
both of them but does not include a Buyer Company other than Buyer
or a Seller Group Person other than Seller.
PBGC means the Pension Benefit Guaranty Corporation.
Permitted Liens has the meaning specified in Section 3.9(a)
hereof.
Person means any natural person, any domestic or foreign
corporation, partnership, limited liability company, limited
liability partnership, joint venture, association, company, or
other legal entity, and any Government.
PMC Note means the note in the amount of $2,437,000
identified on the Balance Sheet and any account receivable from
Plastic Molded Concepts, Inc., not arising from the sale of goods
and inventory.
Puerto Rico Grant means the Grant of Industrial Tax
Exemption applicable to the Business issued by the Commonwealth of
Puerto Rico.
Purchased Assets means all of the Assets other than the
Excluded Assets.
Purchased Entity means any corporation that any Buyer
Company is purchasing an equity interest in pursuant to this
Agreement which is set forth on Schedule 1.1(b).
Purchased Entity Purchase Agreement means the form of
agreement attached as Exhibit D.
Purchase Price shall mean the amount set forth in Section
2.7(b).
Real Property means each parcel of real property included
in the Purchased Assets, including without limitation all
buildings, plants, warehouses, facilities and other improvements
and fixtures thereon and appurtenances thereto.
Returns means returns, reports, estimated tax and
informational statements and returns relating to Taxes which are,
were or will be required by Law to be filed by any Seller Group
Person or other Tax Affiliate of Seller in connection with the
Business, and all information returns (e.g., Form W-2, Form 1099)
and reports relating to Taxes or Employee Plan/Agreement. Any one
of the foregoing Returns may be referred to sometimes as a
Return .
Seller has the meaning set forth in the Preamble.
Seller Company means any Seller Group Person which is a
corporation.
Seller Group means Seller and all Affiliates of Seller.
Seller Group Person means a Person included in the Seller
Group.
Seller Group Persons means all of the persons included in
the Seller Group.
Shares has the meaning specified in Section 3.10(b) hereof.
Tax Affiliate means any member of an Affiliated Group of
which Seller is or was a member, or any member of a combined or
unitary group of which Seller is or was a member.
Taxes means all taxes, charges, fees, levies or other like
assessments imposed or assessed by any Government, including
without limitation income, profits, windfall profit, employment
(including Social Security, state pension plans, and unemployment,
workmen s, and occupational and non-occupational disability
insurance required by Law), withholding, payroll, franchise, gross
receipts, sales, use, transfer, stamp, occupation, real or personal
property, ad valorem, value added, premium, and excise taxes;
Pension Benefit Guaranty Corporation premiums and any other like
Government charges; and shall include all penalties, fines,
assessments, additions to tax, and interest resulting from,
attributable to, or incurred in connection with such Taxes or any
contest or despite thereof. Any one of the foregoing Taxes may be
referred to sometimes as a Tax.
Title Commitment has the meaning specified in Section
7.13(a) hereof.
Title Company has the meaning specified in Section 7.13(a)
hereof.
WARN Act means the Worker Adjustment and Retraining
Notification Act, as amended.
Working Capital means (x) current assets (as identified on
the Balance Sheet) excluding Cash and Cash Equivalents, and the
PMC Note, minus (y) current liabilities (as identified on the
Balance Sheet, all determined in accordance with GAAP; for purposes
of the Closing Balance Sheet, current assets shall be included to
the extent included in the Purchased Assets, and current
liabilities shall be included to the extent arising from Assumed
Liabilities or Liabilities of a Purchased Entity, or a reserve or
accrual relating thereto.
ARTICLE II
PURCHASE AND SALE OF PURCHASED ASSETS
2.1 Assets to be Purchased. Subject to the terms and
conditions hereof, on the Closing Date and as of the Effective
Time, a Seller Group Person shall sell to a Buyer Company, as
identified on Schedule 2.1, free and clear of all Liens, all right,
title and interest in and to, collectively, all of the Purchased
Assets, except for Purchased Assets to the extent owned by
Purchased Entities.
2.2 Assumed Liabilities.
(a) Subject to the terms and conditions hereof, on
the Closing Date and as of the Effective Time, a Seller Group
Person shall assign and transfer to a Buyer Company, as identified
on Schedule 2.1, and a Buyer Company shall assume, only the Assumed
Liabilities.
(b) Notwithstanding the foregoing, if the assignment
or transfer of any obligation or instrument would cause a breach
thereof and if no required consent to such assignment or transfer
has been obtained, then, at the Buyer s election and in its sole
discretion, and subject to the Buyer's right to require strict
compliance with Section 7.10 hereof, such obligation or instrument
shall not be assigned or transferred, but a Buyer Company shall act
as agent for the applicable Seller Group Person in order to obtain
for the applicable Buyer Company the benefits under such obligation
or instrument.
(c) EXCEPT AS EXPRESSLY AND UNAMBIGUOUSLY PROVIDED
IN THIS SECTION 2.2, NEITHER BUYER, NOR ANY BUYER COMPANY, NOR ANY
AFFILIATE OF ANY BUYER COMPANY ASSUMES OR AGREES TO BECOME LIABLE
FOR OR SUCCESSOR TO ANY LIABILITIES OR OBLIGATIONS WHATSOEVER,
LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, CONTINGENT OR
OTHERWISE, WHETHER OF SELLER, ANY SELLER GROUP PERSON, ANY
PREDECESSOR THEREOF, OR ANY OTHER PERSON, OR OF THE BUSINESS. NO
OTHER STATEMENT IN OR PROVISION OF THIS AGREEMENT AND NO OTHER
STATEMENT, WRITTEN OR ORAL, ACTION, OR FAILURE TO ACT INCLUDES OR
CONSTITUTES ANY SUCH ASSUMPTION OR AGREEMENT, AND ANY STATEMENT TO
THE CONTRARY BY ANY PERSON IS UNAUTHORIZED AND HEREBY DISCLAIMED.
2.3 Consideration. The Consideration shall be the
aggregate of (a) the Final Purchase Price, plus (b) the amount of
the Assumed Liabilities.
2.4 Allocation of Consideration. The Consideration
provided for in Section 2.3 shall be allocated among the Purchased
Assets, Assumed Liabilities and Covenant Not to Compete, and among
foreign jurisdictions, as provided in Schedule 2.4 hereto.
2.5 Closing. The Closing shall take place at 9:00 a.m.
local time at the offices of Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇.
2.6 Deliveries of Seller at Closing. At Closing, subject
to the conditions to Seller's obligations in Article VIII, Seller
shall execute and deliver or cause to be delivered the documents
identified in Article VII.
Deliveries of Buyer at Closing. At Closing, subject
to the conditions to Buyer's obligations in Article VII, Buyer
shall (a) execute and deliver or cause to be delivered the
documents identified in Article VIII and (b) transfer by wire
transfer, to an account designated by Seller not less than two
business days before the Closing Date, the sum (the Purchase
Price ) of (i) Ninety Two Million Dollars ($92,000,000) plus (ii)
the amount of Cash and Cash Equivalents of the Purchased Entities
as of the Closing Date (based on an estimate as of December 31,
1996 (the December Cash Estimate )).
Determination of Closing Working Capital.
(a) As of the Closing Date, Buyer shall conduct an
audit and examination of the Purchased Assets and the Assumed
Liabilities (the Closing Audit ) at Buyer's sole cost and expense.
The Seller, at its sole cost and expense, may have a representative
participate in the taking of the physical inventory in connection
with the Closing Audit. On the basis of such Closing Audit, Buyer
shall prepare with the assistance of Seller personnel as requested
by Buyer a balance sheet as of the Closing Date (the Closing
Balance Sheet ) including a computation of Working Capital, as of
the Closing Date, of the Business, in accordance with GAAP except
as set forth in Schedule 2.8 applied consistently with the
accounting policies and procedures followed, and utilizing similar
classifications used, in preparing the Balance Sheet, provided such
policies and procedures are in accordance with GAAP except as set
forth in Schedule 2.8. Buyer shall deliver the Closing Balance
Sheet to the Seller not later than 45 days after the Closing Date.
Each Party (the Reviewed Party ) shall, upon the request of the
other party (the Requesting Party ), provide the Requesting
Party s representatives with reasonable access to the Reviewed
Party s accountants and, to the extent permitted by internal rules
and procedures of the Reviewed Party s accountants, use its
reasonable best efforts to provide equal access to such
accountant s work papers at such accountant s place of business and
in such accountant s presence, in order to facilitate the
Requesting Party s review of such Closing Balance Sheet. In
preparing such Closing Balance Sheet, inventory shall be valued on
a basis consistent with the inventory valuation in the Balance
Sheet.
(b) If the Seller disputes the computation of Working
Capital set forth on the Closing Balance Sheet as delivered by
Buyer, then not more than 20 days after the date the Seller
receives the Closing Balance Sheet the Seller shall provide to
Buyer a Notice of Dispute. Upon receipt of the Notice of Dispute,
Buyer shall promptly consult with the Seller with respect to its
specified points of disagreement in an effort to resolve the
dispute. If any such dispute cannot be resolved by Buyer and the
Seller within 20 days after Buyer receives the Notice of Dispute,
or any mutually agreed upon extension to such period, they shall
refer the dispute to a partner in and designated by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, certified public accountants (the Arbiter ), as an arbitrator
to finally determine, as soon as practicable, and in any event
within 30 days after such referral, all points of disagreement with
respect to the computation of Working Capital set forth on the
Closing Balance Sheet. The Parties represent and warrant that
neither of them has a material pre-existing relationship with the
Arbiter. For purposes of such arbitration each Party shall submit
a proposed computation of Working Capital; Buyer's proposals need
not be identical to the computation of Working Capital set forth
on the Closing Balance Sheet and delivered pursuant to
Section 2.8(a). Any items included in Buyer s computation of
Working Capital not specifically disputed by Seller shall be deemed
accepted and not subject to arbitration. The Arbiter shall apply
the terms of this Section 2.8 and the other relevant provisions of
this Agreement, and shall otherwise conduct the arbitration under
such procedures as the Parties may agree or, failing such
agreement, under the Commercial Arbitration Rules of the American
Arbitration Association. Upon the conclusion of the arbitration
proceeding, the Arbiter shall choose either Buyer s computation of
Working Capital or Seller s computation. The Arbiter shall not
independently calculate Working Capital. The fees and expenses of
the arbitration and the Arbiter incurred in connection with the
arbitration of the computation of Working Capital shall be paid by
the non-prevailing party; provided, that such fees and expenses
shall not include, so long as a Party complies with the procedures
of this Section 2.8, the other Party's outside counsel or
accounting fees. All determinations by the Arbiter shall be final,
conclusive, binding and not subject to judicial review or appeal
with respect to the computation of Working Capital and the
allocation of arbitration fees and expenses.
2.9 Post-Closing Adjustment. The Purchase Price shall be
adjusted as follows, based on the computation of Working Capital
set forth in the Closing Balance Sheet determined under Section
2.8(a) or if necessary, 2.8(b):
(a) If such Working Capital is less than $13,895,000 Seller
shall pay to Buyer such difference;
(b) If such Working Capital is greater than $13,895,000
Buyer shall pay to Seller such difference;
(c) If the December Cash Estimate is greater than the Cash
and Cash Equivalents of the Purchased Entities as of the Closing
Date as listed on the Closing Balance Sheet, Seller shall pay to
Buyer such difference;
(d) If the December Cash Estimate is less than the Cash
and Cash Equivalents of the Purchased Entities as of the Closing
Date as listed on the Closing Balance Sheet, Buyer shall pay to
Seller such difference; and
(e) Any payment required to be made by Buyer or Seller
pursuant to paragraphs (a), (b), (c), or (d) above shall be by wire
transfer of funds not more than three days after final
determination thereof.
ARTICLE III
REPRESENTATI ONS AND WARRANTIES OF SELLER
The Seller hereby makes the following representations and
warranties, each of which is true and correct on the date hereof
and each of which shall survive the Closing Date and the
transactions contemplated hereby. With respect to any
representation or warranty of the Seller in this Article III which
is qualified by or to the Seller s or any Seller Group Person s
knowledge, such knowledge shall be deemed to exist only if the
persons listed on Schedule 3.0 have knowledge of the matter to
which such qualification applies.
3.1 Corporate Existence and Power of Seller.
(a) True and complete copies of the articles or
certificate of incorporation and bylaws and all amendments thereto
of each Seller Company, certified by its secretary, are attached
as Schedule 3.1. Each Seller Company is a corporation duly
organized, validly existing and in good standing under the Laws of
the jurisdictions indicated therein.
(b) Each Seller Company has the corporate power and
authority, and each other Seller Group Person has the legal power
and authority, to own and use its Assets and to transact the
business in which it is engaged, holds all franchises, licenses
and permits necessary and required therefor. Further, each Seller
Company is duly licensed or qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
license or qualification is required, except where the failure to
be so qualified could not be reasonably expected to have a material
adverse effect on such Seller Company. Each Seller Company has the
corporate power, and each other Seller Group Person has the legal
power, to enter into this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby.
3.2 Approval and Enforceability of Agreement.
(a) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been
duly authorized, approved and ratified by all necessary action on
the part of each Seller Group Person. Pursuant to such
resolutions, authorizations, consents, approvals and/or
ratifications, the Seller has full authority to enter into and
deliver this Agreement, to perform its obligations hereunder and
to cause each other Seller Group Person to perform their respective
obligations hereunder, and to consummate, and to cause each other
Seller Group Person to consummate, the transactions contemplated
hereby.
(b) Assuming the due execution and delivery hereof
by Buyer, this Agreement is a legal, valid and binding obligation
of Seller, enforceable against Seller according to its terms.
3.3 Financial Statements.
(a) Attached as Schedule 3.3 hereto are the Financial
Statements.
(b) The Financial Statements were derived from the
books and records of the Seller and (i) are true, complete, and
correct, (ii) present fairly the financial position, results of
operations, and cash flows of the Business and the Seller, as
indicated, at the dates and for the periods indicated, (iii) have
been prepared in accordance with GAAP applied on a basis consistent
with previous periods, and (iv) do not include any untrue statement
of a material fact required to be stated or reflected therein or
omit to state or reflect any material fact necessary to make any
statements therein not misleading.
(c) The Balance Sheet and the Other Statements have
been prepared on a basis consistent with the Reports on Form 10-Q
of Seller filed with the Securities and Exchange Commission.
3.4 Events Subsequent to September 30, 1996. Since
September 30, 1996, except as set forth on Schedule 3.4, there has
been no:
(a) change in the Business Condition of the Business
other than changes in the Ordinary Course, none of which have been
materially adverse and, to the knowledge of each Seller Group
Person, no such change will arise from the consummation of the
transactions contemplated hereby;
(b) loss or, to the knowledge of each Seller Group
Person, threatened loss of a customer account;
(c) damage, destruction or loss, other than
reasonable wear and tear, involving Assets with a fair market value
or book value of $10,000 or more, whether covered by insurance or
not, affecting the Purchased Assets;
(d) declaration, setting aside, or payment of any
dividend or any distribution (in cash or in kind) with respect to
any securities of any Purchased Entities;
(e) payment of fees or expenses of counsel,
accountants and other experts incurred by any Purchased Entities
incident to the negotiation, preparation or execution of this
Agreement or the Closing;
(f) increase in or commitment to increase
compensation, benefits, or other remuneration to or for the benefit
of any shareholder, member, partner, director, officer, Employee
or agent in respect of the Business, any other Person, or any
benefits granted under any Employee Plan/Agreement with or for the
benefit of any such shareholder, member, partner, director,
officer, Employee, agent or Person;
(g) transaction entered into or carried out by any
Seller Group Person in respect of the Business other than in the
Ordinary Course of the Business;
(h) borrowing or incurrence of any indebtedness
(including letters of credit and foreign exchange contracts),
contingent or other, by or on behalf of any Seller Group Person or
any endorsement, assumption, or guarantee of payment or performance
of any Indebtedness or Liability of any other Person or entity by
any Seller Group Person in respect of the Business, except as
provided under the credit facilities listed as Exhibit 10.18, 10.19
and 10.20 of the Seller s Form 10-K for the period ended December
31, 1995 as filed with the Securities and Exchange Commission;
(i) change made by any Seller Group Person in its
Tax or financial accounting or any Tax election;
(j) grant of any Lien with respect to the Purchased
Assets;
(k) transfer or reclassification for accounting
purposes of any Assets other than arm's-length sales, leases, or
dispositions in the Ordinary Course of the Business;
(l) material modification or termination of any
Contract with an aggregate contract value of $50,000 or any
material term thereof;
(m) lease or acquisition of any capital assets
included in the Purchased Assets with a value greater than $10,000
per item, unless Buyer has consented to such lease or acquisition;
(n) in connection with the Business, loan or advance
to any Person except for advances not material in amount made in
the Ordinary Course of the Business to Employees;
(o) management of current assets and current
liabilities constituting Working Capital (and the level thereof)
in a manner inconsistent with current practices or the preparation
of the Balance Sheet; or
(p) commitment or agreement by any Seller Group
Person to do any of the foregoing items (d) through (o).
3.5 Inventories. All finished goods held by any Seller
Group Person at any location are merchantable in the Ordinary
Course of the Business, except to the extent of any reserve
therefor on the Balance Sheet, and all inventories held by any
Seller Group Person at any location are (i) valued at the lower of
cost or market (cost being determined by the FIFO accounting
method) in the same manner as recorded on the Balance Sheet and
(ii) written off to the extent physically damaged, previously used,
obsolete, discontinued, excess or old. Excess inventory
shall mean (i) with respect to products in existence more than 12
months, the amount of inventory in excess of a 12 month supply
based on actual sales of such products over the last 12 months, and
(ii) with respect to products introduced within the last 12 months,
the amount of such inventory in excess of a 24 month supply based
upon forecasted sales, which forecast has been prepared by the
Seller in a commercially reasonable manner. Old inventory shall
mean any item of inventory which has been held by Seller for more
than 24 months. Except as set forth on Schedule 3.5, no Seller
Group Person holds in connection with the Business any Purchased
Assets on consignment or has title to or ownership of any Purchased
Assets in the possession of others.
3.6 Accounts and Notes Receivable. Set forth on Schedule
3.6(a) hereto are all accounts and notes receivable of all Seller
Group Persons and an aging schedule related thereto, each as of
September 30, 1996, June 30, 1996 and December 31, 1995. Such
accounts and notes receivable are, and any accounts and notes
receivable arising between such date and the Closing Date shall
be, valid, genuine and subsisting, and except as set forth on
Schedule 3.6(b), all such accounts and notes receivable arose or
will have arisen in the Ordinary Course of the Business. Such
accounts and notes receivable are not, and will not be on the
Closing Date, subject to any defense, set-off, counterclaims or
Lien, except for customer disputes in the Ordinary Course of the
Business in respect to which adequate reserves are maintained on
the Business books and records. Except to the extent of any
reserve therefor on the Financial Statements or paid in full prior
to Closing, all accounts and notes receivable are and will be
current and accounted for in accordance with GAAP.
3.7 Undisclosed Liabilities. To the knowledge of each
Seller Group Person, no Seller Group Person has, in connection with
the Business, any Liabilities whatsoever, asserted or unasserted,
liquidated or unliquidated, accrued, absolute, contingent, or
otherwise, and there is no basis for any claim against any Seller
Group Person in connection with the Business for any such Liability
except (a) to the extent set forth and used in determining the
consolidated net worth of the Business on the Balance Sheet, (b) to
the extent set forth on Schedule 3.7, or (c) Liabilities incurred
in the Ordinary Course of the Business since the Balance Sheet
Date, none of which will, or could, have an adverse effect upon the
Business Condition of the Business.
3.8 Taxes.
(a) All Returns required to be filed by any Seller
Group Person in connection with the Business or by any Purchased
Entity on or prior to the Closing Date with respect to Taxes have
been or will be timely filed.
(b) All amounts shown on each of such Returns have
been paid or will be paid when due.
(c) Any Taxes which are to be assumed by Buyer in
respect of the Purchased Assets which are attributable to the
Seller Group for either its operations on or before the Closing
Date, or attributable to the Agreement, which are not yet due and
owing, but which will be due within 12 months of the Closing Date,
will be adequately reflected on the Closing Balance Sheet as a
Current Liability for Taxes, other than increases after the Closing
Date in ad valorem real estate taxes assessed against the Real
Property in accordance with past practice. All other liabilities
for Taxes (non-current in nature) will be adequately reflected on
the Closing Balance Sheet as a reserve for Taxes.
(d) There are no grounds for the assertion or
assessment of any Taxes against the Purchased Assets or the
Business other than those reflected or reserved against on the
Closing Balance Sheet.
(e) Neither the Purchased Assets nor the Business
or will be encumbered by any Liens arising out of any unpaid Taxes
and there are no grounds for the assertion or assessment of any
Liens against the Purchased Assets or the Business in respect of
any Taxes (other than Liens for Taxes if payment thereof is not
yet required, and which are set forth on Schedule 3.8(e) hereto).
(f) The transactions contemplated by this Agreement
will not give rise to (i) the creation of any Liens against the
Purchased Assets or the Business in respect of any Taxes or (ii)
the assertion of any additional Taxes against the Purchased Assets
or the Business.
(g) Except as set forth on Schedule 3.8(g), there
is no action or proceeding or unresolved claim for assessment or
collection, pending or threatened, by, or present or expected
dispute with, any Government authority for assessment or collection
from any Seller Group Person of any Taxes of any nature affecting
the Purchased Assets or the Business.
(h) There is no extension or waiver of the period
for assertion of any Taxes against any Seller Group Person
affecting the Purchased Assets or the Business.
(i) Except as set forth on Schedule 3.8(i), no Seller
Group Person is a foreign person within the meaning of Section
1445(f)(3) of the Code.
(j) None of the Purchased Assets or Assumed
Liabilities is subject to, or constitute, a safe harbor lease
within the meaning of Section 168(f)(8) of the Code.
(k) None of the Purchased Assets have been financed
with, or directly or indirectly secures, any industrial revenue
bonds or debt, the interest on which is tax exempt under Section
103(a) of the Code.
(l) Except as set forth on Schedule 3.8(l), none of
the Purchased Assets, Contracts, or Assumed Liabilities will
constitute a partnership, joint venture, or other arrangement or
contract that could be treated as a partnership for federal income
tax purposes.
(m) Except as set forth on Schedule 3.8(m), none of
the Purchased Assets consist of stock in a subsidiary of any Seller
Group Person.
(n) None of the Purchased Assets is tax-exempt use
property within the meaning of Section 168(h) of the Code.
None of the Purchased Assets is subject to a tax
indemnification agreement.
None of the exemptions, grants or tax holidays
with respect to Taxes or tax credits, as disclosed in the
Confidential Memorandum, have expired or have been made null and
void or otherwise invalid by any action or lack of action on the
part of the Seller Group. The Seller Group will take no action
nor make any election which by so doing would alter the status of
such exemption, grant, or tax holiday, other than the transfer of
the Puerto Rico Grant. To the knowledge of any Seller Group
Person, the consummation of the transactions will not result in
the alteration of the status of such exemption, grant, or tax
holiday, other than the transfer of the Puerto Rico Grant. Seller
further agrees to perform any reasonable act or acts necessary to
preserve such exemptions, grants and tax holidays so that said
benefits will survive the Closing.
None of the Purchased Assets includes any
deferred tax asset.
3.9 Real Property Owned.
(a) Set forth on Schedule 3.9(a) hereto is a legal
description of each parcel of Real Property, a description of the
title insurance policy or other evidence of title issued with
respect thereto and a description of the type of use of each such
parcel. Except for (i) current Taxes or assessments due but not
yet payable and (ii) Liens of record set forth on Schedule 3.9(a),
none of which is substantial in character or amount and none of
which interferes with the present use of the Real Property in any
material way ( Permitted Liens ), a Seller Group Person has good
and marketable title to the Real Property free and clear of all
Liens and there exists no restriction on the use or transfer of
the Real Property. No Seller Group Person has in connection with
the Business any interest in or any right or obligation to acquire
any interest in any parcel of real property other than those
described on Schedule 3.9(a).
(b) All improvements located on, and the use
presently being made of, the Real Property comply, in all material
respects, with all applicable zoning and building codes, ordinances
and regulations and all applicable fire, environmental,
occupational safety and health standards and similar standards
established by Law and, to the knowledge of each Seller Group
Person, the same use thereof by Buyer will not result in any
violation of any such code, ordinance, regulation or standard.
The present use and operation of the Real Property does not
constitute a non-conforming use and is not subject to a variance.
Except as set forth on Schedule 3.9(b), to the knowledge of each
Seller Group Person, there is no proposed, pending or threatened
change in any such code, ordinance, regulation or standard which
would adversely affect the Business of the use of the Purchased
Assets.
(c) At and after the Closing, a Buyer Company or a
Purchased Entity shall have the right to maintain or use such
space, facilities or appurtenances outside the building lines,
whether on, over or under the ground, and to conduct such
activities thereon as maintained, used or conducted by any Seller
Group Person in connection with the Business on the date hereof
and the Closing Date and such right is not subject to revocation.
At and after the Closing, a Buyer Company or a Purchased Entity
shall have all rights, easements and agreements necessary for the
use and maintenance of water, gas, electric, telephone, sewer or
other utility pipelines, poles, wires, conduits or other like
facilities, and appurtenances thereto, over, across and under the
Real Property. No proceeding is pending or, to the knowledge of
each Seller Group Persons, threatened which could adversely affect
the zoning classification of the Real Property.
(d) There is no unpaid property Tax, levy or
assessment against the Real Property not reflected on the Balance
Sheet, nor is there pending or, to the knowledge of each Seller
Group Person, threatened any condemnation proceeding against the
Real Property or any portion thereof, other than increases on or
after the Closing in ad valorem taxes in accordance with past
practice. The Real Property consists of one or more legally
subdivided parcels, and the sale thereof as contemplated herein
conforms to and complies with all subdivision, land use and
Environmental Laws. No part of any improvements on the Real
Property encroaches upon any property adjacent thereto or upon any
easement, nor is there any encroachment or overlap on to the Real
Property. Except as set forth as Schedule 3.9(d), to the knowledge
of each Seller Group Person, the Real Property is not located
within an area of special risk or hazard with respect to
earthquake, flood or other natural disaster, and the Real Property
is not located within any flood plain or subject to any similar
type of restrictions for which permits or licenses are necessary
to the use thereof. Other than as described in Schedule 3.38, no
Seller Group Person has dealt with any broker, finder or other
person in connection with the sale of the Real Property in any
manner that might give rise to any claim for commissions against
any Buyer Company or Purchased Entity or any Lien against the Real
Property.
(e) Except as set forth on Schedule 3.9(e), to the
knowledge of each Seller Group Person, there is no condition
affecting the Real Property or the improvements located thereon
which requires repair or correction to restore the same to
reasonable operating condition. Set forth on Schedule 3.9(e) are
copies of documents, reports and agreements relating to any such
conditions. No assessments for public improvements have been made
in respect of the Real Property which are unpaid. Except as
otherwise described on Schedule 3.9(e): (i) there is no pending
or, to the knowledge of each Seller Group Person, threatened
condemnation proceeding, administrative action or judicial
proceeding of any type relating to the Real Property or other
matters affecting adversely the current use, occupancy or value of
the Real Property; (ii) the Real Property does not serve any
adjoining property for any purpose inconsistent with the use of
the Real Property; (iii) there are no leases, subleases, licenses,
concessions or other agreements, written or oral, granting to any
person or entity the right to use or occupy any portion of the Real
Property; (iv) all water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and other
utilities and systems serving the Real Property are sufficient to
enable the continued operation of the Real Property as currently
operated and as proposed to be operated; (v) all certificates of
occupancy, permits, licenses, approvals and other authorizations
required in connection with the past, present and proposed
operation of its business on the Real Property have been lawfully
issued to a Seller Group Person and are, as of the date hereof,
and will be following the consummation of the transactions
contemplated hereby, in full force and effect; and (vi) all Real
Property has access to public roads and utilities necessary to
conduct the Business at such Real Property.
3.10 Personal Property and Capital Stock Owned
(a) Except as set forth on Schedule 3.10(a) hereto, the
Seller Group Persons collectively have good and marketable title
to all personal property included in the Purchased Assets,
including in each case all personal property reflected on the
Balance Sheet or acquired after the date thereof (except any
personal property subsequently sold in the Ordinary Course of the
Business), free and clear of all Liens, and there exists no
restriction on the use or transfer of such property.
(b) The Seller Group Persons collectively are the sole
owners of record and beneficial owners of shares of capital stock
of the Purchased Entities (the Shares ). The number, type and
record and beneficial owners of the Shares are more fully described
on Schedule 3.10(b) and such Shares are owned by the Seller Group
Persons free and clear of all security interests, claims and
restrictions. The Shares constitute 100 percent of the issued and
outstanding capital stock of the Purchased Entities, and are all
validly issued, fully paid and non-assessable.
3.11 Real and Personal Property Leased from Seller Group
Persons. Set forth on Schedule 3.11 hereto is a description of
each lease under which a Seller Group Person is the lessor of any
real or personal property in connection with the Business. Seller
has delivered to Buyer a true, correct and complete copy of each
lease identified on Schedule 3.11. The premises or property
described in such leases are presently occupied or used by the
respective lessees under the terms of such leases. All rentals or
other payments due under such leases have been paid and there
exists no default under the terms of any of such leases and no
event has occurred which, upon passage of time or the giving of
notice, or both, would result in any event of default or prevent
such Seller Group Person from exercising and obtaining the benefits
of any rights contained therein. Except as set forth on Schedule
3.11, no consent is necessary for the assignment or conveyance of
such leases to the Buyer Companies, and upon the Closing a Buyer
Company or a Purchased Entity will have all right, title and
interest of the lessor under the terms of such leases, free of all
Liens.
3.12 Real and Personal Property Leased to a Seller Group
Person. Set forth on Schedule 3.12(a) hereto is a description of
each lease involving annual rental payments of $10,000 or more
under which a Seller Group Person is the lessee of any real
property in connection with the Business, and on Schedule 3.12(b)
hereto is a description of each lease under which a Seller Group
Person is the lessee of any personal property in connection with
the Business. Seller has delivered to Buyer a true, correct and
complete copy of each lease identified on Schedules 3.12(a) and
3.12(b). The premises or property described in said leases are
presently occupied or used by a Seller Group Person as lessee
under the terms of such leases. Except as set forth on
Schedules 3.12(a) and 3.12(b), all rentals due under such leases
have been paid and there exists no default under the terms of any
such leases and no event has occurred which, upon passage of time
or the giving of notice, or both, would result in any event of
default or prevent such Seller Group Person from exercising and
obtaining the benefits of any rights or options contained therein.
The Seller Group Persons collectively have all right, title and
interest of the lessee under the terms of said leases, free of all
Liens and all such leases are valid and in full force and effect.
Except as set forth on Schedules 3.12(a) and 3.12(b), no consent
is necessary for the assignment to the Buyer Companies of such
leases under which a Seller Group Person is lessee. Upon the
Closing, a Buyer Company or a Purchased Entity will have all right,
title and interest of the lessee under the terms of such leases,
free of all Liens. There is no default or basis for acceleration
or termination under, nor has any event occurred nor does any
condition exist which, with the passage of time or the giving of
notice, or both, would constitute a default or basis for
acceleration under any underlying lease, agreement, mortgage or
deed of trust which default or basis for acceleration would
adversely affect any lease described on Schedules 3.12(a) or
3.12(b) or the property or use of the property covered by such
lease. Subject to any consent required of a lessor as set forth
on Schedules 3.12(a) and 3.12(b), there will be no default or basis
for acceleration under any such underlying lease, agreement,
mortgage or deed of trust as a result of the transactions provided
for in this Agreement.
3.13 Intellectual Property.
(a) Schedule 3.13(a) contains a true, complete and
accurate list of all the Intellectual Property. Schedule 3.13(a)
accurately identifies, where appropriate, one or more of the
following, by country, for each item of the Intellectual Property:
filing date, issue date, classification of invention or goods
covered, licensor, license date and licensed subject matter.
Schedule 3.13(a) contains a complete and accurate list of all
licenses and other rights granted by any Seller Group Person to
any third party with respect to any item of the Intellectual
Property. True, complete and correct copies of the forms of such
customer licenses are included as part of Schedule 3.13(a).
(b) Seller represents and warrants as follows: (i)
the Intellectual Property was validly issued and, except as set
forth on Schedule 3.13(b), no Seller Group Person has received
notice of the invalidity or unenforceability of any Intellectual
Property; (ii) there was no inequitable conduct in obtaining any
patent owned by a Seller Group Company and included in the
Intellectual Property; (iii) the Intellectual Property encompasses
all proprietary rights necessary for the conduct of the Business
as presently conducted or proposed to be conducted (in each case
free and clear of all Liens); (iv) each Seller Group Person has
taken all commercially reasonable actions necessary to maintain
and protect the Intellectual Property; (v) to the knowledge of each
Seller Group Person, the owners of the Intellectual Property
licensed to any Seller Group Person have taken all actions
necessary to maintain and protect the Intellectual Property subject
to such licenses; (vi) there has been no claim made against any
Seller Group Person asserting the invalidity, misuse or
unenforceability of any of the Intellectual Property or challenging
such Seller Group Person's right to use or ownership of any of the
Intellectual Property, and, to the knowledge of each Seller Group
Person, there are no grounds for any such claim or challenge; (vii)
to the knowledge of each Seller Group Person, there is and has been
no infringement or misappropriation of any of the Intellectual
Property; (viii) the conduct of the Business has not infringed or
misappropriated, and does not infringe or misappropriate, any
intellectual property or proprietary right of any other entity;
(ix) no loss of any of the Intellectual Property is presently
threatened or pending; and (x) the consummation of the transactions
contemplated by this Agreement will not alter, impair or extinguish
any of the Intellectual Property.
3.14 Necessary Property and Transfer of Purchased Assets.
The Purchased Assets and the Assumed Liabilities constitute all of
the Seller Group Persons' property and property rights now
necessary for the conduct of the Business in the manner and to the
extent presently conducted by the Seller Group Persons. The Assets
constitute all of the Seller Group Persons' property and property
rights now used for the conduct of the Business in the manner and
to the extent presently conducted by the Seller Group Persons. No
such assets or property are in the possession of others and, in
connection with the Business, the Seller Group Persons hold no
property on consignment. Except as set forth on Schedule 3.14
hereto, no consent is necessary to, and there exists no restriction
on, the transfer of any of the Purchased Assets or the assignment
of the Assumed Liabilities to the Buyer Companies. There exists
no condition, restriction or reservation affecting the title to or
utility of the Purchased Assets or Assumed Liabilities which would
prevent the Buyer Companies from occupying or utilizing the
Purchased Assets or enforcing the rights under the Assumed
Liabilities, or any part thereof, to the same full extent that a
Seller Group Person might continue to do so if the sale and
transfer contemplated hereby did not take place. Upon the Closing,
good and marketable title to the Purchased Assets attributable to
the Non-Purchased Entities and the rights under the Assumed
Liabilities shall be vested in the Buyer Companies, and good and
marketable title to the Purchased Assets attributable to the
Purchased Entities shall remain vested in the Purchased Entities,
in all cases free and clear of all Liens.
3.15 Use and Condition of Property. The Purchased Assets
include sufficient Assets in good operating condition and repair
as are required for the operation of the Business as presently
conducted, and conform, in all material respects, to all applicable
Laws, and no notice of any violation of any Law relating to any of
the Purchased Assets has been received by Seller or any other
Seller Group Person except such as have been fully complied with.
There is no pending or, to the knowledge of each Seller Group
Person, threatened condemnation proceeding or similar action
affecting the Purchased Assets or with respect to any streets or
public amenities appurtenant thereto or in the vicinity thereof
which would adversely affect the Business or the use of the
Purchased Assets.
3.16 Licenses and Permits. Set forth on Schedule 3.16
hereto is a description of each license or permit required for the
conduct of the Business together with the name of the Government
agency or entity issuing such license or permit. Such licenses
and permits are valid and in full force and effect. Except as
noted on Schedule 3.16, such licenses and permits are freely
transferable by the applicable Seller Group Person, and upon
Closing the Buyer Companies will have all right, title and interest
of the holder thereof.
3.17 Contracts--Disclosure. Except as set forth in
Schedule 3.17 there is not outstanding:
(a) any single Contract providing for an expenditure
by any Seller Group Person in excess of $25,000, Contracts with the
same or affiliated vendor(s) providing for an expenditure by any
Seller Group Person in excess of $25,000 or any Contracts in the
aggregate providing for expenditures by any Seller Group Persons
in excess of $50,000, for the purchase of any real property,
machinery, equipment or other items which are in the nature of
capital investment;
(b) any single Contract providing for an expenditure
by any Seller Group Person in excess of $50,000, Contracts with the
same or affiliated vendor(s) providing for an expenditure by any
Seller Group Person in excess of $50,000, or Contracts in the
aggregate providing for expenditures by any Seller Group Persons
in excess of $100,000, for the purchase of raw materials, supplies,
component parts or any other items or services;
(c) any Contract to sell products or to provide
services to third Persons which (i) is at a price which would
result in a loss at the gross profit line on the sale of such
products or providing of such services, (ii) is pursuant to terms
or conditions which a Seller Group Person cannot reasonably expect
to satisfy or fulfill in their entirety, or (iii) involves more
than $50,000 or which, together with all other Contracts to or with
the same party or affiliated parties involves more than $50,000;
(d) any Contract for materials, supplies, component
parts or other items or services in excess of the normal, ordinary,
usual and current requirements of the Business or at a price in
excess of the current reasonable market price;
(e) in connection with the Business, any revocable
or irrevocable guaranty, indemnity, or power of attorney;
(f) in connection with the Business, any evidence
of indebtedness, loan agreement, indenture, promissory note, letter
of credit, foreign exchange contract, conditional sales agreement
or other similar type of agreement except as provided under the
credit facilities listed as Exhibit 10.18, 10.19 and 10.20 of the
Seller s Form 10-K for the period ended December 31, 1995 as filed
with the Securities and Exchange Commission;
(g) any Contract which involves (i) a sharing of
profits, (ii) future payments of $25,000 or more per annum to other
Persons, or (iii) any joint venture, partnership or similar
arrangement;
(h) any Contract involving any sales agency, sales
representation, distributorship or franchise;
(i) any Contract containing covenants limiting the
freedom of any Seller Group Person, in connection with the
Business, to compete in any line of business or with any Person or
in any area;
(j) any Contract not made in the Ordinary Course of
the Business; or
any Government Contract;
any Contract between any Seller Group Persons;
any other Contract which is material to the
Business which is not cancelable without penalty on thirty (30)
days notice or less and which is not set forth on another Schedule.
3.18 Contracts--Validity, Etc.
(a) Except as otherwise disclosed on Schedule 3.17,
each Contract on Schedule 3.17 and any other Contract which is
material to the Business is a valid and binding obligation of the
parties thereto, enforceable in accordance with its terms, and in
full force and effect.
(b) No Seller Group Person and, to the knowledge of
each Seller Group Person, no other Person which is party to any
Contract is in breach or violation thereof or default thereunder.
To the knowledge of each Seller Group Person, no event has occurred
which, through the passage of time or the giving of notice, or
both, would constitute, and neither the execution of this Agreement
nor the Closing do or will constitute or result in, a breach or
violation of or default under any Contract, or would cause the
acceleration of any obligation of any party thereto or the creation
of a Lien upon any Purchased Asset.
Each Contract of a Non-Purchased Entity relating
to the Business will be duly assigned to Buyer on the Closing Date
and upon such assignment, Buyer will acquire all right, title and
interest of the Seller Group Person in and to such Contract and
will be substituted for such Seller Group Person under the terms
of such Contract. Except as set forth on Schedule 3.14, no consent
is required for such assignment.
Except as set forth on Schedule 3.18(d), no
Contract with any Purchased Entity contains any change of control
provisions.
3.19 No Breach of Law or Governing Documents. To the
knowledge of each Seller Group Person, each such Person, in
connection with the Business, and each Purchased Entity has
complied with and is not in default under or in breach or violation
of any applicable Law, or the provisions of any franchise or
license. No Seller Group Person is in default under or in breach
or violation of any provision of its articles or certificate of
incorporation or association or its bylaws. No Seller Group Person
has received notice alleging, and neither the execution of this
Agreement nor the Closing do or will constitute or result in, any
default, breach or violation identified in this Section 3.19.
Except as required under the HSR Act and except with respect to the
Puerto Rico Grant, no Government permits or consents are necessary
to effect the transactions contemplated hereby.
3.20 Litigation and Arbitration. Except as set forth on
Schedule 3.20(a) hereto, there is no suit, claim, action or
proceeding now pending or, to the knowledge of each Seller Group
Person, threatened before any court, grand jury, administrative or
regulatory body, Government agency, arbitration or mediation panel
or similar body, nor, to the knowledge or each Seller Group Person,
are there any grounds therefor, to which a Seller Group Person, in
connection with the Business, or a Purchased Entity is a party or
which may result in any judgment, order, decree, liability, award
or other determination which will, or could, have any material
adverse effect upon any Purchased Asset or the assets of any
Purchased Entity or upon the Business Condition of the Business.
Except as set forth on Schedule 3.20(b) hereto, no such judgment,
order, decree or award has been entered against any Seller Group
Person nor has any such liability been incurred which has, or could
have, such effect. There is no claim, action or proceeding now
pending or, to the knowledge of each Seller Group Person,
threatened before any court, grand jury, administrative or
regulatory body, Government agency, arbitration or mediation panel
or similar body which will, or could, prevent or hamper the
consummation of the transactions contemplated by this Agreement,
and none of the Seller Group Persons has been, nor, to the
knowledge or each Seller Group Person, been threatened to be
subject to, and, to the knowledge of each Seller Group Person,
there are no grounds for, any suit, claim, litigation, proceeding
(administrative, judicial, or in arbitration, mediation or
alternative dispute resolution), Government or grand jury
investigation, or other action or order, writ, injunction, or
decree of any court or other Government entity relating to personal
injury, death, or property or economic damage arising from products
of the Business entity.
3.21 Officers, Directors, Employees and Consultants. Set
forth on Schedule 3.21 hereto is a complete list of
(a) all directors of each Purchased Entity;
(b) all officers (with office held) of each Purchased
Entity;
(c) all Employees of each Seller Group Person in
connection with the Business and of each Purchased Entity who earn
total compensation $50,000 or more per year; and
(d) all consultants to each Seller Group Person in
connection with the Business and of each Purchased Entity;
together, in each case, with the current rate of compensation
payable to each.
3.22 Indebtedness to and from Officers, Directors and
Others. Except as set forth on Schedule 3.22, (a) no Seller Group
Person is indebted to any shareholder, director or officer of any
Seller Company, or any Employee or agent of any Seller Group
Person, except for amounts due as normal salaries, wages and
bonuses and in reimbursement of ordinary expenses on a current
basis and (b) no shareholder, director or officer of any Seller
Company, or Employee or agent of any Seller Group Person, is
indebted to any Seller Group Person in connection with the
Business, except for advancements for ordinary business expenses
in a normal amount.
3.23 Outside Financial Interests. Except as identified on
Schedule 3.23 hereto, no officer or director of any Seller Company
nor the owner of more than 5% of the capital stock of any Seller
Company has any direct or indirect financial interest in any
competitor with or supplier or customer of the Business; provided,
however, that for this purpose ownership of corporate securities
having no more than 2% of the outstanding voting power of any
competitor, supplier or customer which securities are listed on
any national securities exchange or authorized for quotation on
the Automated Quotations System of the National Association of
Securities Dealers, Inc. shall not be deemed to be such a financial
interest provided such Person has no other connection or
relationship with such competitor, supplier or customer.
3.24 Payments, Compensation and Perquisites of Agents and
Employees. All payments to agents, consultants and others made by
any Seller Group Person in connection with the Business have been
in payment of bona fide fees and commissions and not as bribes,
illegal or improper payments. Each of the Seller Group Persons
have properly and accurately reflected on its books and records
all compensation paid to and perquisites provided to or on behalf
of its consultants, agents and Employees. Such compensation and
perquisites have been properly and accurately disclosed in the
financial statements, proxy statements and other public or private
reports, records or filings of any Seller Group Person to the
extent required by Law.
3.25 Labor Agreements and Employment Agreements. Except
as set forth on Schedule 3.25, no Seller Group Person is, in
connection with the Business, a party to (a) any union collective
bargaining, works council, or similar agreement or arrangement,
(b) any retainer, consulting, or employment agreement or (c) any
other agreement with an Employee not otherwise required to be set
forth on Schedule 3.25 or 3.26. True, correct and complete copies
of all documents creating or evidencing any agreement or
arrangement listed on Schedule 3.25 have been furnished to Buyer.
There are no negotiations, written demands or proposals which are
pending which concern matters now covered, or that would be
covered, by the type of agreements or arrangements listed in this
Section or which relate to Employee Plan/Agreements. The Seller
Group Persons have at all times, in all material respects, operated
the Business and conducted their respective employment practices
in accordance with the terms of the agreements and arrangements
listed on Schedule 3.25.
3.26 Employee Benefit Plans.
(a) Disclosure. Schedule 3.26 describes all pension,
thrift, savings, profit sharing, retirement, incentive bonus or
other bonus, medical, dental, life, accident insurance, benefit,
employee welfare, disability, group or other insurance, stock
appreciation, stock option, executive or deferred compensation,
health, hospitalization and other similar fringe or employee
benefit plans, programs and arrangements, whether or not written,
and any, whether written or unwritten, golden parachute
agreements, severance agreements or plans, vacation and sick leave
plans, programs, arrangements and policies, including, without
limitation, all employee benefit plans (as defined in Section
3(3) of ERISA), all employee manuals, and all written statements
of policies relating to employment, which are provided to, for the
benefit of, or relate to, any Employees. The items described in
the foregoing sentence are hereinafter sometimes referred to
collectively as Employee Plan/Agreements, and each individually
as an Employee Plan/Agreement. True, correct and complete copies
of all documents creating or evidencing each of the Employee
Plan/Agreements have been furnished to Buyer. No Employee
Plan/Agreement is a multiemployer plan (as defined in Section 4001
of ERISA), and none of the Seller Group Persons have contributed
nor been obligated to contribute to any such multiemployer plan.
Seller has furnished Buyer with respect to each Employee
Plan/Agreement the three most recent annual reports prepared in
connection therewith (Form 5500 including all schedules thereto)
or, if an Employee Plan/Agreement has been in existence for less
than three years, the annual report prepared for each year such
Employee Plan/Agreement has been in existence.
(b) Prohibited Transactions and Reportable Events.
There have been no prohibited transactions within the meaning of
Section 406 or 407 of ERISA or Section 4975 of the Code for which
a statutory or administrative exemption does not exist with respect
to any Employee Plan/Agreement. No reportable event within the
meaning of Section 4043 of ERISA (other than those for which
reporting is waived) has occurred with respect to any Employee
Plan/Agreement.
(c) Payments and Compliance. With respect to each
Employee Plan/Agreement (A) all payments due from any Seller Group
Person to date have been made and all amounts properly accrued to
date as liabilities of Seller which have not been paid have been
properly recorded on the books of Seller and are reflected in
Seller's most recent balance sheet; (B) all reports and information
relating to each such Employee Plan/Agreement required to be
disclosed or provided to participants or their beneficiaries have
been timely disclosed or provided; and (C) each such Employee
Plan/Agreement which is intended to qualify under Section 401 of
the Code has received a favorable determination letter from the
Internal Revenue Service with respect to such qualification, its
related trust has been determined to be exempt from taxation under
Section 501(a) of the Code, and, to the knowledge of each Seller
Group Person, nothing has occurred since the date of such letter
that would adversely affect such qualification or exemption. Each
trust created under any such Employee Plan/Arrangement is exempt
from tax under Section 501(a) of the Code and has been so exempt
during the period from creation to date. Seller has furnished
Buyer with the most recent determination letters of the Internal
Revenue Service relating to each such Employee Plan/Arrangement.
Each Employee Plan/Arrangement has been maintained in compliance
with its terms and with the requirements prescribed by any and all
applicable Laws, including but not limited to ERISA and the Code.
(d) Post-Retirement Benefits. Except as specified
on Schedule 3.26, no Employee Plan/Agreement provides benefits,
including, without limitation, death or medical benefits (whether
or not insured) with respect to current or former employees of any
Seller Group Person beyond their retirement or other termination
of service other than (A) continuation coverage mandated by Section
4980B(f) of the Code ( Continuation Coverage ), (B) death or
pension benefits under any Employee Plan/Agreement that is an
employee pension benefit plan, (C) deferred compensation benefits
accrued as liabilities on the books of Seller (including Seller's
most recent balance sheet), (D) disability benefits under any
Employee Plan/Agreement that is an employee welfare benefit plan
and which have been fully provided for by insurance or otherwise,
or (E) benefits in the nature of severance pay. No tax under
Section 4980B of the Code has been incurred in respect of an
Employee Plan/Agreement that is a group health plan, as defined in
Section 5000(b)(1) of the Code.
(e) No Triggering of Obligations. Except as
specified on Schedule 3.26 other than by reason of actions taken
by Buyer following the Closing, the consummation of the transaction
contemplated by this Agreement will not (A) entitle any current or
former employee of any Seller Group Person to severance pay,
unemployment compensation or any other payment, except as expressly
provided in this Agreement, (B) accelerate the time of payment or
vesting, or increase the amount of compensation due to any such
employee or former employee, (C) result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of
the Code for which an exemption is not available, (D) give rise to
the payment of any amount that would not be deductible pursuant to
the terms of Section 280G of the Code or (E) give rise to a
reportable event described in Section 4043 of ERISA.
(f) International Plans. Except as specified on
Schedule 3.26 no Seller Group Person maintains any Employee
Plan/Agreement covering any Employee outside of the United States
and no Seller Group Person has ever contributed to or been
obligated to contribute to any such Employee Plan/Agreement. Each
such Employee Plan/Agreement is fully funded to the extent required
by all applicable Law and has obtained all appropriate tax
qualifications.
3.27 Terminated Plans. Set forth on Schedule 3.27 hereto
are all employee benefit plans related to the Business which any
Seller Group Person has terminated or taken action to terminate
since January 1, 1992. Such terminations have been carried out in
all material respects in accordance with all provisions of Law,
including without limitation all applicable provisions of the Code
and ERISA and all required disclosure to the PBGC. Except as
described on Schedule 3.27 hereto, no Seller Group Person has any
liability to any Person or entity, including without limitation
the PBGC, any other Government agency or any participant in or
beneficiary of any such plan, nor is any Seller Group Person
liable for any excise, income or other tax or penalty as a result
of such termination. Seller has obtained a favorable determination
letter from the IRS with respect to the termination of each of such
plans in the United States (complete and correct copies of which
have been delivered to Buyer). The notices of sufficiency and
favorable determination letters were received after full and
accurate disclosure of all material facts to the IRS.
3.28 Overtime, Back Wages, Vacation and Minimum Wages. No
Employee of any Seller Group Person in connection with the Business
has any claim against such Seller Group Person (whether under any
Law, Contract, or otherwise) on account of or for (a) overtime pay,
other than overtime pay for the current payroll period, (b) wages
or salary (excluding current bonus, accruals and amounts accruing
under pension and profit-sharing Plans) for any period other than
the current payroll period, (c) vacation, time off or pay in lieu
of vacation or time off, other than that earned in respect of the
current fiscal year, (d) any violation of any Law relating to
minimum wages, child labor or maximum hours of work.
3.29 Discrimination, Workers Compensation and Occupational
Safety and Health. Except as set forth on Schedule 3.29(a), no
Person or party (including, but not limited to, Government agencies
of any kind) has any claim, notice of claim, charge, lawsuit or
basis for any thereof, against any Seller Group Person in
connection with the Business arising out of any Law relating to
discrimination in employment, employment practices (including
wrongful termination), or occupational safety and health standards,
and no such claim, notice of claim, charge or lawsuit is pending
or, to the knowledge of each Seller Group Person, threatened
against any Seller Group Person. Since January 1, 1993, no Seller
Group Person has received any notice in connection with the
Business from any Person alleging a violation of any such Law or
occupational safety or health standards. No Seller Group Person
has any outstanding Contracts or obligations to indemnify any
person for violation of the Laws and standards set forth in this
Section. No Seller Group Person has failed to file any required
EEO-1 Reports and the Seller Group Persons are in compliance with
Executive Order 11246. Except as set forth on Schedule 3.29(b),
there are no pending workers compensation claims involving any
Seller Group Person and there have never been any workers
compensation claims against any Seller Group Person relating to the
use or existence of asbestos in any of such Seller Group Person's
products. Seller has deliver to Buyer a true, correct and complete
list of all workers compensation claims made over the three years
preceding the date hereof.
3.30 Alien Employment Eligibility. To the knowledge of each
Seller Group Person, with respect to each Person employed by any
Seller Group Person in the Business on or after May 1, 1987, and
who actually commenced such employment on or after November 6,
1986, (a) such Seller Group Person hired such Person in compliance
with the Immigration Reform and Control Act of 1986 and the rules
and regulations thereunder ( IRCA ) and (b) such Seller Group
Person and each Affiliate to such Seller Group Person has complied
with all recordkeeping and other regulatory requirements under
IRCA.
3.31 Labor Disputes; Unfair Labor Practices. Except as set
forth on Schedule 3.31, there is neither pending nor, to the
knowledge of each Seller Group Person, threatened any labor
dispute, strike or work stoppage which affects or which reasonably
may be expected to affect the Business Condition of the Business.
Except as set forth on Schedule 3.31, to the knowledge of each
Seller Group Person, since January 1, 1993, no Seller Group Person
nor any of their respective agents, representatives or employees
has committed any unfair labor practice, as defined in the National
Labor Relations Act of 1947, as amended. There is not now pending
or threatened any charge or complaint against any Seller Group
Person by the National Labor Relations Board, any state or local
labor or employment agency or any representative thereof, and the
execution of this Agreement and the consummation of the transaction
contemplated by this Agreement will not result in any such charge
or complaint. Since January 1, 1993, there have been no union
organizing attempts with respect to the Business.
3.32 Insurance Policies. Set forth on Schedule 3.32 hereto
is a list of all insurance policies and bonds in force covering or
relating to the Purchased Assets or the Business, including without
limitation all properties, operations or personnel of the Seller
Group Persons related to the Business and brokers used in the
placement of such policies and bonds. The Seller maintains
occurrence-based product liability insurance with respect to the
Business with not less than $5,000,000.00 of coverage (the Product
Liability Insurance ) and the premiums on the Product Liability
Insurance have been paid to date and will be paid by the Seller,
and such insurance is and will be effective for all periods up to
and including the Closing Date.
3.33 Guarantees. Except as set forth on Schedule 3.33
hereto, no Seller Group Person in connection with the Business is
a guarantor, indemnitor, surety or accommodation party or otherwise
liable for any indebtedness of any other Person, firm or
corporation except as endorser of checks received and deposited in
the Ordinary Course of the Business.
3.34 Product Warranties. Set forth on Schedule 3.34 hereto
are the standard forms of product warranties and guarantees used
in the Business, and copies of all other material product
warranties and guarantees, and a summary of all oral product
warranties used by any of the Seller Group Persons if different
from the foregoing. Except as described on Schedules 3.34 and/or
3.35 since January 1, 1992 no product warranty or similar claims
have been made against any Seller Group Person in connection with
the Business except routine claims as to which, in the aggregate,
losses and expenses in respect of repair or replacement of
merchandise do not and will not exceed the warranty expenses and
warranty reserves reflected in the Other Financial Statements or
the Closing Balance Sheet. No Person or party (including, but not
limited to, Government agencies of any kind) has any claim, or
basis for any action or proceeding, against any Seller Group Person
under any Laws relating to unfair competition, false advertising
or other similar claims arising out of product warranties,
guarantees, specifications, manuals or brochures used in the
Business.
3.35 Product Liability Claims. Except as described on
Schedule 3.35, since January 1, 1992, Seller has not received
notice or information as to any claim or allegation of injury,
death, or property or economic damages, any claim for punitive or
exemplary damages, any claim for contribution or indemnification,
or any claim for injunctive relief in connection with any product
manufactured, sold, distributed or otherwise put in commerce by or
in connection with any service provided by any Seller Group Person
in connection with the Business.
3.36 Product Safety Authorities. Except as set forth on
Schedule 3.36 hereto, no Person has been required to file any
notification or other report with or provide information to any
Government agency or product safety standards group concerning
actual or potential defects or hazards with respect to any product
manufactured, sold, distributed or otherwise put in commerce in
connection with the Business, and there exist no grounds for the
recall of any such product.
3.37 Environmental Matters.
(a) Except as set forth on Schedule 3.37(a), all
assets and property currently or previously owned, leased,
operated, or used by any Seller Group Person, all current or
previous conditions on and uses of the Environmental Property, and
all current or previous ownership or operation of the Seller or
the Environmental Property (including without limitation
transportation and disposal of Hazardous Materials by or for any
Seller Group Person) comply and have at all times complied with,
in all material respects, and do not cause, have not caused, and
will not cause liability to be incurred by any Seller Group Person
under any Environmental Law. Except as set forth on Schedule
3.37(a), no Seller Group Person is in violation of and nor has
violated any Environmental Law.
(b) Except as set forth on Schedule 3.37(b), the
Seller Group Persons have properly obtained and are in compliance
with all Environmental Permits. No deficiencies have been asserted
by any such Government or authority with respect to such items.
(c) Except as set forth on Schedule 3.37(c), there
has been no spill, discharge, leak, leaching, emission, migration,
injection, disposal, escape, dumping, or release of any kind on,
beneath, above, or into the Environmental Property or into the
environment surrounding the Environmental Property of any Hazardous
Materials.
(d) Except as set forth on Schedule 3.37(d), there
are and have been no (i) Hazardous Materials stored, disposed of,
generated, manufactured, refined, transported, produced, or treated
at, upon, or from the Environmental Property; (ii) asbestos fibers
or materials or polychlorinated biphenyls on or beneath the
Environmental Property, or (iii) underground storage tanks or
underground injection control facilities on or beneath the
Environmental Property.
(e) The Seller has delivered to Buyer, prior to the
execution and delivery of this Agreement, complete copies of any
and all (i) documents received by any Seller Group Person from, or
submitted by any Seller Group Person to, the U.S. Environmental
Protection Agency (the EPA ) and/or any state, county or municipal
environmental or health agency or Government agency or department
concerning the environmental condition of the Environmental
Property or the effect of any Seller Group Person's operations on
the environmental condition of the Environmental Property; and (ii)
reviews, audits, reports, or other analyses concerning the
Environmental Property.
(f) To the knowledge of each Seller Group Person,
no expenditure will be required (other than maintenance and similar
expenses in the Ordinary Course of the Business) in order for any
Seller Group Person to comply with any Environmental Laws in effect
at the time of the Closing in connection with the operation or
continued operation of the Business or the Environmental Property
in a manner consistent with the current operation thereof of the
Seller Group Persons.
(g) Except as set forth in Schedule 3.37(g), there
never has been pending or, to the knowledge of the Seller Group
Persons, threatened against the Seller or any other person or
entity to the extent that such other person or entity from time to
time has owned, leased, occupied or conducted operations on the
Environmental Property, any civil, criminal or administrative
action, suit, summons, citation, complaint, claim, notice, demand,
request, judgment, order, Lien, proceeding, hearing, study, inquiry
or investigation based on or related to an Environmental Permit or
an Environmental Law.
(h) Except as set forth in Schedule 3.37(h), none
of the Seller Group Persons, nor any other Person or entity to the
extent that such other Person or entity from time to time has
owned, leased, occupied or conducted operations on the
Environmental Property, has ever received from any Person any
notice of, or has any knowledge of, any past, present or
anticipated future events, conditions, circumstances, activities,
practices, incidents, actions, agreements or plans that could:
(i) interfere with, prevent, or increase the costs of compliance
or continued compliance with any Environmental Permits or any
renewal or transfer thereof or any Environmental Law; (ii) make
more stringent any restriction, limitation, requirement or
condition under any Environmental Law or any Environmental Permit
in connection with the operations on the Environmental Property;
or (iii) give rise to any liability, loss or expense, or form the
basis of any civil, criminal or administrative action, suit,
summons, citation, complaint, claim, notice, demand, request,
judgment, order, Lien, proceeding, hearing, study, inquiry or
investigation involving the Environmental Property or any Seller
Group Person, based on or related to an Environmental Permit or an
Environmental Law or to the presence, manufacture, generation,
refining, processing, distribution, use, sale, treatment,
recycling, receipt, storage, disposal, transport, handling,
emission, discharge, release or threatened release of any Hazardous
Materials.
(i) None of the Seller Group Persons in respect to
the Business has transported or arranged for the transportation of
any Hazardous Materials to any location which is: (i) listed on,
or proposed for listing on, the EPA's National Priorities List
published at 40 CFR Part 300 or on any similar state list; or (ii)
the subject of any regulatory action which may lead to claims
against any of the Seller Group Persons for damages to natural
resources, personal injury, clean-up costs or clean-up work.
(j) Schedule 3.37(j) contains a list of all sites
where the Seller Group Persons Hazardous Materials relating to
the Business may have been sent in the past, or are currently being
sent for disposal, treatment, recycling or storage, including the
address of each such site, and a description and estimate of the
amount of the Hazardous Materials disposed of, treated, recycled
or stored at each such site.
(k) Schedule 3.37(k) contains a list containing the
name and address of each person, firm, corporation or other entity
engaged in the handling, transportation or disposal of the Seller
Group Persons Hazardous Materials in respect to the Business, a
description of such Hazardous Materials, and an estimate of the
amount of such Hazardous Materials.
3.38 Broker's Fees. Except as described on Schedule 3.38,
no Seller Group Person has retained any broker, finder or agent or
agreed to pay any brokerage fees, finder's fees or commissions with
respect to the transactions contemplated by this Agreement.
3.39 Foreign Assets. Except with respect to operations of
the Purchased Entities in France, Germany, the Netherlands and
Ireland, or as set forth on Schedule 3.39, no Seller Group Person
has in connection with the Business any interest in any real
property or tangible or intangible property located outside of
the United States, including any stock, securities or investments
in, claims against, or receivables from any entities or Persons
with substantially all their property or business so located.
3.40 Absence of Sensitive Payments; Anti-Boycott. No Seller
Group Person and no officer, director, manager of any Seller
Company nor agent or employee of any Seller Group Person, in
connection with the Business:
(a) has made or authorized any contributions,
payments or gifts of funds or property to any Government official,
employee or agent where either the payment or the purpose of such
contribution, payment or gift was or is illegal under (i) the
Foreign Corrupt Practices Act of 1977 and the regulations adopted
thereto, or (ii) applicable local Laws;
(b) has directly or indirectly made any contribution
to candidates for public office which would be a violation of (i)
the Foreign Corrupt Practices Act and the regulations adopted
thereto, or (ii) applicable local Laws;
(c) maintains any unrecorded fund or asset for any
purpose; or
(d) received any notice of violation and/or is or
has been not in compliance with relevant anti-boycott legislation,
including without limitation the Tax Reform Act of 1976, the Export
Administration Act of 1979, and the regulations thereunder.
3.41 Trade Regulation Law. No material anti-dumping duty
or other sanction under any trade regulation is in force or has
been in force since January 1, 1993 in relation to any Seller Group
Person in relation to the Business in respect of the products
produced by any Seller Group Person.
3.42 Truthfulness. To the knowledge of each Seller Group
Person, no representation or warranty of the Seller herein and no
statement, information or certificate furnished or to be furnished
by or on behalf of the Seller or its counsel, accountants or other
agents pursuant hereto or in connection with the transactions
contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or
therein not misleading. To the knowledge of each Seller Group
Person, there is no fact or development, actual or prospective,
other than general economic conditions, which adversely affects or
in the future might reasonably be expected adversely to affect the
Business, the Purchased Assets or the rights under the Assumed
Liabilities in any material respect which has not been set forth
or described in this Agreement or in the Schedules hereto.
3.43 Bank Accounts of Purchased Entities. Set forth on
Schedule 3.43 hereto is a list of all bank accounts and safe
deposit boxes maintained by each Purchased Entity, together with
the names of all Persons who are authorized signatories or have
access thereto.
3.44 Books and Records. The books of account, stock record
books and minute books and other corporate records of Seller which
relate to the Business and of each Purchased Entity are in all
material respects complete and correct, have been maintained in
accordance with good business practices and the matters contained
therein are accurately reflected on the Financial Statements. The
minute books and stock books of Seller which relate to the Business
and of each Purchased Entity have been made available to Buyer and
are correct and complete to the date hereof.
3.45 Affiliates. Except as set forth on Schedule 3.45, the
Seller has no Affiliates.
3.46 Ownership of Assets. No Purchased Entity owns any
Assets, has any Liabilities, or otherwise engages in any activity
which is not included in and in connection with the Business.
3.47 No Marks on Equipment or Inventory. The name and ▇▇▇▇
▇▇▇▇▇▇ and any variants thereof do not appear on any existing
molds, dies, or other equipment of the Business nor on any stock
of inventory, packaging, shipping materials, or the like of the
Business.
ARTICLE IV
REPRESENTATIO NS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and
warranties, each of which is true and correct on the date hereof
and each of which shall survive the Closing Date and the sale
contemplated hereby.
4.1 Corporate Existence of Buyer. Each of the Buyer
Companies is or will prior to Closing be a corporation duly
organized, validly existing and in good standing under Law. Each
of the Buyer Companies or will prior to Closing have the corporate
power and authority to own and use its properties and to transact
the business in which it is engaged. In the event any Buyer
Company assigns its rights and obligations hereunder to a
subsidiary or affiliate, as provided in Section 11.6 hereof, such
subsidiary or affiliate will be a corporation duly organized,
validly existing and in good standing under the Laws of its state
of incorporation; and such subsidiary or affiliate will have the
corporate power and authority to own and use its property and to
transact the business in which it is engaged.
4.2 Approval of Agreement. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized, approved and
ratified by all necessary action on the part of Buyer. Pursuant
to such resolutions, authorizations, consents, approvals and/or
ratifications, Buyer has full authority to enter into and deliver
this Agreement, to perform its obligations hereunder and to cause
each other Buyer Company to perform their respective obligations
hereunder, and to consummate, and to cause each other Buyer Company
to consummate, the transactions contemplated hereby. In the event
any Buyer Company assigns its rights and obligations hereunder to
a wholly-owned subsidiary or affiliate, as provided in Section 11.6
hereof, such assignment will have been approved by all necessary
corporate action of such subsidiary or affiliate, and such
subsidiary or affiliate will have full power and authority to
perform its obligations hereunder.
4.3 No Breach of Articles or Indentures. The execution
of this Agreement and the consummation of the transactions
contemplated hereby has not and will not constitute or result in
the breach of any of the provisions of, or constitute a default
under, the articles or certificate of incorporation or association
or bylaws of any Buyer Company, or any material indenture, evidence
of indebtedness or other commitment to which any Buyer Company (or
any subsidiary or affiliate to which any Buyer Company assigns its
rights and obligations hereunder, as provided in Section 11.6
hereof) is a party or by which it is bound, which breach or default
would have a material adverse effect on the Buyer Companies, taken
as a whole.
ARTICLE V
CERTAIN COVE NANTS
5.1 Operation of the Business. Seller covenants that until
the Closing, without the prior written consent of Buyer, no Seller
Group Person will, in connection with the Business, and the Seller
will not permit any Purchased Entity to:
(a) grant any increase in the rate of pay of any of
its Employees, grant any increase in the salaries of any officer,
employee or agent, enter into or increase the benefits provided
under any bonus, profit-sharing, incentive compensation, pension,
retirement, medical, hospitalization, life insurance or other
insurance plan or plans, or other contracts or commitments, or in
any other way increase in any amount the benefits or compensation
of any such officer, Employee or agent except, however, ordinary
merit increases not unusual in character or amount made in the
Ordinary Course of the Business to Employees who are not officers,
directors or stockholders;
(b) enter into any employment contract or collective
bargaining agreement;
(c) enter into any Contract or commitment or engage
in any transaction which is not in the Ordinary Course of the
Business or which is inconsistent with past practices;
(d) sell or dispose of or encumber any material
amount of Assets;
(e) make, or enter into any Contract for, any
material capital expenditure or enter into any material lease of
capital equipment or real estate;
(f) enter into any Contract, whether for the purchase
or sale of inventory, supplies, other products or services or
otherwise, and whether in the Ordinary Course of the Business or
otherwise, involving more than $50,000 or enter into any series of
such Contracts with one party or affiliated group of parties
involving more than $100,000 in the aggregate, except for purchases
of materials and sales of inventory in the Ordinary Course of the
Business;
(g) create, assume, incur or guarantee any
indebtedness other than that incurred pursuant to existing
Contracts disclosed in the Schedules delivered pursuant hereto;
(h) declare or pay any dividend or make any sale of,
or distribution in respect of, its capital stock or directly or
indirectly redeem, purchase or otherwise acquire any of its capital
stock or issue any of its capital stock or other securities other
than the payment of management fees to Affiliates identified on
Schedule 3.17;
(i) make or institute any unusual or novel method
of transacting business or change any accounting procedures or
practices or its financial structure;
(j) make any amendments to or changes in its articles
or certificate of incorporation or association or bylaws;
(k) perform any act, or attempt to do any act, or
permit any act or omission to act, which will cause a breach of
any material Contract, commitment or obligation to which any Seller
Group Person is a party relating to the Business or to the ability
of any Seller Group Person to perform its obligations under this
Agreement; or
(l) manage current assets and current liabilities
constituting Working Capital (and the level thereof) in a manner
inconsistent with current practices or the preparation of the
Balance Sheet.
5.2 Preservation of Business. Seller covenants that, until
the Closing, the Seller Group Persons shall carry on the Business
diligently and substantially in the same manner as heretofore
conducted and shall make commercially reasonable efforts to keep
their respective business organizations intact, including their
respective present Employees and present relationships with
suppliers and customers and others having business relations with
such Seller Group Persons. The Seller Group Persons will at all
times maintain in inventory quantities of raw materials, component
parts, work in process, finished goods and other supplies and
materials sufficient to allow the Buyer Companies to continue to
operate the Business, after the Closing Date, free from any
shortage of such items and, as necessary, to timely complete,
consistent with past practice, all Contracts.
5.3 Insurance and Maintenance of Property. Until the
Closing, Seller shall cause all the Purchased Assets and all
property owned or leased pursuant to the Assumed Liabilities to be
insured against all ordinary and insurable risks (except in respect
of any leased property where the terms of the lease do not impose
on lessee the obligation to maintain insurance and where the loss
of such property would not materially adversely affect the conduct
of the Business) and will operate, maintain and repair all of such
property in a careful, prudent and efficient manner all in
conformity with the insurance policies set forth in Schedule 3.32.
5.4 Full Access. Seller covenants that, until the Closing,
representatives of Buyer shall have full access at all reasonable
times to all premises, properties, books, records, contracts, tax
records and documents of each Seller Group Person relating to the
Business, and Seller will furnish to Buyer any information in
respect of the Business as Buyer may from time to time request.
Such examination and investigation by Buyer, and any discovery of
facts resulting therefrom, shall not affect the warranties and
representations of Seller contained in this Agreement. Buyer shall
use reasonable efforts to promptly inform Seller of any matters of
which Buyer becomes aware that constitute a breach of the
representations and warranties pursuant to Article III hereof;
provided that Buyer's failure to so inform Seller of such matters
shall in no way adversely impact Buyer's right to indemnification
as provided for in Article IX hereof.
5.5 Books, Records and Financial Statements. Seller
covenants that, until the Closing, each Seller Group Person shall
maintain its books and financial records in connection with the
Business in accordance with GAAP consistently applied, and on a
basis consistent with the past practices of such Seller Group
Person. Such books and financial records shall fairly and
accurately reflect the operations of the Business. Seller shall
furnish to Buyer promptly, as available, monthly financial
statements and operating reports applicable to the Business, all
of which shall be prepared in accordance with GAAP consistently
applied and shall present fairly the financial position and results
of operations of the Business at the dates and for the periods
indicated.
5.6 WARN Act. The Seller Group Persons shall give all
necessary or appropriate notice under the WARN Act, and shall be
responsible for any and all liabilities and penalties under the
WARN Act.
5.7 Other Government Filings. The Parties shall cooperate
in making, as soon as practicable following the execution hereof,
all filings required by any Government agency (including without
limitation pre-merger notifications required to be filed with the
Federal Trade Commission and the United States Department of
Justice) in connection with the transactions contemplated by this
Agreement or necessary for their consummation (including without
limitation a request for approval of transfer of the Puerto Rico
Grant). Buyer and Seller covenant with each other that all
information each provides in connection with such filings will be
true, accurate and complete and will comply with all applicable
Laws.
5.8 Tax Matters.
(a) Seller shall pay all applicable sales, use or
other similar transfer Taxes that are, or become, due or payable
as a result of the sale, conveyance, assignment, transfer or
delivery of the Purchased Assets hereunder, whether levied on any
Buyer Company, the Purchased Assets or any Seller Group Person.
Seller, in the case of the Purchased Assets, shall prepare, subject
to Buyer's reasonable approval, and file any Returns required in
respect of such Taxes.
(b) All real estate, personal property, ad valorem
and any other local or state Taxes relating to the Purchased Assets
or the Business which shall be accrued but unpaid as of the Closing
Date, or which shall be paid as of the Closing Date but relate in
whole or in part to periods after the Closing Date, shall be
prorated to the Closing Date and shall be reflected on the Closing
Balance Sheet. Any such prorated Taxes which may be ultimately
assessed after the Closing Date shall be paid by Seller to Buyer
or Buyer to Seller, as the case may be, within thirty (30) days of
such determination.
(c) The Parties shall report Buyer's purchase of the
Purchased Assets pursuant to Section 1060 of the Code and other
applicable Laws in a consistent manner and shall take no position
contrary thereto. Such allocation shall be agreed upon in writing
by Buyer and Seller within thirty (30) days of the final purchase
price determination, as adjusted (if necessary) pursuant to
Section 2.8 of the Agreement. Buyer and Seller each shall be
responsible for the preparation of any statements and forms to be
filed pursuant to Section 1060 of the Code or in accordance with
other applicable Law.
(d) The Parties agree to furnish or cause to be
furnished, upon request, as promptly as practicable, such
information and assistance (including access to books and records)
relating to the Purchased Assets as is reasonably necessary for
the preparation of any Return for Taxes, claims for refund or audit
or prosecution or defense of any claim, suit or proceeding relating
to any proposed adjustment of Taxes paid.
(e) The Parties shall use reasonable efforts to
provide or obtain from any taxing authority any certificate or
other document necessary to mitigate, reduce or eliminate any Taxes
(including additions thereto or interest and penalties thereon)
that otherwise would be imposed with respect to the transactions
contemplated in this Agreement.
Seller shall furnish to Buyer, as provided in
Section 1445(b)(2) of the Code, an affidavit pursuant to Section
1445(a), stating under penalties of perjury, transferor's United
States taxpayer identification number and that the transferor is
not a foreign person.
All gains on the sale of stock in any Controlled
Foreign Corporation (CFC) will be reported, as necessary, under the
provisions of IRC Section 1248, Subpart F or any other governing
statutory authority, on the Returns of the appropriate Seller Group
Person. The Seller Group will indicate the amount of gain to be
reported, for each respective CFC within 40 days of the final
determination of the purchase price as adjusted, if necessary,
under the provisions of Section 2.8 of the Agreement.
5.9 Change of Name. Immediately after the Closing Date,
FilterTek U.S.A., Inc, and any other Seller Group Person not
included in the Purchased Entities which has FilterTek or some
variant thereof in its name, in such manner as is reasonably
requested by Buyer, shall each change its name to some name other
than its name immediately prior to the Closing Date (the Existing
Name ) or any variation or abbreviation thereof and file
appropriate notification of change of name in all jurisdictions
where such notification is required, and Seller will take all steps
as may be appropriate to ensure to the Buyer Companies the
continued right to use the Existing Names and all variants thereof
in connection with Buyer's operation of the Business.
5.10 Escrow. In the event Seller shall, after the Closing,
sell all or substantially all of its assets or initiate procedures
leading to its complete or partial liquidation, dissolution, or
enter into any other transaction which could reasonably be expected
to result in a distribution or other payment to Seller s
stockholders that would leave the Seller with insufficient assets
to meet its obligations to Buyer hereunder, Seller shall prior to
such event deposit an amount reasonably adequate to support the
obligations of Seller to Buyer hereunder, but not less than
$15,000,000, pursuant to the Escrow Agreement.
5.11 Supplements to Schedules. Seller covenants and
agrees that it has submitted the text of this Agreement, as of
the date hereof, for review to all of the persons listed on
Schedule 3.0. The Parties have agreed on the texts of Schedules
1.1(b) and 2.1 (subject to Section 11.1), Schedule 3.0, and the
Exhibits A, E, and F. As to the balance of the Schedules,
Seller shall use reasonable best efforts to complete them and
submit them promptly, and in no event later than January 15,
1997, to Buyer for Buyer s review and approval. The condition
in Section 7.1 shall not be deemed unsatisfied solely as a
result of items proposed to be disclosed in such Schedules
unless:
(a) the proposed items are not true and correct on the
Closing Date;
(b) Assumed Liabilities and Liabilities of the Purchased
Entities reflected in such proposed items will have the effect,
in the aggregate, under GAAP of reflecting an adverse change in
the Business by $250,000 or more from the Business as reflected
in the Confidential Memorandum; as modified by item 1 on
proposed Schedule 3.4; or
(c) any such proposed item involves (i) a material
violation of Law by the Business or in connection with the
Business, any Seller Group Person or Employee, (ii) a pattern of
unethical or unlawful conduct by the Business; or (iii) fraud by
any Seller Group Person in connection with the Business.
5.12 Adverse Changes. Buyer shall promptly inform Seller
of the occurrence of any event or change in circumstances which
materially and adversely affects Buyer s ability to perform its
obligations hereunder or to operate the Business after Closing,
including, without limitation, any materially adverse amendments
or modifications to Borrower s financing commitments.
ARTICLE VI
COVENANT NOT TO COMPETE
6.1 Covenant Not to Compete.
(a) Seller acknowledges and agrees that the value
to Buyer of the transactions provided for herein would be
substantially diminished if any Non-Purchased Entity (or its
successors or assigns) were to enter into business activities
competitive with those sold to the Buyer Companies hereunder for
a reasonable period following the Closing Date. Consequently, as
an inducement for the Buyer Companies to enter into this Agreement,
and in consideration of the promises and representations of the
Buyer Companies under this Agreement, Seller covenants and agrees
on its behalf and on behalf of the other Non-Purchased Entities
that for a period of three (3) years following the Closing Date
(the Restricted Period ), none of the Non-Purchased Entities nor
their respective successors or assigns will engage in, or have any
interest in, directly or indirectly, any other Person, firm,
corporation or other entity engaged in any business activities
competitive with the Business (as conducted up to the Closing
Date). This restriction shall be applicable only with respect to
the geographic areas in which any Seller Group Person has
heretofore or is now conducting or plans to conduct business
operations. Seller covenants and agrees, on its behalf and on
behalf of the other Non-Purchased Entities, not to solicit or
accept business from, or provide competitive products or services
to, any customers (whether or not such Persons have done business
with any Seller Group Persons once or more than once) or accounts
of any Seller Group Persons (prior to the Closing Date) or any
Buyer Companies (after the Closing Date).
(b) Seller specifically acknowledges and agrees that
the foregoing covenants are commercially reasonable and reasonably
necessary to protect the interests Buyer will acquire in the
Business hereunder.
(c) The covenants contained in this Article VI shall
be deemed to be a series of separate covenants, one for each
product line in each county and each city of every state in which
any Seller Group Person has heretofore conducted or now conducts
the Business. Each separate covenant shall hereinafter be referred
to as a Separate Covenant.
(d) If any court or tribunal of competent
jurisdiction shall refuse to enforce one or more of the Separate
Covenants because the time limit applicable thereto is deemed
unreasonable, it is expressly understood and agreed that such
Separate Covenant or Separate Covenants shall not be void but that
for the purpose of such proceedings such time limitation shall be
deemed to be reduced to the extent necessary to permit the
enforcement of such Separate Covenant or Separate Covenants.
(e) If any court or tribunal of competent
jurisdiction shall refuse to enforce any or all of the Separate
Covenants because, taken together, they are more extensive (whether
as to geographic area, scope of business or otherwise) than is
deemed to be reasonable, it is expressly understood and agreed
between the Parties hereto that such Separate Covenant or Separate
Covenants shall not be void but that for the purpose of such
proceedings the restrictions contained therein (whether as to
geographic area, scope of business or otherwise) shall be deemed
to be reduced to the extent necessary to permit the enforcement of
such Separate Covenant or Separate Covenants.
(f) The foregoing, however, shall not prohibit Seller
or any Non-Purchased Entity from conducting or engaging in
activities in the printing industry.
6.2 Restriction on Employment. The Seller agrees on its
behalf and on behalf of each of the other Non-Purchased Entities
that during the Restricted Period none of the Non-Purchased
Entities nor their respective successors or assigns will solicit
for employment, or seek to entice, induce or in any manner
influence any person to leave, or not accept, his or her employment
in the Business. The foregoing shall not prevent any Seller Group
Person from hiring any person who was previously employed by the
Business but who has been discharged by the Buyer.
6.3 Confidentiality. Seller agrees on its behalf and on
behalf of the other Non-Purchased Entities that, from and after
the Closing, none of the Non-Purchased Entities will at any time
disclose to any person other than a Buyer Company or use any
Proprietary Information (as hereinafter defined) owned,
possessed, licensed or used by or relating to the Business, whether
or not such information is embodied in writing or other physical
form. For purposes of this Agreement, the phrase Proprietary
Information means all trade names, trademarks, service marks,
patents and trade secrets and any and all other information not
publicly available which relates to specific matters concerning the
Business, such as, without limiting the generality of the
foregoing, engineering, design, manufacturing, maintenance and
repair information; computer software and programs; component
sourcing and supply information; identities of suppliers, customers
and contractors; product distribution information; pricing and
compensation policies; sales or financing procedures or methods;
operational methods; strategic plans; internal financial
information; research and development plans and activities; and
acquisition and expansion plans. Seller recognizes and agrees that
all documents and objects containing any Proprietary Information,
whether developed by Seller or by someone else for Seller or any
Seller Group Person, will after the Closing Date become the
exclusive property of the Buyer Companies.
6.4 Remedies. Because the breach or anticipated breach
of the restrictive covenants provided for in Section 6.1 could
result in immediate and irreparable harm and injury to Buyer, for
which it would not have an adequate remedy at law, Seller agrees
that Buyer shall be entitled to relief in equity to temporarily,
preliminarily and/or permanently enjoin such breach or anticipated
breach and to seek any and all other legal and equitable remedies
to which Buyer may be entitled. Should such action be taken and
an injunction issued, Buyer shall be entitled to reimbursement of
attorneys' fees and costs incurred.
6.5 Permitted Investments. Nothing contained herein shall
restrict Seller or any other Non-Purchased Entity from owning five
percent (5%) or less of the corporate securities of any Person in
competition with the Business which securities are listed on any
national securities exchange or authorized for quotation on the
Automated Quotations System of the National Association of
Securities Dealers, Inc., if such Person has no other connection
or relationship, direct or indirect, with the issuer of such
securities.
6.6 Access to Properties and Records. (a) Following the
Closing, upon reasonable prior notice and during normal business
hours as requested by Seller, Buyer will afford to Seller such
cooperation of the employees of Buyer as is reasonably necessary
or desirable to enable Seller to prepare timely financial
statements and federal, state and local tax returns or similar
matters. Such cooperation, however, shall not have the effect of
unduly disrupting the performance of such employees regular
duties.
(b) Subject to consummation of the Closing and
subject to the terms of Buyer s documentation retention policy
(which policy the Buyer agrees to deliver to the Seller on or
before June 1, 1997), for a period of eight (8) years after the
Closing Date, Buyer will afford and cause to be afforded to Seller
(i) such access during normal business hours, upon reasonable prior
notice, to such books and records of Buyer as Seller may reasonably
request in connection with matters relating to Seller for periods
ending on or prior to the Closing Date; and (ii) such assistance
in locating and copying such books and records as Seller may
reasonably request, which assistance shall not have the effect of
unduly disrupting the performance of such employees regular
duties.
ARTICLE VII
CONDITIONS T O BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions
provided for in this Agreement shall be subject to the satisfaction
of each of the following conditions on or before the Closing Date,
subject to the right of Buyer to waive any one or more of such
conditions:
7.1 Representations and Warranties of Seller. The
representations and warranties of Seller contained in this
Agreement, including the Schedules hereto, and in the certificates
and papers to be delivered to Buyer pursuant hereto and in
connection herewith shall be true and correct in all respects on
the date hereof and, subject to Section 5.11, on the Closing Date
as though such representations and warranties were made on the
Closing Date, and, to the extent such representations and
warranties are qualified by knowledge, on the basis of knowledge
on the Closing Date.
7.2 Performance of this Agreement. Seller shall have duly
performed or complied with all of the obligations to be performed
or complied with by it under the terms of this Agreement on or
prior to the Closing Date.
7.3 No Material Adverse Change. There shall have been no
material adverse change, actual or threatened, in the Business
(including relationships with customers or vendors for any reason),
whether or not covered by insurance, as a result of any cause
whatsoever.
7.4 Certificate of Seller. Buyer shall have received a
certificate signed by the President of Seller dated as of the
Closing Date and subject to no qualification certifying that the
conditions set forth in Sections 7.1, 7.2, 7.3, 7.6, 7.7, 7.8, and
7.13 hereof have been fully satisfied. Such certificate shall be
deemed a representation and warranty of Seller under this
Agreement.
Opinion of Counsel. Buyer shall have received from
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, counsel to Seller, an opinion
of such counsel, dated the Closing Date, substantially in the form
attached hereto as Exhibit E.
7.6 No Lawsuits. No suit, action or other proceeding or
investigation shall be threatened or pending before or by any Court
or Government concerning this Agreement or the consummation of the
transactions contemplated hereby, or in connection with any claim
against any Seller Group Persons not disclosed herein or on the
Schedules hereto. No Government shall have threatened or directed
any request for information concerning this Agreement, the
transaction contemplated hereby or the consequences or implications
of such transaction to any Buyer Company or any Seller Group
Person, or any officer or director of any Buyer Company or any
Seller Company, or any employee or agent of any Buyer Company or
any Seller Group Person.
7.7 No Restrictions. There shall exist no conditions,
restrictions or reservations affecting the title to or utility of
the Purchased Assets and the rights under the Assumed Liabilities
which would prevent the Buyer Companies from occupying and
utilizing the Purchased Assets and Assumed Liabilities, or any part
thereof, to the same full extent that any Seller Group Person might
continue to do so if the sale and transfer contemplated hereby did
not take place.
7.8 Consents. All consents and approvals, including
without limitation final approval of transfer of the Puerto Rico
Grant, necessary to insure that the Buyer Companies will continue
to have the same full rights in respect to the Purchased Assets
and Assumed Liabilities as the Seller Group Persons had immediately
prior to the consummation of the transaction contemplated hereunder
shall have been obtained; provided that the foregoing shall not
apply to the Puerto Rico Grant to the extent any delay in approval
results from Buyer s request for modification of the current terms
of the Puerto Rico Grant in addition to the request for transfer
to a Buyer Company.
7.9 Releases. Prior to the Closing Date, Seller shall have
delivered to Buyer the written release of all Liens, other than
Liens permitted hereunder, relating to the Purchased Assets,
executed by the holder of or parties to each such Lien. The
releases shall be satisfactory in substance and form to Buyer and
its counsel.
7.10 Documents. Buyer shall receive from Seller, duly
executed, on the Closing Date:
(a) the ▇▇▇▇ of Sale, certificates for the Shares
duly endorsed for transfer or accompanied by duly endorsed stock
powers, and other appropriate documents conveying to Buyer good
and marketable title to the Purchased Assets, other than the
general warranty deeds delivered to the Title Company as provided
in Section 7.12;
the Assignment and Assumption Agreement, with
related consents, if any are so required, and
Purchased Entity Purchase Agreements, duly
stamped, authenticated, and/or notarized as required by Law and as
necessary for the transfer of the Purchased Entities to a Buyer
Company.
7.11 [RESERVED].
7.12 Title Insurance.
(a) As soon as practicable after the date hereof,
but in any event at least fifteen (15) days prior to the Closing
Date, Buyer shall have received a commitment (the Title
Commitment ) from a nationally recognized title company selected
by Buyer (the Title Company ) to issue an ALTA standard form
owner's title insurance policy to the Buyer Companies with respect
to the Real Property, in an amount reasonably acceptable to Buyer
and showing title thereto vested in Seller, subject only to (i)
applicable zoning and building Laws, (ii) the Lien of real estate
Taxes not yet due and payable, (iii) the Permitted Liens as are set
forth on Schedule 3.9(a), and (iv) such other exceptions and Liens
which can be satisfied by the payment of money and which exceptions
and Liens Seller shall, at Seller's sole cost, cause to be removed,
discharged or released at the Closing. Buyer shall also have
obtained assurances from the Title Company that all standard
exceptions (including without limitation those relating to
mechanics' and materialmen's Liens, parties in possession and
survey matters) shall be deleted, and that the title policy to be
issued at Closing shall include an ALTA Form 3.1 zoning endorsement
insuring the ability of the Buyer Companies to continue to operate
the Real Property in the same manner as operated by the Seller
Group Persons prior to the Closing Date, a comprehensive
endorsement and any other special endorsement required by Buyer.
The costs thereof divided equally between Buyer and Seller and
settled at Closing.
(b) In connection with the Title Commitment, Buyer
and the Title Company shall have received as soon as practicable
after the date hereof, but in any event at least fifteen (15) days
prior to the Closing Date, from reputable surveyors, an as built
survey for all improvements located on the Real Property and an
ALTA form survey for the Real Property which shall located by book
and page all easements and rights of way on the Real Property.
The survey shall have been certified by the surveyor to Buyer and
the Title Company in form reasonably acceptable to Buyer and shall
have been sufficient to enable the Title Company to issue the
policy of title insurance contemplated in paragraph (a) above.
Each survey shall contain a legal description of the applicable
Real Property and a certification of the area of the applicable
Real Property in square feet. The costs thereof divided equally
between Buyer and Seller and settled at Closing.
(c) At Closing, Seller shall have executed and
delivered to the Title Company, pursuant to a joint written letter
of instructions, general warranty deeds in statutory form conveying
the Real Property to the Buyer Companies, subject only to (i)
applicable zoning and building Laws, (ii) the Lien of real estate
taxes not yet due and payable, and (iii) the Permitted Liens set
forth on Schedule 3.9(a) which are acceptable to Buyer, together
with such affidavits, certificates and other instruments as are
ordinarily delivered to a purchaser (or assignee) of real estate
and/or filed in the public records of each community where the Real
Property is located. At the Closing, the Title Company shall have
(i) issued to Buyer the owner's policy of title insurance
conforming with all requirements under paragraph (a) above and (ii)
filed each deed for the Real Property for record in the appropriate
public records.
7.13 Compliance with Applicable Law. All filing and
waiting periods requirements of the HSR Act, any other antitrust
or cartel Law, and any other applicable Law relating to
consummation of the transactions provided for herein shall have
been duly complied with. No second request shall have been issued
pursuant to the HSR Act nor has any inquiry or investigation been
instituted by any state or federal antitrust Government agency with
respect to this Agreement.
7.14 Due Diligence. Buyer shall not have obtained
information pursuant to its due diligence review of the Business
and its Business Condition, including without limitation
investigation of customer, vendor, and other third person
relationships and environmental, tort, securities, corporate,
product liability, employee benefits, taxation and insurance
matters, which would reasonably cause Buyer to conclude that that
the Business is not consistent, in all material respects, with the
Confidential Memorandum.
7.15 Foreign Closings. All actions necessary to consummate
the transactions to be contemplated by the Purchased Entity
Purchase Agreements shall have been taken.
7.16 Further Assurances. Buyer shall have received such
further instruments and documents as may reasonably be required to
carry out the transactions contemplated hereby and to evidence the
fulfillment of the agreements herein contained and the performance
of all conditions to the consummation of such transactions.
ARTICLE VIII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions
provided for in this Agreement shall be subject to the satisfaction
of each of the following conditions on or before the Closing Date,
subject to the right of Seller to waive any one or more of such
conditions:
8.1 Representations and Warranties of Buyer. The
representations and warranties of Buyer contained in this
Agreement, including the Schedules hereto, and in the certificates
and papers to be delivered to Seller pursuant hereto and in
connection herewith shall be true and correct in all respects on
the date hereof and on the Closing Date (except for changes
specifically permitted hereunder) as though such representations
and warranties were made on the Closing Date.
8.2 Performance of this Agreement. Buyer shall have duly
performed or complied with all of the obligations to be performed
or complied with by it under the terms of this Agreement on or
prior to the Closing Date.
8.3 Certificate of Buyer. Seller shall have received a
certificate signed by an officer of Buyer dated as of the Closing
Date and subject to no qualification certifying that the conditions
set forth in Sections 8.1 and 8.2 hereof have been fully satisfied.
Such certificate shall be deemed a representation and warranty of
Buyer hereunder.
8.4 Opinion of Counsel. Seller shall have received from
▇▇▇▇▇ ▇▇▇▇ LLP, counsel to Buyer, an opinion of such counsel, dated
the Closing Date, substantially in the form attached hereto as
Exhibit F.
8.5 Payment of Purchase Price . Seller shall receive from
Buyer on the Closing Date the Purchase Price to be delivered under
Section 2.7 hereof.
8.6 Documents. Buyer shall have duly executed the
Assignment and Assumption Agreement and the Purchased Entity
Purchase Agreements.
8.7 Further Assurances. Seller shall have received such
further instruments and documents as may reasonably be required to
carry out the transactions contemplated hereby and to evidence the
fulfillment of the agreements herein contained and the performance
of all conditions to the consummation of such transactions.
ARTICLE IX
INDEMNIFICAT ION
9.1 Indemnification of Buyer. Seller shall hold Buyer,
the Affiliates of Buyer, and, from and after the Closing, the
Purchased Entities, and the shareholders, directors, officers,
employees, successors, assigns and agents of each of them
(collectively, the Buyer Indemnified Parties ) harmless and
indemnify each of them from, against and in respect of, and waives
any claim for contribution or indemnity with respect to, any and
all claims, losses, damages, Liabilities, expenses or costs
( Losses ), plus reasonable attorneys' fees and expenses incurred
in connection with Losses and/or enforcement of this Agreement,
plus interest from the date incurred through the date of payment
at the prime lending rate of ▇▇▇▇▇▇ Guaranty from time to time
prevailing (in all, Indemnified Losses ) incurred or to be
incurred by any of them and resulting from or arising out of (a)
any breach or violation of the representations, warranties,
covenants or agreements of any Seller Group Person contained in
this Agreement, or in any exhibit, statement, Schedule,
certificate, instrument or document delivered pursuant hereto,
including provisions of this Article IX; (b) any Liability of any
Non-Purchased Entity not expressly assumed by Buyer hereunder or
any Liability of any Purchased Entity not connected to the
Business; (c) any Liability arising from the ownership, operation,
or termination of the manufacturing operations of FilterTek GmbH;
(d) any Liability arising from the acquisition of FilterTek, Inc.,
▇▇▇▇▇▇▇▇ Industries, and/or Fuzere Manufacturing by a Seller Group
Person, except to the extent used in the computation of Working
Capital set forth on the Closing Balance Sheet; (e) any Liability
arising from the divestiture of Plastic Molded Concepts; (f) any
Liability arising from (i) any transportation or disposal of any
Hazardous Materials, or (ii) violation of, or contribution
obligation under, any Environmental Law in connection with (A) any
location not included in the Real Property, (B) any operations not
included in the Business, or (C) any discontinued operations of
the Business; and/or (g) any Liability arising from the termination
of employment of Employees in Puerto Rico as a result of the
consummation of the transactions contemplated hereby.
9.2 Indemnification of Seller. Buyer shall hold the Seller
Group Persons, except for, from and after the Closing, the
Purchased Entities, and the shareholders, directors, officers,
employees, successors, assigns, and agents of each of them,
harmless and indemnify each of them from and against any and all
Indemnified Losses incurred or to be incurred by any of them, and
resulting from or arising out of any breach or violation of the
representations, warranties, covenants or agreements of Buyer
contained in this Agreement, including the provisions of this
Article IX, and including the Assignment and Assumption Agreement.
9.3 Survival. The respective representations and
warranties made by the Parties in Articles III and IV and in the
certificates with respect thereto issued pursuant to Sections 7.4
and 8.3 shall survive the Closing Date but thereafter shall expire
unless a claim with respect thereto shall have been made in writing
against the Party responsible for indemnification hereunder (the
Indemnifying Party ) pursuant to Section 11.12 hereof not later
than March 31, 1998; provided, that the foregoing limitations shall
not apply to representations and warranties under Sections 3.1,
3.2, 3.9, 3.10, 3.26 and 3.27, and on the certificate under Section
7.4 with respect to Sections 3.1, 3.2, 3.9, 3.10, 3.26 and 3.27,
which shall survive without limitation hereunder, or to
representations and warranties under Section 3.8 and on the
certificate under Section 7.4 with respect to Section 3.8, and the
rights of the Buyer Indemnified Parties under Section 9.8, which
shall survive to the extent of the applicable statutes of
limitations, if any.
9.4 Limitations.
(a) Seller shall not be liable for any breach of any
representation or warranty under Article III or certificate with
respect thereto under Section 7.4, or indemnification with respect
thereto under Section 9.1(a) or indemnification under Section 9.8,
(i) unless Indemnified Losses with respect thereto exceed $200,000
but if so Seller shall be liable to the full extent thereof, (ii)
to the extent all payments by Seller to a Buyer Indemnified Party
pursuant to Seller s indemnification obligations hereunder exceed
$15,000,000 and (iii) with respect to any matter involving
Indemnified Loss or Losses, or group or series of Indemnified
Losses relating to the same matter, less than $25,000 in the
aggregate; provided, that none of the foregoing limitations shall
apply to representations and warranties under Sections 3.1, 3.2,
3.9, 3.10, 3.26 and 3.27 and on the certificate under Section 7.4
with respect to Sections 3.1, 3.2, 3.9, 3.10, 3.26 and 3.27.
9.5 Notice of Claim. In the event that any Party hereto
seeks indemnification hereunder on behalf of itself or himself or
another indemnified person, such Party (the Indemnified Party )
shall give written notice to the Indemnifying Party specifying the
facts constituting the basis for such claim and the amount, if
known, of the claim asserted. The failure of the Indemnifying
Party, within a period of thirty (30) days after the giving of such
notice by the Indemnified Party, to give written notice to the
Indemnified Party of the intention to contest such claim shall be
deemed an agreement that the claim is a valid claim and at such
time as it is known, the amount thereof shall be paid promptly by
the Indemnifying Party.
9.6 Rights to Contest Claims of Third Persons. If an
Indemnified Party asserts a claim for indemnification hereunder
because of a claim made by any claimant not a Party, the
Indemnified Party shall give the Indemnifying Party reasonably
prompt notice thereof, but in no event more than ten (10) business
days after said assertion is actually known to the Indemnified
Party; provided, however, that the right of a person to be
indemnified hereunder in respect of claims made by a third party
shall not be adversely affected by a failure to give such notice
unless, and then only to the extent that, an Indemnifying Party is
prejudiced thereby. The Indemnifying Party shall have the right,
upon written notice to the Indemnified Party, and using counsel
reasonably satisfactory to the Indemnified Party, to investigate,
secure, contest or settle the claim alleged by such third person
(hereinafter called a Third-Person Claim ), provided that the
Indemnified Party may participate voluntarily, at its own expense,
in any such Third-Person Claim through representatives and counsel
of its own choice, and, provided further, that the Indemnifying
Party unconditionally acknowledges to the Indemnified Party in
writing its obligation to indemnify the persons to be indemnified
hereunder with respect to all elements of, and to the full extent
of, such Third-Person Claim. Unless and until the Indemnifying
Party elects to defend the Third-Person Claim, the Indemnified
Party shall have the full right, at its option, to do so and to
look to the Indemnifying Party under the provisions of this
Agreement for the full amount of the costs, if any, of defense.
The failure of the Indemnifying Party to respond in writing to the
aforesaid notice of the Indemnified Party with respect to such
Third-Person Claim within thirty (30) days after receipt thereof
shall be deemed an election not to defend the same. If the
Indemnifying Party does not assume the defense of any such Third-
Person Claim, including any litigation resulting therefrom, (a)
the Indemnified Party may defend against such claim or litigation,
in such manner as it may deem appropriate, including, but not
limited to, settling such claim or litigation, after giving notice
of the same to the Indemnifying Party, on such terms as the
Indemnified Party may deem appropriate, and (b) the Indemnifying
Party shall be entitled to participate in (but not to control) the
defense of such action, with its own counsel at its own expense.
If the Indemnifying Party thereafter seeks to question the manner
in which the Indemnified Party defended such Third-Person Claim or
the amount or nature of any such settlement, the Indemnifying Party
shall have the burden to prove that the Indemnified Party did not
defend or settle such Third-Person Claim in a reasonably prudent
manner. The Parties shall make available to each other all
relevant information in their possession relating to any such
Third-Person Claim and shall cooperate in the defense thereof.
9.7 Exclusive Remedy. The provisions of this Article IX
and Article X shall constitute the exclusive remedy of the Parties
with respect to any claims or Losses resulting from or arising out
of the provisions of this Agreement which may be asserted after
the Closing; provided, that the foregoing shall not preclude any
claim for injunctive or other non-monetary equitable relief.
9.8 Tax Indemnification. In addition to any other
indemnification granted herein, but subject to Section 9.4 hereof,
Seller agrees to indemnify, defend and hold harmless the Buyer
Indemnified Parties from and against all loss, liability, including
Seller's liability for Seller s Taxes or Seller s liability, if any
(for example, by reason of transferee liability or application of
Treas. Reg. Section 1.1502-6) for Taxes of others, loss of tax
attributes, damage or reasonable expense (including but not limited
to reasonable attorneys' fees and expenses) (collectively, Tax
Losses ) payable with respect to Taxes claimed or assessed against
Buyer, any Buyer Company, any Purchased Entity, or the Purchased
Assets (i) for any taxable period ending on or before the Closing
Date except Taxes of the Purchased Entities to the extent reflected
in the computation of Working Capital set forth on the Closing
Balance Sheet, or (ii) for any taxable period resulting from a
breach of any of the representations or warranties contained in
Section 3.8 hereof. Seller also agrees to indemnify, defend and
hold harmless the Buyer from and against any and all Tax Losses
sustained in a tax period of Buyer ending after the Closing Date
arising out of the settlement or other resolution of a proposed tax
adjustment which relates to a tax period ending on or before the
Closing Date. Notwithstanding anything else stated in this Section
9.8, Seller is not obligated to indemnify Buyer for Tax Losses to
the extent they arise from changes after the Closing Date to any
Laws related to Taxes.
9.9 Mitigation of Losses. Each Party shall take, and shall
cause its respective Affiliates to take, all reasonable steps
within their respective control to mitigate Indemnified Losses
hereunder, provided that all such cost incurred shall be included
in Indemnified Losses.
In addition, the amount of the indemnification due to a party
hereunder in connection with any Indemnified Losses shall be
calculated after giving effect to the amount of any insurance
proceeds or other cash receipts to the extent received by the
Indemnified Person as an indemnity against such Indemnified Loss.
ARTICLE X
DISPUTE RESOLUTION
10.1 Scope; Initiation. Resolution (except for resolution
of the Closing Balance Sheet under Section 2.8) of any and all
disputes arising from or in connection with this Agreement, whether
based on contract, tort, statute or otherwise, including disputes
over arbitrability and disputes in connection with claims by third
persons ( Disputes ) shall be exclusively governed by and settled
in accordance with the provisions of this Article X; provided, that
the foregoing shall not preclude equitable or other judicial relief
to enforce the provisions hereof or to preserve the status quo
pending resolution of Disputes hereunder; and provided further that
resolution of Disputes with respect to claims by third persons
shall be deferred until any judicial proceedings with respect
thereto are concluded. Either Party to this Agreement may commence
proceedings hereunder by delivery of written notice providing a
reasonable description of the Dispute to the other, including a
reference to this Article (the Dispute Notice ).
10.2 Negotiations Between Executives. The Parties shall
first attempt in good faith to resolve promptly any Dispute by
negotiations between executives who are not directly involved in
the Dispute, and who have authority to settle it (as to each Party,
an Executive ). Not later than 20 days after delivery of the
Dispute Notice, each Party shall designate an Executive to meet
with the other Party's Executive at a reasonably acceptable time
and place, and thereafter as such Executives deem reasonably
necessary. The Executives shall exchange relevant information and
endeavor to resolve the Dispute. Prior to any such meeting, each
Party's Executive shall advise the other as to any other
individuals who will attend such meeting. All negotiations
pursuant to this Section 10.2 shall be confidential and shall be
treated as compromise negotiations for purposes of Rule 408 of the
Federal Rules of Evidence and similarly under other federal and
state rules of evidence.
10.3 Binding Arbitration.
(a) If a Dispute has not been resolved pursuant to
Sections 10.2 hereof within 120 days (or such longer period as the
Parties may agree), the Parties hereby agree to submit the Dispute
to arbitration under the following provisions, which arbitration
shall be final and binding upon the Parties, their successors and
assigns, and that the following provisions constitute a binding
arbitration clause under applicable Law.
(b) Either Party may initiate arbitration of a
Dispute by delivery of a demand therefor (the Arbitration Demand )
to the other Party not sooner than 120 days after the date of
delivery of the Dispute Notice but at any time thereafter;
provided, that if a Party does not cooperate in the procedures
provided under Section 10.2, the other Party may initiate
arbitration at such earlier time as such non-cooperation shall
become reasonably apparent.
(c) The arbitration shall be conducted in St. Louis,
Missouri or Chicago, Illinois, by a sole arbitrator selected by
agreement of the Parties not later than 10 days after delivery of
the Arbitration Demand or, failing such agreement, appointed
pursuant to the Commercial Arbitration Rules of the American
Arbitration Association, as amended from time to time (the AAA
Rules ). In order to qualify as an arbitrator hereunder, a person
must be an equity partner (or comparable) in a law firm located in
St. Louis, Missouri or Chicago, Illinois with 175 or more attorneys
and must be experienced in commercial disputes. If an arbitrator
becomes unable to serve, his or her successor(s) shall be similarly
selected or appointed.
(d) The arbitration shall be conducted pursuant to
the Federal Arbitration Act and the Missouri Uniform Arbitration
Act or Illinois Uniform Arbitration Act, as applicable, and such
procedures as the Parties may agree or, in the absence of or
failing such agreement, pursuant to the AAA Rules. Notwithstanding
the foregoing:
(i) each Party shall be allowed to conduct discovery
through written requests for information, document requests,
requests for stipulations of fact, and depositions; (ii) the nature
and extent of such discovery shall be determined by the arbitrator,
taking into account the needs of the Parties and the desirability
of making discovery expeditious and cost-effective; (iii) the
arbitrator may issue orders to protect the confidentiality of
information, to be disclosed in discovery; and (iv) the
arbitrator's discovery rulings may be enforced in any court of
competent jurisdiction.
(e) All hearings shall be conducted on an expedited
schedule, and all proceedings shall be confidential. Either Party
may at its expense make a stenographic record thereof.
(f) The arbitrator shall complete all hearings not
later than 90 days after selection or appointment, and shall make
a final award not later than 30 days thereafter. The award shall
be in writing and shall specify the factual and legal bases for
the award. The arbitrator shall apportion all costs and expenses
of the arbitration, including the arbitrator's fees and expenses
and fees and expenses of experts ( Arbitration Costs ) between the
prevailing and non-prevailing Party as the arbitrator deems fair
and reasonable. In circumstances where a Dispute has been asserted
or defended against on grounds that the arbitrator deems manifestly
unreasonable, the arbitrator may assess all Arbitration Costs
against the non-prevailing Party and may include in the award the
prevailing Party's attorney's fees and expenses in connection with
any and all proceedings under this Article X. Notwithstanding the
foregoing, in no event may the arbitrator award multiple, punitive
or exemplary damages.
(g) Either Party may assert appropriate statutes of
limitation as a defense in arbitration; provided, that upon
delivery of a Dispute Notice any such statute shall be tolled
pending resolution hereunder.
10.4 Confidentiality Notice. Each Party shall notify the
other promptly, and in any event prior to disclosure to any third
person, if it receives any request for access to confidential
information or proceedings hereunder.
ARTICLE XI
MISCELLANEOUS
11.1 Changes to Structure. In the event Buyer deems it
necessary or advisable to change the structure of the acquisition
set forth on Schedule 2.1, so that it would purchase Purchased
Assets of a Seller Group Person and assume its Assumed Liabilities,
rather than include such Person as a Purchased Entity; or require
a transfer of Purchased Assets and Assumed Liabilities to a
Purchased Entity prior to Closing; or other structural change
consistent with the overall objective of Buyer to acquire the
Business; then in such event, provided Buyer gives Seller notice
of such change not later than January 15, 1997, the Parties shall
amend this Agreement accordingly; provided further, that to the
extent such change requires the incurrence of additional cost by
Seller in excess of $25,000, Buyer shall reimburse the amount so
in excess; and provided further, that Schedule 2.1 may be modified
by mutual consent of the Parties to include the acquisition of
Filtertek do Brazil Industria E Comercio Ltda.
11.2 Termination of Agreement. This Agreement and the
transactions contemplated hereby may be terminated prior to the
Closing Date only as follows:
(a) by mutual consent of Buyer and Seller; or
(b) by either Buyer or Seller if the Closing shall
not have occurred on or before, (i) if any of the conditions to
Closing are not satisfied as a result of factors beyond the control
of either Party, March 31, 1997, otherwise (ii) February 15, 1997.
11.3 Manner and Effect of Termination.
(a) Any action by Buyer or Seller to terminate this
Agreement and the transactions contemplated hereby, as provided in
Section 11.2 hereof, shall be taken by its respective Board of
Directors.
(b) If this Agreement is terminated pursuant to
Section 11.2 hereof without fault of either Party or breach of this
Agreement, all obligations of Seller and Buyer hereunder shall
terminate, without liability of Seller to Buyer or of Buyer to
Seller. In such event, each Party hereto shall pay all legal and
other costs and expenses incurred by such Party in connection with
this Agreement and the transactions contemplated hereby.
(c) Nothing in this Section or elsewhere in this
Agreement shall impair or restrict the rights of any Party to any
and all remedies at law or in equity in the event of a breach of
or default under this Agreement.
11.4 Non-Disclosure of Information. No Seller Group
Person nor Buyer or any of its Affiliates shall make any
announcement or other disclosure of the terms hereof or the
transactions contemplated hereby (except disclosure to their
respective professional advisors) without the mutual written
consent of both of the Parties, except as required by law.
11.5 Bulk Sales. Buyer hereby waives compliance with any
applicable State Uniform Commercial Code or other statutory
provisions governing bulk sales. Seller agrees to indemnify,
defend and hold harmless the Buyer Companies from any and all loss,
cost or expenses, resulting from the assertion of claims made
against the Purchased Assets sold hereunder or against any Buyer
Company by creditors of any Seller Group Person under any bulk
sales Law with respect to liabilities and obligations of Seller
Group Persons not assumed by any Buyer Company hereunder, such
indemnity to be in accordance with the provisions of Article IX
hereof without regard to the limitations contained in Section 9.4.
11.6 Contents of Agreement, Parties in Interest, Assignment.
This Agreement, including the Schedules and Exhibits hereto, and
the other agreements and documents referred to herein set forth the
entire understanding of the Parties with respect to the subject
matter hereof. Any previous agreements of understandings between
the parties regarding the subject matter hereof, including, without
limitation, the Confidentiality Agreement, by and between Buyer and
Coopers & ▇▇▇▇▇▇▇, LLP, dated as of September 9, 1996, and the
letters from Buyer to Coopers & ▇▇▇▇▇▇▇, LLP, relating to the
Business, dated September 26, 1996, November 19, 1996, November 20,
1996, November 23, 1996, and November 25, 1996, are merged into and
superseded by this Agreement. All representations, warranties,
covenants, terms and conditions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the
respective heirs, legal representatives, successors and permitted
assigns of the parties hereto; provided, however, that none of the
rights or obligations of any of the parties hereto may be assigned
without the prior written consent of, in the case of assignment by
Seller, Buyer, or, in the case of assignment by Buyer, Seller;
provided however, that Buyer may assign all or part of its rights
under this Agreement and may delegate all or part of its
obligations under this Agreement to one or more corporations all
or substantially all of the capital stock of which is owned,
directly or indirectly, by Buyer, in which event all the rights and
powers of Buyer and the remedies available to it under this
Agreement shall extend to and be enforceable by such assignee. Any
such assignment and delegation shall not release Buyer from its
obligations under this Agreement, and further Buyer guarantees to
Seller the performance by each such assignee of its obligations
under this Agreement. In the event of any such assignment and
delegation, the term Buyer as used in this Agreement shall be
deemed to refer to each such assignee of Buyer and shall be deemed
to include both Buyer and each such assignee where appropriate.
11.7 Severability. If any provision of this Agreement shall
be determined to be contrary to Law and unenforceable by any court
of law, the remaining provisions shall be severable and enforceable
in accordance with their terms.
11.8 Counterparts. This Agreement may be executed in one
or more identical counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same
instrument.
11.9 Interpretation. The table of contents and article and
section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of the Agreement. Both Parties have participated
substantially in the negotiation and drafting of this Agreement
and each Party hereby disclaims any defense or assertion in any
litigation or arbitration that any ambiguity herein should be
construed against the draftsman. Each reference in this Agreement
to an Article or a Section, Schedule or Exhibit, unless otherwise
indicated, shall mean an Article or a Section of this Agreement or
a Schedule or Exhibit attached to this Agreement, respectively.
11.10 Governing Law. This Agreement shall be construed and
interpreted according to the Laws of the State of Illinois.
11.11 Payment of Fees and Expenses. Each Party hereto shall
pay all fees and expenses of such Party's respective counsel,
accountants and other experts and all other expenses incurred by
such Party incident to the negotiation, preparation and execution
of this Agreement and the consummation of the transaction
contemplated hereby, including any finder's or brokerage fees.
11.12 Notice. All notices, requests, demands and other
communications required or permitted under this Agreement shall be
deemed to have been duly given and made if in writing upon being
delivered either by courier delivery or by fax to the Party for
whom it is intended, provided that a copy thereof is deposited,
postage prepaid, certified or registered mail, return receipt
requested (or such form of mail as may be substituted therefor by
postal authorities), in the United States mail, bearing the address
shown in this Section 11.12 for, or such other address as may be
designated in writing hereafter by such Party:
If to Buyer:
ESCO Electronics Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇ LLP
One Metropolitan Square
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Seller:
Schawk, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
Schawk, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: A. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice shall be effective upon receipt. Either Party may
change the address to which notices are to be addressed by giving
the other Party notice in the manner herein set forth.
11.13 Additional Agreements. At the Closing, Buyer shall
reimburse Seller to the extent of:
(a) the cost to Seller of automated fuel-injector
filter assembly cells purchased for use in the Business, provided
that (i) such reimbursement shall not exceed $600,000.00, (ii) such
expenditures for cells shall have been made by Seller prior to
Closing, and (iii) the acquisition of such cells shall have been
consistent with standard policies and procedures of the Business
and pursuant to the documentation attached as Schedule 11.13(a);
and
(b) one-half of the cost of the items listed on
Schedule 11.13(b) provided that (i) such reimbursement shall not
exceed $300,000.00, (ii) such expenditures have been made by Seller
prior to Closing, and (iii) such expenditures have been consistent
with standard policies and procedures of the Business and pursuant
to the documentation attached as Schedule 11.13(b).
In addition, Buyer shall consider, in Buyer s sole discretion, the
reimbursement of additional capital expenditures presented to it
by Seller prior to Closing.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the day and year first above written.
ESCO ELECTRONICS CORPORATION
By:
Name:
Title:
ATTEST:
Name:
Title:
SCHAWK, INC.
By:
Name:
Title:
ATTEST:
Name:
Title: TABLE OF EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit BForm of ▇▇▇▇ of Sale
Exhibit CForm of Escrow Agreement
Exhibit DForm of Purchased Entity Purchase Agreement
Exhibit EForm of Opinion of Counsel to Seller
Exhibit FForm of Opinion of Counsel to Buyer
TABLE OF SCHEDULES
Schedule 1.1(b) Purchased Entities
Schedule 2.1 Buyer Companies
Schedule 2.4 Allocation of Consideration
Schedule 3.0 Knowledge Persons
Schedule 3.1 Seller's Articles or Certificate of Incorporation and
Bylaws
Schedule 3.3 Financial Statements
Schedule 3.4 Events Subsequent to September 30, 1996
Schedule 3.5 Purchased Assets on Consignment or in Possession of
Others
Schedule 3.6(a) List of Accounts and Notes Receivable
Schedule 3.6(b) Non-Ordinary Course Accounts and Notes Receivable
Schedule 3.7 Undisclosed Liabilities
Schedule 3.8(e) Liens for Taxes
Schedule 3.8(g) Tax Claims
Schedule 3.8(i) Foreign Person for Tax Purposes
Schedule 3.8(l) Partnerships, Joint Ventures or Other Arrangements
Schedule 3.8(m) Stock in Subsidiaries of Seller
Schedule 3.9(a) Description of Owned Real Property; Permitted Liens
Schedule 3.9(b) Proposed Regulatory Changes
Schedule 3.9(d) Owned Real Property Located in Hazardous Areas
Schedule 3.9(e) Conditions Requiring Repairs; Disclosures Regarding
Owned Real Property
Schedule 3.10(a) Owned Personal Property
Schedule 3.10(b) Capital Stock
Schedule 3.11 Real and Personal Property Leased from Seller Group
Persons
Schedule 3.12(a) Real Property Leased to a Seller Group Person
Schedule 3.12(b) Personal Property Leased to a Seller Group Person
Schedule 3.13(a) Intellectual Property
Schedule 3.13(b) Notice of Invalidity or Unenforceability Regarding
Intellectual Property
Schedule 3.14 Required Consents
Schedule 3.16 Licenses and Permits
Schedule 3.17 Material Contracts
Schedule 3.18(e) Change of Control Provisions
Schedule 3.20(a) Litigation
Schedule 3.20(b) Judgments, Orders, Etc.
Schedule 3.21 Officers, Directors, Employees and Consultants
Schedule 3.22 Indebtedness to and from Officers, Directors and
Others
Schedule 3.23 Outside Financial Interests
Schedule 3.25 Labor and Employment Agreements
Schedule 3.26 Employee Benefits
Schedule 3.27 Terminated Plans
Schedule 3.29(a) Employment-Related Claims
Schedule 3.29(b) Workers Compensation Claims
Schedule 3.31 Labor Disputes
Schedule 3.32 Insurance
Schedule 3.33 Guarantees
Schedule 3.34 Product Warranties
Schedule 3.35 Product Liability Claims
Schedule 3.36 Product Safety Notifications
Schedule 3.37(a) Non-Compliance with Environmental Laws
Schedule 3.37(b) Non-Compliance with Environmental Permits
Schedule 3.37(c) Release of Hazardous Materials
Schedule 3.37(d) Existence of Hazardous Materials, Asbestos,
Underground Storage Tanks, Etc.
Schedule 3.37(g) Environmental Claims
Schedule 3.37(h) Notice or Knowledge of Certain Environmental
Instigators
Schedule 3.37(j) Hazardous Materials Sites
Schedule 3.37(k) Persons Dealing with Hazardous Material
Schedule 3.38 Broker's Fees
Schedule 3.39 Foreign Assets
Schedule 3.43 Bank Accounts
Schedule 3.45 Affiliates
Schedule 11.13(a) Automated Fuel-Injector Filter Assembly Cell
Documentation
Schedule 11.13(b) Approved Capital Expenditures and Related
Documentation