Exhibit 2.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into this 31st day
of March, 2000, by and among (i) Xxxxxx'x, Inc., a Wisconsin
corporation (the "Buyer"); (ii) the Xxxxx X. Xxxxxx Living Trust,
Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx, Xx., Xxxxx X. Xxxxxx Grantor
Retained Annuity Trust No.2, Xxxx X. Xxxxx and Xxxx X. Xxxxxxx
(collectively the "Principal Shareholders") and (iii) the Xxxxx
X. Xxxxxxx Trust, the Xxxxxx X. Xxxxxxx Trust, the Xxxxxxxx X.
Xxxxxxx Trust, Xxxxxxxx XxXxxxx, Xxxxxx Xxxxxx, Xx., Xxxxxxx
Xxxxxx Xxxxxx, Xxxx X. Xxxxxxx, III, Xxxxxxxx Xxxxxxx Xxxxxxx,
and Xxxxx Xxxxxxx Xxxxxxxxxx, as the record and beneficial owners
of all of the issued and outstanding shares of capital stock of
Mega Marts, Inc., a Wisconsin corporation (the "Company") the
Principal Shareholders and the persons described in clause (iii)
being referred to collectively as the "Shareholders."
WHEREAS, the Shareholders are the beneficial and record
owners of the number of shares of the common stock, par value
$.01 per share, of the Company (the "Common Stock") as set forth
on Section 3.3 of the Disclosure Schedule (defined hereinafter);
WHEREAS, the shares of Common Stock described in the first
"Whereas" clause constitute, in the aggregate, 100% of the issued
and outstanding shares of the capital stock of the Company
(collectively the "Subject Shares"); and
WHEREAS, the Shareholders are willing to sell, and the Buyer
is willing to purchase, all but not less than all of the Subject
Shares on the terms and conditions hereinafter set forth;
WHEREAS, several of the Shareholders also comprise the
stockholders of NDC, Inc. ("NDC"), which simultaneously has
entered into an agreement contemplating the sale of certain of
its assets relating to and used in the conduct of its "Tri-City"
store to the Buyer or to an affiliate of the Buyer (the "NDC
Asset Purchase Agreement").
NOW, THEREFORE, in consideration of the premises and the
promises and covenants herein contained, the parties hereto agree
as follows:
ARTICLE I Purchase and Sale of the Shares
The Shareholders hereby agree to sell, convey, transfer and
deliver to the Buyer at the Closing (as hereinafter defined in
Section 2.4), and the Buyer hereby agrees to purchase from the
Shareholders at the Closing, all (but not less than all) of the
Subject Shares, free and clear of all claims, pledges, security
interests, liens, mortgages, equities, rights of first refusal,
options, contractual commitments, conditional sales contracts,
reservations, restrictions, charges or encumbrances of any nature
whatsoever (collectively, the "Encumbrances"), all on the terms
and conditions set forth in this Agreement.
ARTICLE II Purchase Consideration; Closing
2.1 Purchase Consideration. Subject to the terms and
conditions of this Agreement, the aggregate price to be paid by
the Buyer for the Subject Shares (the "Purchase Price") shall be
One Hundred Twenty Three Million Dollars ($123,000,000), plus or
minus the difference between the Closing Date Net Book Value (as
hereinafter defined) and $39,705,781 (the "Pro Forma Net Book
Value"). The Purchase Price will be payable in the manner
provided in Section 2.2 below.
2.2 Payment of Purchase Price.
(a) Closing Payment. Buyer shall pay to the Shareholders
on the Closing Date the aggregate amount of Eighty Four Million
Dollars ($84,000,000) (the "Closing Payment"), plus or minus the
Estimated Net Book Value Adjustment (as hereinafter defined in
Section 2.3(a)). The Closing Payment shall be made by a single
wire transfer of immediately available funds to a single account
to be designated by the Shareholders, which transfer shall be
deemed for all purposes to constitute delivery of the Closing
Payment to all of the Shareholders. The Closing Payment shall be
allocated among the Shareholders in the manner set forth on
Section 2.2 of the Disclosure Schedule attached hereto and
incorporated herein by reference (the "Disclosure Schedule").
(b) Promissory Notes. The remainder of the Purchase Price
in the amount of Thirty Nine Million Dollars ($39,000,000) shall
be paid in the form of non-negotiable subordinated promissory
notes (the "Notes") issued by Buyer in favor of the Shareholders
in the proportions set forth in Section 2.2 of the Disclosure
Schedule, substantially in the form of Exhibit A attached hereto
and incorporated herein. The Notes shall be subordinated to the
Buyer's senior funded debt ("Senior Debt") pursuant to a
subordination agreement to be entered into by the holders of the
Notes with Buyer's senior lenders in the form of Exhibit B hereto
(the "Subordination Agreement").
2.3 Net Book Value Adjustment. The Purchase Price shall
be adjusted (the "Net Book Value Adjustment") in accordance with
this Section 2.3.
(a) Estimated Net Book Value. Prior to the Closing, the
parties jointly will prepare an estimate of the Closing Date Net
Book Value (as defined in Section 2.3(c)) of the Company, which
estimate will be based on the interim financial statements of the
Company as of the month end next preceding the Closing Date (the
"Estimated Net Book Value"). The difference (positive or
negative) between the Estimated Net Book Value and the Pro Forma
Net Book Value is referred to herein as the "Estimated Net Book
Value Adjustment."
(b) Closing Balance Sheet and Closing Date Net Book Value
Certificate. Within sixty (60) days after the Closing Date, the
Shareholders shall deliver to the Buyer: (i) a balance sheet
(together with appropriate supporting schedules and work papers)
of the Company as of the Closing Date (the "Closing Balance
Sheet"), audited by Ernst & Young (the "Company's Accountants"),
prepared from the books and records of the Company in accordance
with generally accepted accounting principles ("GAAP") applied on
a basis consistent with the "Financial Statements" (as
hereinafter defined), and (ii) a statement of the Closing Date
Net Book Value (as determined pursuant to Section 2.3(c)) of the
Company as of the Closing Date, accompanied by a certificate of
the Shareholders' Agents to the effect that such statement has
been prepared in accordance with the terms of this Agreement and
GAAP applied on a basis consistent with that used in preparation
of the Financial Statements (the "Closing Date Net Book Value
Certificate").
(c) Definition of Closing Date Net Book Value. For
purposes of this Agreement, the term "Closing Date Net Book
Value" shall mean the book value of the Company's assets less its
liabilities, as set forth on the Closing Balance Sheet,
determined as of the Closing Date in a manner consistent with
that used in the preparation of the Financial Statements, and in
any event in accordance with GAAP, but subject to the following:
(i) inventory will be valued at its cost to the
Company consistent with the Company's historical methods for
calculating inventory values described in Section 2.3(b) of the
Disclosure Schedule, based on a physical inventory at each of the
Company's retail stores, to be taken by Badger Inventory
Services, Inc., on a date mutually agreed upon by Buyer and the
Company, at or as near as practicable to the Closing Date but in
no event more than 21 days prior to the Closing Date (the cost of
the physical inventory to be borne by the Company and accrued as
a liability on the Closing Balance Sheet);
(ii) the Closing Date Net Book Value shall be reduced
by the amount of any payments made, costs incurred or amounts
accrued by the Company as described in Section 6.4(a)(ii),
Section 7.8 or Section 11.3;
(iii) the Closing Date Net Book Value will reflect
an accrual for employee vacation and holiday pay, the amount
thereof to be determined in accordance with GAAP, provided that
in making such determination for purposes of this subsection
(iii) accrued employee vacation and holiday pay will include that
which each employee has earned but not used as of the Closing
Date, as well as a pro-rata portion of that which each employee
has accrued through the Closing Date, even though the employee
may not be entitled thereto unless he or she would have remained
employed by the Company for some additional time after the
Closing Date, and the gross amount so determined will be reduced
by the amount of accrued vacation pay that employees will be
assumed to forfeit, at a forfeiture rate consistent with the
Company's past experience; and
(iv) accounts receivable will be valued at their
estimated net collectible balance in a manner consistent with the
Company's historical practice
(d) Buyer's Review. As soon as practicable after its
receipt of the Closing Balance Sheet and the Closing Date Net
Book Value Certificate, but in any event not more than forty-five
(45) days thereafter, the Buyer shall: (i) cause Deloitte &
Touche, the Buyer's independent certified public accountants
("Buyer's Accountants"), to review the Closing Balance Sheet and
the Closing Date Net Book Value Certificate and (ii) deliver to
the Shareholders' Agents (as hereinafter defined) either a notice
of acceptance of the Closing Date Net Book Value Certificate (a
"Notice of Acceptance") or a notice of dispute relating to the
Closing Date Net Book Value Certificate setting forth in
reasonable detail the basis for such dispute (a "Dispute
Notice").
(e) Access. After the Closing Date, the Buyer shall allow
Shareholders' Agents, Company's Accountants and their respective
representatives, during normal business hours, to have reasonable
access to, and to examine and make copies of, all books and
records of the Company, including but not limited to the books,
records, schedules, work papers and audit programs of the Buyer
and the Buyer's Accountants and to have reasonable access to and
assistance from the Company's employees to the extent such
documents and access are necessary to prepare the Closing Date
Net Book Value in accordance with Section 2.3(b) and to respond
to any Dispute Notice delivered by the Buyer pursuant to Section
2.3(d).
(f) Dispute Resolution. In the event the Buyer delivers a
Dispute Notice, such dispute shall be resolved in accordance with
the procedures set forth below.
(i) Mutual Agreement. The Buyer and the Shareholder's
Agent shall endeavor, through good faith negotiations, to resolve
any such dispute on terms mutually acceptable to them. The
Buyer's Accountants, on behalf of the Buyer, and the Company's
Accountants, on behalf of the Shareholders (such accountants
being hereinafter collectively referred to as the "Parties'
Accountants"), may participate in such negotiations to the extent
requested by the parties.
(ii) Neutral Accountants. If such dispute or
controversy is not resolved by the mutual agreement of the
parties or the Parties' Accountants within thirty (30) days after
the Shareholders' Agents' receipt of the Dispute Notice, the
Buyer and the Shareholders' Agents jointly shall appoint, within
fifteen (15) days thereafter, a national accounting firm other
than one of the Parties' Accountants (and, provided further, that
if the parties cannot agree on the selection of such a national
accounting firm, they shall select such national accounting firm
by lot from among the "Big-Five" accounting firms other than the
Parties' Accountants) (the firm so appointed being referred to as
the "Neutral Accountants"), to resolve such dispute or
controversy. The Neutral Accountants shall be instructed to use
their best efforts to make their determination as to such dispute
or controversy within thirty (30) days after their appointment.
The Neutral Accountants shall act as arbitrators, and their
determination shall be final, binding and conclusive as between
the Buyer and the Shareholders absent fraud or manifest error.
(iii) Fees. The respective fees and disbursements
of the Parties' Accountants shall be borne by the party which
retained them. The fees and disbursements of the Neutral
Accountants shall be apportioned equally between the Buyer on the
one hand and the Shareholders on the other hand. The
Shareholders shall pay a percentage of such fees and expenses
equal to A/(A+B) and the Buyer shall pay a percentage of such
fees and expenses equal to B/(A+B), where A is equal to the
absolute value of the difference (in dollars) between the Closing
Date Net Book Value as finally determined by the Neutral
Accountants and the Closing Date Net Book Value as reflected in
the Dispute Notice prepared and delivered by the Buyer in
accordance with Section 2.3(d)(ii) (after adjustment, if any,
following negotiations between Shareholders' Agents and the Buyer
pursuant to Section 2.3(f)(i)), and where B is equal to the
absolute value of the difference (in dollars) between Closing
Date Net Book Value as finally determined by the Neutral
Accountants and the Closing Date Net Book Value as reflected in
the statement of the Closing Date Net Book Value prepared and
delivered by the Shareholders' Agents in accordance with Section
2.3(b) (after adjustment, if any, following negotiations between
Shareholders' Agents and the Buyer pursuant to Section
2.3(f)(i)).
(g) Final Net Book Value Adjustment. If the Closing Date
Net Book Value is greater than the Estimated Net Book Value,
Buyer shall pay to the Shareholders, in accordance with their
respective proportions of the Purchase Price set forth in Section
2.2 of the Disclosure Schedule, the amount of such excess, with
interest at the rate of seven and one-quarter percent (7.25%) per
annum from and after the Closing Date to the date of payment. If
the Closing Date Net Book Value is less than the Estimated Net
Book Value, the Shareholders shall pay to Buyers the amount of
such deficiency, with interest at a rate of seven and one-quarter
percent (7.25%) per annum from and after the Closing Date to the
date of payment, in accordance with the "Percent of P-C
Adjustment" set forth opposite their respective names in Section
2.2 of the Disclosure Schedule. Any payment required of the
Buyer or the Shareholders, as the case may be, pursuant to this
Section 2.3(f) shall be made within fifteen (15) days of the
delivery of the Notice of Acceptance or, in the event of delivery
of a Dispute Notice, within fifteen (15) days of a final
determination thereof as described in Section 2.3(e), by wire
transfer of immediately available funds (i) if to the Buyer, to
such account as is designated by the Buyer, and (ii) if to the
Shareholders, to the account referred to in Section 2.2(a)
hereof, which transfer shall be deemed for all purposes to
constitute delivery to all of the Shareholders.
2.4 Time and Place of Closing. The closing of the
transactions contemplated hereby (the "Closing") shall take place
at the offices of Xxxxx Xxxxxxxxxxx Xxxxx S.C., Suite 2100, 000
Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx, 00000, on March 31,
2000 at 9:00 A.M., or on such other date or at such other
location as the parties shall mutually agree in writing (the
"Closing Date"), and shall be effective for all purposes as of
11:59 P.M. on April 1, 2000 (the "Effective Date").
2.5 Deliveries.
(a) Deliveries by the Shareholders. The Shareholders shall
deliver or cause to be delivered to the Buyer at the Closing the
following:
(i) certificates representing all of the Subject
Shares, free of any restrictive legends (other than those
relating to the Securities Act of 1933 or any stockholders
agreement to which a Shareholder is a party that will be
terminated at Closing as described in subparagraph (xii) below)
and duly endorsed or accompanied by duly executed stock powers;
(ii) certificates, dated as of the Closing Date and
executed by each of the Principal Shareholders and the Chief
Financial Officer of the Company (in his or her capacity as
such), respectively, to the effect that (A) each of the
representations and warranties of the Principal Shareholders made
under Article III hereof is true and correct in all material
respects on the Closing Date as though made on such date and
(B) the Shareholders and the Company have performed and complied
in all material respects with all covenants, conditions and
obligations under this Agreement which are required to be
performed or complied with by them on or prior to the Closing
Date;
(iii) a certified copy of the Articles of
Incorporation and Bylaws of the Company;
(iv) all minute books, stock books, stock transfer
records, corporate seals and other corporate and shareholder
records of the Company and each Subsidiary (as hereinafter
defined);
(v) letters of resignation, dated as of the Closing
Date, of all of the directors and officers of the Company and the
Subsidiaries;
(vi) written opinions of Xxxxx & Xxxxxxx and of Xxxxxxx
& Xxxx, S.C., counsel for the Shareholders, dated the Closing
Date, substantially in the form of Exhibits C-1 and C-2 hereto;
(vii) acknowledgments by the Shareholders of their
receipt of the Closing Payment;
(viii) executed counterparts of the following
agreements:
(A) Noncompetition Agreements entered into
between the Buyer and Xx. Xxxx Xxxxxxx, Xx. Xxxx Xxxxx and Mr.
Xxxxx Xxxxxx, Jr., respectively, substantially in the form of
Exhibit D hereto;
(B) the Subordination Agreement entered into by
and between the Shareholders and the Buyer's senior lender, as
described in Section 2.2(b) above;
(C) Amended and Restated NDC Leases (as defined
in Section 7.11 below) entered into by and between NDC as lessor
and the Company as lessee (and with Buyer as guarantor of the
obligations of the Company), for the NDC Leased Real Property (as
defined in Section 3.11(c) hereof), substantially in the form of
and on the terms set out on Exhibit E hereto;
(D) title commitments for the Owned Real Property
(as defined in Section 3.11(a) hereof) and leasehold title
insurance commitments for the Leased Real Property, as described
in Section 7.8 hereof;
(E) Landlord Consents and Estoppel Certificates;
as described in Section 7.9 hereof;
(F) Sublessee Estoppel Certificates, as described
in Section 7.10 hereof;
(G) Subordination, Nondisturbance and Attornment
Agreements, as described in Section 7.12 hereof; and
(H) Tri-City Bank Agreement (as hereinafter
defined in Section 8.6) entered into by and between the Buyer and
Tri-City National Bank ("Tri-City"), substantially in the form of
Exhibit F hereto.
(ix) evidence, reasonably satisfactory to the Buyer, as
to termination as of:
(A) the Closing Date of guarantees of the
indebtedness of NDC for which the Company is currently liable;
and
(B) the interest rate swap agreement between the
Company and Bank One.
(x) a certificate (executed in duplicate) of each of
the Shareholders in a form acceptable to the Buyer certifying
that such Shareholder is not a "foreign person" within the
meaning of Section 1445 of the Internal Revenue Code of 1986, as
amended;
(xi) certificates of status issued by the Wisconsin
Department of Financial Institutions dated within twenty (20)
business days of the Closing Date certifying that the Company and
each Subsidiary is a domestic corporation organized under the
laws of the State of Wisconsin and has filed its annual report
required under the Wisconsin Business Corporation Law ("WBCL");
(xii) evidence, reasonably satisfactory to the
Buyer, as to the termination of all stockholder agreements,
voting trust agreements, nominee arrangements, options, warrants,
rights or other privileges with respect to any shares of the
Company's capital stock;
(xiii) all executed written consents of third
parties to the sale of the Subject Shares to the Buyer hereunder
which may be required pursuant to any agreement or arrangement to
which the Company, any Subsidiary or any Shareholder is a party;
and
(xiv) an agreement among Buyer, the Company and the
Shareholders, in form and substance satisfactory to them and
their respective counsel, whereby all agreements (including the
"Pick `N Save" trademark license and supply agreements) entered
into between the parties (or their affiliates) prior to the date
hereof (the "Existing Agreements") are terminated and the parties
mutually release each other from and against any and all claims,
demands, causes of action, liabilities, costs, expenses, or
obligations (other than those arising out of this Agreement) that
any party may have against any other arising out of or relating
to the Existing Agreements or the business relationships existing
between the parties (the "Termination and Release Agreement").
(b) Deliveries by the Buyer. The Buyer shall deliver to
the Shareholders at the Closing the following:
(i) payment of the Purchase Price in accordance with
the provisions of this Article II;
(ii) the Notes;
(iii) certificates, dated as of the Closing Date
and executed by proper officers of the Buyer to the effect that:
(A) each of the representations and warranties of the Buyer made
under Article IV hereof is true and correct in all material
respects on the Closing Date as though such representations and
warranties were made on such date and (B) the Buyer has performed
and complied in all material respects with all covenants and
obligations under this Agreement which are to be performed or
complied with by it on or prior to the Closing Date;
(iv) the written opinion of Xxxxx Xxxxxxxxxxx Xxxxx
S.C., counsel for the Buyer, dated the Closing Date,
substantially in the form of Exhibit G hereto;
(v) a copy, certified as of the Closing ate by a
proper officer of the Buyer, of the resolutions of the Boards of
Directors of the Buyer authorizing the execution, delivery and
performance of this Agreement by the Buyer;
(vi) executed counterparts of each of the agreements
specified in Section 2.5(a)(viii) above to which the Buyer is a
party;
(vii) in the event that an affiliate of Buyer (and
not Buyer) is the Lessee under any of the Amended and Restated
NDC Leases described in Section 2.5(a)(vii)(C) above, an
unconditional guarantee of such leases by the Buyer in form
reasonably acceptable to NDC's lender; and
(viii) the executed Termination and Release
Agreement.
ARTICLE IIIARepresentations and Warranties of the Shareholders
Each of the Shareholders severally makes the representations
and warranties set forth in this Article IIIA, each of which is
true and correct as of the date hereof and will be true as of the
Closing Date.
3A.1 Authority of the Shareholders; No Violations.
(a) The Shareholder has full right, power, legal capacity
and authority to sell, transfer and deliver to the Buyer the full
legal and beneficial ownership in the Subject Shares to be sold
by such Shareholder pursuant to this Agreement and to consummate
the transactions contemplated herein and in any documents to be
delivered in connection herewith ("Seller Ancillary Documents")
to which such Shareholder is a party.
(b) If the Shareholder is a trust, estate, or entity other
than a natural person or corporation (the "Entity"), the
representatives, trustees or other fiduciaries who have signed
this Agreement (and any relevant Seller Ancillary Document) on
behalf of such Entity are the duly appointed and acting
representatives, trustees, or fiduciaries of such Entity as of
the date hereof (and will be such as of the Closing Date). The
representatives, trustees, or other fiduciaries of such Entity
have all the power and authority necessary to own and dispose of
the Subject Shares held by such Entity. No beneficiary or other
party with any beneficial interest in the Entity has heretofore
in any way assigned, transferred or encumbered, or permitted the
assignment, transfer or other encumbrance of, the Subject Shares
(or any interest therein) held by such Entity. The execution and
delivery of this Agreement and any relevant Seller Ancillary
Document by such representatives, trustees, or other fiduciaries,
and the performance by such representatives, trustees, or other
fiduciaries of their obligations hereunder have been duly and
validly authorized and approved by all actions required under
applicable law relating to the Entity and under the terms of the
relevant will, trust or other instruments. Such representatives,
trustees, and fiduciaries have full power and authority under the
terms of the applicable instruments and under any document
relating to or applicable to such Entity to execute and deliver
this Agreement and any relevant Seller Ancillary Document on
behalf of such Entity and to perform their respective obligations
hereunder and thereunder. Neither the execution of this
Agreement or any relevant Seller Ancillary Document, consummation
of the transactions contemplated hereby or thereby nor compliance
with or fulfillment of the terms and conditions hereof or thereof
will violate or conflict with any provision of the applicable
instruments or any other document relating to the Entity.
(c) This Agreement has been duly and validly executed and
delivered by the Shareholder and is the legal, valid and binding
obligation of the Shareholder enforceable in accordance with its
terms, except that the enforceability of this Agreement is
subject to bankruptcy, insolvency, reorganization and similar
laws of general applicability relating to or affecting creditors'
rights and limitations on the availability of the remedy of
specific performance and other equitable relief. No action,
consent or approval by or filing with any federal, state, munici
pal, foreign or other court or governmental or administrative
body or agency or any other regulatory or self-regulatory body is
required in connection with the execution and delivery by the
Shareholder of this Agreement or the Seller Ancillary Documents
or the consummation by such Shareholder of the transactions
contemplated hereby and thereby, other than the HSR Filings (as
defined in Section 7.3). No claim, action, suit, proceeding,
arbitration, investigation or inquiry before any federal, state,
municipal, foreign or other court or governmental or administra
tive body or agency, any securities or commodities exchange,
other regulatory body or any private arbitration tribunal is now
pending or, to the Knowledge of the Shareholder, threatened,
against or relating to such Shareholder which would adversely
affect the ability of such Shareholder to consummate the sale of
the Subject Shares or the other transactions contemplated by this
Agreement or the Seller Ancillary Documents. Neither the
execution and delivery of this Agreement by the Shareholder, nor
the consummation of the transactions contemplated hereby, will
breach, violate or constitute an event of default (or an event
which with the lapse of time or the giving of notice or both
would constitute an event of default) under, give rise to any
right of termination, cancellation, modification or acceleration
under, or require any consent or the giving of any notice under,
any contract or instrument to which such Shareholder is a party
or by which such Shareholder or any of such Shareholder's
properties or assets (including the Subject Shares) may be bound.
3A.2 Title to the Subject Shares. The Shareholder is the
beneficial and record owner of the number of Subject Shares set
forth opposite the name of such Shareholder in Section 3A.2 of
the Disclosure Schedule and at the Closing such Shareholder will
deliver to the Buyer good and marketable title to such shares,
free and clear of any Encumbrances (except for the rights of the
Buyer arising under this Agreement).
ARTICLE III Representations and Warranties of the Principal
Shareholders
Each of the Principal Shareholders severally makes the
representations and warranties set forth in this Article III,
each of which is true and correct as of the date hereof and will
be true as of the Closing Date.
3.1 Corporate Organization. The Company is a corporation
duly organized and validly existing under the laws of the State
of Wisconsin. The Company is current in all filings necessary to
maintain its corporate existence under Wisconsin law and no
proceedings have been filed or are pending for its dissolution or
winding up. The Company has all requisite corporate power and
authority to own, lease and operate the properties and assets it
now owns, leases or operates and to carry on its business as
presently conducted or presently proposed to be conducted. The
Company is duly qualified to do business as a foreign corporation
in Illinois and is not required to be so qualified as a foreign
corporation in any other jurisdiction. The Company has, upon or
prior to execution of this Agreement, delivered to the Buyer
complete and correct copies of its Articles of Incorporation, as
amended to date (certified by the Wisconsin Department of
Financial Institutions as of a recent date), and its By-Laws, as
amended to date. Neither the Articles of Incorporation nor the
By-Laws of the Company have been amended since the dates of
certification thereof, nor has any action been taken for the
purpose of effecting any amendment of such instruments.
3.2 No Violations. Except as set forth in Section 3.2 of
the Disclosure Schedule, the execution, delivery and performance
of this Agreement by the Shareholders and the consummation of the
transactions contemplated hereby will not: (i) violate or
conflict with any provision of the charter documents of the
Company or any Subsidiary (as defined in Section 3.5 hereof);
(ii) breach, violate or (whether immediately or with the lapse of
time or the giving of notice or both) constitute an event of
default under or an event which would give rise to any right of
termination, cancellation, modification, acceleration or
foreclosure under, or require any consent of or the giving of any
notice to any third party under, any note, bond, indenture,
credit facility, mortgage, security agreement, lease, license,
franchise, permit or other agreement, instrument or obligation
(except for such other agreements or instruments the breach of
which would not give rise to any material liability or obligation
on the part of Buyer or the Company or otherwise give rise to a
Material Adverse Effect, and which do not relate to, involve or
purport to govern or restrict the transfer of the Subject Shares
or any other capital stock of or equity interest in the Company)
to which the Company or any Subsidiary is a party, or by which
the Company or any Subsidiary or any of their properties or
assets may be bound, or give rise to the creation of any
Encumbrance upon the Subject Shares or upon the properties or
assets of the Company or any Subsidiary; (iii) violate or
conflict with any law, statute, rule, regulation, ordinance,
code, judgment, order, writ, injunction, decree or other
requirement of any court or of any governmental body or agency
thereof applicable to the Company or any Subsidiary or by which
any of their properties or assets may be bound; or (iv) require
any registration or filing by the Company, the Subsidiaries or
the Shareholders with, or any permit, license, exemption,
consent, authorization or approval of, or the giving of any
notice by the Company, any Subsidiary or any of the Shareholders
to, any governmental or regulatory body, agency or authority,
other than the HSR Filings and applications, approvals, or
consents relating to the transfer of any "Licenses" (as defined
in Section 3.13 below).
3.3 [Intentionally Left Blank]
3.4 Capitalization of the Company. The authorized, issued
and outstanding shares of all classes of capital stock of the
Company, and the record and beneficial ownership thereof, is set
forth in Section 3.4 of the Disclosure Schedule. The Subject
Shares constitute 100% of the issued and outstanding shares of
the capital stock of the Company on a fully diluted basis (i.e.,
after giving effect to the exercise of all options, warrants or
similar rights to acquire shares of stock) and there are no other
shares of any class of capital stock authorized, issued or
outstanding as of the date hereof. All of the Subject Shares
were duly and validly authorized and issued and are fully paid
and nonassessable, except as provided in Section 180.0622(2)(b)
of the Wisconsin Statutes. Except as disclosed in Section 3.4 of
the Disclosure Schedule, there are no agreements, arrangements or
understandings (including, without limitation, options or rights
of first refusal), to which any Shareholder, the Company or any
Subsidiary is a party, or by which any Shareholder, the Company
or any Subsidiary is bound relating to the ownership, acquisition
or disposition of the Subject Shares or any interest therein, and
there are no agreements, arrangements or understandings to which
any Shareholder, the Company or any Subsidiary is a party or by
which they are bound relating to the repurchase or redemption of
any shares of the Company's capital stock. There are no
outstanding options, warrants or other rights to subscribe for or
purchase, or securities convertible into or exchangeable for,
shares of the Company's capital stock, there are no agreements,
arrangements or understandings to which the Company or any
Subsidiary is a party or by which they are bound pursuant to
which the Company is or may be required to issue or sell
additional shares of the Company's capital stock, and no person
other than the Shareholders owns or holds any legal, equitable or
beneficial interest in or right to any shares of the Company's
capital stock or other equity interest in the Company of any
nature whatsoever.
3.5 Subsidiaries and Affiliates . Section 3.5 of the
Disclosure Schedule sets forth the name, jurisdiction of
incorporation, capitalization, ownership, officers and directors
of each corporation or other entity in which the Company has any
direct or indirect equity interest or other ownership interest
("Subsidiary") and the jurisdictions, if any, in which each
Subsidiary is qualified or licensed to do business as a foreign
corporation. Section 3.5 of the Disclosure Schedule also
describes briefly the business of and assets (including
intangible assets) owned by each Subsidiary. All of the
outstanding shares of capital stock of each Subsidiary owned by
the Company are free and clear of any Encumbrance, and are
validly issued, fully paid and nonassessable. The Company owns
100% of the issued and outstanding shares of all classes of
capital stock of each Subsidiary. There are no options,
warrants, conversion privileges or any other rights, agreements,
arrangements or understandings (including, without limitation,
rights of first refusal) with respect to any shares of capital
stock of any Subsidiary. Each Subsidiary (i) is a corporation
duly organized and validly existing under the laws of its state
of incorporation, (ii) is current in all filings necessary to
maintain its corporate existence under such law and no
proceedings have been filed or are pending for its dissolution or
winding up, (iii) has all requisite corporate power and authority
to own, lease and operate the properties and assets it now owns,
leases or operates and to carry on its business as presently
conducted or presently proposed to be conducted, and (iv) is not
required to be qualified to transact business as a foreign
corporation in any jurisdiction other than the jurisdictions
listed in Section 3.5 of the Disclosure Schedule. The Company
has, upon or prior to the execution of this Agreement, delivered
to the Buyer complete and correct copies of the Articles of
Incorporation, as amended to date (certified by the secretary of
state of the state of incorporation) and By-Laws, as amended to
date (certified by the Secretary of the Company as of a recent
date) of each Subsidiary. Neither the Articles of Incorporation
nor the By-laws of any Subsidiary have been amended since the
dates of certification thereof, nor has any action been taken for
the purpose of effecting any amendment of such instruments.
3.6 Financial Statements . The Company has heretofore
delivered to Buyer copies of the audited financial statements of
the Company for the fiscal years ended December 28, 1996, January
3, 1998 and January 2, 1999, and unaudited interim financial
statements for the period ended October 2, 1999. The aforesaid
financial statements, including all notes thereto, are herein
referred to collectively as the "Financial Statements." The
Financial Statements (i) have been prepared from and are
consistent with the books and records of the Company, (ii) have
been prepared in accordance with GAAP consistently applied during
the periods covered thereby, and (iii) fairly and accurately
present the financial condition, results of operations and cash
flows of the Company as at the dates, and for the periods, stated
therein; provided, that the unaudited interim financial
statements do no reflect customary year end adjustments and
accruals and lack footnote disclosure and other presentation
items.
3.7 Absence of Undisclosed Liabilities . To the knowledge
of the Principal Shareholders, the Company and the Subsidiaries
do not have any liabilities (whether known, unknown, absolute,
accrued, contingent or otherwise), except (i) to the extent
reflected or reserved against in the Financial Statements,
(ii) for obligations incurred pursuant to contracts entered into
in the ordinary course of business and identified in an
appropriate section of the Disclosure Schedule hereto to the
extent required by this Agreement to be identified in the
Disclosure Schedule hereto, (iii) for liabilities incurred in the
ordinary course of business since the date of the most recent of
the Financial Statements, all of which liabilities are properly
reflected in the books and records of the Company or the
applicable Subsidiary and will be reflected on the Closing
Balance Sheet, and (iv) for other liabilities set forth in
Section 3.7 of the Disclosure Schedule.
3.8 Absence of Certain Changes or Events . Except as set
forth in Section 3.8 of the Disclosure Schedule, since January 2,
1999, the Company and the Subsidiaries have carried on their
businesses in the ordinary course and consistent with past
practice. Except as set forth in Section 3.8 of the Disclosure
Schedule, or as expressly contemplated by this Agreement, since
October 2, 1999, the Company and the Subsidiaries have not:
(a) incurred any obligation or liability for borrowed
money (other than advances under existing credit facilities in
the ordinary course of business and consistent with past
practice), nor guaranteed, or agreed to act as surety,
indemnitor, co-signer or accommodation party for, any
indebtedness, liability or obligation of any third party, except
for liability due to endorsement of checks in the normal course
of collection;
(b) suffered any damage, destruction or loss, whether
or not covered by insurance, affecting their properties, assets
or business, exceeding $25,000 individually or $100,000 in the
aggregate;
(c) mortgaged, pledged or subjected to any lien,
charge or other encumbrance any of their assets, tangible or
intangible, except in the ordinary course of business and
consistent with past practice;
(d) sold or transferred any of their assets, except in
the ordinary course of business and consistent with past
practice, or canceled or compromised any material debts or waived
any claims or rights of a material nature;
(e) leased, licensed or granted to any person or
entity any rights in any of their assets or properties outside
the ordinary course of business and inconsistent with past
practice;
(f) experienced any material adverse change in their
financial condition, results of operations, cash flows, assets,
liabilities, business or operations taken as a whole;
(g) made any change in any accounting principle or
practice or in their method of applying any such principle or
practice;
(h) issued any additional shares of capital stock or
any options, warrants or other rights to purchase, or any
securities convertible into or exchangeable for, shares of their
capital stock;
(i) declared or paid any dividends on or made any
other distributions (however characterized) in respect of shares
of their capital stock;
(j) repurchased or redeemed any shares of their
capital stock;
(k) organized any new subsidiary, acquired any capital
stock or other equity security of any corporation or acquired any
equity or other ownership interest in any business;
(l) made any capital expenditure or capital
expenditure commitment in excess of $25,000.00 in any one
instance or $100,000.00 in the aggregate;
(m) entered into any agreement or commitment to do any
of the foregoing.
3.9 Legal Proceedings. Except as set forth in Section 3.9
of the Disclosure Schedule and except for claims, suits, actions
or proceedings alleging personal injury or property damage where
the amount claimed or reasonably estimated to be at issue in each
case is less than $25,000.00 and the Company's insurance carrier
has assumed the defense thereof without reservation of rights,
there are no suits, actions, proceedings (including, without
limitation, arbitral and administrative proceedings), or claims
(including without limitation, worker's compensation claims)
pending or, to the Knowledge of the Shareholders, any
governmental investigations or audits pending, nor to the
Knowledge of the Shareholders, are any of the foregoing
threatened, against the Company or any Subsidiary or their
properties, assets or business (nor are any of the foregoing
pending or, to the Knowledge of the Shareholders, threatened
against, relating to or involving any of the Shareholders,
officers, directors, employees or agents of the Company or any
Subsidiary in connection with the businesses of the Company or
the Subsidiaries). There are no such suits, actions,
proceedings, or claims pending, or, to the Knowledge of the
Shareholders, any governmental investigations or audits pending,
nor, to the Knowledge of the Shareholders, are any of the
foregoing threatened, challenging the validity or propriety of,
or otherwise relating to or involving, this Agreement or the
transactions contemplated hereby. There is no judgment, order,
writ, injunction, decree or award (whether issued by a court, an
arbitrator, a governmental body or agency thereof or otherwise)
to which the Company or any Subsidiary is a party, or involving
the properties, assets or businesses of the Company or any
Subsidiary, which is unsatisfied or which requires continuing
compliance therewith by the Company or said Subsidiary.
3.10 Taxes .
(a) Except as set forth in Section 3.10(a) of the
Disclosure Schedule, all returns and reports relating to Taxes
(as hereinafter defined) which are required to be filed with
respect to the Company and the Subsidiaries on or before the date
hereof or which will be required to be filed on or before the
Closing Date have been, or will be, duly and timely filed and all
such returns and reports are, or will be, complete and correct in
all material respects. Except as set forth in Section 3.10(a) of
the Disclosure Schedule, all Taxes imposed or that may in the
future be imposed on or with respect to the Company or any
Subsidiary for or relating to taxable periods prior to and
through the Closing Date or relating to the activities of the
Company prior to and through the Closing Date, whether or not
they have been assessed prior to the Closing Date, have been
paid, will be paid prior to the Closing Date, or, if not assessed
or due and payable as of the Closing Date, will be accrued for on
the Closing Balance Sheet and taken into account in the
determination of the Company's Closing Date Net Book Value.
Except as set forth in Section 3.10(a) of the Disclosure
Schedule, there are no actions or proceedings currently pending
or, to the Knowledge of the Shareholders, threatened against the
Company or any Subsidiary by any governmental authority for the
assessment or collection of Taxes, no claim for the assessment or
collection of Taxes has been asserted or, to the Knowledge of the
Shareholders, threatened, against the Company or any Subsidiary,
and there are no matters under discussion by the Company or any
of the Shareholders with any governmental authority regarding
claims for the assessment or collection of Taxes against the
Company or any Subsidiary. There are no agreements, waivers, or
applications by the Company or any Subsidiary for an extension of
time for the assessment or payment of any Taxes. There are no
Tax liens on any of the assets of the Company or any Subsidiary
(other than any lien for current Taxes not yet due and payable).
Except as set forth in Section 3.10(a) of the Disclosure
Schedule, no issue has arisen in any examination of the Company
or any of the Subsidiaries by any taxing authority that, if
raised with respect to the same or substantially similar facts
arising in any other Tax period not so examined, would result in
a deficiency for such other period, if upheld.
(b) For purposes of this Agreement, the terms "Tax"
and "Taxes" shall mean and include any and all foreign, national,
federal, state, local, or other taxes, charges, duties, fees,
levies or other assessments, payments-in-lieu of taxes, social
security obligations, deficiencies, fees, export or import
duties, or other governmental charges, including, without
limitation, income, excise, property, sales, use, gross receipts,
recording, insurance, value added, profits, license, withholding,
payroll, employment, net worth, capital gains, transfer, stamp,
social security, environmental, occupation and franchise taxes,
any installment payment for taxes and contributions or other
amounts determined with respect to compensation paid to
directors, officers, employees or independent contractors, from
time to time imposed by or required to be paid to any
governmental authority (and including any additions to tax
thereon, penalties for failure to pay any Tax or make any deposit
or file any return or report, and interest on any of the
foregoing).
(c) None of the Shareholders is a foreign person,
within the meaning of Section 1445 of the Code.
(d) Except as set forth in Section 3.10(a) of the
Disclosure Schedule, the Company and each of the Subsidiaries
timely has withheld proper and accurate amounts from its
employees, customers, shareholders and others from whom it is or
was required to withhold Taxes in compliance with all applicable
Laws, and has paid such withheld amounts on a timely basis to the
appropriate taxing authorities.
3.11 Title to Properties and Related Matters .
(a) Owned Real Property. Section 3.11(a) of the
Disclosure Schedule contains a complete and correct list of all
real property owned by the Company or any Subsidiary (the "Owned
Real Property"). Except as set forth in Section 3.11(a) of the
Disclosure Schedule, no ownership interest in any Owned Real
Property or other real property reflected in the most recent
Financial Statement has been disposed of, and no real property
has been acquired by the Company or any Subsidiary since the date
of the most recent Financial Statement. With respect to all such
Owned Real Property, the Company or the applicable Subsidiary, as
the case may be, has good and marketable title in fee simple
thereto, including all structures, plants, improvements, systems
and fixtures thereon, free and clear of all Encumbrances
whatsoever, except (i) as specifically disclosed in Section
3.11(a) of the Disclosure Schedule, (ii) liens for Taxes not yet
delinquent or due and payable, and (iii) easements, rights-of-way
and similar covenants and restrictions of record and municipal
and zoning ordinances and building use restrictions filed of
record which do not in any material way impair the use of such
property in the manner currently used or impair the Company's or
the applicable Subsidiary's good and marketable title to such
Owned Real Property. Except as set forth in Section 3.11(a) of
the Disclosure Schedule, none of the structures, plants,
buildings, improvements or systems located on any Owned Real
Property encroaches on any real property owned by others. Except
as set forth in Section 3.11(a) of the Disclosure Schedule, none
of the Owned Real Property nor any portion thereof is subject to
any sublease, license, or other agreement, arrangement or
understanding for its use or occupancy by any person other than
the Company or a Subsidiary.
(b) Jondex Leased Real Property. Section 3.11(b) of
the Disclosure Schedule sets forth a list of all real property
subleases between Jondex Corp. ("Jondex") or the Buyer as
sublessor and the Company as sublessee. Except as set forth in
Section 3.11(b) of the Disclosure Schedule, (i) all lease
payments due to the date hereof on each such sublease have been
paid and, to the Knowledge of the Principal Shareholders, the
Company is not in default under any material term of any such
sublease, and no event has occurred which constitutes, or with
the passage of time or the giving of notice or both would
constitute, a default by the Company under such sublease. The
Company has good and marketable title to all structures, plants,
leasehold improvements, systems, fixtures and other property
located on or about any of the Jondex Leased Real Property which
are owned by the Company, free and clear of any Encumbrances (but
subject to the interest of Jondex or the Buyer and the landlords
under the underlying prime leases). Except as set forth in
Section 3.11(b) of the Disclosure Schedule, none of the Jondex
Leased Real Property nor any portion thereof is subject to any
sublease, license, or other agreement, arrangement or
understanding for its use or occupancy by any person other than
the Company or a Subsidiary.
(c) NDC Leased Real Property and Other Leased Real
Property. Section 3.11(c) of the Disclosure Schedule sets forth
a complete and correct list of all real property leases and
subleases to which the Company or any Subsidiary is a party, as
tenant (excluding subleases of property subleased by the Company
from Jondex or Buyer and included within the definition of Jondex
Leased Real Property, above) and either NDC is lessor (the "NDC
Leased Real Property") or a party other than NDC is lessor (the
"Other Leased Real Property"), together with a brief description
of the property leased, identifying the owner and any sublessors
of the property, and identifying the date and term of the lease
or sublease (and in the case of any sublease, the underlying
prime lease) and any renewal or purchase options (including, in
the case of any sublease, those applicable under the underlying
prime lease). The Company has previously made available to the
Buyer complete and correct copies of each lease or sublease (and
in the case of any sublease, the underlying prime lease) and any
amendments thereto listed in Section 3.11(c) of the Disclosure
Schedule. Except as set forth in Section 3.11(c) of the
Disclosure Schedule, (i) each such lease or sublease (and in the
case of any sublease, to the Knowledge of the Principal
Shareholders, the underlying prime lease) is in full force and
effect; (ii) all lease payments due to date on any such lease or
sublease (and in the case of any sublease, to the Knowledge of
the Principal Shareholders, the underlying prime lease) have been
paid, and neither the Company nor any Subsidiary nor, to the
Knowledge of the Principal Shareholders, any other party is in
default under any such lease or sublease (or, in the case of any
sublease, the underlying prime lease), and no event has occurred
which constitutes, or with the lapse of time or the giving of
notice or both would constitute, a default by the Company, the
applicable Subsidiary or, to the Knowledge of the Principal
Shareholders, any other party under such lease or sublease; and
(iii) there are no material disputes or disagreements between the
Company, the applicable Subsidiary and to the Knowledge of the
Principal Shareholders, any other party with respect to any such
lease or sublease (or, in the case of any sublease, the
underlying prime lease). The Company or the applicable
Subsidiary has good and marketable title to all structures,
plants, leasehold improvements, systems, fixtures and other
property located on or about any of the NDC Leased Real Property
or Other Leased Real Property which are owned by the Company or
the applicable Subsidiary, free and clear of any Encumbrances
(but subject to the interests of landlords under any applicable
leases). Except as set forth in Section 3.11(c) of the
Disclosure Schedule, none of the NDC Leased Real Property or
Other Leased Real Property nor any portion thereof is subject to
any sublease, license, or other agreement, arrangement or
understanding for its use or occupancy by any person other than
the Company or a Subsidiary.
(d) Real Property Representations. Except as noted,
the following representations and warranties in this Section
3.11(d) apply to the Owned Real Property, the NDC Leased Real
Property and the Other Leased Real Property (the "Real
Property"). Except as set forth in Section 3.11(d) of the
Disclosure Schedule, no work has been performed on or with
respect to or in connection with any of the Real Property or
Jondex Leased Real Property that would cause such Real Property
or Jondex Leased Real Property to become subject to any
mechanics', materialmen's, workmen's, repairmen's, carriers' or
similar liens aggregating in excess of $25,000. The structures,
plants, improvements, systems and fixtures (excluding storage
tanks or other impoundment vessels, whether above or below
ground) located on each such parcel of Real Property and Jondex
Leased Real Property conform with all Federal, state and local
statutes and laws and all ordinances, rules, regulations and
similar governmental and regulatory requirements applicable to
their current uses (except as set forth in Section 3.11(d) of the
Disclosure Schedule, and except for Environmental Laws which are
addressed exclusively in Section 3.28) and are in good operating
condition and repair, ordinary wear and tear excepted. Each such
parcel of Real Property, in view of the purposes for which it is
currently used, conforms with all covenants or restrictions of
record and each such parcel conforms with all applicable building
codes and zoning requirements; to the Knowledge of the Principal
Shareholders, current, valid certificates of occupancy (or
equivalent governmental approvals) have been issued for each item
of Real Property to the extent required by law; and the Principal
Shareholders have no Knowledge of any proposed material change in
any such governmental or regulatory requirements or in any such
zoning requirements. Except as set forth in Section 3.11(d) of
the Disclosure Schedule, all existing electrical, plumbing, fire
sprinkler, lighting, air conditioning, heating, ventilation,
elevator and other mechanical systems located in or about the
Real Property are in good operating condition and repair,
ordinary wear and tear excepted. The maintenance and operation
of such items located in or about the Real Property or the Jondex
Leased Real Property is and has been conducted in substantial
compliance with the terms and conditions of all leases or
subleases to which the Company or any Subsidiary is a party. The
Company or the applicable Subsidiary has all easements, rights-of-
way and similar rights necessary to conduct its business as
presently conducted and to use the items of Real Property as
currently used, including, without limitation, easements and
licenses for pipelines, power lines, water lines, roadways and
other access. All such easements and rights are valid, binding
and in full force and effect, any amounts due and payable thereon
to date have been paid or have been fully accrued for in the
books and records of the Company or the applicable Subsidiary
neither the Company, the applicable Subsidiary nor, to the
Knowledge of the Principal Shareholders, any other party thereto
is in default thereunder, and there exists no event or condition
affecting the Company, the applicable Subsidiary or any other
party thereto, which, with the passage of time or notice or both,
would constitute a material default thereunder. No such easement
or right will be breached by, nor will any party thereto be given
a right of termination as a result of, the transactions
contemplated by this Agreement.
(e) Personal Property. Except as set forth in Section
3.11(e) of the Disclosure Schedule, the Company and each
Subsidiary has good and marketable title to all items of
equipment, machinery, vehicles, furniture, fixtures and other
tangible personal property currently owned or used by the Company
and each Subsidiary (and reflected on the Financial Statements or
acquired after the date thereof, other than personal property
sold or otherwise disposed of in the ordinary course of business
and consistent with past practice), free and clear of any
Encumbrances. All such items of personal property are in good
operating condition and repair, ordinary wear and tear excepted,
are physically located at or about the Company's owned or leased
premises, and are owned outright by the Company or the applicable
Subsidiary, or validly leased by the Company. No such item of
personal property is subject to any sublease, license or other
agreement, arrangement or understanding for its use by any person
other than the Company or the applicable Subsidiary. The
maintenance and operation thereof has complied with all
applicable laws, regulations, ordinances, contractual commitments
and obligations. Except as set forth in Section 3.11(e) of the
Disclosure Schedule or as disclosed in the Financial Statements,
no item of tangible personal property with a fair market value
exceeding $50,000 owned or used by the Company or any Subsidiary
is subject to any conditional sale agreement, installment sale
agreement or title retention or security agreement or arrangement
of any kind; as to each item of personal property subject to any
such agreement or arrangement, Section 3.11(e) of the Disclosure
Schedule sets forth a brief description of the property in
question and the underlying obligation.
(f) Personal Property Leases. Section 3.11(f) of the
Disclosure Schedule sets forth a complete and correct list and
summary description of all personal property leases to which the
Company or any Subsidiary is a party (either as landlord or
tenant) wherein the property leased has a fair market value
exceeding $25,000 or the total annual rental payments in any year
exceed $10,000 ("Material Personal Property Leases"). With
respect to each Material Personal Property Lease, Section 3.11(f)
of the Disclosure Schedule also provides a brief description of
the property leased, identifying the date and term of the lease,
the amount and timing of lease payments and any renewal or
purchase options. The Company has previously made available to
the Buyer complete and correct copies of each Material Personal
Property Lease (and any amendments thereto). Except as set forth
in Section 3.11(f) of the Disclosure Schedule, (i) each such
lease is in full force and effect; (ii) all lease payments due to
date on any such lease have been paid, and neither the Company,
nor the applicable Subsidiary, nor, to the Knowledge of the
Shareholders, any other party is in default under any such lease,
and no event has occurred which constitutes, or with the lapse of
time or the giving of notice or both would constitute, a default
by the Company, the applicable Subsidiary or any other party
under such lease; and (iii) there are no material disputes or
disagreements between the Company, the applicable Subsidiary and
any other party with respect to any such lease.
3.12 Computer Software . All computer software used by the
Company or installed on any computers owned or used by the
Company is either (i) owned by the Company or (ii) used pursuant
to valid and effective licenses from the owners thereof. The
Company is not in material breach or default under any of such
licenses, and has not received any notice suggesting or alleging
that any such material breach or default has occurred or that the
Company is using or has used any computer software without an
appropriate license therefor.
3.13 Licenses, Permits, Authorizations and Consents .
Section 3.13 of the Disclosure Schedule sets forth all material
approvals, authorizations, consents, licenses, orders and permits
of all governmental and regulatory authorities, whether foreign,
federal, state or local (collectively, "Licenses") held by or
granted to the Company and each Subsidiary, identified by store
location. Each of the Licenses is in full force and effect. The
Company has complied with all of the terms, conditions and
requirements imposed by each of the Licenses, except where the
failure so to comply would not have a Material Adverse Effect.
Neither the Company, the Subsidiaries, nor the Shareholders have
received any notice of, and the Shareholders have no Knowledge
of, any intention on the part of any appropriate authority to
cancel, revoke or modify, or any inquiries, proceedings or
investigations the purpose or possible outcome of which is the
cancellation, revocation or modification of any such permit,
license, exemption, consent, authorization or approval, except as
set forth in Section 3.13 of the Disclosure Schedule. The
Licenses set forth in Section 3.13 of the Disclosure Schedule
include all Licenses which are required for the ownership of the
Company's or the applicable Subsidiary's assets or the conduct of
its business as it is presently conducted, except for Licenses
the absence of which would not have a Material Adverse Effect.
Licenses required under Environmental Laws are addressed
exclusively in Section 3.28.
3.14 Patents, Trademarks, Etc. Section 3.14 of the
Disclosure Schedule sets forth a complete and correct list of all
patents, patent applications, material unpatented inventions,
trademarks and service marks, logos, trademark and service xxxx
registrations (and applications therefor), trade or business
names and copyrights owned by and registered in the name of the
Company or any Subsidiary, or used by the Company or any
Subsidiary in the conduct of their businesses (other than those
licensed to the Company by Buyer or its affiliates)
(collectively, the "Intangible Rights"). Except as set forth on
Section 3.14 of the Disclosure Schedule, the Company or the
applicable Subsidiary has the right to use all of the Intangible
Rights, including, but not limited to the names "Mega Marts" and
"Mega Food Center," in its business as and where the same is
currently conducted and the use of such Intangible Rights in the
conduct of the Company's or the applicable Subsidiary's business
as and where the same is currently conducted does not conflict
with the rights of others in any manner. Except as set forth in
Section 3.14 of the Disclosure Schedule, there are no licenses,
agreements or commitments outstanding or effective granting any
other person any right to use, operate under, license or
sublicense the Intangible Rights. Neither the Shareholders nor
the Company have received any notice or claim that any of the
Intangible Rights infringes upon or conflicts with the rights of
any other person. Except as set forth in Section 3.14 of the
Disclosure Schedule, to the Knowledge of the Shareholders, there
is no infringement or violation by any other person of the
Company's or any Subsidiary's rights in any of the Intangible
Rights.
3.15 Contracts.
(a) Except as set forth in Section 3.15(a) of the
Disclosure Schedule (or in Sections 3.11(b), 3.11(c), 3.11(f),
3.14, 3.16(a), or 3.20 of the Disclosure Schedule), and except
for contracts, arrangements or understandings that would have
been required to be identified on any of the foregoing sections
of the Disclosure Schedule but for the fact that they were
excepted from disclosure pursuant to the terms of the applicable
Section of this Agreement, and except for agreements between the
Company and Buyer or its affiliates, neither the Company nor any
Subsidiary is a party to, or subject to:
(i) any contract, arrangement or understanding,
or series of related contracts, arrangements or understandings,
other than Purchase Orders (as hereinafter defined), which
involves annual expenditures or receipts by the Company or the
applicable Subsidiary of more than $25,000;
(ii) any Material Personal Property Lease;
(iii) any lease of real property;
(iv) any license agreement other than software
licenses described in clause (i) of the first sentence of Section
3.12 hereof;
(v) any contract, arrangement or understanding
not made in the ordinary course of business and consistent with
past practice involving annual payments not exceeding $5,000 in
each case;
(vi) any note, bond, indenture, credit
facility, mortgage, security agreement or other instrument or
document relating to or evidencing indebtedness for money
borrowed or a security interest or mortgage in the assets of the
Company or any Subsidiary;
(vii) any warranty, indemnity or guaranty
issued by the Company;
(viii) any contract, arrangement or
understanding granting to any person the right to use any
material item of property or property right of the Company or any
Subsidiary;
(ix) any contract, arrangement or understanding
restricting the right of the Company or any Subsidiary to engage
in any business activity or compete with any business; or
(x) any outstanding offer or commitment to enter
into any contract or arrangement of the nature described in
subsections (i) through (ix) of this Section 3.15(a).
For purposes of this Agreement "Purchase Orders" shall mean
those purchase orders of the Company or Subsidiary and other
contracts and commitments issued or entered into by the Company
or Subsidiary to or with its suppliers and vendors for the
purchase of goods, products and supplies in the ordinary course
of business and on the Company's or Subsidiary's standard terms
and conditions.
(b) The Company previously has delivered to the
Buyer complete and correct copies of each written contract (and
any amendments thereto), listed on Section 3.15(a) or identified
in Sections 3.11(b), 3.11(c), 3.11(f), 3.14 or 3.16 of the
Disclosure Schedule, and Section 3.15(a) of the Disclosure
Schedule contains a complete and correct description of each oral
contract to which the Company and each Subsidiary is a party or
bound which is required to be disclosed on Section 3.15(a) of the
Disclosure Schedule. Except as set forth in Section 3.15(c) of
the Disclosure Schedule, (i) each such contract is in full force
and effect; (ii) neither the Company nor (to the Knowledge of the
Shareholders) any other party is in material default under any
such contract, and no event has occurred which constitutes, or
with the lapse of time or the giving of notice or both would
constitute, a default by the Company, the applicable Subsidiary
or (to the Knowledge of the Shareholders) by any other party
under such contract; and (iii) there are no material disputes or
disagreements between the Company, the applicable Subsidiary and
any other party with respect to any such contract.
3.16 Employees.
(a) The Company previously has delivered to the Buyer
a schedule setting forth the names of all current salaried
employees of the Company and each Subsidiary and their current
salary rates. Except as set forth in Section 3.16(a) of the
Disclosure Schedule, the Company or the applicable Subsidiary has
accrued on its books and records all obligations for salaries,
vacations, benefits and other compensation with respect to its
employees and any of its Former Employees (as hereinafter
defined), to the extent required by GAAP, including, but not
limited to, severance, bonuses, incentive and deferred
compensation. Except as disclosed in Section 3.16(a) of the
Disclosure Schedule, the Company and the Subsidiaries do not
currently offer, nor have they ever offered, retiree health or
insurance benefits to employees or Former Employees (as
hereinafter defined), and the Company and the Subsidiaries have
no liabilities (contingent or otherwise) with respect thereto.
Complete and correct copies of all material written agreements
with or concerning any employee (or any Former Employee),
including, without limitation, union and collective bargaining
agreements, and all employment policies, employee handbooks, and
the like, and all amendments and supplements thereto, have
previously been delivered to the Buyer, and a list of all such
agreements, handbooks and policies is set forth in Section
3.16(a) of the Disclosure Schedule. Except as set forth in
Section 3.16(a) of the Disclosure Schedule and except pursuant to
the terms of any contract or agreement to which the Company or
any Subsidiary is a party and which is listed in any Section of
the Disclosure Schedule, since the latest Financial Statement,
the Company and the Subsidiaries have not (i) except in the
ordinary course of business and consistent with past practice,
increased the salary or other compensation payable or to become
payable to or for the benefit of any of the employees,
(ii) provided any of the employees with any increased security or
tenure of employment, (iii) increased the amounts payable to any
of the employees upon the termination of any such person's
employment or (iv) amended any Benefit Plan (as hereafter
defined) to provide improved benefits granted to or for the
benefit of any of the employees under any Benefit Plan (as
hereinafter defined).
(b) Since January 1, 1995 and, to the Knowledge of the
Principal Shareholders, prior to that date, the Company and each
Subsidiary have complied at all times with all laws, statutes,
rules and regulations applicable with respect to employees or
employment practices in every one of the jurisdictions in which
they operate and/or do business. In particular, the Company and
each Subsidiary have complied with all laws and statutes, and all
rules and regulations applicable to and/or aiming at
discriminatory practices (including, without limitation,
discrimination based on race, age or gender), labor standards and
working conditions, occupational health and safety, payment of
minimum wages and overtime rates, worker's compensation, the
withholding and payment of Taxes or any other kind of
governmental charge from any kind of compensation, or otherwise
relating to the conduct of employers with respect to employees or
potential employees, and there have been no claims made or, to
the Knowledge of the Shareholders, threatened thereunder against
the Company or any Subsidiary arising out of, relating to or
alleging any violation of any of the foregoing, which claims, if
resolved adversely to the Company or the applicable Subsidiary,
would have a Material Adverse Effect. The Company and each
Subsidiary have complied with the employment eligibility
verification form requirements under the Immigration and
Naturalization Act, as amended ("INA"), in recruiting, hiring,
reviewing and documenting prospective employees for employment
eligibility verification purposes and the Company and each
Subsidiary has complied with the paperwork provisions and anti-
discrimination provisions of the INA, except, in either case,
where the failure so to comply would not have a Material Adverse
Effect. The Company and each Subsidiary have obtained and
maintained the employee records and I-9 forms in proper order as
required by law. Except as set forth in Section 3.16(b) of the
Disclosure Schedule, and except for routine grievances none of
which, if resolved adversely to the Company, would, individually
or in the aggregate, have a Material Adverse Effect, there are no
material controversies, strikes, work stoppages, picketing or
disputes pending or, to the Knowledge of the Shareholders,
threatened between the Company or any Subsidiary and any
employees or Former Employees (as hereinafter defined); no
organizational effort by any labor union or other collective
bargaining unit is pending or, to the Knowledge of the
Shareholders, threatened with respect to any employees; and no
consent of or any other action by or negotiation with any labor
union or other collective bargaining unit is required in
connection with or to consummate the transactions contemplated by
this Agreement, except as set forth in Section 3.16(b) of the
Disclosure Schedule.
3.17 Benefit Plans.
(a) For purposes hereof, the term "Benefit Plan" shall
mean each and every defined benefit and defined contribution
plan, employee stock ownership plan, consulting or employment
agreement, executive compensation plan, bonus plan, incentive
compensation plan or arrangement, deferred compensation agreement
or arrangement, agreement with respect to temporary employees,
vacation pay, sickness, disability or death benefit plan (whether
provided through insurance, on a funded or unfunded basis or
otherwise), employee stock option or stock purchase plan,
severance pay plan, arrangement or practice, employee relations
policy, practice or arrangement, retiree medical or life
insurance benefits, and each other employee benefit plan, program
or arrangement, which at any time has been maintained or
contributed to by the Company or any Subsidiary for the benefit
of or relating to any of the employees or to any former employee
of the Company or any Subsidiary ("Former Employee") or his/her
dependents, survivors or beneficiaries, whether written or oral,
but not including any multi-employer benefit plans within the
meaning of Section 3(37) of ERISA (a "Multi-Employer Plan").
Section 3.17(a) of the Disclosure Schedule contains a complete
and correct list of all current Benefit Plans.
(b) Except as set forth on Schedule 3.17(b) of the
Disclosure Schedule, each Benefit Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA),
meets the requirements of Section 401(a) of the Code; the trust,
if any, forming part of such plan is exempt from U.S. federal
income tax under Section 501(a) of the Code; a favorable
determination letter has been issued by the Internal Revenue
Service (the "IRS") with respect to each plan and trust and each
material amendment thereto; and nothing has occurred since the
date of such determination letter that would adversely affect the
qualification of such plan. No Benefit Plan is a "voluntary
employees beneficiary association" (within the meaning of Section
501(c)(9) of the Code) and there are no current "welfare benefit
funds" relating to Employees or Former Employees within the
meaning of Section 419 of the Code other than as set forth in
Section 3.17(b) of the Disclosure Schedule. No event or
condition exists which respect to any Benefit Plan that could
subject the Company or any Subsidiary to any material Tax under
Section 4980B of the Code (or under its predecessor statute,
Section 162(k) of the Code). With respect to each Benefit Plan
listed on Schedule 3.17(a), the Company has heretofore delivered
to the Buyer complete and correct copies of the following
documents, where applicable: (i) the most recent annual report
(Form 5500 series), together with schedules, as required, filed
with the IRS, and any financial statements and opinions required
by Section 103(a)(3) of ERISA, (ii) the most recent determination
letter issued by the IRS, (iii) the most recent summary plan
description and all modifications, as well as all other
descriptions distributed to employees or set forth in any manuals
or other documents, (iv) the text of the Benefit Plan and of any
trust, insurance or annuity contracts maintained in connection
therewith, (v) the most recent independent appraisal in the case
of an employee stock ownership plan, and (vi) the most recent
actuarial report, if any, relating to the Benefit Plan.
(c) Except as set forth on Schedule 3.17(c) of the
Disclosure Schedule, neither the Company nor any corporation or
other trade or business under common control with the Company or
any Subsidiary (as determined pursuant to Section 414(b) or (c)
of the Code) (a "Common Control Entity") has maintained or
contributed to or in any way directly or indirectly has any
liability (whether contingent or otherwise) with respect to any
Multi-Employer Plan. The Company and the Subsidiaries have not
completely or partially withdrawn from any Multi-Employer Plan
and, except as set forth in Section 3.17(c) of the Disclosure
Schedule, the Company and the Subsidiaries would have no
withdrawal liability under Title IV of ERISA if they were to
withdraw as of the date hereof from any multi-employer plan to
which the Company or any Subsidiary has contributed. To the
Knowledge of the Principal Shareholders, no proceedings by the
Pension Benefit Guaranty Corporation (the "PBGC") to terminate
any Benefit Plan have been instituted or threatened. To the
Knowledge of the Principal Shareholders: no event has occurred or
condition exists which constitutes grounds for the PBGC to
terminate any Benefit Plan; neither the Company, the Subsidiaries
nor any Common Control Entity is a party to or has any liability
under any agreement imposing secondary liability on it as a
seller of the assets of a business in accordance with Section
4204 of ERISA or under any other provision of Title IV of ERISA
or other agreement; no contingent or other liability with respect
to which the Company or any Subsidiary has, had or could have any
liability exists under Title IV of ERISA to the PBGC or to any
Benefit Plan. No assets of the Company or any Subsidiary are
subject to a lien under Sections 4064 or 4068 of ERISA. Except
as set forth in Section 3.17(c) of the Disclosure Schedule, the
Company and the Subsidiaries do not currently maintain or
contribute to any plan subject to Title IV of ERISA or Section
412 of the Code (other than Multi-Employer Plans), and, except as
set forth in Section 3.17(c) of the Disclosure Schedule, each
such plan previously maintained or contributed to by the Company
and the Subsidiaries has been terminated in accordance with the
provisions of the Code and ERISA and the Company and the
Subsidiaries do not have any actual or contingent liability
associated with any such terminated plan, including, but not
limited to, any future obligations or liability associated with
(i) the solvency or ability to provide benefits of any insurance
company providing annuity payments under such terminated plan,
(ii) claims by participants resulting from any alleged breach of
fiduciary duty in connection with the termination of any such
terminated plan, or (iii) the disqualification of any such
terminated plan. All contributions and payments required to be
made to or with respect to each Benefit Plan (including
contributions to union-sponsored pension or health and welfare
plans) with respect to the service of employees or other
individuals with or related to the Company or the Subsidiaries
prior to the date hereof have been made or have been accrued for
in the Financial Statements, or, for periods after the most
recent of the Financial Statements and through the Closing Date,
will be accrued in the books and records of the Company or the
applicable Subsidiary, and will be accrued and reflected as
liabilities on the Closing Balance Sheet and, except to the
extent so accrued, the Company and the Subsidiaries shall have no
liability to or with respect to any Benefit Plan relating to such
prior period.
Except as set forth in Section 3.17(c) of the Disclosure
Schedule, the Company and the Subsidiaries do not provide, nor do
they have any obligation to provide, post-retirement medical,
life insurance or other benefits to employees or Former Employees
or their survivors, dependents and beneficiaries, except as may
be required by the Consolidated Omnibus Budget Reconciliation Act
of 1986 or similar state medical temporary benefits continuation
law. Except as set forth in Section 3.17(c) of the Disclosure
Schedule, the Company and the Subsidiaries will not incur any
liability under any severance agreement, deferred compensation
agreement, employment agreement or other compensation agreement
as a result of the consummation of the transactions contemplated
by this Agreement, nor will the terms or the Company's or any
Subsidiary's liability or obligations under any such agreement be
altered or increased as a result of such transactions.
(d) Except as set forth in Section 3.17(d) of the
Disclosure Schedule: none of the Benefit Plans has been subject
to a "reportable event," within the meaning of Section 4043 of
ERISA (whether or not waived); there have been no "prohibited
transactions", within the meaning of Section 4975 of the Code or
Part 4 of Subtitle B of Title I of ERISA; there have been no
breaches of fiduciary responsibility within the meaning of Part 4
of Subtitle B of Title I of ERISA; and none of the Benefit Plans
which are subject to Section 412 of the Code has incurred any
"accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code and no event or set of
conditions exist which could subject the Company to any material
Tax under Section 4971 of the Code or a lien under Section 412(n)
of the Code.
(e) Each Benefit Plan has been administered to date in
accordance with the applicable provisions of ERISA, the Code and
applicable law and with the terms and provisions of all
documents, contracts or agreements pursuant to which such Benefit
Plan is maintained. All reports and information required to be
filed with the Department of Labor, the IRS, the PBGC or plan
participants or beneficiaries with respect to any Benefit Plan
have been timely filed; there is no dispute, arbitration, claim,
suit or grievance pending or to the Knowledge of the
Shareholders, threatened, involving a Benefit Plan (other than
routine claims for benefits). To the Knowledge of the Principal
Shareholders, none of the Benefit Plans nor any fiduciary thereof
has been the direct or indirect subject of an order or
investigation or examination by a governmental or quasi-
governmental agency and there are no matters pending before the
IRS, the Department of Labor, the PBGC or any other domestic or
foreign governmental agency with respect to a Benefit Plan.
There have been no claims, or notice of claims, filed under any
fiduciary liability insurance policy covering any Benefit Plan.
The Company will incur no liability or obligation to make any
"parachute payment" (as that term is defined in Section
280G(b)(2) of the Code) to any of the employees prior to the
Closing or in connection with the transactions contemplated
hereby. No event or set of conditions exist which would subject
the Company or any Subsidiary to any material Tax under Sections
4972, 4974-76, 4979, 4980, 4999 or 5000 of the Code.
3.18 Compliance with Applicable Law. Except as set forth
in Section 3.18 of the Disclosure Schedule, the Company and the
Subsidiaries have complied with all applicable foreign or
domestic laws and statutes and all ordinances, codes, rules,
regulations, judgments, orders, injunctions, writs or decrees of
any Federal, state, local or foreign court or any governmental
body or agency thereof to which the Company or any Subsidiary may
be subject or which are applicable to the operations, businesses
or assets of the Company or any Subsidiary as such businesses are
currently conducted (except Environmental Laws, which are
addressed exclusively in Section 3.28). Neither the Company,
the Subsidiaries, nor the Shareholders have received any written
notice alleging any such violation, nor do the Shareholders have
any Knowledge of any inquiry, investigation or proceeding
relating thereto.
3.19 Ability to Conduct the Business. Except as may be
disclosed in Section 3.11(b), 3.11(c), 3.15(a)(ix) or 3.15(a)(x)
of the Disclosure Schedule, there is no agreement, arrangement or
understanding, nor any judgment, order, writ, injunction or
decree of any court or any governmental body or agency thereof
that could prevent the use by the Company or any Subsidiary of
any of their material properties and assets or the conduct by the
Company or any Subsidiary of their businesses in any material
respect.
3.20 Material Suppliers. Section 3.20 of the Disclosure
Schedule sets forth a complete and correct list of all written
supply contracts, arrangements and understandings (other than
Purchase Orders (as defined in Section 3.15(a)) and agreements
between the Company and Buyer or Buyer's affiliates) currently in
existence between the Company or any Subsidiary and any supplier
of merchandise to the Company or the applicable Subsidiary
wherein the aggregate volume of purchases from such supplier by
the Company and the Subsidiaries in any year exceeds or can be
expected to exceed $1,000,000.
3.21 Inventories. Except for inventory which has been
written down on the books of the Company or a Subsidiary to its
net realizable value, or is eligible to be returned to the
vendors thereof, the merchandise inventory of the Company (the
"Inventory") is of merchantable and salable quality and is not
damaged or beyond its applicable date code. The quantities of
Inventory on hand are such that they can reasonably be expected
(on the basis of the Company's past experience) either (i) to be
sold within the time period remaining prior to the expiration of
their applicable date codes, or (ii) to be able to be returned to
the vendors thereof. The Company's inventory is valued on the
basis of the lower of cost (determined on a LIFO basis) to the
Company or the applicable Subsidiary or fair market value, in the
manner described in the Financials Statements, and is accurately
and fairly reflected in the Financial Statements and in the books
and records of the Company.
3.22 Accounts Receivable. Except as disclosed in Section
3.22 of the Disclosure Schedule, all accounts receivable of the
Company and each Subsidiary, including, but not limited to all
coupon receivables (i) arose from bona fide sales of goods or
services or payments related to the same (such as advertising
coop or coupon redemption payments) in the ordinary course of
business and consistent with past practice, (ii) are owned by the
Company or the applicable Subsidiary free and clear of any
Encumbrances, and (iii) are accurately and fairly reflected on
the Financial Statements or, with respect to accounts receivable
of the Company or the applicable Subsidiary created after the
date thereof and through the Closing Date, are and will be
accurately and fairly reflected in the books and records of the
Company or the applicable Subsidiary. To the Knowledge of the
Principal Shareholders, the Company's accounts receivable can
reasonably be expected to be collected, in the ordinary course of
business and without offset or counterclaim, in the net aggregate
amount at which they will be reflected on the Closing Balance
Sheet.
3.23 Insurance. Section 3.23 of the Disclosure Schedule is
a complete and correct list of all insurance (including, without
limitation, worker's compensation insurance) policies carried by,
or covering, the Company and each Subsidiary with respect to
their businesses or employees. Complete and correct copies of
each such policy have previously been delivered to the Buyer.
All such policies are in full force and effect, and no written
notice of cancellation has been given with respect to any such
policy. All premiums due thereon have been paid in a timely
manner.
3.24 Bank Accounts; Powers of Attorney. Section 3.24 of
the Disclosure Schedule sets forth a complete and correct list
showing: all banks in which the Company and each Subsidiary
maintains a bank account or safe deposit box (collectively, "Bank
Accounts"), together with, as to each such Bank Account, the
account number, the names of all signatories thereof and the
authorized powers of each such signatory and, with respect to
each such safe deposit box, the number thereof and the names of
all persons having access thereto; and the names of all persons
holding powers of attorney from the Company and each Subsidiary
and a summary statement of the terms thereof.
3.25 Minute Books, etc. Except as set forth in Section
3.25 of the Disclosure Schedule, the minute books, stock
certificate books and stock ledgers of the Company and each
Subsidiary are complete and correct in all material respects and
fairly reflect all transactions in shares of the Company's or the
applicable Subsidiary's capital stock. The minute books of the
Company and each Subsidiary contain accurate and complete records
of all meetings or written consents to action of the Board of
Directors and shareholders of the Company or the applicable
Subsidiary and accurately reflect all material corporate actions
of the Company and the applicable Subsidiary which are required
by law to be passed upon by the Board of Directors (and all
committees thereof) or shareholders of the Company or the
applicable Subsidiary.
3.26 Books and Records. Except as set forth in
Section 3.26 of the Disclosure Schedule, all of the records,
data, information, databases, systems and controls maintained,
operated or used by the Company or the Subsidiaries in connection
with the conduct or administration of their businesses (including
all means of access thereto and therefrom) are located on the
premises of the Company or have been delivered to the Buyer and
are under the exclusive ownership and direct control of the
Company or the applicable Subsidiary.
3.27 Transactions with Related Parties. Section 3.27 of
the Disclosure Schedule contains an accurate and complete list
and description of all material agreements, arrangements and
understandings relating to the provision of services, use or
transfer of property or assets, or outstanding indebtedness,
which are currently in effect or which occurred at any time after
January 2, 1999 between the Company or any Subsidiary and any of
the following (each, a "Related Party"): (i) each person who is
now or at the time in question was a shareholder, director or
officer of the Company or any Subsidiary; (ii) the spouses,
children, grandchildren, siblings, parents, grandparents, uncles,
aunts, nieces, nephews or first cousins of any person described
in (i) (collectively, "near relatives"); (iii) any trust for the
benefit of any person described in (i) or any of their respective
near relatives; and (iv) any corporation, partnership, joint
venture or other entity owned or controlled by any person
described in (i) or any of their respective near relatives.
Except as set forth in Section 3.27 of the Disclosure Schedule,
there is now and on the Closing Date there will be no outstanding
indebtedness, liability or obligation owed by the Company to the
Shareholders, of any nature, with the exception of accrued wages,
salaries and related employee benefits due in the ordinary course
of business to those Shareholders who are also employees, for
services performed prior to the Closing Date.
3.28 Environmental Matters.
(a) No Hazardous Substances. Except as set forth in
Section 3.28(a) of the Disclosure Schedule, and except for
Hazardous Substances (as hereinafter defined in Section 3.28(c))
generated, stored, treated, manufactured, refined, handled,
produced, disposed of or used by the Company or the Subsidiaries
in the ordinary course of their businesses, in compliance with
the requirements of currently applicable laws, rules and
regulations or otherwise in a manner which would not give rise to
any liabilities or obligations under such laws, rules and
regulations (i) neither the Company nor any Subsidiary has caused
there to be, nor to the Knowledge of the Principal Shareholders
are there, any Hazardous Substances in, on or under any of the
Real Property (as hereinafter defined in Section 3.28(d)); (ii)
none of such Real Property has been designated, restricted or
investigated by any governmental authority as a result of the
actual or suspected presence, spillage, leakage, discharge or
other emission of Hazardous Substances; (iii) no Hazardous
Substances have been generated, used, stored, treated,
manufactured, refined, handled, produced or disposed of in, on or
under, and no Hazardous Substances have been transported,
released or disposed of at, from or to, any of such Real Property
by the Company or any Subsidiary or by any persons or agents
operating under the control, direction and supervision of the
Company or any Subsidiary, including, without limitation, all
employees, agents and contractors of the Company or any
Subsidiary; and (iv) the Company and the Subsidiaries have not
received any written or oral governmental notice, order, inquiry,
investigation, environmental audit or assessment or any lien,
encumbrance, decree, easement, covenant, restriction, servitude
or proceeding concerning, or arising by reason of, the actual or
suspected presence, spillage, leakage, discharge, disposal or
other emission of any Hazardous Substance in, on, under, around,
about or in the vicinity of, or the transportation of any
Hazardous Substance at, from or to, any of such Real Property.
Section 3.28(a) of the Disclosure Schedule contains a list of all
above ground or underground tanks used for the storage of
Hazardous Substances on or below the surface of any Real
Property;
(b) Compliance with Environmental Laws. Except as
disclosed in Section 3.28(b) of the Disclosure Schedule, and
except for conditions that are not attributable to any act or
omission of the Company or any Subsidiary and of which the
Principal Shareholders do not have Knowledge: (i) neither the
Company, the Subsidiaries nor any Real Property (including
storage tanks or other impoundment vessels, whether above or
below ground) are in material violation of, or subject to any
material liabilities as a result of any past or current
violations of, any existing federal, state or local law
(including common law), statute, ordinance, rule or regulation of
any federal, state or local governmental authority relating to
pollution or protection of the environment, including, without
limitation, statutes, laws, ordinances, rules and regulations
relating to the emission, generation, discharge, spillage,
leakage, storage, off-site dumping, release or threatened release
of Hazardous Substances into ambient air, surface water, ground
water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances (collectively,
"Environmental Laws"); and (ii) no material expenditures are
required in connection with the operation of the Company's or the
Subsidiaries' businesses as presently conducted in order to
comply with any Environmental Laws. Except as disclosed in
Section 3.28(b) of the Disclosure Schedule, the Company, the
Subsidiaries and the Real Property have in all material respects
passed all inspections conducted by applicable governmental
authorities and regulatory bodies in connection with the matters
described in the preceding sentence. The Company has all
approvals, authorizations, consents, licenses, orders and permits
of all governmental and regulatory authorities required under any
Environmental Laws (collectively, "Environmental Permits"),
except for Environmental Permits the lack of which could not give
rise to any material obligation or liability on the part of the
Company or otherwise have any Material Adverse Effect, nor impair
the ability of the Company to conduct any material aspect of the
Company's business at any one or more of its locations. Each of
the Environmental Permits is in full force and effect. The
Company has complied with all of the terms, conditions and
requirements imposed by each of the Environmental Permits, except
where the failure so to comply would not have a Material Adverse
Effect. Neither the Company, the Subsidiaries, nor the
Shareholders have received any notice of, and the Shareholders
have no Knowledge of, any intention on the part of any
appropriate authority to cancel, revoke or modify, or any
inquiries, proceedings or investigations the purpose or possible
outcome of which is the cancellation, revocation or modification
of any such Environmental Permit. All cleanup, removal and other
remediation activities carried out by the Company or the
Subsidiaries or by agents of the Company or the Subsidiaries at
the Real Property have been conducted in material compliance with
all applicable Environmental Laws, and there is no basis for
liability on the part of the Company or any Subsidiary as a
result of such activities.
(c) Definition of "Hazardous Substances". For
purposes of this Agreement, the term "Hazardous Substance" shall
mean any product, substance, chemical, contaminant, pollutant,
effluent, waste or other material which, or the presence, nature,
quantity and/or intensity of existence, use, manufacture,
disposal, transportation, emission, discharge, spill, release or
effect of which, either by itself or in combination with other
materials located on any of the Real Property, is defined or
listed in, regulated or monitored by, or otherwise classified
pursuant to, any statute, law, ordinance, rule or regulation
applicable to the Real Property as "hazardous substances,"
"hazardous materials," "hazardous wastes," "infectious wastes" or
"toxic substances." Hazardous Substances shall include, but not
be limited to, (i)(A) any "hazardous substance" as defined in the
Comprehensive Environmental Response, Compensation and Liability
Act, (B) any "regulated substance" as defined in the Solid Waste
Disposal Act or (C) any substance subject to regulation pursuant
to the Toxic Substances Control Act, as such laws are now in
effect or may be amended through the Closing Date and any rule,
regulation or administrative or judicial policy statement,
guideline, order or decision under such laws,
(ii) petroleum and refined petroleum products, (iii) asbestos and
asbestos-containing products, (iv) flammable explosives, (v)
radioactive materials, and (vi) radon.
(d) Definition of "Real Property". For purposes of
this Section 3.28, the term "Real Property" shall be deemed to
include all Real Property (as defined in Section 3.11(d)) at
which the operations of the Company or any Subsidiary are
currently conducted, together with all other locations (whether
leased or owned by the Company or the applicable Subsidiary) at
which the operations of the Company or any Subsidiary have
previously been conducted (to the extent that any prior
activities of the Company, the Subsidiary or their predecessors
in interest give rise to any liabilities, claims or obligations
(including, without limitation, any obligations to investigate,
cleanup or remediate) with respect to the matters described in
this Section 3.28).
(e) Exclusive Representation. This Section 3.28
contains the sole representations and warranties of the Principal
Shareholders with respect to any matters that relate to or are
governed by Environmental Laws.
3.29 Disclosure. No representation or warranty made by the
Shareholders in this Article III (including, without limitation,
any section of the Disclosure Schedule relating thereto), and no
section of the Disclosure Schedule, certificate or other written
document or instrument delivered or to be delivered by the
Company or the Shareholders, as applicable, pursuant to this
Agreement 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 any material fact
necessary to make the statements contained therein not
misleading. The disclosure of any matter in any schedule to this
Agreement shall be deemed to be a disclosure for all purposes of
this Agreement to which such matter could reasonably be expected
to be pertinent.
3.30 Reliance. The representations and warranties of the
Shareholders made in Article III of this Agreement are made by
such Shareholders with the knowledge and expectation that the
Buyer is placing reliance thereon in entering into, and
performing its obligations under, this Agreement, and the same
shall not be affected or deemed waived in any respect whatsoever
by reason of any investigation heretofore or hereafter conducted
or knowledge gained by or on behalf of the Buyer (including,
without limitation, by any of its advisors, consultants or
representatives and any information contained in any Phase I or
Phase II or other environmental audit or investigation procured
by or on behalf of the Buyer or otherwise) prior to the Closing,
whether in contemplation of this Agreement or otherwise, or by
reason of the fact that the Buyer or any of such advisors,
consultants or representatives knew or should have known that any
such representation or warranty is or might be inaccurate, or
that any covenant or undertaking has been or might have been
breached, at or prior to the Closing, and no claims by the Buyer
with respect thereto shall be waived or otherwise affected as a
result of such knowledge on the part of the Buyer (or any of its
advisors, consultants or representatives) and none of the
Shareholders shall raise any such matter as a defense to any
claim by the Buyer for indemnification hereunder.
3.31. Disclosure Schedule. Any information which is
disclosed in the Disclosure Schedule or any other Schedule or
Exhibit hereto shall be deemed to be disclosed for all Sections
of this Agreement to which such disclosure is relevant. All
capitalized terms used in the Disclosure Schedule and not
otherwise defined therein shall have the same meanings as are
ascribed to such terms in this Agreement. The Disclosure
Schedule shall not vary, change or alter the literal meaning of
the representations and warranties of the Shareholders contained
in this Agreement, other than creating specific, limited
exceptions thereto which are directly responsive to the language
of the applicable warranties and representations contained in
this Agreement. The Shareholders shall be entitled to amend the
Disclosure Schedule prior to Closing; provided, however, (i) that
such amendments, if any, shall occur no late than the earlier of
Closing or two days after the matter causing the amendment comes
to the Knowledge of the Shareholders, and (ii) that such
amendments may be made only to the extent that the Buyer approves
of the same (such approval not to be withheld in bad faith).
ARTICLE IV Representations and Warranties of the Buyer
The Buyer makes the representations and warranties set forth
in this Article IV, each of which is true and correct as of the
date hereof and will be true as of the Closing Date:
4.1 Corporate Organization . The Buyer is a corporation
duly organized and validly existing under the laws of the State
of Wisconsin. The Buyer is current in all filings necessary to
maintain its corporate existence under Wisconsin law and no
proceedings have been filed or are pending for its dissolution or
winding up. The Buyer has all requisite corporate power and
authority to own, lease and operate the properties and assets it
now owns, leases or operates and to carry on its business as
presently conducted or presently proposed to be conducted.
4.2 Authorization . The Buyer has full corporate power and
authority to execute, deliver and perform this Agreement. The
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly approved by
the Board of Directors of the Buyer, and no other corporate
action on the part of the Buyer is necessary to approve and
authorize the execution and delivery of this Agreement by Buyer
or the consummation of the transactions contemplated hereby. The
execution, issuance and delivery of the Notes have been duly
authorized by all necessary corporate action on the part of the
Buyer. This Agreement and the Notes have been duly executed and
delivered by the Buyer and constitute the valid and binding
agreement of the Buyer enforceable in accordance with their
respective terms, except that the enforceability of this
Agreement is subject to bankruptcy, insolvency, reorganization
and similar laws of general applicability relating to or
affecting creditors' rights and limitations on the availability
of the remedy of specific performance and other equitable
remedies.
4.3 Consents and Approvals; No Violations . Except as set
forth in Section 4.3 of the Disclosure Schedule, the execution
and delivery of this Agreement does not and the consummation of
the transactions contemplated hereby will not: (i) violate or
conflict with any provision of the charter documents of the
Buyer, (ii) breach, violate or constitute an event of default (or
an event which with the lapse of time or the giving of notice or
both would constitute an event of default) under, give rise to
any right of termination, cancellation, modification,
acceleration or foreclosure under, or require any consent or the
giving of any notice under, any note, bond, indenture, mortgage,
security agreement, lease, license, franchise, permit, agreement
or other instrument or obligation to which the Buyer is a party,
or by which the Buyer or any of its properties or assets may be
bound, or result in the creation of any Encumbrance or other
right of any third party of any kind whatsoever upon the
properties or assets of the Buyer pursuant to the terms of any
such instrument or obligation, (iii) violate or conflict with any
law, statute, ordinance, code, rule, regulation, judgment, order,
writ, injunction, decree or other instrument of any court or
governmental or regulatory body, administration, agency or
authority applicable to the Buyer or by which any of its
properties or assets may be bound or (iv) require any filing by
the Buyer with, or any permit, license, exemption, consent,
authorization or approval of, or the giving of any notice by the
Buyer to, any governmental or regulatory body, agency or
authority, other than the HSR Filings.
4.4 Investment Purpose. The Buyer is acquiring the Subject
Shares for investment for its own account and not with a view to
the sale or distribution of any part thereof and the Buyer has no
present intention of selling, granting participations in, or
otherwise distributing the Subject Shares (not including
collateral assignments, transfers to Affiliates of the Buyer or
pledges of the Subject Shares for financing purposes).
4.5 No Brokers or Finders. Neither the Buyer nor any of
its officers, directors or employees, on behalf of the Buyer, has
employed any broker or finder or incurred any other liability for
any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
4.6 Financial Statements. Buyer has provided to the
Shareholders true and complete copies of the financial statements
of the Buyer consisting of (i) balance sheets of the Buyer as of
January 2, 1999 and January 3, 1998 and the related statements of
income and cash flows for the years then ended (including the
notes contained therein or annexed thereto), which financial
statements have been reported on, and are accompanied by, the
signed, unqualified opinions of Deloitte & Touche LLP,
independent auditors for the Buyer for such years and (ii) an
unaudited balance sheet of the Buyer as of January 1, 2000 (the
"Recent Balance Sheet"), and the related unaudited statements of
income for the year then ended (including the notes and schedules
contained therein or annexed thereto). All of the financial
statements referred to in (i) and (ii) above (including all notes
and schedules contained therein or annexed thereto) have been
prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, for the
absence of footnote disclosure) applied on a consistent basis,
have been prepared in accordance with the books and records of
the Buyer and fairly present, in accordance with generally
accepted accounting principles, the assets, liabilities and
financial position, the results of operations and cash flows of
the Buyer as of the dates and for the years indicated.
4.7 Claims, Legal Actions. There is no claim, legal
action, counterclaim, suit, arbitration, governmental
investigation or other legal, administrative or tax proceeding,
nor any order, decree or judgment in progress or pending, or to
the knowledge of the Buyer, threatened against or relating to the
Buyer that would have a Material Adverse Effect on the Buyer, or
on the transactions contemplated by this Agreement, nor does the
Buyer know of any basis for the same. There are no applications,
complaints or proceedings pending or, to the knowledge of the
Buyer, threatened before any federal, state or local agency
involving environmental issues relating to the Buyer under any
federal, state or local environmental law or regulation which, if
concluded adversely to Buyer, would have a Material Adverse
Effect on the Buyer. No order, writ, injunction or decree is in
effect or, to the knowledge of the Buyer, is threatened with
respect to the Buyer which would have a Material Adverse Effect
on the Buyer. To the knowledge of the Buyer, there is no basis
for any legal proceeding against the Buyer that, if adversely
determined, would have a Material Adverse Effect on the Buyer or
the Shareholders' interest in the Notes.
4.8 Disclosure. To the knowledge of the Buyer, no
representation or warranty by the Buyer in this Agreement, nor
any statement, certificate, schedule, document or exhibit hereto
furnished or to be furnished by or on behalf of the Buyer
pursuant to this Agreement or in connection with the transactions
contemplated hereby, contains or shall contain any untrue
statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not
misleading.
ARTICLE V Conduct of Business Pending Closing
5.1 Conduct of the Business of the Company . The
Shareholders covenant and agree with the Buyer that, between the
date hereof and the Closing Date (except as otherwise agreed in
writing by the Buyer):
(a) the business of the Company and each
Subsidiary will be conducted diligently and only in the ordinary
course consistent with past practice;
(b) no change will be made in the Articles of
Incorporation, By-Laws or other charter documents of the Company
or any Subsidiary;
(c) subject to the limitations elsewhere in this
Agreement, the Shareholders and the Company shall use their
reasonable best efforts to preserve the assets, business and
goodwill of the Company and each Subsidiary, to keep available
the services of the present employees of the Company and each
Subsidiary and to preserve the goodwill of the Company's and each
Subsidiary's customers, suppliers and others having business
relationships with the Company and the Subsidiaries, provided
that the Company and the Subsidiaries shall not be authorized
(without the prior written consent of the Buyer) to make any
commitment on behalf of the Buyer;
(d) the Company and the Subsidiaries shall not
announce or institute any increase in the salary, commission or
other compensation (including bonuses) rates payable or to become
payable by the Company or any Subsidiary to any employee or agent
of the Company or any Subsidiary, or approve, adopt, amend or
modify any Benefit Plan or similar plan, agreement or
arrangement, except pursuant to the terms of any contract or
agreement to which the Company or the Subsidiaries are a party
and which is listed in any section of the Disclosure Schedule, or
pursuant to existing policies and practices of the Company and
the Subsidiaries as described in Section 6.1(d) of the Disclosure
Schedule;
(e) the Company and the Subsidiaries shall not enter
into any contract or commitment, or series of related contracts
or commitments (except for Purchase Orders), unless such contract
or commitment, or series of related contracts or commitments, (i)
arises in the ordinary course of business, and (ii) involves
expenditures or revenues of less than $25,000 in the aggregate;
(f) the Shareholders shall promptly advise the Buyer
in writing of the commencement or threat of any suit, proceeding
or investigation against, relating to or involving the Company or
any Subsidiary which, had it existed on the date of this
Agreement, would have been required to be disclosed on Section
3.9 of the Disclosure Schedule;
(g) the Shareholders shall promptly advise the Buyer
in writing of (i) any material adverse change in the assets,
liabilities, financial condition, business, operations or
prospects of the Company or any Subsidiary and (ii) any event,
condition or state of facts which will or may reasonably be
expected to result in the failure to satisfy any of the
conditions in Article VIII hereof;
(h) the Company shall not create or permit to become
effective any Encumbrance on the assets, tangible or intangible,
of the Company or any Subsidiary, except in the ordinary course
of business consistent with past practice;
(i) the Company and the Subsidiaries shall maintain
their current liability, casualty, property and other insurance
coverages in full force and effect without reduction in coverage;
(j) the Company and the Subsidiaries shall not issue
any additional shares of capital stock or any options, warrants
or other rights to purchase, or securities convertible into or
exchangeable for, shares of capital stock of the Company or any
Subsidiary;
(k) the Company and the Subsidiaries shall not declare
or pay any dividends on or make any other distributions (however
characterized) in respect of shares of their capital stock;
(l) the Company and the Subsidiaries shall not
repurchase or redeem any shares of their capital stock;
(m) the Company and the Subsidiaries shall not
organize any new subsidiary, acquire any capital stock or other
equity security of any corporation or acquire any equity or other
ownership interest in any business;
(n) the Company and the Subsidiaries shall not make
any change in the accounting principles or practices reflected in
the Financial Statements or in their methods of applying such
principles or practices; and
(o) the Company and the Subsidiaries shall not incur
any indebtedness, liability or obligation (whether absolute,
contingent or otherwise), except in the ordinary course of
business and consistent with past practice and not in any event
consisting of indebtedness for borrowed money (other than
advances under existing credit facilities in the ordinary course
of business and consistent with past practice), or guarantee, or
act as surety, indemnitor, co-signer or accommodation party for,
any indebtedness, liability or obligation of any third party,
except for liability due to endorsement of checks in the normal
course of collection;
(p) the Company and the Subsidiaries shall not make
any capital expenditure or commitment in excess of $25,000.00,
with the exception of the planned capital expenditures identified
on Section 5.1 of the Disclosure Schedule;
(q) the Company and the Subsidiaries shall not cancel
any debts or waive any claims or rights of value other than write-
offs of accounts receivable (including non-sufficient fund
checks) in the ordinary course of business;
(r) the Company and the Subsidiaries shall not sell,
transfer or otherwise dispose of any of their material properties
or assets (real, personal or mixed, tangible or intangible)
except in the ordinary course of business and consistent with
past practices, and in any event shall not dispose of or transfer
any shares of the stock of the Buyer;
(s) the Company and the Subsidiaries shall not dispose
of or permit to lapse any right to the use of any patent,
trademark or copyright (or application therefor), trade name,
service xxxx or brand name or permit to lapse any material
license, service xxxx or brand name permit or form of
authorization, or dispose of or disclose to any person any trade
secret, formula, process or know-how not theretofore a matter of
public knowledge;
(t) the Company and the Subsidiaries shall not pay,
loan or advance any amount to, or sell, transfer or lease any
properties or assets to, or enter into any agreement or
arrangement with, any Related Party, except for directors' fees
and compensation and expense advances and reimbursements to
officers and employees, in each case in the ordinary course of
business and consistent with past practices;
(u) except for the Revised Leases, the Company and the
Subsidiaries shall not enter into any lease (as lessor or lessee)
of real property or enter into any contract, arrangement, license
or lease of personal property;
(v) the Company and the Subsidiaries shall not change
any of their current banking relationships;
(w) the Company and the Subsidiaries shall not
terminate, amend or fail to perform any obligation under any
material contract, lease, commitment or license;
(x) the Company and the Subsidiaries shall comply in
all material respects with all laws applicable to them and their
properties, operations, business and employees and shall file all
required tax returns and other reports required by any
governmental agency or authority that are required to be filed on
or prior to the Closing Date;
(y) the Company and the Subsidiaries shall not enter
into any agreement or commitment to take any action prohibited
under this Section 5.1.
5.2 Access to Personnel, Properties, Books and Records .
From the date hereof until the Closing Date, the Shareholders
will, and will cause the Company to, cooperate fully with the
Buyer in the Buyer's investigation of the business, assets and
liabilities of the Company and each Subsidiary. Without limiting
the generality of the foregoing, the Shareholders will allow the
employees, attorneys, accountants, and other representatives of
the Buyer to meet with the management of the Company and each
Subsidiary and their representatives, to have full and complete
access to the books, records, properties, financial statements
and other documents and materials relating to the Company's and
the Subsidiaries' operations (including the right to make
extracts therefrom or copies thereof); provided that Buyer will
endeavor to conduct its examination at a location away from the
Company's premises to the extent it is practical to do so, and,
with respect to its investigation of said premises, such
investigation will occur at such times and in such a manner as
the Shareholders reasonably determine to be appropriate to
protect the confidentiality of the transactions contemplated by
this Agreement and avoid unreasonable disruption of the Company's
business operations. The information furnished by the Company or
the Shareholders or their representatives to the Buyer or its
representatives pursuant to this Section 5.2 shall be subject to
the provisions of the Confidentiality Agreement among the parties
hereto dated October 1, 1999.
5.3 Best Efforts . Subject to the terms and conditions
herein provided, each of the parties hereto agrees that it shall
use its best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary, proper or
advisable to fulfill the conditions to the parties' obligations
hereunder and to consummate and make effective the transactions
contemplated by this Agreement.
ARTICLE VI Additional Covenants
6.1 Further Assurances . The Shareholders shall, at any
time and from time to time from and after the Closing Date, upon
the request and at the expense of the Buyer but without further
consideration, perform, execute, acknowledge, deliver and file,
or cause to be performed, executed, acknowledged, delivered and
filed, all such further acts, deeds, transfers, conveyances,
assignments or assurances as the Buyer may reasonably request in
order to ensure that the Buyer is vested with complete beneficial
ownership and control of the Subject Shares.
6.2 Transfer Taxes. The Shareholders shall be responsible
for, and shall pay or reimburse promptly when and if due, all
applicable sales, transfer, excise, use, documentary stamps or
any other similar taxes which may be imposed in any jurisdiction,
or by any authority, in connection with or arising from the sale
of the Subject Shares to the Buyer. The Shareholders shall
prepare and file all appropriate sales, transfer, excise, use,
documentary stamps and other tax returns and other documents and
shall make timely payment of any sales, transfer, excise, use and
other taxes due in any jurisdiction in connection with the
transactions contemplated hereunder.
6.3 Tax Matters.
(a) The Buyer will cause the Company and the
Subsidiaries to prepare and file appropriate Tax returns for all
periods ending prior to or on the Closing Date, to the extent
such returns have not been filed prior to the Closing Date. The
Shareholders agree to cooperate fully, as and to the extent
reasonably requested by the Buyer or its representatives, in
connection with the preparation and review of such Tax returns.
(b) Before filing any such returns with the IRS
or any other relevant Tax authority, the Buyer shall deliver a
copy of such returns to the Shareholders' Agents for the
Shareholders' review and approval, which shall not be
unreasonably withheld or delayed, provided that Buyer shall make
such revisions to such tax returns as are reasonably requested by
the Shareholders' Agent and consistent with applicable tax laws
and regulations and interpretations thereof.
(c) Any Tax refunds in excess of $10,000 in any
case that are received by the Buyer or the Company or any
Subsidiary, and any amounts credited against Tax to which the
Buyer or the Company or any Subsidiary becomes entitled, that
relate to Tax periods or portions thereof ending on or before the
Closing Date, other than amounts reflected on the Closing Balance
Sheet (whether as assets, as reductions of liabilities, as
components of the Company's deferred tax accounts, or otherwise),
shall be for the account of the Shareholders, and the Buyer shall
pay over to the Shareholders any such refund or the amount of any
such credit within thirty (30) days after its receipt of the
same.
(d) The Buyer, the Company and the Shareholders
shall cooperate fully, as and to the extent reasonably requested
by the other party, in connection with the filing of Tax Returns
pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes, subject to Section 10.4 below.
Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. The Buyer and
the Company agree to retain all books and records with respect to
Tax matters pertinent to the Company or any Subsidiary relating
to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and any extensions
thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing
authority.
6.4 Employee Benefit Plans.
(a) 401(k) Plans.
(i) Immediately after the Closing Date, the Buyer
shall cause the Company to adopt the Mega Marts, Inc. Profit
Sharing 401(k) Plan (the "New Company Plan"). The New
Company Plan shall either be an amendment and restatement of
the existing Mega Marts, Inc. Hourly Employees Profit
Sharing and 401(k) Retirement Savings Plan (the "Hourly
Plan") or it shall be an entirely new plan into which the
Hourly Plan is subsequently merged. The New Company Plan
shall provide the employees of the Company after the Closing
Date eligibility, vesting and benefits on terms that are
substantially identical, as applied to the applicable
employees, as the Hourly Plan or the NDC, Inc. Profit
Sharing and 401(k) Retirement Savings Plan (the "NDC Plan").
(ii) Employees of the Company or NDC who become
employees of the Buyer on the Closing Date shall be covered
under the terms of the Buyer's tax qualified retirement plan
or plans ("Buyer's Retirement Plans") with respect to
accruals for compensation earned after the Closing Date.
(iii) For purposes of eligibility and vesting
under the New Company Plan and the Buyers' Retirement Plans,
years of service as of the Closing Date under the NDC Plan
and Hourly Plan shall be credited for any employee of NDC or
the Company immediately prior to the Closing Date.
(iv) As soon as practicable after the Closing
Date, Shareholders shall cause NDC to cause a plan-to-plan
transfer from the NDC Plan to the New Company Plan of the
assets and liabilities attributable to the Transferred
Employees. For purposes of this Section 6.4, "Transferred
Employees" shall mean those employees of the Company or of
NDC who either continue as employees of the Company on the
Closing Date or become employees of the Company or the Buyer
on the Closing Date.
(v) Buyer shall cause the New Company Plan to
provide a minimum discretionary allocation for the
Transferred Employees who are employed by the Company or the
Buyer on December 31, 2000 and who earn at least 1,000 hours
of service during such calendar year, including hours with
the Company, the Buyer, and NDC. The minimum allocation for
an eligible employee shall be a designated percentage of the
compensation earned from the Company or NDC from January 1,
2000 through the Closing Date. The designated percentage
for union employees shall be 4% and for nonunion employees
4.5%. Such aggregate amount related to Company employees
shall be accrued as a liability of the Company as of the
Closing Date for purposes of the Closing Balance Sheet and
the determination of the Closing Date Net Book Value.
(vi) As soon as practicable, but in no event
later than six (6) months, after the Closing Date, Buyer
shall cause the Company to submit to the IRS an application
for a determination letter that the New Company Plan
satisfies the tax-qualification requirements under Section
401(a) of the Code and that the trust that forms a part of
the New Company Plan is exempt from taxation under Section
501(a) of the Code.
(vii) The Shareholders, the Company and the Buyer
agree to cooperate (and the Shareholders agree to cause NDC
to cooperate) in the transfer of NDC Plan assets for the
accounts of the Transferred Employees to the New Company
Plan, so that such transfer shall comply with Sections
401(a)(12) and 414(1) of the Code and that thereafter each
Transferred Employee will have an account balance in the New
Company Plan equal to his or her account balance in the NDC
Plan immediately before the transfer of assets.
(b) Health Insurance Plans. Prior to the Closing Date
the Company will enter into a group health insurance contract
with the insurer that currently provides group health insurance
to the employees of the Company and NDC (the "Current Coverage"),
providing coverage to the Transferred Employees, effective as of
the Closing Date, that is substantially identical to the Current
Coverage, with no interruption in coverage and no exclusion for
prior existing conditions. The form and terms of such insurance
contract will be subject to Buyer's approval. Effective as of
the Closing Date, the Transferred Employees will cease to be
covered under the Current Coverage.
ARTICLE VIII Conditions to the Obligations of the Buyer
The obligations of the Buyer to consummate the transactions
contemplated hereunder shall be subject to the satisfaction of
each of the following conditions at or prior to the Closing,
unless waived by the Buyer in writing:
7.1 Representations and Warranties True . All of the
representations and warranties of the Shareholders contained in
this Agreement (including, without limitation, the Disclosure
Schedule hereto) shall be true and correct in all material
respects on the Closing Date as though such representations and
warranties were made on such date, and the Company and the
Shareholders shall have delivered separate certificates to that
effect at the Closing.
7.2 Performance . The Shareholders shall have performed
and complied in all material respects with, and shall have caused
the Company to comply in all material respects with, all
covenants and obligations under this Agreement which are required
to be performed or complied with by such parties on or prior to
the Closing Date.
7.3 Approvals, Permits, Etc. All consents,
authorizations, approvals, exemptions, licenses or permits of, or
registrations, qualifications, declarations or filings with, any
governmental body or agency thereof that are required in
connection with the sale and transfer of the Subject Shares to
the Buyer pursuant to this Agreement and the consummation of the
transactions contemplated hereby and are identified on Section
7.3 of the Disclosure Schedule, or for the operation of the
business of the Company following its acquisition by Buyer
hereunder, shall have been duly obtained or made in form and
substance reasonably satisfactory to the Buyer and its counsel
and shall be effective at and as of the Closing Date, including
without limitation, the filing of notices with the appropriate
authorities under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act ("HSR Filings") and the expiration of the waiting periods
thereunder.
7.4 Delivery of Closing Documents . The Shareholders shall
have delivered to the Buyer the documents referred to in Section
2.5(a) hereof, in form and substance reasonably satisfactory to
the Buyer and its counsel.
7.5 Absence of Certain Events . No statute, rule or
regulation shall have been enacted or promulgated which would
make any of the transactions contemplated by this Agreement
illegal or would otherwise prevent the consummation thereof. No
order, decree, writ or injunction shall have been issued and
shall remain in effect, by any court or governmental body or
agency thereof which restrains, enjoins or otherwise prohibits
the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental body
or agency thereof shall have been instituted by any person (or
instituted or threatened by any governmental body or agency
thereof), and no investigation by any governmental body or agency
thereof shall have been commenced, with respect to the
transactions contemplated hereby which in the written opinion of
Buyer's counsel would make it imprudent to proceed with the
transactions contemplated hereby.
7.6 No Material Adverse Change. There shall have been no
material adverse change in the financial condition, results of
operations, cash flows, assets, liabilities, business or
operations of the Company or any Subsidiary during the period
between January 2, 1999 and the Closing Date.
7.7 Consents . Any restrictions or limitations on or
rights of third parties in relation to the sale of the Subject
Shares to the Buyer that may be required pursuant to any
agreement to which the Company or any of the Shareholders are
parties or by which they are bound, shall have been duly waived
or released.
7.8 Evidence of Title to Real Property. The Company, at
its expense, shall have obtained and delivered to Buyer, not
later than ten (10) days prior to the Closing Date the following
documents confirming the Company's title to all of the Owned Real
Property, all of which shall be reasonably satisfactory to Buyer
and consistent with the title requirements of Section 3.11
hereof: (i) title commitments for the Owned Real Property which
shall be updated as of the Closing Date (or letter reports
covering the period after the date of the Company's most recent
title policy for such property through the Closing Date), and
(ii) surveys for the Owned Real Property and NDC Leased Property.
The Company, at its expense, also shall have obtained and
delivered to Buyer not later than ten (10) days prior to the
Closing Date, leasehold title insurance commitments confirming
the Company's leasehold interest in all of the NDC Leased Real
Property and the Other Leased Real Property (or letter reports
covering the period after the date of NDC's most recent title
policy for any NDC Leased Real Property parcel). Neither the
Company nor the Shareholders shall have any obligation to obtain,
or to pay premiums for, any title insurance policy for any of the
Real Property for which title insurance commitments are obtained
pursuant to this Section 7.8.
7.9 Landlord Consents and Estoppel Certificates. Buyer
shall have received certificates from the lessors of each parcel
of NDC Leased Real Property, the Other Leased Real Property and,
to the extent required by Buyer's senior Lenders, the Jondex
Leased Real Property (and in the case of parcels that are
subleased to the Company or to NDC, from the lessors under the
underlying prime leases), substantially in the form attached
hereto as Exhibit H, consenting to the transaction contemplated
by this Agreement, confirming that the lease (and in the case of
subleases, the underlying prime lease) of such property is in
force and effect, that no defaults exist thereunder, and
certifying to such other matters, reasonably required by Buyer or
its senior lenders, as are usual and customary in transactions of
this nature.
7.10. Sublessee Estoppel Certificates. Buyer shall have
received certificates from any sublessees, licensees, or other
occupants of the Owned Real Property, the NDC Leased Real
Property, the Jondex Leased Real Property and the Other Leased
Real Property described on Sections 3.11(b) and 3.11(c) of the
Disclosure Schedule, substantially in the form attached hereto as
Exhibit I, confirming that each such sublease, license, or other
agreement or arrangement pursuant to which such person occupies
such property is in full force and effect, that no defaults exist
thereunder, and certifying to such other matters relating thereto
as may reasonably be required by Buyer.
7.11 NDC Leases. Buyer or an affiliate of Buyer (which may
be the Company) and NDC, the owner of certain of the real estate
set forth on Section 7.11 of the Disclosure Schedule, shall have
entered into amended and restated leases of such real estate,
substantially in the form of and on the terms set forth on
Exhibit E hereto ("Amended and Restated NDC Leases"). In the
event that an affiliate of Buyer, and not the Buyer, is the
lessee under any of the Amended and Restated NDC Leases, the
Buyer shall unconditionally guarantee the obligations of the
Lessee in form reasonably satisfactory to NDC's lender.
7.12 Subordination, Nondisturbance and Attornment
Agreements. Buyer shall have received Subordination,
Nondisturbance and Attornment Agreements from each lender to NDC
for each parcel of NDC Leased Real Property and the Shareholders
shall have used their reasonable best efforts to obtain such
agreement from the lender or lenders to the owner of each parcel
of Other Leased Real Property, substantially in the form attached
hereto as Exhibit J (the "Subordination, Nondisturbance and
Attornment Agreements").
7.13 Closing of NDC Transaction. The transactions that are
the subject of the NDC Asset Purchase Agreement shall have been
closed, contemporaneously with the Closing under this Agreement.
ARTICLE VIII
Conditions to the Obligations of the Company and the Shareholders
The obligations of the Company and the Shareholders to
consummate the transactions contemplated hereunder shall be
subject to the satisfaction of each of the following conditions
on or prior to the Closing, unless waived by the Shareholders'
Agents in writing:
8.1 Representations and Warranties True . All of the
representations and warranties of the Buyer contained in this
Agreement (including, without limitation, the Disclosure
Schedule) shall be true and correct in all material respects on
the Closing Date as though such representations and warranties
were made on such date, and the Buyer shall have delivered
certificates to that effect at the Closing.
8.2 Performance . The Buyer shall have performed and
complied in all material respects with all covenants and
obligations under this Agreement which are required to be
performed or complied with by it on or prior to the Closing Date.
8.3 Approvals, Permits, Etc. All consents,
authorizations, approvals, exemptions, licenses or permits of, or
registrations, qualifications, declarations or filings with, any
governmental body or agency thereof that are required in
connection with the sale and transfer of the Subject Shares to
the Buyer pursuant to this Agreement and the consummation of the
transactions contemplated hereby shall have been duly obtained or
made in form and substance reasonably satisfactory to the
Shareholders and their counsel and shall be effective at and as
of the Closing Date.
8.4 Delivery of Closing Documents . The Shareholders shall
have received the cash, instruments, agreements and other
documents referred to in Section 2.5(b) hereof in form and
substance reasonably satisfactory to the Shareholders and their
counsel.
8.5 Absence of Certain Events . No statute, rule or
regulation shall have been enacted or promulgated which would
make any of the transactions contemplated by this Agreement
illegal or would otherwise prevent the consummation thereof. No
order, decree, writ or injunction shall have been issued and
shall remain in effect, by any court or governmental body or
agency thereof which restrains, enjoins or otherwise prohibits
the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental body
or agency thereof shall have been instituted by any person (or
instituted or threatened by any governmental body or agency
thereof), and no investigation by any governmental body or agency
thereof shall have been commenced, with respect to the
transactions contemplated hereby which in the written opinion of
Shareholders' counsel would make it imprudent to proceed with the
transactions contemplated hereby.
8.6 Tri-City National Bank Agreement. Buyer shall have
entered into an agreement with Tri-City, substantially in the
form attached hereto as Exhibit F, pursuant to which Tri-City
will have a first right to negotiate in good faith with Buyer for
the operation of a bank branch in certain new retail grocery
stores opened by Buyer (and operated by Buyer or its subsidiaries
or Affiliates) and in which Buyer elects to place a banking
facility, during the ten (10) years following the Closing Date,
(the "Tri-City Bank Agreement").
8.7 Closing of NDC Transaction. The transactions that are
the subject of the NDC Asset Purchase Agreement shall have been
closed, contemporaneously with the Closing under this Agreement.
ARTICLE IX Termination
9.1 Termination . This Agreement may be terminated at any
time prior to the Closing Date:
(a) by the mutual written consent of the Buyer, on the
one hand, and all of the Shareholders who collectively own not
less than 80% of the Subject Shares (a "Supermajority of the
Shareholders"), on the other hand;
(b) by either the Buyer or a Supermajority of the
Shareholders if any statute, rule or regulation has been enacted
which in the written opinion of counsel for the terminating party
would make any of the transactions contemplated by this Agreement
illegal or would otherwise prevent the consummation thereof or if
any court or governmental body or agency thereof shall have
issued any writ or injunction, or taken any other action,
restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby and all appeals and means of appeal therefrom
have been exhausted;
(c) by the Buyer, if any of the conditions specified
in Article VII have not been met or waived prior to such time as
such condition can no longer be satisfied; or
(d) by a Supermajority of the Shareholders, if any of
the conditions specified in Article VIII shall not have been met
or waived prior to such time as such condition can no longer be
satisfied; or
(e) by either the Buyer or a Supermajority of the
Shareholders, if the Closing has not occurred on or before April
17, 2000.
9.2 Effect of Termination . In the event of termination of
this Agreement pursuant to the preceding Section 9.1, this
Agreement shall forthwith become null and void and there shall be
no liability on the part of any party hereto or their respective
officers or directors, except for Sections 11.3 and 11.4 hereof,
which shall remain in full force and effect, and except that
nothing herein shall relieve any party hereto from liability for
a breach of this Agreement prior to the termination hereof.
ARTICLE X Indemnification; Survival of Representations and
Warranties
10.1 Indemnity Obligations of the Principal Shareholders .
Subject to the conditions and limitations set forth in this
Article X, the Principal Shareholders hereby agree, severally in
accordance with the "Indemnification Percentages" set forth
opposite their respective names on Section 2.2 of the Disclosure
Schedule, to indemnify and hold the Buyer and the Company and
their respective parents, subsidiaries, affiliates, directors,
officers, employees and agents (such parties being collectively
referred to herein as the "Buyer Indemnities") harmless from, and
to reimburse each such Buyer Indemnitee for, on an after-Tax
basis (within the meaning of Section 10.6(b)), any loss, damage,
deficiency, claim, liability, obligation, suit, action, fee,
penalty, fine, interest, surcharge, cost or expense of any nature
whatsoever, to the extent that any such item is not reserved for
or reflected as a liability on the Closing Balance Sheet and
taken into account in the computation of Closing Date Net Book
Value or, if such a reserve shall have been made, to the extent
that any such item exceeds the amount of such reserve
(collectively, "Losses"), arising out of, based upon or resulting
from:
(a) any inaccuracy in or any breach of any
representation and warranty of the Shareholders contained in this
Agreement or the Disclosure Schedule, certificate or other
written instrument or document delivered by the Shareholders
pursuant hereto,
(b) any breach or nonfulfillment of, or any failure to
perform, any of the covenants, agreements or undertakings of the
Company and the Shareholders contained in or made pursuant to
this Agreement,
(c) any liabilities or obligations arising out of any
and all actions, claims, suits, proceedings, demands,
assessments, judgments, recoveries, damages, costs and expenses
or deficiencies incident to the disposition of any Buyer
Indemnity Claim (as hereinafter defined) asserted under this
Section 10.1, and
(d) all interest, penalties, costs and expenses
(including, without limitation, all out-of-pocket expenses,
reasonable investigation expenses and reasonable fees and
disbursements of accountants and counsel) arising out of or
related to any such Buyer Indemnity Claims.
Subject to the conditions and limitations set forth in this
Article X, each Shareholder hereby individually agrees to
indemnify and hold the Buyer Indemnities harmless from and to
reimburse each such Buyer Indemnitee for, on an after-Tax Basis
(within the meaning of Section 10.6(b)), Losses arising out of,
based upon or resulting from (a) any inaccuracy in or any breach
of any representation and warranty of such Shareholder set forth
in Article IIIA hereof, or (b) any failure by such Shareholder to
pay to Buyer any amount owed to Buyer under Section 2.3(g)
hereof, and, in either case, any interest, penalties, costs and
expenses (including, without limitation, all out-of-pocket
expenses, reasonable investigation expenses and reasonable fees
and disbursements of accountants and counsel) arising out of or
related to any such Buyer Indemnity Claims.
All claims made by any Buyer Indemnities under this Section
10.1 are referred to herein as "Buyer Indemnity Claims." The
term "Buyer Indemnity Claims" also includes for all purposes
hereunder all claims in respect of Tax Liabilities as provided
for in Section 10.4.
10.2 Indemnity Obligations of the Buyer . The Buyer agrees
to indemnify and hold each of the Shareholders harmless from, and
to reimburse the Shareholders for, on an after-Tax basis (within
the meaning of Section 10.6(b)), any Shareholder Indemnity Claims
(as that term is hereinafter defined) arising under the terms and
conditions of this Agreement. For purposes of this Agreement,
the term "Shareholder Indemnity Claim" shall mean any loss,
damage, deficiency, claim, liability, suit, action, fee, cost or
expense of any nature whatsoever (collectively "Losses") arising
out of, based upon or resulting from:
(a) any inaccuracy in or any breach of any
representation and warranty of the Buyer contained in this
Agreement or the Disclosure Schedule, certificate or other
written instrument or document delivered by the Buyer pursuant
hereto;
(b) any breach or nonfulfillment of, or failure to
perform, any of the covenants, agreements or undertakings of the
Buyer contained in or made pursuant to the terms and conditions
of this Agreement;
(c) any obligations or liabilities arising out of any
and all actions, claims, suits, proceedings, demands,
assessments, judgments, recoveries, damages, costs and expenses
or deficiencies incident to the disposition of any matter which
is the subject of indemnification under this Section 10.2; and
(d) all interest, penalties, costs and expenses
(including, without limitation, all out-of-pocket expenses,
reasonable investigation expenses and reasonable fees and
disbursements of counsel and accountants) arising out of or
related to any Shareholder Indemnity Claims asserted under this
Section 10.2.
10.3 Procedures Relative to Indemnification Claims .
(a) Claim Notice. Subject to the provisions of
Section 10.4 below, in the event that any party hereto shall
claim that it is entitled to be indemnified pursuant to the terms
of this Article X, it (the "Claiming Party") shall provide
written notice of such claim (a "Claim Notice") to the party
against which the claim is made (the "Indemnifying Party") as
promptly as reasonably practical after confirmation of the facts
supporting the claim or receipt of a written notice of any claim
of a third party (a "Third Party Claim") that may reasonably be
expected to result in a claim by such party against the party to
which such notice is given, as the case may be. If the Claiming
Party is a Buyer Indemnitee, such Claim Notice shall be served
upon the Shareholders' Agents. Each such Claim Notice shall
specify in reasonable detail, to the extent feasible or relevant,
the breach of representation, warranty, covenant or agreement
claimed by the Claiming Party, together with the Claiming Party's
good faith estimate of the liability, loss, cost or expense
incurred by or imposed upon or expected to be incurred by or
imposed upon the Claiming Party on account thereof (including,
without limitation, such party's good faith estimate of the costs
and expenses, including reasonable attorney's fees, expected to
be incurred in connection therewith).
(b) Defense. Subject to the remaining provisions
hereof, the Indemnifying Party may, upon receipt of written
notice of a Third Party Claim and at its expense, defend such
claim in its own name or, if necessary, in the name of the
Claiming Party. The Claiming Party will cooperate with and make
available to the Indemnifying Party such assistance and materials
as may be reasonably requested of the Claiming Party, and the
Claiming Party shall have the right, to participate in but not
control the defense thereof at the expense of the Claiming Party;
provided, however, that the Claiming Party shall have the right
to approve the legal counsel selected by the Indemnifying Party,
which approval shall not be withheld unreasonably. The
Indemnifying Party shall have the right to settle and compromise
any such claim with respect to which it controls the defense only
with the consent of the Claiming Party, which consent shall not
be unreasonably withheld. If the proceeding involves a matter
solely of concern to the Claiming Party in addition to the claim
for which indemnification under this Article X is being sought,
the Claiming Party shall have the right to control the defense
and settlement of such additional claim in its own discretion and
with its own counsel at the expense of the Claiming Party.
(c) Defense of Claims Below Indemnification Threshold.
Notwithstanding anything to the contrary in the foregoing, the
Buyer shall have the right at its own expense to control the
defense of any Third Party Claim (other than Zero-Threshold
Claims (as hereinafter defined)) if the potential loss or
liability associated with such claim, together with the aggregate
amount of all previously settled claims, is less than the
Indemnification Threshold (as hereinafter defined); provided,
that the Buyer shall keep the Shareholders' Agents reasonably
informed as to the nature and conduct of such claim and the
Shareholders' Agents shall be afforded an opportunity to monitor
developments in connection therewith. The Buyer shall have the
right to settle any such matter with the consent of the
Shareholders' Agents, such consent not to be unreasonably
withheld or delayed.
(d) Defense by Claiming Party. In the event the
Indemnifying Party shall fail or not have the right to assume the
defense under Paragraphs 10.3(b) or 10.3(c), above, or shall
notify the Claiming Party that it shall refuse to conduct a
defense against a Third Party Claim, then the Claiming Party
shall have the right to conduct a defense against such claim and
shall have the right to settle and compromise such claim without
the consent of the Indemnifying Party (except as provided in
Paragraph 10.3(c)) at the expense of the Indemnifying Party.
Once the amount of such claim is liquidated and the claim is
finally determined, the Claiming Party shall be entitled to
pursue each and every remedy available to it at law or in equity
to enforce the indemnification provisions of this Article X,
subject to the provisions of this Agreement.
10.4 Special Indemnification for Tax Liabilities .
(a) Subject to the conditions and limitations of this
Article X, the Principal Shareholders, severally in accordance
with the "Indemnification Percentages" set forth opposite their
respective names on Section 2.2 of the Disclosure Schedule, shall
indemnify and hold harmless the Buyer and each Buyer Affiliate
(as that term is hereinafter defined) from and against the
payment of any and all Tax Liabilities (as that term is
hereinafter defined) and of any and all costs and expenses which
may be incurred in connection with contesting any claims for Tax
Liabilities, including, without limitation, reasonable fees and
disbursements of counsel, accountants and other experts (but not
the costs of the services of persons who are the in-house
personnel or employees of the Buyer or any Buyer Affiliates) (the
"Costs and Expenses"). To the extent that any such contest
involves a claim for Tax Liabilities subject to indemnification
hereunder and also claims for other liabilities not subject to
such indemnification, then, notwithstanding any other provision
of this Section 10.4, the Shareholders shall be liable to
indemnify the Buyer and any Buyer Affiliates for only that
portion of the Costs and Expenses as is reasonably related to the
defense or contest of the Tax Liabilities subject to
indemnification hereunder. The term "Buyer Indemnity Claims"
shall be deemed to include all claims for Tax Liabilities.
(b) For purposes of this Section 10.4, the term "Buyer
Affiliate" shall mean the Buyer, and any other corporation or
other entity which is, directly or indirectly, controlled by or
under common control with the Buyer, or any successor in interest
to, or transferee of, the Buyer, as determined from time to time,
including, without limitation, the Company and any successor in
interest to, or transferee of, the Company.
(c) For purposes of this Agreement, the term "Tax
Liabilities" shall mean and include any and all liabilities for
Taxes (as defined in Section 3.9(b)) to the extent the aggregate
amount thereof exceeds the amount "accrued or reserved" (as
hereinafter defined) for such Taxes in the Closing Balance Sheet
and taken into account as liabilities in the computation of the
Closing Date Net Book Value, (i) which are or shall be incurred,
with respect to any taxable year or any other period beginning
prior to the Closing by the Company or any predecessor of, or
transferor to, the Company, or (ii) which are or shall be
incurred by any affiliated group, as defined in Section 1504(a)
of the Code as in effect during any relevant period (or any other
group required to file or filing returns on a consolidated or
combined basis), of which the Company, or any predecessor of, or
transferor to, the Company has been a member at any time prior to
the Closing Date, in either case whether or not such Taxes were
assessed prior to the Closing Date; provided, however, that for
purposes of computing the amount of any Tax Liabilities subject
to indemnification hereunder, any such taxable year or other
period which ends after the Closing Date shall be deemed to end
at the close of business on the Closing Date, and provided
further, however, that in the case of any ad valorem property tax
imposed upon the ownership or holding of real property or
personal property, the term "Tax Liabilities" shall include only
that percentage of the liability therefor which equals the
percentage of the actual period to which such said liability
relates which precedes the Closing Date. Solely for purposes of
the first sentence of this paragraph (c), the amount "accrued or
reserved" for Taxes on the Closing Balance Sheet shall be deemed
to include only reserves or accruals for Taxes arising in the
future but relating to tax periods prior to the Closing Date, and
shall not include any reserves or accruals for future tax
liabilities that are known or expected to arise in future periods
and are attributable to such future periods (including, without
limitation, so-called "deferred tax accounts" attibutable to
differences between tax accounting and financial accounting
methods).
(d) In the event that any Buyer Affiliate receives
written notice of a claim made by any Federal, state, local,
foreign or other governmental authority from such governmental
authority and such claim, if successful, would result in an
obligation to indemnify pursuant to this Section 10.4
(hereinafter, referred to as a "Tax Claim"), the Buyer shall give
timely notice to the Shareholders' Agents of such Tax Claim in
writing, specifying in reasonable detail the basis of such Tax
Claim, and the facts pertaining thereto, and shall not make
payment of the Taxes claimed for at least fifteen (15) days after
the giving of such notice (unless required by law to make payment
prior to such time). If the Shareholders' Agents wishes the
indemnitee to contest such Tax Claim, the Shareholders' Agents
shall (i) within fifteen (15) days after notice by the indemnitee
to the Shareholders' Agents of such Tax Claim, or, if earlier,
the period required by law, request that such Tax Claim be
contested, (ii) if the indemnitee so requests, furnish an opinion
of independent tax counsel selected by the Shareholders' Agents
and reasonably satisfactory to the indemnitee, that there is a
reasonable defense to the Tax Claim, (iii) agree to pay the
indemnitee from time to time on demand, on an after-Tax basis
(within the meaning of Section 10.6(b)), an amount equal to the
Taxes which are ultimately payable as a result of contesting such
Tax Claim and all Costs and Expenses, to the extent subject to
indemnification under this Section 10.4 (provided, that nothing
in this clause (iii) shall be deemed to obligate any Indemnifying
Party to pay or reimburse any Buyer Affiliate for any Taxes or
Costs and Expenses prior to such time as the same are due and
payable, or paid, by such Buyer Affiliate). If any such Tax
Claim shall be made by any governmental authority and the
Shareholders' Agents shall have requested the indemnitee to
contest such Tax Claim, as above provided, and shall have duly
complied, and shall continue to duly comply, with all of the
terms of this Section 10.4, the indemnitee hereby agrees to take
such action in connection with contesting any such Tax Claim as
the Shareholders' Agents shall reasonably request in writing from
time to time, including consulting with the Shareholders' Agents
in connection with any audit, investigation or other
administrative proceeding by the IRS or other governmental
authority and any judicial proceeding; provided that Buyer or the
indemnitee shall retain ultimate control of any such audit,
investigation or other administrative or judicial proceeding; and
provided further, that the indemnitee may, at its sole option,
either pay the Taxes claimed and xxx for a refund in the
appropriate court of proper jurisdiction, as the indemnitee shall
elect, or contest such Tax Claim without first paying the Taxes
claimed, considering, however, in good faith such request as the
Shareholders' Agents shall make concerning the most appropriate
forum in which to proceed. The Buyer agrees to notify the
Shareholders' Agents in a timely manner in writing of any action
taken or proposed to be taken from time to time by the
governmental authority with respect to such Tax Claim, and to
make available to the Shareholders' Agents any relevant
information relating to such Tax Claim which may be particularly
within the knowledge of the Buyer or any Buyer Affiliate and to
otherwise cooperate with the Shareholders' Agents in good faith
in order to contest effectively any such Tax Claim.
(e) An indemnitee's failure to give timely notice or
to make available information, including providing copies of
documents or furnishing relevant data in connection with any such
claim, shall not constitute a defense (in whole or in part) to
any claim for indemnification under this Section 10.4, except and
only to the extent that such failure shall result in any material
prejudice to the Shareholders.
(f) The Principal Shareholders' obligation to
indemnify the Buyer or any other indemnitee under this Section
10.4 shall become fixed upon a Final Determination (as
hereinafter defined) of the liability of the Buyer or other
indemnitee, and within fifteen (15) days after such Final
Determination any amounts owed to the Buyer or other indemnitee
under this Section 10.4 shall be paid to the Buyer or such other
indemnitee.
(g) For purposes of this Section 10.4, a "Final
Determination" shall be deemed to occur with respect to a
proposed or other adjustment forming the basis for a Tax Claim
when (i) there is a decision, judgment, decree or other order by
any court of competent jurisdiction, which decision, judgment,
decree or other order has become final with respect to the
indemnitee (i.e., all allowable appeals taken pursuant to this
Section 10.4 have been exhausted by either party to the action or
the time period within which such appeal may be filed has
expired), (ii) there is a closing agreement made under
Section 7121 of the Code (or any analogous provision under the
laws of any other jurisdiction) binding in respect of the
indemnitee or other administrative settlement with the IRS or
other governmental authority, (iii) the time for instituting a
claim for refund in respect of the indemnified claim has expired,
or, if a claim was filed, the time for instituting suit with
respect thereto has expired or (iv) the Taxes which are the
subject of a proposed or other adjustment are paid, and, pursuant
to written agreement between the Shareholders' Agents and the
Buyer, no claim for refund is filed, and no other contest of such
proposed or other adjustment is made.
(h) If any such Tax Claim referred to in
subsection 10.4(d) hereof shall be made by any Federal, state,
local, foreign or other governmental authority and the
Shareholders' Agents shall have failed (i) to request the
indemnitee to contest or not to contest such Tax Claim, as above
provided, or (ii) to comply with any of the other terms of this
Section 10.4, the indemnitee shall defend or contest such claim
in good faith to the extent it is reasonable to do so, taking
into account the merits of the indemnitee's legal position, the
magnitude of such claim and the overall Tax and other interests
of the indemnitee, and the Principal Shareholders shall become
obligated to pay the indemnitee, on an after-Tax basis (within
the meaning of Section 10.6(b)) and in accordance with the
provisions of this Section 10.4, an amount which shall be equal
to the Taxes which are paid as a result of such Tax Claim,
together with all Costs and Expenses which the indemnitee incurs
in connection with contesting such claim.
(i) In the event that the Shareholders' Agents receive
notice of any claim which, if successful, may result in an
obligation to indemnify pursuant to this Section 10.4, the
Shareholders' Agents (i) shall promptly notify the indemnitee in
writing of such claim (specifying in reasonable detail the basis
of such claim, action or suit and the facts pertaining thereto)
and of any action taken or proposed to be taken from time to time
by the IRS or any other governmental authority with respect
thereto, and (ii) shall agree in writing that such claim shall be
subject to the provisions of this Section 10.4 with respect to
obligations of the Principal Shareholders (to the extent that
such claim ultimately results in Tax Liabilities covered by his
Section 10.4), and shall comply with all such provisions.
10.5 Duration . Except as otherwise provided in this
Agreement, all representations and warranties of the parties
contained in or made pursuant to this Agreement, and the rights
of the parties to seek indemnification with respect thereto,
shall survive the Closing indefinitely; provided however, that,
except in respect of any claims for indemnification as to which a
Claim Notice or any similar notice under Section 10.4 shall have
been duly given prior to the relevant expiration date set forth
below, if any (which notice shall preserve such claim pending
resolution thereof pursuant to the terms hereof), the following
representations and warranties, and the right to make any
indemnification claims relating thereto, shall expire on the
following dates:
(a) in the case of any claims for Tax Liabilities
(including Costs and Expenses), the date of expiration of the
relevant statute of limitations, including any extensions thereof
(whether by waiver or otherwise), provided that, notwithstanding
anything to the contrary in the foregoing, the indemnity
obligations of the Principal Shareholders hereunder shall survive
with respect to any and all costs, expenses and liabilities
(including, without limitation, reasonable attorney's fees and
investigation expenses) incurred by any Buyer Indemnitee or Buyer
Affiliate, as applicable, in establishing or in seeking to
establish, whether in a judicial proceeding or otherwise, that
the underlying matter giving rise to such claim for
indemnification is time-barred under the applicable statute of
limitations, whether or not such efforts are successful;
(b) in the case of any Buyer Indemnity Claims other
than with respect to any breach of the representations and
warranties set forth in Sections 3.1 [Corporate Organization],
3A.1 [Authorization; No Violation], 3A.2 [Title to the Subject
Shares], 3.4 [Capitalization of the Company], 3.5 [Subsidiaries
and Affiliates], and 3.11(a), 3.11(b) and the first sentence of
3.11(e) [Title to Property and Related Matters] ( the "Special
Representations and Warranties"), fifteen (15) months after the
Closing Date; and
(c) in the case of any Shareholder Indemnity Claims,
fifteen (15) months after the Closing Date.
10.6 Tax and Insurance Effect of Losses; Certain
Limitations.
(a) Tax Benefits and Insurance Recoveries. In
determining the amount of any Buyer Indemnification Claim or
Shareholder Indemnification Claim, for all purposes hereunder,
there shall be taken into account any income or other Tax benefit
which the Claiming Party may actually have received or be
entitled to receive (if in the future, at its present value) as a
result of the Losses forming the basis of such claim. Any
indemnification payments under this Article X shall be treated
for income tax purposes as an adjustment to the Purchase Price.
If, notwithstanding the preceding sentence, the Claiming Party
incurs any income Tax or other Tax cost as a result of its
receipt of any indemnification payment from the Indemnifying
Party (including any such indemnification payment which the
Claiming Party would be entitled to receive but for the
provisions of Section 10.6(b)), such income Tax or other Tax cost
shall also be taken into account (net of any Tax benefit received
by the Claiming Party as a result of the Losses forming the basis
of the Claim in the current or any prior period). There shall
also be taken into account in determining the amount of any
Indemnification Claim under this Article X any amounts which the
Claiming Party may actually have received or be entitled to
receive or be reimbursed for, under insurance policies from
unaffiliated insurance carriers, that reduce Losses that would
otherwise be sustained.
(b) Indemnification Threshold and Cap.
Notwithstanding anything to the contrary herein, but subject to
Section 10.6(c): (i) any claim by a Claiming Party against any
Indemnifying Party under this Agreement shall be payable by the
Indemnifying Party only in the event and to the extent that the
accumulated amount of all claims that have been Definitively
Resolved (as hereinafter defined) (for purposes hereof, "Settled
Claims") against such Indemnifying Party shall exceed the amount
of Nine Hundred Nineteen Thousand Dollars ($919,000) in the
aggregate (the "Indemnification Threshold"); and (ii) the maximum
amount for which an Indemnifying Party shall be obligated to
provide indemnification hereunder shall not exceed Twenty Million
Dollars ($20,000,000) (the "Indemnification Cap"). In applying
the Indemnification Threshold and the Indemnification Cap, all
Buyer Indemnities (or Buyer Affiliates), on the one hand, and all
Principal Shareholders as a group, on the other hand, shall be
considered to be one "Indemnifying Party." At such time as the
aggregate amount of Settled Claims against an Indemnifying Party
shall exceed the Indemnification Threshold, such party shall
thereafter be liable on a dollar-for-dollar basis for the full
amount of all further claims beyond the Indemnification
Threshold, subject to the Indemnification Cap.
(c) Zero-Threshold Claims. Notwithstanding the
preceding Section 10.6(b), the following categories of claims for
indemnification ("Zero-Threshold Claims") shall not be subject to
the Indemnification Threshold or the Indemnification Cap, but
shall be payable on a dollar-for-dollar basis without any
exclusion therefor or limitation thereon:
(i) any claims for Tax Liabilities (including
Costs and Expenses);
(ii) any Indemnity Claims in respect of the Net
Book Value Adjustment (including the obligation of each party to
pay the amount of the Net Book Value Adjustment to the other
party as provided in Paragraph 2.3(e)); and
(iii) any Buyer Indemnity Claims relating to
the Special Representations and Warranties.
(d) Definitively Resolved. For purposes hereof, a
Buyer Indemnity Claim or Shareholder Indemnity Claim shall be
deemed to have been "Definitively Resolved" when any of the
following events has occurred:
(i) a claim is settled by mutual agreement of the
Buyer and the Shareholders' Agents; or
(ii) a final judgment, order or award of a court
of competent jurisdiction deciding such claim has been rendered,
as evidenced by a certified copy of such judgment, provided that
such judgment is not appealable or the time for taking an appeal
has expired; or
(iii) a claim is the subject of a "Final
Determination" as defined in Section 10.4(g) hereof.
10.7 Appointment of Shareholders' Agents.
(a) Each Shareholder hereby irrevocably constitutes
and appoints Xxxxxxxxxxx X. Xxxxx ("Xxxxx"), Xxxxxxx X. Xxxxx
("Xxxxx") and Xxxxx X. Xxxxxx, Xx. ("Xxxxxx") as such
Shareholders' agents ("the Shareholders' Agents") for the purpose
of representing such Shareholders in connection with the
following matters: (i) consenting to, compromising or settling
any Buyer Indemnity Claims and (ii) resolving all matters arising
under Section 2.3 of this Agreement, including, without
limitation, all matters pertaining to the Net Book Value
Adjustment. The appointment of Xxxxxxxxxxx X. Xxxxx, Xxxxxxx X.
Xxxxx and Xxxxx X. Xxxxxx, Xx. as the Shareholders' Agents is
coupled with an interest and all authority hereby conferred shall
be irrevocable and shall not be terminated by any or all of the
Shareholders without the consent of the Buyer, which consent may
be withheld for any reason. Such appointment shall be binding
upon the heirs, executors, administrators, estates, personal
representatives, successors and assigns of each Shareholder.
(b) In furtherance and not in limitation of the
authority granted to the Shareholders' Agents in Section 10.7(a)
above, each of the Shareholders, for themselves and their
respective heirs, executors, administrators, successors and
assigns, hereby authorizes the Shareholders' Agents without
notice to such Shareholder hereunder to:
(i) waive any provision of this Agreement;
(ii) make and receive notices and other commu
nications pursuant to this Agreement, including any service of
process in any legal action or other proceeding arising out of or
related to this Agreement or any of the transactions hereunder
(and to that effect, any notice to be given to any Shareholder or
Shareholders hereunder need not be given to each Shareholder
separately, but rather shall be effective, as provided in Section
11.2 below, when given to any two or more of the Shareholders'
Agents);
(iii) settle any dispute, claim, action, suit
or proceeding arising out of or related to this Agreement on
behalf of all or any of the Shareholders, including, without
limitation, by consenting to the entry of any confession of
judgment in connection therewith, as further provided in Section
10.7(c), below;
(iv) appoint or provide for successor agents, with
the consent of the Buyer, such consent not to be unreasonably
withheld; and
(v) pay any expenses incurred or which may be
incurred by or on behalf of the Shareholders in connection with
this Agreement.
In the event of the failure or refusal of (a) Xxxxx to act as a
Shareholders' Agent (or upon his death), then the President of
Xxxxxxx & Xxxx, S.C., Milwaukee, Wisconsin, shall appoint a
shareholder of such firm to act as Shareholders' Agent as a
successor to Xxxxx; (b) Xxxxx to act as a Shareholders' Agent (or
upon his death), then the President of Xxxxx & Lardner,
Milwaukee, Wisconsin, shall appoint a partner of such firm to act
as Shareholders' Agent as a successor to Xxxxx; and (c) Xxxxxx to
act as a Shareholders' Agent (or upon his death), then the
Shareholders which held a majority of the Subject Shares shall
promptly appoint one of the remaining Shareholders as a successor
to Xxxxxx for purposes of this Section 10.7, and failing such
appointment, the Buyer may, by written notice to the Shareholders
at the last address of the Shareholders designated under this
Agreement, designate one of the other Shareholders as such
successor. The appointment of any successor Shareholders' Agent
as provided in the preceding sentence shall not be effective
until notice of such appointment has been given to Xxxxxx'x and
Buyer in the manner provided herein.
(c) Any claim, action, suit or other proceeding,
whether in law or equity, to enforce any right, benefit or remedy
granted to the Shareholders under this Agreement relating to a
matter within the scope of the Shareholders' Agents' authority
specified in Section 10.7(a) may be asserted, brought, prosecuted
or maintained only by the Shareholders' Agents, and the
Shareholders hereby irrevocably waive any right to enforce such
rights in their own name. The Shareholders consent and agree
that any claim, action, suit or other proceeding, whether in law
or equity, to enforce any right, benefit or remedy granted to any
Buyer Indemnitee under this Agreement relating to a matter within
the scope of the Shareholders' Agents' authority specified in
Section 10.7(a), including, without limitation, any Buyer
Indemnity Claim asserted under Section 10.1, may be asserted,
brought, prosecuted or maintained by any Buyer Indemnitee against
the Shareholders by service of process on any two of the
Shareholders' Agents and without the necessity of serving process
on, or otherwise joining or naming as a defendant in such claim,
action, suit or other proceeding, any Shareholders. For this
purpose, each Shareholder hereby irrevocably stipulates and
agrees that any one of the Shareholders' Agents is a proper party
defendant to represent its interests in any such proceeding and
to appear on its behalf for all purposes therein, and that
service of process upon any two of the Shareholders' Agents shall
be effective to bind such Shareholder for all purposes of any
such proceeding. Each Shareholder hereby irrevocably waives any
and all rights it may have to object to jurisdiction or venue in
any proceeding in which service of process is served upon any
Shareholders' Agent on such Shareholder's behalf, in each case as
further provided in Section 11.13 below. With respect to any
matter within the scope of authority granted to the Shareholders'
Agents under this Section 10.7, the Shareholder shall be bound by
any determination in favor of or against the Shareholders' Agents
or the terms of any settlement or release to which the
Shareholders' Agents shall become a party, including, without
limitation, any confession of judgment or other stipulation or
settlement granted or entered into by the Shareholders' Agents on
their behalf.
(d) All out-of-pocket expenses incurred by the
Shareholders' Agents in the performance of his duties hereunder
(including, without limitation, attorneys' and accountants' fees)
shall be borne by the Shareholders, and neither the Company nor
the Buyer shall have any liability with respect thereto.
(e) In performing their duties hereunder, the
Shareholders' Agents will not be liable to the Shareholders in
the absence of gross negligence or wilful misconduct. The
Shareholders hereby agree, severally in proportion to their
"Percent of P-C Adjustment" set forth opposite their names in
Section 2.2 of the Disclosure Schedule, to indemnify and hold
each of the Shareholders' Agents harmless from and against any
and all claims, damages and/or expenses that may be asserted
against any of the Shareholders' Agents as a result of the
performance of their duties hereunder, absent gross negligence or
wilful misconduct on the part of the Shareholders' Agents.
10.8 Set-Off Rights. Buyer shall have the right to offset
any Buyer Indemnification Claims which have been Definitively
Resolved in favor of Buyer against amounts due to the
Shareholders under the Notes. Buyer will exercise such right of
set-off (to be applied against amounts due under the Notes in the
order of their maturity), to the full extent of all amounts
remaining due under the Notes, before pursuing any other remedies
that may be available to Buyer or any Buyer Indemnitee to recover
any Buyer Indemnification Claims, provided that the exercise of
such right of set off is not prohibited by and would not result
in a breach, default, or violation of any provisions of the
Senior Debt or the Subordination Agreement.
10.9 Exclusive Remedy. The parties agree that, except as
expressly provided herein, and except for claims for injunctive
relief to enforce specifically the provisions of this Agreement,
the rights of indemnification provided in this Article X shall be
the sole and exclusive remedies of Buyer, any Buyer Indemnitee or
Buyer Affiliate, the Company and the Shareholders for any claim
or cause of action arising out of or relating to the negotiation,
execution, delivery, performance or breach of this Agreement
(whether such claim or cause of action is based on breach of
contract, misrepresentation, tort, violation of statute
(including, but not limited to, Environmental Laws and securities
laws and regulations) or otherwise).
ARTICLE XI Miscellaneous Provisions
11.1 Waiver of Compliance . Any failure by any of the
parties hereto to comply with any obligation, covenant or
agreement or to fulfill any condition herein may be waived only
by a written notice from the party entitled to the benefits
thereof. No failure by any party hereto to exercise, and no
delay in exercising, any right hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or future exercise of that
right or any other right hereunder by that party.
11.2 Notices . Subject to Section 11.12(b) below, all
notices and other communications required or permitted hereunder
shall be deemed given if given in writing and delivered
personally, by commercial delivery service, by courier or by
facsimile transmission, telexed or mailed by registered or
certified mail (return receipt requested) fax, telex or postage
fees prepaid, to the party to receive the same at its respective
address set forth below, or at such other address as may from
time to time be designated by such party to the others in
accordance with this Section 11.2 (provided, that written notice
given in any other manner shall nonetheless be effective upon its
actual receipt by the party entitled to receive it):
If to the Shareholders'
Agents, to: Xxxxx X. Xxxxxx, Xx.
0000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
and to: Xxxxx & Lardner
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
and to : Xxxxxxx & Xxxx, S.C.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
Notices to the Shareholders' Agents shall be
effective when given (in the manner provided above, or
otherwise when received) by any two of the three
Shareholders' Agents.
If to the Buyer to: Xxxxxx'x, Inc.
00000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention:
Xxxxxx X. Xxxx, Vice President,
Secretary and Treasurer
Facsimile: (000) 000-0000
with a copy to: Xxxxx Xxxxxxxxxxx Xxxxx S.C.
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
All such notices and communications hereunder shall be
deemed given when received, as evidenced by the acknowledgment of
receipt issued with respect thereto by the applicable postal
authorities or the signed acknowledgment of receipt of the person
to whom such notice or communication shall have been personally
delivered, confirmed answer back or other evidence of
transmission.
11.3 Expenses . Each party hereto shall bear and pay its
own expenses (and, in the case of the Shareholders, the Company's
expenses) in connection with the negotiation, execution and
delivery of this Agreement and the transactions contemplated
hereby, whether or not the Closing occurs hereunder. Without
limiting the generality of the foregoing, the Shareholders will
be solely responsible for the payment of any fees or commissions
due to any investment banker, financial advisor, attorneys or
accountants or the like retained by the Company and/or the
Shareholders; provided that the Company may pay any such
transaction expenses of the Shareholders if such payments are
taken into account as reductions of the Company's Closing Date
Net Book Value.
11.4 Public Announcements . No party hereto will issue any
report, statement or release to the general public, to the trade,
to the general or trade press, or to any third party (other than
its advisors and representatives in connection with the
transactions contemplated hereby), relating to this Agreement and
the transactions contemplated hereby, except as may be mutually
agreed by the parties hereto.
11.5 Binding Effect; Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns and, in the
case of the Shareholders, their heirs, beneficiaries,
remaindermen, personal representatives, executors,
administrators, fiduciaries and permitted assigns. Neither this
Agreement nor any rights, duties or obligations shall be
assigned by any party hereto without the prior hereto written
consent of the other parties, and any attempted assignment or
transfer without such prior written consent shall be null and
void; provided that, the Buyer shall have the right, without the
prior written consent of the Company or the Shareholders, to
assign their rights and delegate their duties under this
Agreement to any direct or indirect wholly-owned subsidiary of
Buyer, provided that no such assignment or delegation shall
relieve the Buyer of any liabilities or obligations hereunder
unless agreed to in writing by the Shareholders.
11.6 No Third Party Beneficiary . Neither this Agreement
nor any provision hereof, nor any statement, schedule,
certificate, instrument or other document delivered or to be
delivered pursuant hereto, nor any agreement entered into or to
be entered into pursuant hereto or any provision thereof, is
intended to create any right, claim or remedy in favor of, or
impose any obligation upon, any person or entity other than the
parties hereto and their respective successors and permitted
assigns, and in the case of the Shareholders, their heirs,
beneficiaries, personal representatives, executors and permitted
assigns.
11.7 Captions and Paragraph Headings . Captions and
paragraph headings used herein are for convenience only and are
not intended to be a part of this Agreement and shall not be used
in construing it.
11.8 Entire Agreement; Modifications; Severability . The
making, execution and delivery of this Agreement by the parties
hereto has been induced by no representations, statements,
warranties or agreements other than those herein expressed. This
Agreement embodies the entire agreement of the parties pertaining
to the subject matter hereof and supersedes all prior or
contemporaneous agreements or understandings, written or oral, of
the parties relating to the subject matter hereof. This
Agreement may be amended or modified only by an instrument signed
by the parties or their duly authorized agents. The invalidity,
illegality or unenforceability for any reason of any one or more
provisions of this Agreement shall not affect the validity,
legality or enforceability of the remainder of this Agreement.
11.9 Definition of Knowledge. With respect to the
representations and warranties of the Principal Shareholders set
forth herein which are made subject to the qualification "to the
Knowledge of the Principal Shareholders," the Principal
Shareholders shall be deemed to have Knowledge of (i) any matter,
fact, or thing that is, as of the date hereof or the Closing
Date, actually known to any Shareholder; and (ii) any matter,
fact or thing which reasonably should be known by any Principal
Shareholder after "due inquiry" by such Shareholder, taking into
account any and all roles or positions which such Shareholder may
hold and any and all duties and responsibilities he or she may
have vis-a-vis the Company and its business. In the case of any
Principal Shareholder which is a trust, estate, or other entity,
such Principal Shareholder shall be deemed to have the Knowledge
of those persons who are its fiduciaries or representatives and
beneficiaries (determined as through such fiduciaries or
representatives were "Principal Shareholders" as that term is
used in this Section 11.9).
11.10 Definition of Material Adverse Effect. The term
"Material Adverse Effect" as used in this Agreement shall mean an
effect that is materially adverse to the business, financial
condition or results of operations of the Company and the
Subsidiaries (or the Buyer and its subsidiaries, as the case may
be) taken as a whole; provided, that any impairment of the
Company's ability to conduct continuously any material aspect of
its business at any one or at more than one of its retail
locations will be deemed to constitute a Material Adverse Effect.
11.11 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
11.12 Governing Law . The parties hereby agree that
this Agreement, and the respective rights, duties and obligations
of the parties hereunder, shall be governed by and construed in
accordance with the laws of the State of Wisconsin, without
giving effect to principles of conflicts of law thereunder.
11.13 Exclusive Jurisdiction. Each of the parties
hereby (a) irrevocably consents and agrees that any legal or
equitable action or proceeding arising under or in connection
with this Agreement shall be brought exclusively in any Federal
or state court within Milwaukee or Waukesha County, State of
Wisconsin, and any court to which an appeal may be taken in any
such litigation, and (b) by execution and delivery of this
Agreement, irrevocably submits to and accepts with respect to any
such action or proceeding, for such party's heirs, beneficiaries
remaindermen, personal representatives, executors,
administrators, fiduciaries and permitted assigns and in respect
of such party's properties and assets, generally and
unconditionally, the jurisdiction of the aforesaid courts, and
irrevocably waives any and all rights such party may now or
hereafter have to object to such jurisdiction under the
constitution or laws of the State of Wisconsin or the
Constitution or laws of the United States of America or
otherwise. Each of the Shareholders hereby irrevocably
undertakes to designate and appoint, and hereby does designate
and appoint, the Shareholder's Agent, as such Shareholder's
authorized agent in Wisconsin to accept and acknowledge on such
Shareholder's behalf service of any and all process which may be
served in any such litigation in any such court, and agrees that
service of process upon such agent shall be deemed in every
respective effective service of process upon such party in any
such litigation and shall be taken and held to be valid personal
service upon such party.
11.14 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN
CONNECTION WITH THIS AGREEMENT OR ANY DISPUTE OR CONTROVERSY
HEREUNDER OR THE TRANSACTIONS THAT ARE THE SUBJECT HEREOF.
11.15 Termination of Stockholder Agreements . By
executing this Agreement, and effective at the Closing, the
Stockholders and the Company agree that any and all stockholders'
agreements to which any of them may be a party, including without
limitation the agreement listed on Section 3.4 of the Disclosure
Schedule, shall be terminated and of no further force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement on the date first above written.
MEGA MARTS, INC. XXXXXX'X, INC.
By: By: XXXXXX X. XXXX
Its: Xxxxxx X. Xxxx, Vice-President,
__________________________ Secretary and Treasurer
NDC, INC.
By:
Its:
__________________________
SHAREHOLDERS:
XXXXX X. XXXXXX LIVING TRUST XXXXX X. XXXXXX GRANTOR
RETAINED ANNUITY TRUST NO. 2
XXXXX X. XXXXX XXXXX X. XXXXX
By:__________________________ By: _______________________________
Xxxxx X. Xxxxx, Co-Trustee Xxxxx X. Xxxxx, Co-Trustee
XXXXXXXX XXXXXXX XXXXXXXX XXXXXXX
By:____________________________ By:_________________________________
Xxxxxxxx XxXxxxx, Co-Trustee Xxxxxxxx XxXxxxx, Co-Trustee
XXXX X. XXXXXXX XXXX X. XXXXXXXX
By:____________________________ By:____________________________
Xxxx X. Xxxxxxx, Co-Trustee Xxxx X. Xxxxxxx, Co-Trustee
XXXXX XXXXXX, JR XXXXXX X. XXXXXX
_____________________________ ___________________________________
Xxxxx X. Xxxxxx, Xx. Xxxxxx X. Xxxxxx
XXXX X. XXXXX XXXX X. XXXXXXX
_____________________________ ____________________________________
Xxxx X. Xxxxx Xxxx X. Xxxxxxx
XXXXX X. XXXXXXX TRUST XXXXXX X. XXXXXXX TRUST
XXXX X. XXXXXXX XXXX X. XXXXXXX
By:__________________________ By:________________________________
Xxxx X. Xxxxxxx, Trustee Xxxx X. Xxxxxxx, Trustee
XXXXXXXX X. XXXXXXX TRUST
XXXX X. XXXXXXX XXXXXXXX XXXXXXX
By:__________________________ ___________________________________
Xxxx X. Xxxxxxx, Trustee Xxxxxxxx XxXxxxx
XXXXXX XXXXXX, XX XXXXXXX XXXXXX XXXXXX
_____________________________ ___________________________________
Xxxxxx Xxxxxx, Xx. Xxxxxxx Xxxxxx Xxxxxx
XXXX X. XXXXXXX, III XXXXXXXX XXXXXXX XXXXXXX
_____________________________ ___________________________________
Xxxx X. Xxxxxxx, III Xxxxxxxx Xxxxxxx Xxxxxxx
XXXXX XXXXXXX XXXXXXXXXX
_____________________________
Xxxxx Xxxxxxx Xxxxxxxxxx
STOCK PURCHASE AGREEMENT
by and among
XXXXXX'X, INC.
AND
THE SHAREHOLDERS OF MEGA MARTS, INC.
________________________________
Dated as of March 31, 2000
________________________________
TABLE OF CONTENTS
ARTICLE I
Purchase and Sale of the Shares 1
ARTICLE II
Purchase Consideration; Closing 2
2.1 Purchase Consideration. 2
2.2 Payment of Purchase Price. 2
2.3 Net Book Value Adjustment. 3
2.4 Time and Place of Closing. 6
2.5 Deliveries. 6
ARTICLE IIIA
Representations and Warranties of the Shareholders
9
3A.1 Authority of the Shareholders; No Violations. 9
3A.2 Title to the Subject Shares. 11
ARTICLE III
Representations and Warranties of the Principal
Shareholders 11
3.1 Corporate Organization. 11
3.2 No Violations. 11
3.3 [Intentionally Left Blank] 12
3.4 Capitalization of the Company. 12
3.5 Subsidiaries and Affiliates 13
3.6 Financial Statements 13
3.7 Absence of Undisclosed Liabilities 14
3.8 Absence of Certain Changes or Events 14
3.9 Legal Proceedings. 15
3.10 Taxes 16
3.11 Title to Properties and Related Matters 17
3.12 Computer Software 21
3.13 Licenses, Permits, Authorizations and Consents 21
3.14 Patents, Trademarks, Etc. 21
3.15 Contracts 22
3.16 Employees 23
3.17 Benefit Plans. 25
3.18 Compliance with Applicable Law. 28
3.19 Ability to Conduct the Business. 28
3.20 Material Suppliers. 28
3.21 Inventories. 29
3.22 Accounts Receivable. 29
3.23 Insurance. 29
3.24 Bank Accounts; Powers of Attorney. 30
3.25 Minute Books, etc. 30
3.26 Books and Records. 30
3.27 Transactions with Related Parties. 30
3.28 Environmental Matters. 31
3.29 Disclosure. 33
3.30 Reliance. 33
3.31. Disclosure Schedule. 33
ARTICLE IV
Representations and Warranties of the Buyer 34
4.1 Corporate Organization 34
4.2 Authorization 34
4.3 Consents and Approvals; No Violations 34
ARTICLE V
Conduct of Business Pending Closing 36
5.1 Conduct of the Business of the Company 36
5.2 Access to Personnel, Properties, Books and
Records 39
5.3 Best Efforts 40
ARTICLE VI
Additional Covenants 40
6.1 Further Assurances 40
6.2 Transfer Taxes. 40
6.3 Tax Matters. 40
ARTICLE VII
Conditions to the Obligations of the Buyer 42
7.1 Representations and Warranties True 43
7.2 Performance 43
7.3 Approvals, Permits, Etc. 43
7.4 Delivery of Closing Documents 43
7.5 Absence of Certain Events 43
7.6 No Material Adverse Change. 44
7.7 Consents 44
8.1 Representations and Warranties True 45
8.2 Performance 46
8.3 Approvals, Permits, Etc. 46
8.4 Delivery of Closing Documents 46
8.5 Absence of Certain Events 46
ARTICLE IX
Termination 47
9.1 Termination 47
9.2 Effect of Termination 47
ARTICLE X
Indemnification; Survival of Representations and
Warranties 48
10.1 Indemnity Obligations of the Principal
Shareholders 48
10.2 Indemnity Obligations of the Buyer 49
10.3 Procedures Relative to Indemnification Claims 50
10.4 Special Indemnification for Tax Liabilities 51
10.5 Duration 54
10.6 Tax and Insurance Effect of Losses; Certain
Limitations. 55
10.7 Appointment of Shareholders' Agent 57
ARTICLE XI
Miscellaneous Provisions 59
11.1 Waiver of Compliance 59
11.2 Notices 59
11.3 Expenses 60
11.4 Public Announcements 61
11.5 Binding Effect; Assignment. 61
11.6 No Third Party Beneficiary 61
11.7 Captions and Paragraph Headings 61
11.8 Entire Agreement; Modifications; Severability 61
11.9 Definition of Knowledge. 62
11.10 Definition of Material Adverse Effect. 62
11.11 Counterparts. 62
11.12 Governing Law . 62
11.15 Termination of Stockholder Agreements 63
SCHEDULES
3.1 Corporate Organization
3.2 Authorization; No Violations
3.3 Title to the Subject Shares
3.4 Capitalization of the Company
3.5 Subsidiaries and Affiliates
3.6 Financial Statements
3.7 Absence of Undisclosed Liabilities
3.8 Absence of Certain Changes or Events
3.9 Legal Proceedings.
3.10 Taxes
3.11 Title to Properties and Related Matters
3.12 Computer Software
3.13 Licenses, Permits, Authorizations and Consents
3.14 Patents, Trademarks, Etc.
3.15 Contracts
3.16 Employees
3.17 Benefit Plans
3.18 Compliance with Applicable Law
3.19 Ability to Conduct the Business
3.20 Material Suppliers
3.21 Inventories
3.22 Accounts Receivable
3.23 Insurance
3.24 Bank Accounts; Powers of Attorney
3.25 Minute Books, etc.
3.26 Books and Records
3.27 Transactions with Related Parties.
3.28 Environmental Matters
3.29 Year 2000 Compliance
3.30 Disclosure
3.31 Reliance
5.1 Permitted Capital Expenditures
EXHIBITS
Exhibit A Promissory Notes
Exhibit B Subordination Agreements
Exhibit C-1 Xxxxx & Xxxxxxx Legal Opinion
Exhibit C-2 Xxxxxxx & Xxxx S.C. Legal Opinion
Exhibit D Noncompetition Agreements
Exhibit E Amended and Restated NDC Leases
Exhibit F Tri-City Bank Agreement
Exhibit G Xxxxx Xxxxxxxxxxx Xxxxx S.C. Legal Opinion
Exhibit H Landlord Consents and Estoppel Certificates
Exhibit I Sublessee Estoppel Certificates
Exhibit J Subordination, Nondisturbance and Attornment
Agreement
THE ABOVE-DESCRIBED EXHIBITS AND SCHEDULES ARE OMITTED FROM THIS
FILING PURSUANT TO ITEM 601(b)(1) OF REGULATION S-K. THE REGISTRANT,
XXXXXX'X, INC., HEREBY AGREES TO FURNISH A COPY OF SUCH EXHIBITS
AND SCHEDULES TO THE COMMISSION UPON REQUEST.
