EXHIBIT 2.1
==============================================================================
STOCK PURCHASE AGREEMENT
AMONG
XXXXX PLASTICS CORPORATION,
CPI HOLDING CORPORATION
CARDINAL PACKAGING, INC.
AND
THE SHAREHOLDERS OF CPI HOLDING CORPORATION
JUNE 18, 1999
==============================================================================
TABLE OF CONTENTS
PAGE
ARTICLE I GENERAL............................................................1
1.1 THE PURCHASE AND SALE OF COMMON STOCK.................................1
1.2 CHARTER OF HOLDING....................................................1
1.3 TAKING OF NECESSARY ACTION; FURTHER ASSURANCES........................1
1.4 [INTENTIONALLY OMITTED]...............................................2
1.5 CLOSING; CLOSING DELIVERIES...........................................2
ARTICLE II PAYMENT OF PURCHASE PRICE.........................................3
2.1 GENERAL...............................................................3
2.2 DELIVERY OF FUNDS; SURRENDER OF CERTIFICATES..........................5
2.3 REDEMPTION OF CLASS A AND B PREFERRED.................................5
2.4 PURCHASE PRICE ADJUSTMENT.............................................5
2.5 ESCROW AGREEMENT; DELIVERY OF FUNDS...................................8
2.6 PAYMENT OF FUNDED INDEBTEDNESS AND CAPITAL LEASES.....................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS...............9
3.1 TITLE TO THE SHARES...................................................9
3.2 AUTHORITY; NONCONTRAVENTION; CONSENTS.................................9
3.3 RELATED TRANSACTIONS.................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HOLDING AND THE COMPANY........10
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.................10
4.2 EQUITY INVESTMENTS...................................................11
4.3 CAPITAL STOCK........................................................11
4.4 AUTHORITY; NONCONTRAVENTION; CONSENTS................................11
4.5 FINANCIAL STATEMENTS.................................................12
4.6 ABSENCE OF UNDISCLOSED LIABILITIES...................................12
4.7 ABSENCE OF CHANGES...................................................13
4.8 TAX MATTERS..........................................................13
4.9 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS...........14
4.10 REAL PROPERTY-OWNED OR LEASED........................................15
4.11 INTELLECTUAL PROPERTY................................................16
4.12 AGREEMENTS, NO DEFAULTS, ETC.........................................16
4.13 LITIGATION, ETC......................................................17
4.14 COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS..............................18
4.15 LABOR RELATIONS; EMPLOYEES...........................................18
4.16 ERISA COMPLIANCE.....................................................19
4.17 ENVIRONMENTAL MATTERS................................................21
4.18 BROKERS..............................................................22
4.19 RELATED TRANSACTIONS.................................................22
4.20 SUPPLIERS AND VENDORS................................................23
4.21 CUSTOMERS............................................................23
4.22 DISCLOSURE...........................................................23
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER.......................23
5.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.................24
5.2 AUTHORITY............................................................24
5.3 NONCONTRAVENTION; CONSENTS...........................................24
5.4 BROKERS..............................................................24
5.5 INVESTMENT INTENT....................................................25
5.6 AVAILABILITY OF FINANCING............................................25
(i)
ARTICLE VI CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING; ADDITIONAL
PRE-CLOSING AGREEMENTS......................................................25
6.1 AFFIRMATIVE COVENANTS OF THE COMPANY.................................25
6.2 NEGATIVE COVENANTS OF THE COMPANY....................................26
6.3 [INTENTIONALLY OMITTED.].............................................27
6.4 CONSENTS.............................................................27
6.5 EFFORTS TO CONSUMMATE................................................27
6.6 NOTICE OF PROSPECTIVE BREACH.........................................27
6.7 PUBLIC ANNOUNCEMENTS; WAIVER OF CONFIDENTIALITY......................27
6.8 NEGOTIATION WITH OTHERS; DISPOSITION AND VOTING OF SECURITIES........28
6.9 [INTENTIONALLY OMITTED.].............................................29
6.10 SHAREHOLDERS' REPRESENTATIVE.........................................29
6.11 AVAILABILITY OF FINANCING............................................32
6.12 ENVIRONMENTAL ACTIONS................................................32
ARTICLE VII CONDITIONS......................................................32
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS...............................32
7.2 CONDITIONS TO OBLIGATIONS OF THE BUYER...............................33
7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY, THE SUBSIDIARIES AND THE
SHAREHOLDERS.........................................................34
ARTICLE VIII INDEMNIFICATION................................................35
8.1 INDEMNIFICATION GENERALLY; ETC.......................................35
8.2 LIMITATIONS ON INDEMNIFICATION.......................................36
8.3 ASSERTION OF CLAIMS; PAYMENT OF CLAIMS...............................38
8.4 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS.............................39
8.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; COVENANTS................40
8.6 NO THIRD PARTY RELIANCE..............................................41
ARTICLE IX ADDITIONAL AGREEMENTS............................................41
9.1 EXPENSES.............................................................41
9.2 AMENDMENTS TO EMPLOYMENT AGREEMENTS..................................41
9.3 USE OF NAME..........................................................42
9.4 TERMINATION OF AFFILIATE TRANSACTIONS................................42
9.5 AGREEMENT TO WIND DOWN THE ESOP......................................42
9.6 TAX MATTERS..........................................................42
ARTICLE X TERMINATION; EFFECT OF TERMINATION................................43
10.1 TERMINATION..........................................................43
10.2 EFFECT OF TERMINATION................................................44
ARTICLE XI MISCELLANEOUS PROVISIONS.........................................44
11.1 AMENDMENT............................................................44
11.2 EXTENSION; WAIVER....................................................44
11.3 ENTIRE AGREEMENT.....................................................45
11.4 SEVERABILITY.........................................................45
11.5 NO THIRD-PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS.................45
11.6 HEADINGS.............................................................46
11.7 NOTICES..............................................................46
11.8 COUNTERPARTS.........................................................47
11.9 GOVERNING LAW........................................................47
11.10 INCORPORATION OF EXHIBITS AND SCHEDULES............................47
11.11 CONSTRUCTION.......................................................47
11.12 REMEDIES...........................................................48
11.13 WAIVER OF JURY TRIAL...............................................48
11.14 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES.......48
(ii)
SCHEDULES AND EXHIBITS
Schedule I Shareholders of CPI Holding Corporation
Schedule II Notices
Annex I Definitions
Exhibit A Restated Certificate of Incorporation
Exhibit B Escrow Agreement
Exhibit C Highly Confident Letter issued by Xxxxxxxxx Lufkin & Xxxxxxxx
Exhibit D Opinion of Counsel to the Company and the Shareholders
Exhibit E Opinion of Counsel to the Buyer
STOCK PURCHASE AGREEMENT dated as
of June 18, 1999, among XXXXX PLASTICS
CORPORATION, a Delaware corporation (the
"Buyer") CPI HOLDING CORPORATION, a Delaware
corporation ("Holding"), CARDINAL PACKAGING,
INC., an Ohio corporation (the "Company"),
and THE HOLDERS OF COMMON STOCK OF HOLDING
NAMED ON SCHEDULE I ATTACHED HERETO (each, a
"Shareholder", and collectively the
"Shareholders").
The Company is engaged in the business of manufacturing, marketing
and selling rigid thin-walled polyethylene and polypropylene containers and
lids, and marketing, selling and leasing filling machine equipment. Pursuant to
the terms and conditions of this Agreement (this "Agreement"), the Shareholders
desire to sell, and the Buyer desires to purchase, all of the issued and
outstanding shares of common stock, $0.01 par value, of Holding not owned of
record by Holding. Capitalized terms used but not defined herein have the
meanings set forth in ANNEX I hereto.
NOW, THEREFORE, in consideration of the premises and the mutual
benefits to be derived from this Agreement and the representations, warranties,
covenants, agreements and conditions contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
GENERAL
1.1 THE PURCHASE AND SALE OF COMMON STOCK.
In accordance with, and subject to, the provisions of this Agreement, at
the Closing, the Shareholders agree to sell and transfer to the Buyer and the
Buyer agrees to purchase from the Shareholders the Shares for the consideration
set forth in Article II hereof.
1.2 CHARTER OF HOLDING.
Upon filing by the Buyer after the Closing Date, the certificate of
incorporation of Holding ("Holding's Restated Charter") shall be amended and
restated in its entirety to read as set forth in EXHIBIT A hereto.
1.3 TAKING OF NECESSARY ACTION; FURTHER ASSURANCES.
Prior to the Closing Date, and subject to the terms and conditions
contained in this Agreement, the parties hereto shall take or cause to be taken
all such actions as may be reasonably necessary or appropriate in order to
effectuate, the transactions contemplated hereby.
1.4 [INTENTIONALLY OMITTED].
1.5 CLOSING; CLOSING DELIVERIES.
(a) The closing (the "Closing") for the consummation of the
transactions contemplated by this Agreement, unless another date or place is
agreed to by the parties, shall take place at the offices of X'Xxxxxxxx Graev &
Karabell, LLP, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, as soon as
practicable after the satisfaction or waiver (to the extent the same may be
waived) of the conditions set forth in Section 7 (such date on which the Closing
is consummated being referred to herein as the "Closing Date").
(b) At the Closing, Holding, the Company and the Shareholders shall
deliver to the Buyer:
(i) counterparts of the Escrow Agreement among the Buyer, the
Company and the Shareholders' Representative in substantially the
form of the draft attached hereto as EXHIBIT B (the "Escrow
Agreement"), duly executed by the Shareholders' Representative;
(ii) counterparts of the Employment Agreement Amendments, duly
executed by each of Messrs. Hartman, Makowski, Xxxxx and Xxxxx;
(iii) original stock certificates representing all of the
Shares, with duly executed stock powers;
(iv) certified copies of the resolutions of Holding's board of
directors approving this Agreement, all other agreements and
documents contemplated hereby and the consummation of the
transactions contemplated hereby;
(v) an officer's certificate certifying Holding's Charter,
Holding's By-laws and the incumbency of each officer executing this
Agreement or any agreement or instrument contemplated hereby; and
(vi) certificates of the Secretaries of State (or other
applicable office) in which Holding and the Company are organized
and qualified to do business, dated as of the Closing Date (or as
close thereto as reasonably practicable), certifying as to the good
standing and non-delinquent status of such entity.
(c) At the Closing, the Buyer shall deliver to the Shareholders:
(i) counterparts of the Escrow Agreement, duly executed by the
Buyer and Holding;
(ii) certified copies of the resolutions of the board of
directors of the Buyer authorizing and approving this Agreement, all
other agreements and instruments contemplated hereby to be entered
into by the Buyer and the consummation of the transactions
contemplated hereby;
-2-
(iii) an officer's certificate of the Buyer certifying its
certificates of incorporation, by-laws and the incumbency of each
officer executing this Agreement or any agreement or instrument
contemplated hereby; and
(iv) certificates of the Secretaries of State (or other
applicable office) in which the Buyer is organized, dated as of the
Closing Date (or as close thereto as reasonably practicable),
certifying as to the good standing and non-delinquent status of such
entity.
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 GENERAL.
(a) The following terms used in this Agreement shall have the
following respective meanings:
"CAPITAL LEASE OBLIGATIONS" means the obligations of Holding, on a
consolidated basis, to pay rent or other amounts under any lease of (or other
arrangement covering the right to use) real or personal property, which
obligations are required to be classified and accounted for as capital leases on
a consolidated balance sheet of Holding as of such date computed in accordance
with GAAP.
"CAPX ADDITIONAL AMOUNT" means, if applicable, the aggregate amount
paid by the Company prior to Closing for the Van Dam printer (it being expected
that $449,755 is payable in July 1999 and $89,955 is payable in August 1999).
"CAPX REDUCTION AMOUNT" means, if applicable, the amount by which
$300,000 for each month between November 30, 1998 and the Closing Date (using
$10,000 per day for any partial month) exceeds the aggregate amount of capital
expenditures paid (or accrued to the extent shown as a liability on the Closing
Balance Sheet) during such period (it being understood that the CapX Additional
Amount, if any, will be excluded from the amount of capital expenditures made
during such period).
"CLOSING CONSIDERATION" means $69.5 million plus the CapX Additional
Amount (if any), minus the CapX Reduction Amount (if any), minus the amount of
Shareholders' Expenses, minus the aggregate amount of Funded Indebtedness, minus
the aggregate amount of Capital Lease Obligations, minus the Preferred
Redemption Amount, minus the amount of Third Party Payments, plus the Closing
Working Capital Amount, plus or minus (as the case may be) the Employee Benefit
Amount.
"CLOSING WORKING CAPITAL AMOUNT" means $474,000, which is an
estimate of the working capital adjustment to be made under Section 2.4, based
on the Company's working capital as of April 30, 1999.
"ESCROW AMOUNT" means $500,000.
-3-
"EMPLOYEE BENEFIT AMOUNT" means the difference between (i) the
present value of all accrued benefits (whether or not vested) under that certain
Employee Plan subject to Title IV of ERISA described in Item 1 of Schedule 4.16
of the Disclosure Letter and (ii) the current fair market value of the assets of
such Employee Plan (for purposes of determining the present value of accrued
benefits under the Employee Plans, the actuarial assumptions and methods used
for funding under such Employee Plan for the most recent plan valuation date
shall be used including any accrued contribution receivable); it being
understood that (A) the Employee Benefit Amount shall be determined as of the
most recent practicable date that precedes the Closing Date and (B) the Closing
Consideration is increased if the present value of such accrued benefits is less
than the fair market value of such assets, and the Closing Consideration is
decreased if the present value of such accrued benefits is greater than the fair
market value of such assets.
"FUNDED INDEBTEDNESS" means the aggregate amount (including the
current portions thereof), without duplication, of all (i) indebtedness for
money borrowed from others and purchase money indebtedness (other than accounts
payable in the ordinary course), (ii) indebtedness of the type described in
clause (i) above guaranteed in any manner by Holding or the Company, or in
effect guaranteed, directly or indirectly, in any manner by Holding or the
Company through an agreement, contingent or otherwise, to supply funds to, or in
any other manner invest in, the debtor, or to purchase indebtedness, or to
purchase and pay for property if not delivered or pay for services if not
performed, primarily for the purpose of enabling the debtor to make payment of
the indebtedness or to assure the owners of the indebtedness against loss (any
such arrangement being hereinafter referred to as a "Guaranty"), but excluding
endorsements of checks and other instruments in the ordinary course and any
Guaranty by Holding or the Company of indebtedness of the type described in
clause (i) above of Holding or the Company, (iii) all indebtedness of the type
described in clause (i) above secured by any Encumbrance upon property owned by
Holding or the Company, even though neither Holding nor the Company has in any
manner become liable for the payment of such indebtedness, (iv) amounts to be
paid on or after the Closing Date, whether payable on or after the Closing Date,
under the Long Service Executive Nonqualified Pension Agreement, undated, among
the Company, Xxxxxx Xxxxxxxxx and Xxxxx Xxxxxxxxx, and (vi) all interest expense
accrued but unpaid, and all prepayment premiums on, or relating to, any of such
indebtedness, including, but not limited to, the obligations arising under the
items set forth on Schedule 2.1.
"MAXIMUM CONSIDERATION" means an amount equal to the Closing
Consideration, as adjusted pursuant to Section 2.4(c).
"PER SHARE CLOSING AMOUNT" means an amount equal to the quotient
obtained by dividing (A) the remainder of the Closing Consideration minus the
Escrow Amount by (B) the Share Number, rounded to the nearest $.0001.
"PREFERRED REDEMPTION AMOUNT" means the aggregate amount paid at the
Closing to redeem all of the issued and outstanding shares of Holding's Class A
Preferred Stock and Class B Preferred Stock in accordance with the terms of
Holding's Restated Certificate of Incorporation.
-4-
"PROPORTIONATE PERCENTAGE" means with respect to any Shareholder,
the quotient obtained by dividing the number of Shares held by such Shareholder
immediately prior to the Closing Date by the Share Number.
"SHARES" means the shares of Holding Common Stock that are issued
and outstanding immediately prior to the Closing that are NOT owned directly or
indirectly by Holding or the Company (whether as treasury stock or otherwise),
including any shares issuable upon the exercise of options.
"SHARE NUMBER" means the aggregate number of all Shares.
"SHAREHOLDERS' EXPENSES" means all fees and expenses that are unpaid
at the Closing Date that are incurred by Holding, the Company and (to the extent
reimbursable by the Company) the Shareholders in connection with the preparation
for, and consummation of, the transactions contemplated hereby and by the other
agreements referred to herein; the amount of such Shareholders' Expenses as of
the date hereof being set forth on Schedule 2.1(a) of the Disclosure Letter (it
being understood that such Schedule will be updated, as necessary, on the
Closing Date).
"THIRD PARTY PAYMENTS" means the aggregate amount of all payments
required to be made by the Company to third parties as a direct result of the
consummation of the transactions proposed hereby, as set forth on Schedule
2.1(b) of the Disclosure Letter.
(b) Anything contained in this Agreement to the contrary
notwithstanding, the entire consideration payable with respect to all Shares
shall not exceed the Maximum Consideration.
2.2 DELIVERY OF FUNDS; SURRENDER OF CERTIFICATES.
At the Closing, upon surrender by each Shareholder to Holding of the
certificates which, immediately prior to the Closing, represent Shares, the
Buyer shall pay to each such Shareholder the Per Share Closing Amount for each
Share, by wire transfer to an account designated by such Shareholder to the
Buyer not later than three Business Days prior to the Closing Date.
2.3 REDEMPTION OF CLASS A AND B PREFERRED.
At the Closing, the Buyer shall cause Holding to wire transfer the
Preferred Redemption Amount to the holders of the Class A Preferred and the
Class B Preferred to such accounts as are designated by the ESOP Trustee and
KECC.
2.4 PURCHASE PRICE ADJUSTMENT.
(a) PREPARATION OF CLOSING BALANCE SHEET.
As promptly as practicable following the Closing Date (but in no event
later than 90 days after the Closing Date), the Buyer shall prepare, and cause
Ernst & Young LLP to certify, a consolidated balance sheet (the "Closing Balance
Sheet") of Holding reflecting the financial position of Holding and the Company
as of the close of business on the Closing Date and a
-5-
statement (the "Final Net Working Capital Statement") setting forth the
computation of the Final Net Working Capital (as defined below) derived
therefrom on the Closing Date, which statement shall be prepared in accordance
with generally accepted accounting principles ("GAAP") consistently applied with
Holding's November 30, 1998 audited balance sheet (the "November Balance
Sheet"); PROVIDED, HOWEVER, that (A) real and personal property taxes, vacation
accruals, medical claims, and workmen's compensation shall be determined in a
manner consistent with the November Balance Sheet, regardless of GAAP, (B) to
the extent that the personal property taxes owed to the states of Ohio and
California remain unpaid as of the close of business on the Closing Date, such
amount shall be a liability on the Closing Balance Sheet (for purposes of
identification, such amount being approximately $167,000 in back taxes and
$10,000 in interest as of April 1999), (C) any deposit or downpayment of fixed
assets made by the Company shall not constitute a prepaid asset, and (D) the
only adjustments to the reserves, allowances and writeoffs set forth on the
November Balance Sheet shall be those arising in the ordinary course of business
and due to changes in underlying facts and circumstances which occur after
November 30, 1998. For purposes of preparing the Final Net Working Capital
Statement, "Final Net Working Capital" shall mean the total current assets of
Holding and the Company minus the total current liabilities (excluding cash,
deferred Taxes, prepaid Taxes and the current portions of Funded Indebtedness,
Capitalized Lease Obligations, Third Party Payments and Shareholders' Expenses),
in each case determined as of the close of business on the Closing Date and by
reference to the amounts set forth on the Closing Balance Sheet; PROVIDED,
HOWEVER, that in the event the accrued Tax liabilities (the "Accrued Tax
Liabilities") are less than or equal to $475,000, Accrued Tax Liabilities shall
be excluded from current liabilities in determining the Final Net Working
Capital, and in the event the Accrued Tax Liabilities exceed $475,000 (such
excess being the "Recorded ATL"), the Recorded ATL shall be included in current
liabilities in determining the Final Net Working Capital. For purposes of this
Agreement, the amount by which the Accrued Tax Liabilities exceeds the Recorded
ATL is hereinafter referred to as the "Unrecorded ATL".
(b) REVIEW BY THE SHAREHOLDERS' REPRESENTATIVE.
(i) Upon completion of the Closing Balance Sheet, the Buyer shall
promptly deliver the same together with the Final Net Working Capital
Statement to the Shareholders' Representative with a notice (the "Notice
of Adjustment") of the Buyer setting forth its proposed adjustment, if
any, of the Maximum Consideration as contemplated hereby. During the
preparation of and after the completion of the audit of the Closing
Balance Sheet until the Final Determination Date (as defined below), the
Buyer shall provide the Shareholders' Representative and its advisors with
timely access to the work papers, trial balances and similar materials
used in connection with the audit of the Closing Balance Sheet and the
preparation of the Final Net Working Capital Statement and timely access
to and full cooperation of the Company's management.
(ii) Following receipt of the Notice of Adjustment, the
Shareholders' Representative will be afforded a period of 20 Business Days
(the "First 20-Day Period") to review the Notice of Adjustment. At or
before the end of the First 20-Day Period, the Shareholders'
Representative will either (A) accept the Final Net Working Capital (as
set forth in the Notice of Adjustment) in its entirety, in which case the
Final Net Working Capital will be as set forth in the Notice of Adjustment
or (B) deliver to the Buyer a
-6-
written notice (the "Objection Notice") containing a sufficiently detailed
written explanation of those items in the Final Net Working Capital
Statement (as set forth in the Notice of Adjustment) which the
Shareholders' Representative disputes, in which case the items identified
by the Shareholders' Representative shall be deemed to be in dispute. The
failure by the Shareholders' Representative to deliver the Objection
Notice within the First 20-Day Period shall constitute the Shareholders'
Representative's acceptance of the Final Net Working Capital as set forth
in the Notice of Adjustment. If the Shareholders' Representative delivers
the Objection Notice in a timely manner, then, within a further period of
20 Business Days from the end of the First 20-Day Period the parties and,
if desired, their accountants will attempt to resolve in good faith any
disputed items and reach a written agreement (the "Settlement Agreement")
with respect thereto. Failing such resolution, the unresolved disputed
items will be referred for final binding resolution to Xxxxxx Xxxxxxxx LLP
(the "Arbitrating Accountants"), the fees and expenses of which shall be
borne equally by the Shareholders' Representative, on the one hand, and
the Company, on the other hand. The Final Net Working Capital will be
deemed to be as determined by the Arbitrating Accountants. Such
determination (the "Accountants' Determination") shall be (A) in writing,
(B) furnished to the Shareholders' Representative and the Buyer as soon as
practicable after the items in dispute have been referred to the
Arbitrating Accountants, (C) made in accordance with the principles set
forth in Section 2.4(a) and (D) nonappealable and incontestable by the
Shareholders, the Company, the Buyer and each of their respective
Affiliates and successors and not subject to collateral attack for any
reason, other than manifest error or fraud.
(iii) For purposes of this Section 2.4, the "Final Determination
Date" shall mean the earliest to occur of (A) the 11th day following the
receipt by the Shareholders' Representative of the Notice of Adjustment if
the Shareholders' Representative shall have failed to deliver the
Objection Notice to the Buyer within the First 20-Day Period, (B) the date
on which either the Shareholders' Representative or the Buyer gives the
other a written notice to the effect that such party has no objection to
the other party's determination of the Final Net Working Capital, (C) the
date on which the Shareholders' Representative and the Buyer execute and
deliver a Settlement Agreement and (D) the date as of which the
Shareholders' Representative and Buyer shall have received the
Accountants' Determination.
(c) ADJUSTMENT.
(i) If the Final Net Working Capital is greater than the sum of
$10,300,000 plus the Closing Working Capital Amount (the amount of such
excess being referred to herein as the "Underpayment Amount"), then,
within five Business Days following the Final Determination Date, the
Maximum Consideration shall be increased by the amount of the Underpayment
Amount and the Buyer shall, or shall cause Holding to pay, or cause to be
paid, to each Shareholder its PRO RATA portion (based on such
Shareholder's Proportionate Percentage) of the Underpayment Amount.
(ii) If the Final Net Working Capital is less than the sum of
$10,300,000 plus the Closing Working Capital Amount (the amount of such
shortfall being referred to herein as the "Overpayment Amount"), then,
within five Business Days following the
-7-
Final Determination Date, the Maximum Consideration shall be decreased by
the amount of the Overpayment Amount and the Shareholders shall pay, or
cause to be paid, to the Buyer each Shareholder's PRO RATA portion (based
on such Shareholder's Proportionate Percentage) of the Overpayment Amount.
The Overpayment Amount may, at the sole discretion of the Buyer, be
satisfied out of the Escrow Fund and upon such election by the Buyer, the
Buyer and the Shareholders' Representative shall execute and deliver to
the Escrow Agent joint written instructions directing the Escrow Agent to
pay the Overpayment Amount to the Company. Within 15 days of the date the
Overpayment Amount is paid to the Company from the Escrow Fund pursuant to
the provisions of the foregoing sentence, in order to replenish the Escrow
Fund the Shareholders shall deliver to the Escrow Agent each Shareholder's
pro rata portion (based on such Shareholder's Proportionate Percentage) of
the amount that was deducted from the Escrow Fund to pay the Overpayment
Amount. Nothing contained in this subparagraph shall be construed as an
election of remedies by the Buyer and the Company, and the Buyer and the
Company shall have and retain all other rights and remedies existing in
their respective favor at law or in equity for a breach of the provisions
of this Section 2.4; PROVIDED, HOWEVER, that other than with respect to
Tax matters, claims may not be made with respect to any matter pursuant to
the other representations, warranties, covenants or agreements herein to
the extent such matter would be duplicative with any matter included as
part of the purchase price adjustment mechanism pursuant to this Section
2.4(c)(ii).
(iii) Interest shall accrue on the Underpayment Amount or the
Overpayment Amount, as applicable, at a rate of 8% per annum from the
Closing Date until the date on which such amount is paid.
2.5 ESCROW AGREEMENT; DELIVERY OF FUNDS.
(a) On or prior to the Closing Date, the Buyer and Holding shall
appoint Old National Bank of Evansville to act as escrow agent (the "Escrow
Agent") pursuant to the Escrow Agreement.
(b) At the Closing Date, upon the terms and conditions contained in
this Agreement and the Escrow Agreement, the Buyer shall deposit with the Escrow
Agent an amount equal to the Escrow Amount.
2.6 PAYMENT OF FUNDED INDEBTEDNESS AND CAPITAL LEASES.
(a) On the Closing Date, the Buyer shall, or shall cause its lenders
to deliver to the holders of Funded Indebtedness, Capital Lease Obligations and
Preferred Stock, an amount sufficient to repay all Funded Indebtedness and
Capital Lease Obligations outstanding as of the Closing Date and also the
Preferred Redemption Amount, with the result that immediately following the
Closing there will be no further monetary obligations of Holding or the Company
with respect to any Funded Indebtedness, Capital Lease Obligations or Preferred
Stock outstanding immediately prior to the Closing. On the Closing Date, the
Company will provide the Buyer and such lenders with customary pay-off letters
from all holders of Funded Indebtedness and Capital Lease Obligations in form
and substance reasonably satisfactory to the Buyer, and make arrangements
reasonably satisfactory to the Buyer for such holders to provide
-8-
to the Buyer recordable form mortgage and lien releases, canceled notes,
trademark and patent assignments and other documents requested by the Buyer
simultaneously with or promptly following the Closing.
(b) On the Closing Date, the Buyer shall, or shall cause Holding to,
pay any outstanding Third Party Payments and Shareholders' Expenses.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder severally represents and warrants to the Buyer as
follows:
3.1 TITLE TO THE SHARES.
Such Shareholder is the lawful owner, of record and beneficially, of those
shares of Holding Common Stock and/or other equity securities of Holding set
forth opposite his, her or its name on SCHEDULE I hereto and has good and
marketable title to such securities, free and clear of any Encumbrances
whatsoever and with no restriction on the voting rights and other incidents of
record and beneficial ownership pertaining thereto, except, in the case of the
Management Shareholders, to the extent that such shares have been pledged to the
Company to secure a promissory note for the purchase thereof pursuant to
agreements that shall be terminated at or prior to the Closing Date. Except for
this Agreement and as set forth on Schedule 3.1 of the Disclosure Letter, there
are no agreements or understandings between such Shareholder and any other
Shareholder or any other Person with respect to the acquisition, disposition or
voting of or any other matters pertaining to any of the capital stock or other
equity securities of Holding. Such Shareholder acquired his, her or its shares
of Holding Common Stock and other equity securities in one or more transactions
exempt from registration under the Securities Act of 1933, as amended, and in
compliance with applicable state securities laws.
3.2 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) Such Shareholder has full and absolute legal right, capacity,
power and authority to enter into this Agreement and this Agreement is the valid
and binding obligation of such Shareholder, enforceable against such Shareholder
in accordance with its terms, except as enforceability thereof may be limited by
any applicable bankruptcy, reorganization, insolvency or other Laws affecting
creditors rights generally or by general principles of equity. If such
Shareholder is a trust, such trust is a validly created and existing trust under
applicable state law.
(b) Except as set forth on Schedule 3.2 of the Disclosure Letter,
neither the execution, delivery and performance of this Agreement by such
Shareholder, nor the consummation of the transactions contemplated hereby by
such Shareholder, nor compliance by such Shareholder with any of the provisions
hereof will (i) conflict with, or result in any violations of, or cause a
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, amendment, cancellation or acceleration of any
obligations contained in, or the loss of any material benefit under, any term,
condition or provision of any Contract to which such Shareholder is a party, or
by which such Shareholder or any of his, her or its properties may be bound or
(ii) violate any Law applicable to such Shareholder or any of his,
-9-
her or its properties, which conflict or violation would prevent the
consummation of the transactions contemplated by this Agreement or result in an
Encumbrance on or against any capital stock of Holding.
(c) Except as contemplated by this Agreement or as set forth on
Schedule 3.2 of the Disclosure Letter, no Permit, authorization, consent or
approval of or by, or any notification of or filing with, any Person
(governmental or private) is required in connection with the execution, delivery
and performance by such Shareholder of this Agreement or the consummation by
such Shareholder of the transactions contemplated hereby.
3.3 RELATED TRANSACTIONS.
Except as set forth on Schedule 3.3 of the Disclosure Letter, and except
for salary to Shareholders who are currently employees of Holding and the
Company, such Shareholder is not now, nor has such Shareholder been during the
last three fiscal years, (i) a party to any transaction or Contract with Holding
or the Company that will not be terminated or completed at or prior to the
Closing Date (other than employment agreements that are set forth on the
Disclosure Schedule and, with respect to Xxxxxx Financial, Inc., other than
those obligations that expressly survive the repayment of the indebtedness owed
by the Company to Xxxxxx Financial, Inc. as set forth in the definitive
documentation relating to such indebtedness), or (ii) other than with respect to
Xxxxxx Financial, Inc., the direct or indirect owner of an interest in any
Person which is a supplier or customer of Holding or the Company (other than
non-affiliated holdings in publicly-held companies).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HOLDING AND THE COMPANY
Holding and the Company jointly and severally represent and warrant
to the Buyer as follows:
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
Each of Holding and the Company is a corporation duly organized, validly
existing and in good standing under the Laws of its respective jurisdiction of
incorporation, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted, and,
except as set forth on Schedule 4.1 of the Disclosure Letter dated the date of
this Agreement (the "Disclosure Letter") certified by the Chief Executive
Officer of Holding and the Company and delivered by Holding and the Company to
the Buyer, is duly qualified and in good standing to do business in each
jurisdiction in which the failure to be so qualified would reasonably be
expected to have a M aterial Adverse Affect on the Company or Holding, each of
which jurisdictions is set forth on Schedule 4.1 of the Disclosure Letter. The
Company has delivered to the Buyer true and complete copies of Holding's Charter
and Holding's By-laws, and also the certificate of incorporation and by-laws of
the Company, in each case as amended to the date hereof.
-10-
4.2 EQUITY INVESTMENTS.
Other than the Company, Holding has never had, nor does it currently have,
any subsidiaries, nor has it ever owned, nor does it currently own, any capital
stock or other proprietary interest, directly or indirectly, in any Person. The
Company has never had, nor does it currently have, any subsidiaries, nor has it
ever owned, nor does it currently own, any capital stock or equity interest,
directly or indirectly, in any Person.
4.3 CAPITAL STOCK.
The authorized capital stock of Holding consists of (i) 100,000 shares of
Class A Preferred Stock, $.01 par value (the "Class A Preferred"), of which
80,000 shares are issued and outstanding; (ii) 100,000 shares of Class B
Preferred Stock, $.01 par value (the "Class B Preferred"), of which 60,966.69
shares are issued and outstanding; (iii) 500,000 shares of Class A Common Stock,
$.01 par value, of which 89,281.50 shares are issued and outstanding; (iv)
300,000 shares of Class B Common Stock, $.01 par value, of which 124,760 shares
are issued and outstanding; and (v) 200,000 shares of Class C Common Stock, $.01
par value, of which 90,791.60 shares are issued and outstanding. The Class A
Preferred and Class B Preferred are referred to herein as the "Holding Preferred
Stock," and the Class A, Class B and Class C Common Stock are referred to herein
as the "Holding Common Stock." All shares of the Holding Preferred Stock and the
Holding Common Stock are owned of record and beneficially by the Persons and in
the amounts set forth on Schedule 4.3 of the Disclosure Letter. All of the
issued and outstanding capital stock of the Company is owned of record and
beneficially by Holding. Other than the securities described above and except as
described on Schedule 4.3 of the Disclosure Letter, there are no outstanding
securities, options, warrants, rights or agreements or other commitments
pursuant to which Holding is or may become obligated to issue any shares of its
capital stock, or any securities convertible into or exercisable or exchangeable
for such capital stock. There are no outstanding securities, options, warrants,
rights or agreements or other commitments pursuant to which the Company is or
may become obligated to issue any shares of its capital stock, or any securities
convertible into or exercisable or exchangeable for such capital stock, other
than the preemptive rights existing under the corporation statutes of the State
of Ohio.
4.4 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) Each of Holding and the Company has all the requisite corporate
power and authority to enter into this Agreement and each Related Document to
which it is a party to perform their respective obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby;
the execution, delivery and performance of this Agreement and each Related
Document to which they are a party and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of Holding and the Company; and this
Agreement and each Related Document to which they are a party has been duly and
validly executed and delivered by Holding and the Company and this Agreement and
each Related Document to which they are a party is the valid and binding
obligation of Holding and the Company, enforceable against Holding or the
Company in accordance with its terms, except as
-11-
enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other Laws affecting creditors rights generally or
by general principles of equity.
(b) Neither the execution, delivery and performance of this
Agreement and the Related Documents to which Holding or the Company is a party,
nor the consummation by Holding or the Company of the transactions contemplated
hereby or thereby, nor compliance by Holding or the Company with any provision
hereof will (i) conflict with, or result in any violation of, or cause a default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, amendment, cancellation or acceleration of any obligation
contained in, or the loss of any material benefit under, or result in the
creation of any Encumbrance upon, any asset of Holding or the Company under any
term, condition or provision of (x) Holding's Charter or Holding's By-laws, (y)
the certificate of incorporation or by-laws of the Company, or (z) except as set
forth on Schedule 4.4 of the Disclosure Letter, any material Contract to which
Holding or the Company is a party or by which any of their respective properties
or assets are bound, or (ii) violate any material Laws applicable to Holding,
the Company or any of their respective properties.
(c) Except as set forth on Schedule 4.4 of the Disclosure Letter and
as required by the HSR Act, no material consent, approval, Order or
authorization of, registration, declaration or filing with, or notification to
any Governmental Entity or any other third party is required in connection with
the execution, delivery and performance by Holding and the Company of this
Agreement or the Related Documents to which either is a party or the
consummation of the transactions contemplated hereby or thereby.
4.5 FINANCIAL STATEMENTS.
Holding has previously delivered to the Buyer (i) the audited consolidated
balance sheets of Holding as of November 30, 1998 and 1997 and the related
consolidated statements of income, shareholders' equity and cash flows for the
fiscal years then ended; and (ii) the unaudited consolidated balance sheet of
Holding as of March 31, 1999 and the related consolidated statements of income,
shareholders' equity and cash flows for the four-month period then ended
(collectively, the "Financial Statements," and the balance sheet as of March 31,
1999 being the "Latest Balance Sheet" and the date thereof being the "Latest
Balance Sheet Date"). Except as set forth on Schedule 4.5 of the Disclosure
Letter, the Financial Statements (i) are in accordance with the books and
records of Holding and the Company, (ii) fairly present in all material respects
the financial condition of Holding and the Company on a consolidated basis as at
the respective dates indicated and the results of operations, stockholders'
equity and cash flows of the Company for the respective periods indicated and
(iii) have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods covered thereby, except,
with respect to unaudited financial statements, for normal year-end adjustments
and the absence of footnotes.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth on Schedule 4.6 of the Disclosure Letter, Holding and
the Company have no material Liability, except for (i) Liabilities reflected in
the Liabilities section of the Latest Balance Sheet, (ii) Liabilities under
Contracts that are set forth in the Disclosure Letter (or
-12-
Contracts not set forth in the Disclosure Letter due solely as a result of the
dollar thresholds in Section 4.12) which have arisen in the ordinary course of
business (none of which relates to a breach of contract), (iii) Liabilities that
have arisen since the date of the Latest Balance Sheet in the ordinary course of
business (none of which relates to breach of contract, breach of warranty, tort,
infringement, violation of Law, or any action, suit or Proceeding) and (iv)
other Liabilities which individually or in the aggregate would not reasonably be
likely to have a Material Adverse Effect on the Company or Holding.
4.7 ABSENCE OF CHANGES.
Except as set forth on Schedule 4.7 of the Disclosure Letter, since the
Latest Balance Sheet Date, there has not been any Material Adverse Change with
respect to Holding or the Company. Since that date, except as set forth on
Schedule 4.7 of the Disclosure Letter, Holding and the Company have been
operated in the ordinary course, consistent with past practice, and:
(a) no fee, interest, dividend, royalty or any other payment of any
kind has been made by Holding or the Company to any Shareholder or any Affiliate
of the Company or any Shareholder;
(b) no party (including Holding and the Company) has accelerated,
terminated, modified (out of the ordinary course of business) or canceled any
Contract (or series of related Contracts) involving more than $50,000 to which
Holding or the Company is a party or by which Holding or the Company is bound
and, to the Best Knowledge of the Company, no party intends to take any such
action;
(c) neither Holding nor the Company has experienced any material
damage, destruction, or loss (whether or not covered by insurance) to its
property;
(d) there has not been any material action or failure to act by
Holding or the Company, or to the Best Knowledge of the Company, any other
material occurrence, event, incident or transaction outside the ordinary course
of business involving Holding or the Company;
(e) neither Holding nor the Company has taken any action that would
violate any of the negative covenants set forth in Section 6.2 of this
Agreement; and
(f) there has been no agreement, understanding or authorization,
whether in writing or otherwise, for Holding or the Company to take any of the
actions specified in items (a) through (e) above.
4.8 TAX MATTERS.
Except as set forth on Schedule 4.8 of the Disclosure Letter, Holding and
the Company (a) have paid, or adequately reserved for on the Closing Balance
Sheet in accordance with GAAP, all Taxes required to be paid by them through the
date hereof and (b) have filed or caused to be filed in a timely manner (within
any applicable extension periods) all Tax Returns due through the date hereof
(and will file or cause to be filed prior to the Closing Date all Tax Returns
due through the Closing Date) with appropriate Governmental Entities in all
-13-
jurisdictions in which the Tax Returns are required to be filed, and all such
Tax Returns are true and complete in all material respects and Holding or the
Company has timely paid, or will timely pay if due before the Closing Date, in
full all Taxes shown thereon as being due. Other than as set forth on Schedule
4.8 of the Disclosure Letter, neither Holding nor the Company is, nor has any of
them ever been, included in any consolidated or combined Tax Return for Federal,
state or local Tax purposes or is a member of an affiliated group within the
meaning of Section 1504 of the Code. Except as set forth on Schedule 4.8 of the
Disclosure Letter, no Tax liens (other than Permitted Encumbrances) have been
filed which are currently in effect and neither Holding nor the Company has been
notified by the Internal Revenue Service or any other taxing authority that any
issues have been raised (and are currently pending) by the Internal Revenue
Service or any other taxing authority in connection with any Tax Return, and no
waivers of statutes of limitation have been given or requested which are
currently in effect with respect to Holding or the Company. Except as set forth
on Schedule 4.8 of the Disclosure Letter, there are no pending Tax audits of any
Tax Returns. No unresolved deficiencies or additions to Taxes have been
proposed, asserted or assessed against Holding, the Company or any member of any
affiliated or combined group of which Holding or the Company was or is a member.
Holding has made full and adequate provision (i) on the Latest Balance Sheet for
all Taxes payable by it or the Company for all periods prior to the date
thereof, and (ii) on its books for all Taxes payable by it for all periods
beginning on or after such date. Neither Holding nor the Company has incurred
any Tax Liability since the Latest Balance Sheet Date, except for Taxes incurred
in the ordinary course of business. Neither Holding nor the Company has made an
election to be treated as a "consenting corporation" under Section 341(f) of the
Code and since June 15, 1993 neither Holding nor the Company has been a
"personal holding company" within the meaning of Section 542 of the Code.
Holding, the Company and each of their respective predecessors have complied in
all material respects with all applicable Laws relating to the payment and
withholding of Taxes and have withheld and paid over all amounts required by Law
to be withheld and paid from the wages or salaries of employees, and neither
Holding nor the Company is liable for any Taxes for failure to comply with such
Laws. Neither Holding nor the Company is a party to any Tax sharing agreement.
Holding has not agreed to nor is it required to make any adjustments pursuant to
Section 481 of the Code for any period ending on or after the Closing Date and
the Internal Revenue Service has not proposed any such adjustments or changes in
Holding's accounting method. Except as set forth on Schedule 4.8 of the
Disclosure Letter, there is no Contract covering any Person that individually or
collectively could, as a result of the transactions contemplated hereby or by
reason of the prior acquisition of the Company consummated in 1996, give rise to
the payment of any amount being non-deductible by Holding or the Company by
reason of Section 280G of the Code.
4.9 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
Holding and/or the Company have good title to the Intellectual Property
Rights as provided in Section 4.11 and to all other assets, properties and
interests in properties, real, personal or mixed, reflected on the Latest
Balance Sheet or acquired after the Latest Balance Sheet Date (except assets
acquired through Capitalized Lease Obligations, inventory or other property sold
or otherwise disposed of since the Latest Balance Sheet Date in the ordinary
course of business and accounts receivable and notes receivable paid subsequent
to the Latest Balance Sheet Date), free and clear of all Encumbrances, of any
kind or character, except for those Encumbrances set forth in the Disclosure
Letter and Permitted Encumbrances. Except for
-14-
inventory and supplies in transit in the ordinary course of business, all
material tangible personal property is located on the premises of the Company,
other than ice cream filling equipment used by customers. Except as set forth on
Schedule 4.9 of the Disclosure Letter, the assets, properties and interests in
properties of Holding and the Company include all assets, properties and
interests in properties (real, personal and mixed, tangible and intangible) (or
the right pursuant to lease of contract to use) and all Contracts necessary to
enable the Buyer to carry on the business as presently conducted by Holding and
the Company.
4.10 REAL PROPERTY-OWNED OR LEASED.
(a) The Disclosure Letter contains a list and brief description of
all of the owned real property of Holding and the Company (the "Owned Real
Property") and all real property in which Holding or the Company has a leasehold
interest held under leases (the "Leased Property"), including the name of the
lessor and any requirement of consent of the lessor to consummate the
transactions contemplated hereby. The Owned Real Property and the Leased
Property (together, the "Real Property") constitute all real properties used or
occupied by Holding and the Company in connection with the operation of the
Company's business.
(b) With respect to the Real Property, except as set forth on
Schedule 4.10 of the Disclosure Letter:
(i) with respect to Owned Real Property, and to the Best
Knowledge of the Company, the Leased Property, no portion thereof is
subject to any pending condemnation Proceeding or Proceeding by any
public or quasi-public authority and, to the Best Knowledge of the
Company, there is no threatened condemnation or Proceeding with
respect thereto;
(ii) with respect to the Leased Property, the Company is the
owner and holder of all the leasehold estates purported to be
granted by such lease and each lease is in full force and effect and
constitutes a valid and binding obligation of the Company;
(iii) no notice of any increase in the assessed valuation of
the Real Property and no notice of any contemplated special
assessment has been received by Holding or the Company and to the
Best Knowledge of the Company, there is no threatened special
assessment pertaining to any of the Real Property;
(iv) there are no Contracts, written or oral, to which Holding
or the Company is a party, granting to any party or parties the
right of use or occupancy of any portion of the parcels of the Real
Property;
(v) there are no parties (other than Holding, the Company or
their lessees disclosed pursuant to paragraph (iv) above) in
possession of the Real Property; and
(vi) with respect to the Leased Property, to the Best
Knowledge of the Company, there have been no discussions or
correspondence with the landlord concerning renewal terms for those
leases scheduled to expire within 12 months of the date of this
Agreement.
-15-
4.11 INTELLECTUAL PROPERTY.
Except in each case as set forth on Schedule 4.11 of the Disclosure
Letter:
(a) the Company owns (or has the right to use), sell, license and
dispose of, and has the right to bring actions for the infringement of, and,
where the Company has deemed necessary, has made timely and proper application
for all material Intellectual Property Rights reasonably necessary or required
for the conduct of its business, as currently conducted and as currently
proposed to be conducted (such Intellectual Property Rights, collectively, the
"Requisite Rights"), and such rights to use, sell, license, dispose of and bring
actions are sufficient for such conduct of the Company's business;
(b) there are no royalties, honoraria, fees or other payments
payable by Holding or the Company to any Person by reason of the ownership, use,
license, sale or disposition of Requisite Rights;
(c) to the Best Knowledge of the Company, no activity, service or
procedure currently conducted or proposed to be conducted by Holding or the
Company infringe any Intellectual Property Right of any other party;
(d) neither Holding nor the Company has received from any third
party in the past three years any notice, charge, claim or other assertion that
Holding or the Company is infringing any Intellectual Property Right of any
third party or committed any acts of unfair competition, and no such claim is
impliedly threatened by an offer to license from a third party under a claim of
use; and
(e) neither Holding nor the Company has knowledge of or sent to any
Person in the past three years any notice, charge, claim or other assertion of
any present, impending or threatened infringement by, or misappropriation of,
any Intellectual Property Right of Holding or the Company by such other Person
or any acts of unfair competition by such other Person. The Disclosure Letter
contains a true and complete list of all material applications, filings and
other formal actions made or taken pursuant to Federal, state, local and foreign
Laws by Holding and the Company to perfect or protect their interest in the
Requisite Rights, including, without limitation, all patents, patent
applications, trademarks, trademark applications, service marks and service xxxx
applications.
4.12 AGREEMENTS, NO DEFAULTS, ETC.
Except as set forth on Schedule 4.12 of the Disclosure Letter, neither
Holding nor the Company is a party to any:
(a) Contract for the employment of any officer, individual employee
or other Person on a full-time, part-time, consulting or other basis or
agreement with any Affiliates, that, solely with respect to any Affiliates, will
not be terminated prior to the Closing Date, other than advances in the ordinary
course of business;
-16-
(b) Contract relating to the borrowing of money or to the
mortgaging, pledging or otherwise placing an Encumbrance on any asset or group
of assets of Holding or the Company;
(c) Contract relating to any guarantee of any obligation, including,
without limitation, any guarantee for borrowed money;
(d) Contract with respect to the lending or investing of funds
(other than agreements entered into in the ordinary course of business relating
to the establishment or operation of bank accounts);
(e) Contract or indemnification with respect to any form of
intangible property, including any Intellectual Property Rights or confidential
information;
(f) Contract or group of related Contracts with the same party
(excluding purchase orders entered into in the ordinary course of business which
are to be completed within six months of entering into such purchase orders) for
the purchase or sale of products or services under which the undelivered balance
of such products and services has a selling price in excess of $100,000;
(g) Contract that prohibits it from freely engaging in business
anywhere in the world;
(h) other Contract (x) that is not terminable by either party
without penalty upon advance notice of 90 days or less and involves aggregate
consideration in excess of $75,000 or (y) that involves aggregate consideration
in excess of $150,000 (excluding in the case of clauses (x) and (y) above any
purchase order entered into in the ordinary course of business which is to be
completed within six months of entering into such purchase orders); or
(i) other Contract not covered by (a) through (h) above that the
Company reasonably deems to be material to the Company's business.
Except as set forth on Schedule 4.12 of the Disclosure Letter, there are no
vehicles, boats, aircraft, apartments or other residential or recreational
properties or facilities owned or operated by Holding or the Company for
executive, administrative or sales purposes or any social club memberships owned
or paid for by it. Except as set forth on Schedule 4.12 of the Disclosure
Letter, Holding and the Company have in all material respects performed all the
obligations required to be performed by them to date and are not in default or
alleged to be in default in any material respect under any Contract, and, to the
Best Knowledge of the Company, there exists no event, condition or occurrence
which, after notice or lapse of time, or both, would constitute such a default
by Holding or the Company of any of the foregoing. Except as set forth on
Schedule 4.12 of the Disclosure Letter, the Company has furnished to Buyer true
and complete copies of all Contracts listed in the Disclosure Letter or complete
descriptions of all material terms of any oral Contracts listed in the
Disclosure Letter.
4.13 LITIGATION, ETC.
Except as set forth on Schedule 4.13 of the Disclosure Letter, there are
no (i) Proceedings pending or, to the Best Knowledge of the Company, threatened
against Holding or the Company,
-17-
whether at law or in equity, or before or by any Governmental Entity or
arbitrator or (ii) Orders of any Governmental Entity or arbitrator against
Holding or the Company which are in effect on the date hereof. The Company has
delivered to Buyer all material documents and correspondence relating to such
matters referred to in the Disclosure Letter.
4.14 COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth on Schedule 4.14 of the Disclosure Letter,
the Company's business currently being conducted, and has not at any time in the
past three years been conducted, in violation in any material respect of any
Law, Order or Permit. Except as set forth on Schedule 4.14 of the Disclosure
Letter, no investigation or review by any Governmental Entity with respect to
Holding or the Company is pending or, to the Best Knowledge of the Company,
threatened, nor has any Governmental Entity notified Holding or the Company of
its intention to conduct the same. Holding and the Company have all material
Permits necessary for the conduct of their business. Such Permits are in full
force and effect, no violations are or have been recorded in respect of any
thereof and no Proceeding is pending or, to the Best Knowledge of the Company,
threatened to revoke or limit any thereof. The Disclosure Letter contains a true
and complete list of all material Permits under which Holding and the Company
are operating or bound, and the Company has furnished to Buyer true and complete
copies thereof.
(b) Neither the Food and Drug Administration nor any other
Governmental Entity regulating the marketing, distribution, sale or advertising
of any of the products currently sold, distributed or used in connection with
the Company's business has requested that any such product be removed from the
market, that substantial new product testing be undertaken as a condition to the
continued manufacturing, selling, distribution or use of any such product or
that such product be modified in a way likely to have a Material Adverse Effect
on Holding or the Company.
4.15 LABOR RELATIONS; EMPLOYEES.
Except as set forth on Schedule 4.15 of the Disclosure Letter, (i) neither
Holding nor the Company is delinquent in payments to any of its employees for
any wages, salaries, commissions, bonuses or other direct compensation for any
services performed by them to date or amounts required to be reimbursed to such
employees, (ii) upon termination of the employment of any such employees, none
of Holding, the Company, or the Buyer will by reason of any action taken or not
taken prior to the Closing be liable to any of such employees for severance pay
or any other payments pursuant to the terms of any written or oral agreement
entered into prior to the Closing between the Company or Holding and any such
employee, (iii) Holding and the Company are in compliance in all material
respects with all Laws respecting labor, employment and employment practices,
terms and conditions of employment and wages and hours, (iv) there is no unfair
labor practice complaint against Holding or the Company pending before the
National Labor Relations Board or any other Governmental Entity, (v) there is no
labor strike, material dispute or grievance, slowdown or stoppage actually
pending or, to the Best Knowledge of the Company, threatened against or
involving Holding or the Company, and (vi) no labor union currently represents
the employees of Holding or the Company. Neither Holding nor the Company is a
party to or bound by any collective bargaining agreement, union
-18-
Contract or other agreement with any party or parties that represent the
employees of the Company as a group.
4.16 ERISA COMPLIANCE.
(a) Schedule 4.16 contains a true and complete list of all Employee Plans.
(b) Except as provided on Schedule 4.16:
(i) each of the Employee Plans sponsored by the Company or an ERISA
Affiliate that is qualified under Section 401 of the Code has received a
favorable determination letter from the Internal Revenue Service as to the
qualification of such plan or is within the remedial amendment period to
file such plan;
(ii) each Employee Plan has been operated and administered in
accordance with its terms and is in compliance in all material respects
with ERISA and the Code;
(iii) all contributions due and payable on or before the Closing
Date in respect of any Employee Plan have been made in full and proper
form, or adequate accruals have been provided for in the financial
statements for such amounts for periods ending on the Closing Date;
(iv) no Employee Plan subject to Part (3) of Subtitle B of Title I
of ERISA or Section 412 of the Code has incurred any "accumulated funding
deficiency" (as defined in Section 412(a) of the Code), whether or not
waived;
(v) no liability under Title IV of ERISA has been incurred,
including without limitation, for previously terminated Employee Plans, by
the Company or its ERISA Affiliates that has not been satisfied, and no
condition exists that presents a risk to the Company or its ERISA
Affiliates of incurring any liability under such Title;
(vi) no "reportable event" (within the meaning of Section 4043 of
ERISA) has occurred with respect to any Employee Plan for which the notice
requirement has not been waived;
(vii) neither the Company nor any of its ERISA Affiliates, nor to
the knowledge of the Company and its ERISA Affiliates, any other
"disqualified person" or "party in interest" (as defined in Section 4975
of the Code and Section 3(14) of ERISA, respectively) with respect to an
Employee Plan has breached the fiduciary rules of ERISA or engaged in a
prohibited transaction which could subject the Company or its ERISA
Affiliates to any Tax or penalty imposed under Sections 4975 of the Code
or Section 502 (i), (j) or (l) of ERISA;
(viii) all PBGC premium, bond coverage and reporting and disclosure
obligations imposed under ERISA and the Code have been satisfied in all
material respects with respect to each Employee Plan;
-19-
(ix) each Employee Plan which is subject to the requirements of the
Consolidated Omnibus Budget Reconciliation of 1985 ("COBRA") and the
Health Insurance Portability and Accountability Act ("HIPAA") has been
maintained in compliance in all material respects with COBRA and HIPAA,
including all notice requirements, and no Tax payable on account of
Section 4980B or any other section of the Code has been or is expected to
be incurred;
(x) no benefit payable or which may become payable by the Company or
its ERISA Affiliates pursuant to any Employee Plan shall constitute an
"excess parachute payment," within the meaning of Section 280G of the
Code, which is or may be subject to the imposition of an excise Tax under
Section 4999 of the Code or which would not be deductible by reason of
Section 280G of the Code;
(xi) no Employee Plan currently maintained by the Company or its
ERISA Affiliates is or was a "multiple employer plan" (within the meaning
of Section 413 of the Code);
(xii) neither the Company nor its ERISA Affiliates is or ever has
been obligated to contribute to any "multiemployer plan" (within the
meaning of Section 3(37) of ERISA;
(xiii) each Employee Plan which is intended to meet the requirements
of Section 125 of the Code meets such requirements and each program of
benefits for which employee contributions are provided pursuant to
elections made under such Employee Plan meets the requirements of the Code
applicable thereto;
(xiv) with respect to any Employee Plan, there has not been any act
or omission by the Company or any of its ERISA Affiliates that has given
rise to or could give rise to any fines, penalties or related charges
under ERISA or the Code for which the Company or any of its ERISA
Affiliates could be liable;
(xv) no Proceedings (other than routine benefit claims) are pending
or to the Best Knowledge of the Company, threatened against or relating to any
Employee Plan, or any fiduciary thereof, and to the Best Knowledge of the
Company, there is no basis for any such Proceeding;
(xvi) the Company has timely deposited and transmitted all amounts
withheld from employees for contributions or premium payments for each
Employee Plan into the appropriate trusts or accounts;
(xvii) neither the Company nor any ERISA Affiliate maintains or
contributes to any employee welfare benefit plan (as defined in Section
3(1)) of ERISA, which provides benefits to retired employees or former
employees (other than required by Section 601 of ERISA);
(xviii) no action, suit, proceeding, hearing, audit or investigation
with respect to the operation or the investment of assets of any Employee
Plan (other than routine
-20-
benefit claims) is pending or, to the knowledge of the Company or any
ERISA Affiliate, threatened against or relating to any Employee Plan; and
(xix) each Employee Plan has been established and operated for the
exclusive benefit of the participants and beneficiaries of such Employee
Plan.
(c) The Company has delivered or made available to the Buyer true and
complete copies of the following documents, as they have been amended to the
date hereof, relating to the Employee Plans: (i) all Employee Plan document;
(ii) the most recently completed actuarial valuation for each Employee Plan;
(iii) the Form 5500, 5500-C or 5500-R for each Employee Plan for the three most
recent Plan years; and (iv) all governmental rulings, determinations and
opinions (and pending requests therefor) with respect to any Employee Plan.
4.17 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 4.17 of the Disclosure Letter,
the Company's business in not currently being conducted, and has not at any time
in the past been conducted in violation of any Environmental, Health and Safety
Laws. Holding and the Company have all Permits necessary for the conduct of
their business under Environmental, Health and Safety Laws. Except as set forth
on Schedule 4.17 of the Disclosure Letter, neither Holding or the Company nor
any of their respective past owned or leased property or operations is subject
to or the subject of, any Proceeding, Order, settlement, or, to the Company's
Best Knowledge, other Contract arising under Environmental, Health and Safety
Laws, nor, to the Best Knowledge of the Company, has any investigation been
commenced or is any Proceeding threatened against Holding or the Company under
the Environmental, Health and Safety Laws with regard to the Company's business.
For purposes of this Section 4.17, the term "Company" shall include Holding, the
Company and any predecessor of Holding or the Company, including any Person to
whose liabilities Holding or the Company has succeeded, in whole or in part,
pursuant to Environmental, Health and Safety Laws, Contract, common Law or the
operation of Law.
(b) Except as set forth on Schedule 4.17 of the Disclosure Letter,
(i) the Company has not received any written or oral notice, report or other
information that the Company is potentially responsible under the Environmental,
Health and Safety Laws for any damages, sanctions or remedies, including for
response costs or natural resource damages, as those terms are defined under the
Environmental, Health and Safety Laws, at any location, (ii) the Company has not
transported or disposed of, or allowed or arranged for any third party to
transport to or dispose of, any Hazardous Materials at any location so as to
give rise to any Liability or corrective or remedial obligation of the Company
under Environmental, Health and Safety Laws, (iii) neither the Real Property nor
any other current or past property or facility owned, operated or used by the
Company or any predecessor to the Company is contaminated with any Hazardous
Materials so as to give rise to any Liability or corrective or remedial
obligation of the Company under Environmental, Health and Safety Laws, and (iv)
neither the Real Property, nor any facilities or equipment situated thereon,
contain friable and damaged asbestos-containing material so as to give rise to
any Liability or corrective or remedial obligation of the Company under
Environmental, Health and Safety Laws.
-21-
(c) Schedule 4.17 of the Disclosure Letter sets forth a complete and
accurate list of all properties and facilities previously owned or operated by
the Company. Without limitation upon the indemnification obligations under
Article VIII for breaches of paragraph (a) and (b) above, except as set forth on
Schedule 4.17 of the Disclosure Letter, to the Best Knowledge of the Company,
none of the following has existed or occurred at any such property or facility
or at any of the Real Property: a release of Hazardous Materials in an amount
then or now exceeding a reportable quantity as defined under, or in a manner
that then or now would support an Order by a Governmental Entity under,
Environmental, Health and Safety Laws; hazardous waste treatment, storage or
disposal facilities, as those terms are defined under the Environmental, Health
and Safety Laws; any underground storage tank, aboveground storage tank,
landfill, waste pile, other waste disposal area, surface impoundment, or article
or equipment containing polychlorinated biphenyls.
(d) The Company has provided the Buyer with correct and complete
copies of all reports and studies performed by or on behalf of, or within the
possession or control of, the Company with respect to past or present
environmental conditions or events at any of the Real Property or any property
formerly owned, leased, or operated by the Company, and to the Best Knowledge of
the Company, there are no other environmental reports or studies with respect
thereto, other than as contemplated hereby.
(e) Except as set forth on Schedule 4.17 of the Disclosure Letter,
the Company has not by Contract, consent order or other agreement assumed (1)
any obligations or liabilities of any other Person arising under Environmental,
Health and Safety Laws or (2) responsibility for the correction or remediation
of any condition arising from or relating to the release or threatened release
of Hazardous Materials.
4.18 BROKERS.
Other than Brown, Gibbons, Lang & Company, L.P., none of the Shareholders,
Holding, the Company or any of their respective officers, directors or employees
(or any Affiliate of the foregoing) have employed any broker or finder or
incurred any Liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
4.19 RELATED TRANSACTIONS.
Except as set forth on Schedule 4.19 of the Disclosure Letter, and except
for salary to regular employees of Holding and the Company, no current or former
Affiliate of Holding, the Company or any associate (as defined in the rules
promulgated under the Securities Exchange Act of 1934, as amended) thereof (but
excluding any Shareholder, it being understood that the scope of this
representation is provided by the Shareholders in Section 3.3), is now, or has
been during the last three fiscal years, (i) a party to any transaction or
Contract with Holding or the Company that will not be terminated or completed at
or prior to the Closing Date and (ii) the direct or indirect owner of an
interest in any Person which is a supplier or customer of Holding or the Company
(other than non-affiliated holdings in publicly-held companies). In addition,
there will be no claim, demand, Liability or obligation against or imposed upon
any member of the Buyer Group arising from or in connection with any assertion
by any former shareholder, warrantholder, optionholder or other securityholder
of Holding or the Company or the heirs,
-22-
representatives or estate thereof of any impropriety with respect to any action
or transactions of or involving Holding or the Company prior to or at the
Closing (including, without limitation, the actions and transactions
contemplated by this Agreement and the Related Documents).
4.20 SUPPLIERS AND VENDORS.
Except in the ordinary course of business, since November 30, 1998, none
of the Company's five largest suppliers of materials, other than resin, and
three largest resin suppliers (by dollar amount of product purchased during the
last 12 months) has canceled or otherwise terminated, or to the Best Knowledge
of the Company, threatened to cancel or otherwise terminate, its relationship
with the Company or has decreased, limited or otherwise modified in any
materially adverse manner, or threatened to decrease, limit or otherwise modify
in any materially adverse manner, the services, supply of resin or any other
materials it provides to the Company.
4.21 CUSTOMERS.
Except to the extent any such business relationship is impaired solely by
virtue of an account or note receivable past 90 days due as disclosed in the
Disclosure Letter, to the Best Knowledge of the Company, the business
relationship of the Company with its top 20 customers (by dollar amount of
materials supplied during the last 12 months) is generally good and no material
disagreement or problem exists between the Company and any such customer. Since
January 1, 1998, no customer to which more than $100,000 of the Company's annual
sales (on a consolidated basis) are attributable has threatened in writing, or
has otherwise notified Xxxxx Xxxxxxx, Xxxxxxx Xxxxx, Xxxx Xxxxx or Xxxxxxx
Xxxxxxxx that it intends to terminate its relationship and dealings with the
Company, whether as a result of the transactions contemplated by this Agreement
or otherwise (nor does any of such persons have knowledge of any such
notification being given to any other employee or representative of the
Company). Schedule 4.21 of the Disclosure Letter sets forth each customer to
which more than $100,000 of the Company's 1998 fiscal sales were attributable
that is no longer a customer of the Company.
4.22 DISCLOSURE.
To the best knowledge of the Company, neither this Agreement nor the
Disclosure Schedules contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein,
taken as a whole, in light of the circumstances in which they were made, not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE BUYER
The Buyer represents and warrants to Holding, the Company and the
Shareholders as follows:
-23-
5.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
The Buyer is a corporation duly organized, validly existing and in good
standing under the Laws of its jurisdiction of incorporation, has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and, is duly qualified and in good
standing to do business in each jurisdiction in which the failure to be so
qualified would reasonably be expected to have a Material Adverse Effect on the
Buyer.
5.2 AUTHORITY.
The Buyer has all requisite power and authority to enter into this
Agreement and the Related Documents to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby; the execution, delivery and performance by the
Buyer of this Agreement and the Related Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Buyer; and this Agreement
and the Related Documents to which the Buyer is a party have been duly executed
and delivered by the Buyer and constitute the valid and legally binding
obligations of the Buyer, enforceable in accordance with its terms and
conditions, except as enforceability thereof may be limited by any applicable
bankruptcy, reorganization, insolvency or other Laws affecting creditors' rights
generally or by general principles of equity.
5.3 NONCONTRAVENTION; CONSENTS.
(a) Neither the execution, delivery and performance of this
Agreement and the Related Documents to which the Buyer is a party nor the
consummation of the transactions contemplated hereby or thereby by the Buyer
shall (i) violate any Law, the result of which would prevent the consummation by
the Buyer of the transactions contemplated hereby or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any Contract to which the Buyer is a party or by which
any such party is bound or to which any of its properties is subject, the result
of which would prevent the consummation by the Buyer of the transactions
contemplated hereby.
(b) Except for requisite filings under the HSR Act or as otherwise
contemplated by this Agreement or any Related Document, no material permit,
Order, declaration or filing, authorization, consent or approval of or by, or
any material notification of or filing with, any Person (governmental or
private) is required in connection with the execution, delivery and performance
of this Agreement by the Buyer and the Related Documents to which the Buyer is a
party or the consummation by any such party of the transactions contemplated
hereby or thereby.
5.4 BROKERS.
Neither the Buyer nor any of its officers, directors, stockholders or
employees (or any Affiliate of any of the foregoing) has employed any broker or
finder or incurred any Liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated hereby.
-24-
5.5 INVESTMENT INTENT.
The Buyer is acquiring the Shares for its own account for investment and
not with a view to, or for sale in connection with, any distribution thereof,
nor with any present intention of distributing or selling the same. The Buyer
has no present or contemplated agreement (other than the pledge of such shares,
if required, as security for financing arrangements) providing for the
disposition thereof.
5.6 AVAILABILITY OF FINANCING.
Attached hereto as EXHIBIT C is a highly confident letter from Xxxxxxxxx,
Lufkin and Xxxxxxxx Securities Corporation which has been delivered to the Buyer
prior to the date hereof. The terms set forth in such letter are satisfactory to
the Buyer.
ARTICLE VI
CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING;
ADDITIONAL PRE-CLOSING AGREEMENTS
6.1 AFFIRMATIVE COVENANTS OF THE COMPANY.
From and after the date of this Agreement until the Closing or the earlier
termination of this Agreement pursuant to Section 10.1 (the "Transition
Period"), except as otherwise consented to in writing by the Buyer, which
consent shall not be unreasonably withheld or delayed, Holding and the Company
shall:
(a) conduct the operations of Holding and the Company according to
the ordinary and usual course of business consistent with past custom and
practice (including the collection of receivables, the payment of payables and
the maintenance of supplies) and use commercially reasonable best efforts to
preserve intact their respective business organizations, keep available the
services of their respective employees, and maintain satisfactory relationships
with suppliers and customers;
(b) maintain the assets of Holding and the Company in customary
repair, order and condition, maintain insurance reasonably comparable to that in
effect on the Latest Balance Sheet Date, replace in accordance with past
practice inoperable, worn out or obsolete assets with modern assets of
comparable quality and, in the event of an immaterial casualty, loss or damage
to any of such assets or properties prior to the Closing Date for which the
Company is insured or the condemnation of any assets or properties, either
repair or replace such assets or property or, if the Buyer agrees, cause the
Company to retain such insurance or condemnation proceeds;
(c) promptly inform the Buyer in writing of any material variances
from the representations and warranties contained in Section 4; and
(d) permit representatives of the Buyer to have reasonable access to
Holding's and the Company's books, records, properties, facilities, customers,
suppliers, sales representatives, consultants, key employees and independent
accountants in connection with the Buyer's due diligence review of Holding and
the Company; PROVIDED, HOWEVER, that the Buyer and its
-25-
representatives will only be allowed access to the Company's customers on an
anonymous basis, with the customers to be interviewed to be agreed upon by the
Buyer and the Company; and PROVIDED FURTHER, HOWEVER, that in no event will the
Company be obligated to provide information to the Buyer or its representatives
which would constitute a violation of any applicable antitrust laws or
regulations (it being understood that any such investigation by the Buyer shall
not obviate or diminish any representation or warranty of Holding, the Company
or the Shareholders.
6.2 NEGATIVE COVENANTS OF THE COMPANY.
During the Transition Period, without the prior written consent of the
Buyer (which consent shall not be unreasonably withheld or delayed), except as
expressly contemplated by this Agreement or the Related Documents, Holding and
the Company shall not:
(a) sell, lease, transfer or assign any of the assets of Holding or
the Company, tangible or intangible, other than inventory in the ordinary course
of business consistent with past custom and practice;
(b) delay or postpone the payment of accounts payable and other
obligations and Liabilities or accelerate the collection of accounts receivable,
other than in the ordinary course of business consistent with past custom and
practice;
(c) enter into any Contract (or series of related Contracts) other
than in the ordinary course of business;
(d) enter into any employment Contract or collective bargaining
agreement, written or oral, or modify the terms of any existing such Contract
(other than closing bonuses, all of which shall be accrued on the Closing
Balance Sheet);
(e) grant any increase in the base compensation of any of the
officers or employees of Holding or the Company other than in the ordinary
course of business consistent with past custom and practice;
(f) adopt, amend, modify or terminate any bonus, profit-sharing,
incentive, severance or other plan, Contract or commitment for the benefit of
any of the officers or employees of Holding or the Company, other than as
contemplated by the transactions to be effected hereunder and under the Related
Documents;
(g) other than as contemplated by this Agreement or any Related
Document, enter into any transaction with any of the officers, employees or
Affiliates of Holding or the Company (or any directors, officers or employees of
such Affiliate), other than ordinary course employment arrangements entered into
in accordance with past custom or practice or pursuant to existing agreements;
or
(h) intentionally take any action which would require disclosure
under Section 6.1(c).
-26-
6.3 [INTENTIONALLY OMITTED.]
6.4 CONSENTS.
Each party shall use its reasonable best efforts, and the other parties
shall cooperate with such efforts, to obtain any consents and approvals of, or
effect the notification of or filing with, each Person or authority, whether
private or governmental, whose consent or approval is required in order to
permit the consummation of the transactions contemplated hereby.
6.5 EFFORTS TO CONSUMMATE.
Subject to the terms and conditions herein provided, the parties shall do
or cause to be done all such reasonable acts and things as may be necessary,
proper or advisable, consistent with all applicable Laws, to consummate and make
effective the transactions contemplated hereby as soon as reasonably
practicable.
6.6 NOTICE OF PROSPECTIVE BREACH.
Each party shall immediately notify the other parties in writing upon the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (i) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement to the Closing as if such
representation and warranty were made at such time or (ii) any material failure
of any party hereto or any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement.
6.7 PUBLIC ANNOUNCEMENTS; WAIVER OF CONFIDENTIALITY.
Each party agrees that, except (i) as otherwise required by Law and (ii)
for disclosure to its respective directors, officers, employees, financial
advisors, potential financing sources and their advisors, legal counsel,
independent certified public accountants or other agents, advisors or
representatives on a need-to-know basis, at all times prior to the Closing it
will not issue any reports, statements or releases, in each case pertaining to
this Agreement or the transactions contemplated hereby, without the prior
written consent of the Company or the Buyer, as the case may be, which consent
shall not unreasonably be withheld or delayed. The Shareholders, Holding and the
Company acknowledge that the Buyer has prepared an Offering Memorandum relating
to the offer of Senior Subordinated Notes of the Buyer which contains
confidential and proprietary information regarding Holding and the Company, and
the Shareholders, Holding and the Company hereby waive any obligations of the
Buyer, First Atlantic Capital, Ltd. and their respective affiliates and
representatives to maintain the confidentiality of the information regarding
Holding and the Company that is set forth in the Offering Memorandum, whether in
its preliminary or final form (it being understood and agreed, however, that
none of the Shareholders, Holding or the Company shall be responsible for any
Liability that arises out of the inclusion of such information therein, and the
Buyer agrees to indemnify any such Person for any such Liability, whether
incurred before or after the Closing).
-27-
6.8 NEGOTIATION WITH OTHERS; DISPOSITION AND VOTING OF SECURITIES.
(a) During the Transition Period (the "Exclusive Period"), Holding,
the Company, and the Shareholders shall deal exclusively with the Buyer
regarding the acquisition of or investment in Holding or the Company, whether by
way of merger, purchase of capital stock, purchase of assets or otherwise (a
"Potential Transaction") and, without the prior written consent of the Buyer,
neither Holding, the Company nor any Shareholder shall, directly or indirectly
(i) solicit, initiate discussions with or engage in negotiations with any Person
(whether such negotiations are initiated by Holding, the Company or any
Shareholder or otherwise), other than the Buyer and its Affiliates or a party
designated by the Buyer, relating to a Potential Transaction, (ii) provide
information or documentation with respect to Holding, the Company or its
business to any Person, other than the Buyer and its Affiliates or a party
designated by the Buyer, relating to a Potential Transaction or (iii) enter into
an agreement with any Person, other than the Buyer or any Affiliate thereof,
providing for any Potential Transaction. If Holding, the Company or any
Shareholder receives an unsolicited inquiry, offer or proposal relating to any
of the above, Holding, the Company or such Shareholder shall immediately notify
the Buyer thereof. Holding, the Company and the Shareholders represent to the
Buyer that they are not bound to negotiate a Potential Transaction with any
other Person and that their execution of this Agreement does not violate any
agreement to which any of them are bound or to which any of the assets of
Holding or the Company are subject.
(b) During the Transition Period, each Shareholder, as to himself,
herself or itself, and Holding (with respect to the securities of the Company)
shall:
(i) without the prior written consent of the Buyer, refrain from
transferring, selling or assigning to any Person, or agreeing in any
manner to transfer, sell or assign to any Person, or pledge, encumber,
deposit in a voting trust or grant a proxy with respect to, any securities
of Holding or the Company presently or hereafter owned or controlled by
him, her or it; and
(ii) vote the shares of capital stock of Holding and the Company
presently or hereafter owned or controlled by such Shareholder (or any
other security which has voting rights) against any merger, consolidation,
sale of assets, reorganization, recapitalization, liquidation or winding
up of Holding or the Company at every meeting of shareholders of Holding
or the Company called therefor and at every adjournment thereof (or
withhold consent in writing to any such action proposed to be taken by
written consent in lieu of a meeting).
(c) The parties recognize and acknowledge that a breach by Holding,
the Company or any Shareholder of this Section 6.8 will cause irreparable and
material loss and damage to the Buyer as to which they will not have an adequate
remedy at law or in damages. Accordingly, each party acknowledges and agrees
that the issuance of an injunction or other equitable remedy is an appropriate
remedy for any such breach.
-28-
6.9 [INTENTIONALLY OMITTED.]
6.10 SHAREHOLDERS' REPRESENTATIVE.
The Shareholders agree among themselves (without prejudice to or affecting
in any way the rights provided in this Agreement or otherwise to the Buyer) as
follows:
(a) APPOINT. The Shareholders, for themselves and their personal
representatives and other successors, hereby irrevocably constitute and appoint
KECC, as their agent and true and lawful attorney-in-fact (the "Shareholders'
Representative"), with full power and authority, except as otherwise expressly
provided in this Agreement, in the name of and for and on behalf of the
Shareholders, to take all action required or permitted under this Agreement
(including, without limitation, (i) to give and receive (or refrain from giving
or receiving) all accountings, reports, notices, waivers and consents, (ii) to
determine the Final Net Working Capital in accordance with Section 2.4 and reach
agreement with Buyer with respect to Final Net Working Capital as contemplated
by Section 2.4, (iii) to terminate this Agreement as provided in Article X, (iv)
to amend this Agreement to extend the termination dates provided in Article X,
(v) to receive notices of any claims relating to the indemnification in Article
VIII, (vi) to elect and, if elected, to assume control of the defense of any
such claims (including the employment of counsel) and to reach an agreement with
respect to or settle any proceeding relating to such claims, (vii) to authorize
the Escrow Agent to pay any amounts from the amounts held by the Escrow Agent
(either to the Shareholders' Representative, to be distributed to the
Shareholders as provided in this Agreement, or to the Buyer in payment or
settlement of claims), and (viii) to take any and all actions on behalf of the
Shareholders from time to time as the Shareholders' Representative may deem
necessary or desirable to fulfill the interests and purposes of this Section
6.10) and to act for such person and in such person's name, place and stead as
fully to all intents and purposes as such person could do in person. In the
event of the resignation of KECC or any successor Shareholders' Representative,
the Shareholders shall promptly appoint a substitute or substitutes and shall
advise the Buyer thereof. Each of the Shareholders further acknowledges and
agrees that upon execution of this Agreement, any delivery by the Shareholders'
Representative of any waiver, amendment, agreement, opinion, certificate or
other documents executed by the Shareholders' Representative pursuant to this
Section 6.10, such person shall be bound by such documents as fully as if such
person had executed and delivered such documents. The authority conferred under
this Section 6.10 is an agency coupled with an interest and all authority
conferred hereby is irrevocable and not subject to termination by the
Shareholders or by operation of law, whether by the death or incapacity of any
Shareholders, the termination of any trust or estate or the occurrence of any
other event. If any Shareholder should die or become incapacitated, if any trust
or estate should terminate or if any other such event should occur, any action
taken by the Shareholders' Representative pursuant to this Section 6.10 shall be
as valid as if such death or incapacity, termination or other event had not
occurred, regardless of whether or not the Shareholders' Representative or the
Buyer shall have received notice of such death, incapacity, termination or other
event.
(b) RELIANCE BY REPRESENTATIVE. The Shareholders' Representative
shall be entitled to rely, and shall be fully protected in relying, upon any
statements furnished to it by any Shareholder, Holding or the Company, or any
other evidence deemed by the Shareholders' Representative to be reliable, and
the Shareholders' Representative shall be entitled to act on the
-29-
advice of counsel selected by it. The Shareholders' Representative shall be
fully justified in failing or refusing to take any action under this Agreement
unless it shall have received such advice or concurrence of the Shareholders as
it deems appropriate or it shall have been expressly indemnified to its
satisfaction by the Shareholders severally, according to their respective
Percentage Interests, against any and all Liability and expense that the
Shareholders' Representative may incur by reason of taking or continuing to take
any such action.
(c) EXPENSES OF REPRESENTATIVE. The Shareholders' Representative
shall be entitled to retain counsel and to incur such expenses (including
litigation expenses) as the Shareholders' Representative deems to be necessary
or appropriate in connection with its performance of its obligations under this
Agreement, and all such fees and expenses (including reasonable attorneys' fees)
incurred by the Shareholders' Representative shall be borne by the Shareholders
severally according to their respective Percentage Interests.
(d) INDEMNIFICATION. No Shareholders' Representative shall have by
reason of this Agreement a fiduciary relationship in respect of any Shareholder.
No Shareholders' Representative shall be liable to any Shareholder for any
action taken or omitted by him or it hereunder or under any other document
hereunder, or in connection therewith, except that no Shareholders'
Representative shall be relieved of any liability imposed by law for gross
negligence or willful misconduct. No Shareholders' Representative shall be
liable to any Shareholder for any apportionment or distribution of payments made
by him in good faith, and if any such apportionment or distribution is
subsequently determined to have been made in error the sole recourse of any
Shareholder to whom payment was due, but not made, shall be to recover from
other Shareholders any payment in excess of the amount to which they are
determined to have been entitled. No Shareholders' Representative shall be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement. Each of the
Shareholders acknowledges and agrees that the Shareholders' Representative shall
not be obligated to take any actions and shall be entitled to take such actions
as the Shareholders' Representative deems appropriate in such Shareholders'
Representative's sole discretion. The Shareholders hereby agree severally to
indemnify the Shareholders' Representative (in his or its capacity as such)
ratably according to their respective Percentage Interests against, and to hold
the Shareholders' Representative (in his or its capacity as such) harmless from,
any and all Liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of whatever kind which may at
any time be imposed upon, incurred by or asserted against the Shareholders'
Representative in such capacity in any way relating to or arising out of its
action or failure to take action pursuant to this Agreement or in connection
herewith or therewith in such capacity; PROVIDED, HOWEVER, that no Shareholder
shall be liable for the payment of any portion of such Liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the gross negligence or willful misconduct
of the Shareholders' Representative. The agreements in this paragraph shall
survive termination of this Agreement.
(e) OTHER AGREEMENTS AMONG THE SHAREHOLDERS.
(i) The determination of each Shareholder to enter into this
Agreement and to sell to the Buyer all of the Shares owned by such
Shareholder pursuant to this Agreement has been made by such Shareholder
independent of any other Shareholder and
-30-
independent of any statements or opinions as to the advisability of such
sale which may have been made, given by or implied by the actions of any
other Shareholder or by any agent or employee of any other Shareholder.
Each Shareholder has had an opportunity to ask questions and receive
answers concerning the terms and conditions hereunder of the sale of the
Shares owned by such Shareholder and has had full access to such other
information concerning the Company and Holding and the terms and
conditions of the sale of the Shares owned by such Shareholder as he, she
or it has requested.
(ii) It is acknowledged and agreed by each of the Shareholders that,
at the request of the Shareholders, KECC has coordinated the negotiations
with the Buyer of this Agreement and the other documents and transactions
contemplated hereby. In addition, it is acknowledged and agreed by each of
the Shareholders that KECC has not acted on behalf of such Shareholder (as
agent, advisor or otherwise) in connection with the transactions
contemplated hereby. In consideration of KECC's efforts, the Shareholders
have agreed that (a) the Company shall pay a closing fee to KECC of
$500,000.00 and (b) each of the Shareholders will pay a pro rata portion
of the reasonable costs, fees and out-of-pocket expenses incurred by or at
the direction of KECC in connection with the transactions contemplated
hereby, including the reasonable fees and expenses of KECC's counsel,
Xxxxxxxx & Xxxxx.
(iii) Each Shareholder agrees that KECC shall receive the Purchase
Price on behalf of such Shareholder and distribute such funds in
accordance with Section 2.2. Each of the Shareholders agrees that KECC may
pay all transaction expenses described in paragraph (ii) above on behalf
of the Shareholders and may withhold from such Shareholder's Per Share
Closing Amount and retain in a separate account such amounts as KECC deems
appropriate as security for claims in excess of the escrow amount (it
being understood that the withholding or releasing of such funds shall not
be a limitation of such Shareholder's obligation or rights (including the
obligations and rights under the contribution agreement described below)).
The Shareholders' Representative may pay out funds held in the
Shareholders' Representative's account as it deems appropriate in
accordance with the terms of this Agreement. Prior to the Closing, the
Shareholders agree to enter into a contribution agreement providing that
if KECC makes a payment pursuant to Section 8.1(a), each Shareholder shall
indemnify KECC for its pro rata amount of such payment in accordance with
such Shareholder's Percentage Interest.
(f) PROVISIONS RELATING TO MANAGEMENT SHAREHOLDERS. As provided in
Section 7.2(l), each Management Shareholder agrees to exercise the options held
by such Management Shareholder immediately prior to the Closing. Each Management
Shareholder agrees that the proceeds payable with respect to the Shares obtained
upon exercise of the options shall be reduced by (x) the exercise price of the
options (i.e., $26.75 per share) (it being understood that the aggregate amount
of exercise price of the options shall, solely for purposes of making the
determination of the amounts to be distributed to the Shareholders, be (I) added
to the aggregate Closing Consideration, and (II) deducted from the amount to be
distributed to such Management Shareholder), and (y) the amount of withholding
taxes that Holding is required to withhold as a result of such Management
Shareholder's exercise of the options, which amount shall be paid by the
Shareholders' Representative to Holding for such purpose.
-31-
6.11 AVAILABILITY OF FINANCING.
The Buyer covenants to use reasonable best efforts to obtain the financing
on the terms set forth in the highly confident letter delivered by Xxxxxxxxx,
Lufkin & Xxxxxxxx Securities Corporation.
6.12 ENVIRONMENTAL ACTIONS.
Holding and the Company shall, during the Transition Period, exercise
commercially reasonable best efforts, at their own cost and expense, to complete
the tasks with respect to environmental matters set forth in Schedule 6.12
hereto.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.
The respective obligations of each party to effect the transactions
contemplated hereby are subject to the satisfaction prior to the Closing Date of
the following conditions unless waived (to the extent such conditions can be
waived) by the Buyer or the Shareholders' Representative, as applicable:
(a) APPROVALS. All authorizations, consents, Orders or approvals of,
or declarations or filings with, or expiration of waiting periods imposed by,
any Governmental Entity necessary for the consummation of the transactions
contemplated hereby shall have been obtained or made.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any Governmental
Entity nor other legal restraint or prohibition preventing the consummation of
the transactions contemplated hereby shall be in effect.
(c) STATUTES. No action shall have been taken or threatened, and no
Law or Order shall have been enacted, promulgated or issued or deemed applicable
to the transactions contemplated hereby by any Governmental Entity that would
(i) make the consummation of the transactions contemplated hereby illegal or
substantially delay the consummation of any material aspect of the transactions
contemplated hereby, (ii) compel Holding, the Company, the Buyer, or any of
their Affiliates to dispose or hold separate all or a material portion of the
business or assets of Holding, the Company, the Buyer or any Affiliate thereof
as a result of the consummation of the transactions contemplated hereby or (iii)
render any party unable to consummate the transactions contemplated hereby.
(d) XXXX-XXXXX-XXXXXX. The waiting period for consummation of the
transactions contemplated hereby prescribed by the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or
early termination thereof shall have been granted.
-32-
7.2 CONDITIONS TO OBLIGATIONS OF THE BUYER.
The obligations of the Buyer to consummate the transactions contemplated
hereby are subject to the satisfaction of the following conditions unless waived
(to the extent such conditions can be waived) by the Buyer:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by Holding, the Company and the Shareholders in this
Agreement shall be true and correct in all material respects (except for such
representations and warranties which are qualified by their terms by a reference
to materiality, which representations and warranties as so qualified shall be
true in all respects) at and as of the Closing Date with the same effect as if
such representations and warranties had been made at and as of the Closing Date,
and the Buyer shall have received a certificate signed by the Chief Executive
Officer of Holding and the Company to that effect.
(b) PERFORMANCE OF OBLIGATIONS. Holding, the Company and the
Shareholders shall have performed in all material respects all obligations and
covenants required to be performed by them under this Agreement as of the
Closing Date, and the Buyer shall have received a certificate signed by the
Chief Executive Officer of Holding and the Company to that effect.
(c) AUTHORIZATION. All action necessary to authorize the execution,
delivery and performance of this Agreement and the Related Documents by Holding
and the Company and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the requisite shareholder approvals,
shall have been duly and validly taken by Holding and the Company, and Holding
and the Company shall have full power and right to consummate the transactions
contemplated hereby and thereby on the terms provided herein.
(d) OPINION OF THE COMPANY'S AND THE SHAREHOLDERS' REPRESENTATIVE'S
Counsel. The Buyer shall have received an opinion of Xxxxxxxx & Xxxxx, counsel
for Holding and the Company, dated the Closing Date, in substantially the form
of EXHIBIT D attached hereto.
(e) CONSENTS AND APPROVALS. The Buyer shall have received duly
executed copies of all consents and approvals in form and substance satisfactory
to the Buyer and its counsel, that are set forth on Schedule 7.2(e) of the
Disclosure Letter.
(f) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, Orders or approvals of, and filings or registrations with, any
Governmental Entity which are required for or in connection with the execution
and delivery by Holding, the Company and the Shareholders of this Agreement and
the Related Documents and the consummation by Holding, the Company and the
Shareholders of the transactions contemplated hereby and thereby shall have been
obtained or made.
(g) ABSENCE OF MATERIAL ADVERSE CHANGE. Since November 30, 1998,
there shall have been no Material Adverse Change with respect to Holding or the
Company.
-33-
(h) CLOSING DOCUMENTS. The Buyer shall have received duly executed
copies of the closing documents set forth in Section 1.5(b), and such documents
shall be in full force and effect.
(i) FINANCING. The Buyer shall have obtained on terms and conditions
that are satisfactory to the Buyer in its sole discretion all of the financing
needed in order to consummate the transactions contemplated hereby.
(j) PAYMENT AND CANCELLATION OF THE FUNDED INDEBTEDNESS. The Company
shall have delivered to the Buyer duly executed letter agreements in form and
substance reasonably satisfactory to the Buyer, and its counsel, providing for
(i) the payment and cancellation of all of the Funded Indebtedness and Capital
Lease Obligations as of the Closing Date and (ii) the release of any
Encumbrances, other than Permitted Encumbrances on the assets of Holding and the
Company relating thereto.
(k) REDEMPTION OF PREFERRED STOCK. The Series A Preferred and Series
B Preferred shall have been redeemed in full, and no shares of Preferred Stock
of Holding shall remain outstanding, and the Buyer shall have received the
original stock certificates representing all such shares, with a duly executed
stock power for each, and a receipt duly executed by the ESOP Trustees and KECC
evidencing receipt of the Preferred Redemption Amount (it being understood that
the redemption will occur simultaneously with the Closing, provided that all
other conditions to the Buyer's obligations to consummate the transactions
contemplated hereby have been waived or satisfied, and it being further
understood that the Preferred Redemption Amount will be paid with the proceeds
of the financing incurred by the Buyer to consummate the transactions
contemplated hereby).
(l) EXERCISE OF STOCK OPTIONS. All issued and outstanding securities
convertible or exercisable for capital stock of the Company shall have been
exercised, cancelled or terminated as of the Closing Date.
7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY, THE SUBSIDIARIES AND THE
SHAREHOLDERS.
The obligations of Holding, the Company and the Shareholders to consummate
the transactions contemplated hereby are subject to the satisfaction of the
following conditions unless waived (to the extent such conditions can be waived)
by the Shareholders' Representative:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by the Buyer in this Agreement shall be true and correct in
all material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true in all respects) at and as of the
Closing Date with the same effect as if such representations and warranties had
been made at and as of the Closing Date, and the Company shall have received a
certificate signed by an authorized officer of the Buyer to that effect.
(b) PERFORMANCE OF OBLIGATIONS. The Buyer shall have performed in
all material respects the obligations and covenants required to be performed by
it under this Agreement prior to or as of the Closing Date, and the Company
shall have received a certificate signed by an authorized officer of the Buyer
to that effect.
-34-
(c) AUTHORIZATION. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement and the Related Documents
by the Buyer and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Buyer, including, without
limitation, the requisite shareholder approvals shall have been duly and validly
taken by the Buyer and the Buyer shall have full power and right to consummate
the transactions contemplated hereby and thereby.
(d) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, Orders or approvals of, and filings or registrations with, any
Governmental Entity which are required for or in connection with the execution
and delivery of this Agreement and the Related Documents by the Buyer and the
consummation by the Buyer of the transactions contemplated hereby and thereby
shall have been obtained or made.
(e) CONSENTS AND APPROVALS. The Shareholders' Representative shall
have received duly executed copies of all consents and approvals in form and
substance satisfactory to the Shareholders' Representative and its counsel, that
are set forth on Schedule 7.3(e) of the Disclosure Letter.
(f) FAIRNESS OPINION. The ESOP Trustees shall have received a
fairness opinion of Xxxx Xxxxx & Associates relating to the consummation of the
transactions contemplated hereby with respect to the fairness of such
transactions to the participants in the ESOP Plan.
(g) CLOSING DOCUMENTS. Holding, the Company and the Shareholders
shall have received duly executed copies of the closing documents set forth in
Section 1.5(c), and such documents shall be in full force and effect.
(h) OPINION OF BUYER'S COUNSEL. The Company and the Shareholders'
Representative shall have received the opinion of X'Xxxxxxxx, Graev & Karabell,
LLP. counsel for the Buyer, dated the Closing Date, in substantially the form of
EXHIBIT E.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION GENERALLY; ETC.
From and after the Closing Date:
(a) BY KECC IN FAVOR OF THE BUYER GROUP. KECC agrees to indemnify
and hold harmless the Buyer Group for any and all Losses they may suffer,
sustain or incur as a result of:
(i) the untruth, inaccuracy or breach of any representation or
warranty of Holding or the Company contained in Section 4 or in the
related provisions of the Disclosure Letter it being understood that for
purposes of this Section 8.1(a)(i), any such untruth, inaccuracy, or
breach shall be determined without regard to any disclosure set forth on
Schedule 4.17 of the Disclosure Letter; or
-35-
(ii) the breach of any agreement or covenant of Holding or the
Company contained in Section 6.1 or 6.2 of this Agreement or in the
Disclosure Letter; or
(iii) the assertion of any claim, demand, Liability or obligation
against any member of the Buyer Group arising from or in connection with
the action against the Company by Xxxxx Xxxx Xxxxx (XXXXX X. XXXXXXXX
PACKAGING, INC., Portage County Common Pleas, Case No. 95 CV 0491).
(b) BY THE SHAREHOLDERS IN FAVOR OF THE BUYER GROUP. Each
Shareholder and his, her or its successors, assigns, heirs, representatives and
estate, as the case may be, agrees (severally and not jointly) to indemnify and
hold harmless the Buyer Group for any and all Losses they may suffer, sustain or
incur as a result of:
(i) the untruth, inaccuracy or breach of any representation or
warranty of such Shareholder contained in Section 3 or in related
provisions of the Disclosure Letter; or
(ii) the breach by such Shareholder of any agreement or covenant to
be performed by such Shareholder contained in this Agreement.
(c) BY BUYER IN FAVOR OF THE COMPANY AND THE SHAREHOLDER GROUP. The
Buyer agrees to indemnify and hold harmless Holding, the Company and the
Shareholder Group for any and all Losses they may suffer, sustain or incur as a
result of:
(i) the untruth, inaccuracy or breach of any representation or
warranty of the Buyer contained in Section 5 or in related provisions of
the Disclosure Letter; or
(ii) the breach of any agreement or covenant of the Buyer contained
in this Agreement; or
(iii) Liabilities or obligations arising under any third party
claims for Environmental Liabilities relating to the Company's operations
where such Shareholder's liability, or alleged liability, for such
Environmental Liabilities arise by virtue of such Shareholder's status as
a Shareholder of Holding, other than any such Liability or obligation (A)
which is of a nature that is indemnifiable by the Shareholders under
either Section 8.1(a) or 8.1(b) or (B) arising out of conduct by such
Shareholder if such conduct was undertaken other than in the best
interests of the Company.
8.2 LIMITATIONS ON INDEMNIFICATION.
Anything contained herein to the contrary notwithstanding:
(a) INDEMNITY BASKETS AND SHARING ARRANGEMENTS FOR THE SHAREHOLDERS.
The Buyer Group shall not have the right to be indemnified pursuant to Section
8.1(a) unless and until the Buyer Group shall have incurred on a cumulative
basis since the Closing Date aggregate Losses in an amount exceeding $750,000
(the "Shareholder Basket"), in which event the right to be indemnified shall
apply only to the extent such Losses exceed $750,000; PROVIDED, HOWEVER, that
(i) in no event shall the limitations set forth in this Section 8.2(a) apply to
the rights of the
-36-
Buyer Group to be indemnified pursuant to Section 8.1(a)(i) with respect to the
representations and warranties set forth in Sections 4.3, 4.4(a), 4.18 and
breaches that constitute fraud, and Section 8.1(a)(ii), and (ii) with respect to
the rights of the Buyer Group to be indemnified for Losses pursuant to Section
8.1(a)(i) with respect to the representations and warranties set forth in
Section 4.17 ("Environmental Losses"), subject to the other limitations set
forth in this Section 8.2, KECC shall indemnify the Buyer Group for (1) 100% of
the initial $500,000 of Environmental Losses after the Shareholder Basket has
been reached (regardless of whether such basket was reached as a result of
Environmental Losses or Losses of any other kind), (2) 50% of the additional
Environmental Losses up to the next $1,000,000 of Environmental Losses (it being
understood that the Buyer Group shall not be entitled to indemnification for the
remaining 50%), and (3) 100% of all Environmental Losses in excess of those
described in (1) and (2).
(b) INDEMNITY LIMITATIONS FOR KECC. The sum of all Losses pursuant
to which indemnification is payable by KECC pursuant to Section 8.1(a) shall not
exceed $7.0 million in the aggregate; PROVIDED, HOWEVER, that in no event shall
the limitations set forth in this Section 8.2(b) apply to the rights of the
Buyer Group to be indemnified pursuant to Section 8.1(a)(i) with respect to the
representations and warranties set forth in Sections 4.3, 4.4(a) and breaches
that constitute fraud.
(c) INDEMNITY BASKETS FOR THE BUYER GROUP. The Shareholders, Holding
and the Company shall not have the right to be indemnified pursuant to Section
8.1(c) unless and until the Shareholders, Holding and the Company shall have
incurred on a cumulative basis since the Closing Date aggregate Losses in an
amount exceeding $750,000, in which event the right to be indemnified shall
apply only to the extent such Losses exceed $750,000; PROVIDED, HOWEVER, that in
no event shall the limitations set forth in this Section 8.2(c) apply to the
rights of the Shareholders, Holding and the Company to be indemnified pursuant
to (i) Section 8.1(c)(i) with respect to the representations and warranties set
forth in Sections 5.1, 5.3 and breaches that constitute fraud and (ii) Section
8.1(c)(ii) and (iii).
(d) INDEMNITY LIMITATIONS FOR THE BUYER GROUP. The sum of all Losses
pursuant to which indemnification is payable by the Buyer pursuant to Section
8.1(c) shall not exceed $7.0 million in the aggregate; PROVIDED, HOWEVER, that
in no event shall the limitations set forth in this Section 8.2(d) apply to the
rights of the Shareholders, Holding and the Company to be indemnified pursuant
to (i) Section 8.1(c)(i) with respect to the representations and warranties set
forth in Sections 5.1, 5.3 and breaches that constitute fraud and (ii) Section
8.1(c)(ii).
(e) INDEMNITY LIMITATIONS REGARDING ENVIRONMENTAL MATTERS. The
rights of the Buyer Group to be indemnified, subject to the limitations set
forth in Section 8.3 and this Section 8.2 with respect to Environmental Losses,
for Environmental Losses pursuant to Section 8.1(a)(i) as it relates to the
representations and warranties set forth in Section 4.17 (the "Buyer
Environmental Indemnification") shall be the sole and exclusive remedy that the
Buyer Group shall have with respect to any Losses arising from or relating to
any environmental matter or condition, any violation of any Environmental,
Health and Safety Laws or the generation, storage, treatment, disposal,
transportation, shipment offsite, migration or other management of Hazardous
Materials (collectively, "Environmental Liabilities"). Without limiting the
generality of the foregoing, except with respect to the Buyer Environmental
Indemnification, the Buyer, on behalf of itself and the other members of the
Buyer Group, expressly waives any other rights and
-37-
remedies available to the Buyer Group at law or equity, including liability for
damages or contribution under CERCLA or other Environmental, Health and Safety
Laws.
(f) LOSSES OF NET INSURANCE AND OTHER ITEMS. The amount of any Loss
for which indemnification is provided (or the Shareholder Basket is credited)
under this Section 8 shall be net of (i) any reserves (or overstatement of
liabilities in respect of actual liabilities) included in the Closing Balance
Sheet; (ii) any amounts recovered or recoverable by the Indemnified Persons
pursuant to (A) any indemnification by, or indemnification agreement with, any
third party, and (B) any insurance proceeds (net of any retro-premium
obligations and the present value of the future premium increases directly
attributable to any claims made with respect to such Loss) or other cash
receipts or sources of reimbursement received as an offset against such Loss
(and no right of subrogation shall accrue to any insurer or third party
indemnitor hereunder), and (iii) an amount equal to the present value of the Tax
benefit, if any, attributable to such Loss (and shall be increased by an amount
equal to the present value of the Tax detriment, if any, attributable to receipt
of any indemnification payments under this Section 8). If the amount to be
netted hereunder from any payment required under Section 8.1 is determined after
payment by the Indemnifying Persons of any amount otherwise required to be paid
to an Indemnified Person pursuant to this Section 8, the Indemnified Persons
shall repay the Indemnifying Persons, promptly after such determination, any
amount that the indemnifying Persons would not have had to pay pursuant to this
Section 8 had such determination been made at the time of such payment.
(g) MITIGATION OF LOSS. Each party shall take all reasonable steps
(consistent with sound business judgment) to mitigate any Loss (including, to
the extent consistent with sound business judgment, incurring costs only to the
minimum extent necessary to remedy the breach which gives rise to the Loss) upon
becoming aware of any event which would reasonably be expected to, or does, give
rise thereto.
(h) INDEMNITY LIMITATION FOR SHAREHOLDER GROUP. Subject to the other
limitations set forth in this Section 8, in no event shall the Shareholder Group
be liable to indemnify the Buyer Group for an aggregate amount that is greater
than the Maximum Consideration.
(i) KNOWLEDGE OF BUYER. The Buyer Group shall not be entitled to
indemnification pursuant to Section 8.1(a)(i) with respect to any breach of a
representation or warranty if any member of the Buyer Group (excluding the
Company, Holding and their respective officers, directors, employees,
representatives and Affiliates) had actual knowledge, prior to the Closing, that
such breach existed. The parties hereto acknowledge and agree that awareness of
the facts or circumstances relating to a breach, but not the facts or
circumstances that constitute the breach, of a representation or warranty does
not constitute actual knowledge of the breach of such representation or
warranty.
8.3 ASSERTION OF CLAIMS; PAYMENT OF CLAIMS.
(a) No claim shall be brought under Section 8.1 hereof unless the
Indemnified Persons, or any of them, at any time prior to the applicable
Survival Date, give the Indemnifying Persons (i) written notice of the existence
of any such claim, specifying in reasonable detail the
-38-
nature and basis of such claim and the amount thereof, to the extent known (it
being understood that in the case of any claim made by a Person other than by
reason of a third party claim, the Indemnified Person must have either (x)
incurred, in good faith, some damages or expenses with respect to such claim at
or prior to the date of such notice or (y) a reserve would be required to be
provided on a balance sheet prepared in accordance with GAAP with respect to
such claim) or (ii) written notice pursuant to Section 8.4 of any Third Party
Claim, the existence of which might give rise to such a claim. Upon the giving
of such written notice as aforesaid, the Indemnified Persons, or any of them,
shall have the right to commence legal proceedings subsequent to the Survival
Date for the enforcement of their rights under Section 8.1 hereof.
(b) Any obligation of KECC to indemnify the Buyer Group shall be
satisfied (i) first, from the Escrow Fund, and the Company, the Shareholders'
Representative and the Buyer shall, after final resolution of the existence of
the obligation, execute joint written instructions to the Escrow Agent directing
the Escrow Agent to make payment to Holding or the appropriate member of the
Buyer Group; and (ii) second, from KECC by payment to Holding or the appropriate
member of the Buyer Group.
(c) With respect to the rights of the Buyer Group to be indemnified
for Environmental Losses, KECC shall have no obligation to provide
indemnification with respect to any remedial or corrective action unless such
action is required to comply with (a) Environmental Health and Safety Laws, (b)
directives imposed by Governmental Entities pursuant to Environmental Health and
Safety Laws having jurisdiction thereunder, or (c) solely with respect to the
Minneapolis Minnesota facility of the Company, claims, demands or obligations
pursuant to the Lease and Lease Extension Agreement as (in pertinent part) in
effect on the date hereof for such facility. Nothing in this Section 8.3(c) or
otherwise in this Agreement shall limit the right of the Company or Buyer on and
after the Closing Date, to conduct environmental audits, assessments or
investigations, including without limitation subsurface investigations, at its
sole and unfettered discretion.
8.4 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS.
The obligations and Liabilities of an Indemnifying Person with respect to
Losses resulting from the assertion of liability by third parties (each, a
"Third Party Claim") shall be subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice to
the Indemnifying Persons of any Third Party Claim which might give rise to any
Loss by the Indemnified Persons, stating the nature and basis of such Third
Party Claim, and the amount thereof to the extent known; PROVIDED, HOWEVER, that
no delay on the part of the Indemnified Persons in notifying any Indemnifying
Persons shall relieve the Indemnifying Persons from any Liability or obligation
hereunder unless (and then solely to the extent) the Indemnifying Persons are
prejudiced by such delay. Such notice shall be accompanied by copies of all
relevant documentation with respect to such Third Party Claim, including,
without limitation, any summons, complaint or other pleading which may have been
served, any written demand or any other document or instrument.
-39-
(b) Upon delivery of notice by the Indemnifying Persons to the
Indemnified Persons, the Indemnifying Persons shall have the right to assume the
defense of any Third Party Claim at their own expense and by their own counsel,
which counsel shall be reasonably satisfactory to the Indemnified Persons;
PROVIDED, HOWEVER, that the Indemnifying Persons shall not have the right to
assume the defense of any Third Party Claim, if (i) the Indemnified Persons
shall have been advised by counsel that there are one or more legal or equitable
defenses available to them which are different from or in addition to those
available to the Indemnifying Persons, and, in the reasonable opinion of counsel
to the Indemnified Persons, counsel for the Indemnifying Persons could not
adequately represent the interests of the Indemnified Persons because such
interests could be in conflict with those of the Indemnifying Persons, (ii) such
action or Proceeding involves, or could have a material effect on, any material
matter beyond the scope of the indemnification obligation of the Indemnifying
Persons or (iii) the Indemnifying Persons shall not have assumed the defense of
the Third Party Claim within 90 days.
(c) If the Indemnifying Persons shall assume the defense of a Third
Party Claim (under circumstances in which the proviso to the first sentence of
Section 8.4(b) is not applicable), the Indemnifying Persons shall not be
responsible for any legal or other defense costs subsequently incurred by the
Indemnified Persons in connection with the defense thereof. If the Indemnifying
Persons do not exercise their right to assume the defense of a Third Party Claim
by giving the written notice referred to in Section 8.4(b), or are otherwise
restricted from so assuming by the proviso to the first sentence of Section
8.4(b), the Indemnifying Persons shall nevertheless be entitled to participate
in such defense with their own counsel and at their own expense; and in any such
case, the Indemnified Persons may assume the defense of the Third Party Claim,
with counsel which shall be reasonably satisfactory to the Indemnifying Persons,
and shall act reasonably and in accordance with their good faith business
judgment and shall not effect any settlement without the consent of the
Indemnifying Persons, which consent shall not unreasonably be withheld or
delayed.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third Party Claim, they shall not make any settlement of any claims
that does not unconditionally release the Indemnified Persons from liability of
any kind without the written consent of the Indemnified Persons, which consent
shall not be unreasonably withheld (provided that such consent will be required
with respect to any settlement that involves anything other than or in addition
to the payment of money).
8.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; COVENANTS.
Subject to the further provisions of this Section 8.5, the representations
and warranties of the Shareholders contained in Section 3 and the
representations and warranties of Holding and the Company contained in Section 4
and the representations and warranties of the Buyer contained in Section 5 shall
survive the Closing Date until the date that is 18 months after the Closing
Date; PROVIDED, HOWEVER, that the representations and warranties of the
Shareholders, Holding and the Company contained in Sections 3.1, 3.2, 3.3, 4.3,
4.4(a) and 4.18 shall survive the Closing Date without any time limit, the
representations and warranties set forth in Section 4.17 shall survive the
Closing Date until the second anniversary of the Closing Date and the
representations and warranties set forth in Sections 4.8 and 4.16 shall survive
the Closing Date until the date that is 90 days after the expiration of the
statute of limitations, if any, applicable to
-40-
the matters set forth therein. The covenants and other agreements of the parties
contained in this Agreement shall survive the Closing Date until they are
otherwise terminated, whether by their terms or as a matter of applicable law;
PROVIDED, HOWEVER, that the covenants in Sections 6.1 and 6.2 shall terminate 18
months after the Closing Date and the covenants under Sections 6.4, 6.5, 6.6,
6.7(other than the last sentence thereof), 6.8, 6.11 and 6.12 shall not survive
the Closing. For convenience of reference, the date upon which any
representation, warranty, covenant or other agreement contained herein shall
terminate, if any, is referred to herein as the "Survival Date".
8.6 NO THIRD PARTY RELIANCE.
Anything contained herein to the contrary notwithstanding, the
representations and warranties of Holding, the Company and the Shareholders
contained in this Agreement (including, without limitation, the Disclosure
Letter) (i) are being given by Holding, the Company and the Shareholders as an
inducement to the Buyer to enter into this Agreement (and Holding, the Company
and the Shareholders acknowledge that the Buyer has expressly relied thereon)
and (ii) are solely for the benefit of the Buyer and its Affiliates.
Accordingly, no third party or anyone acting on behalf of any thereof other than
the Indemnified Persons, and each of them, shall be a third party or other
beneficiary of such representations and warranties and no such third party shall
have any rights of contribution against Holding or the Company with respect to
such representations or warranties or any matter subject to or resulting in
indemnification under this Section 8, or otherwise.
ARTICLE IX
ADDITIONAL AGREEMENTS
9.1 EXPENSES.
Except as otherwise provided herein, each of Holding, the Company and the
Shareholders, on one hand, and the Buyer, on the other hand, shall bear their
own expenses in connection with the preparation for and consummation of the
transactions contemplated hereby (the "Transaction Expenses"); PROVIDED,
HOWEVER, that in the event the transactions contemplated hereby are consummated,
all Transaction Expenses (other than Shareholder Expenses which are deducted
from the Purchase Price) incurred by Holding, the Company and the Shareholders
shall be borne PRO RATA by the Shareholders, and such expenses shall not in any
event be the responsibility of the Company, Holding, the Buyer or any Affiliate
of the Buyer unless so deducted from the Purchase Price.
9.2 AMENDMENTS TO EMPLOYMENT AGREEMENTS.
Prior to the Closing, each of Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxxx, Xxxx Xxxxx
and Xxxxxxx Xxxxx will amend their respective employment agreements with the
Company so as to give the Company the option, upon a resignation by such
employee, to pay severance to the employee (such severance to include the same
items as are payable in the event of a termination without cause) for up to 18
months (but not later than January 31, 2001), in return for the
-41-
noncompetition covenant to be in effect for the same period of time as the
severance (the "Employment Agreement Amendments").
9.3 USE OF NAME.
Until the fourth anniversary of the Closing Date, (i) KECC shall not
acquire an equity interest in any company or business which uses the name
"Cardinal" and which manufactures, markets, sells or distributes plastic
products, unless such company or business operated under the name of Cardinal
for at least one year prior to the date of the acquisition, and (ii) KECC shall
not change the name of any entity in which it has a controlling equity interest
to any name that includes "Cardinal". In connection therewith, it is agreed that
the undertaking under this Section 9.3 is of a special and unique nature, the
loss of which cannot be adequately compensated for in damages by an action at
law, and that the breach or threatened breach of the provisions of this Section
9.3 would cause Holding, the Buyer and their Affiliates irreparable harm. In the
event of any such breach, Holding and the Buyer shall be entitled, as a matter
of right, to injunctive and other equitable relief without waiving any other
rights which they may have to damages or otherwise.
9.4 TERMINATION OF AFFILIATE TRANSACTIONS.
(a) Each Shareholder agrees that, effective as of the Closing Date
and without any further action by Holding, the Company, or any Shareholder, each
of Holding and the Company shall be released from any and all obligations and
liabilities under the agreements set forth in the Disclosure Letter in response
to Sections 3.3 (other than (i) in the case of KECC, the amount of any accrued
and unpaid management fee owing under the agreement described in item A1 of
Section 3.3 of the Disclosure Letter, but solely to the extent such fees are
accrued as a current liability on the Closing Balance Sheet, and (ii) in the
case of the Management Shareholders, any obligations or liabilities under their
respective employment agreements).
(b) Notwithstanding any provision in this Agreement to the contrary,
Buyer, Holding and the Company agree that each Person who is, immediately prior
to the Closing, serving as an officer or director of the Company will continue
to have the benefit of any indemnification arrangements as were in effect from
time to time, as set forth (x) in the charter and/or bylaws of Holding or the
Company (as appropriate), or (y) to the extent applicable to any such charter or
bylaws, any related provisions of applicable state corporate laws.
9.5 AGREEMENT TO WIND DOWN THE ESOP.
The Parties hereto acknowledge and agree that upon receipt of payment in
full of the Preferred Redemption Amounts, the Buyer and the Company shall take
or cause to be taken, as the case may be, all actions necessary to wind down the
ESOP. The costs of winding down and terminating the ESOP shall be paid by
Holding or the Company. The Closing Balance Sheet shall include as a current
liability reserve in the amount of $50,000 relating to such expenses.
9.6 TAX MATTERS.
(a) Buyer shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns (the "Post Closing Tax Returns") for the Company for
all periods (or portions thereof)
-42-
ending on or before the Closing Date which are filed after the Closing Date. All
Post Closing Tax Returns shall be prepared in accordance with past practice to
the extent consistent with Applicable Law and, unless otherwise agreed to by the
parties, will only contain positions regarding Tax items that a prudent business
person, upon the advice of relevant experts, would include in a Tax return. The
Buyer shall permit the Shareholders' Representative to monitor the preparation
of and review each Post Closing Tax Return prior to its filing. Unless the
Shareholders' Representative gives written notice to the Buyer, in reasonable
detail, of its disagreement with any Post Closing Tax Return within 20 days of
its receipt thereof, such Post Closing Tax Return shall become final and binding
upon the parties. To the extent the Shareholders' Representative timely
disagrees with a Post Closing Tax Return and the Buyer and the Shareholders'
Representative do not reach a mutually satisfactory agreement with respect to
any such comments within 20 days of the date of such objection, Xxxxxx Xxxxxxxx
LLP shall resolve any such disagreement which resolution shall be conclusive and
binding upon the parties.
(b) The Post Closing Tax Returns, as finally determined, shall be
filed by the Buyer. The excess, if any, of (i) any refund of income Taxes
received by the Buyer or the Company in connection with such Post Closing Tax
Return attributable to Tax items incurred by the Company prior to the Closing
Date (the "Tax Refund") over (ii) the Unrecorded ATL, shall be promptly paid to
the Shareholders pro rata based on each Shareholder's Proportionate Percentage.
The excess, if any, of the Unrecorded ATL over the amount of the Tax Refund set
forth on a Post Closing Tax Return shall be paid by KECC to the Buyer upon the
later to occur of (x) the date such Post Closing Tax Return is filed and (y) the
Final Determination Date.
ARTICLE X
TERMINATION; EFFECT OF TERMINATION
10.1 TERMINATION.
This Agreement may be terminated at any time prior to the Closing by:
(a) the mutual consent of the Buyer and the Company; or
(b) the Buyer, if there has been a breach by Holding, the Company or
any Shareholder of any representation, warranty, covenant or agreement set forth
in this Agreement on the part of Holding, the Company or any Shareholder which
is material and which such party fails to cure within 10 Business Days after
notice thereof is given by the Buyer (except no cure period shall be provided
for a breach which by its nature cannot be cured); or
(c) the Company, if there has been a breach by the Buyer of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of the Buyer which is material and which such party fails to cure
within 10 Business Days after notice thereof is given by the Company (except no
cure period shall be provided for a breach which by its nature cannot be cured);
or
(d) the Buyer or the Company, if the conditions set forth in Section
7.1 shall not have been satisfied or waived (to the extent they may be waived)
by the close of business on July 16, 1999; or
-43-
(e) the Buyer, if the conditions set forth in Section 7.2 shall not
have been satisfied or waived (to the extent they may be waived) by the close of
business on July 16, 1999; or
(f) the Shareholders' Representative, if the conditions set forth in
Section 7.3 shall not have been satisfied or waived (to the extent they may be
waived) by the close of business on July 16, 1999; or
(g) the Buyer or the Shareholders' Representative, if any permanent
injunction or other Order of a court or other competent authority preventing the
Closing shall have become final and nonappealable;
PROVIDED, HOWEVER, that neither the Company nor the Buyer shall be entitled to
terminate this Agreement pursuant to Section 10.1(d), (e) or (f) if such party's
intentional breach (or, with respect to the Company, a Shareholder's intentional
breach) of this Agreement has prevented the satisfaction of a condition. Any
termination pursuant to Section 10.1(a) shall be effected by a written
instrument signed by the Buyer and the Company, and any termination pursuant to
this Section 10.1 (other than a termination pursuant to Section 10.1(a)) shall
be effected by written notice from the party so terminating to the other parties
hereto, which notice shall specify the Section hereof pursuant to which this
Agreement is being terminated.
10.2 EFFECT OF TERMINATION.
In the event of the termination of this Agreement as provided in Section
10.1, this Agreement shall be of no further force or effect, except for Sections
6.7, Section 9.1, this Section 10.2 and Section 11, each of which shall survive
the termination of this Agreement; PROVIDED, HOWEVER, that the Liability of any
party for any breach by such party, if such breach arose out of an intentional
act of such party, of the representations, warranties, covenants or agreements
of such party set forth in this Agreement occurring prior to the termination of
this Agreement shall survive the termination of this Agreement and, in addition,
in the event of any action for breach of contract in the event of a termination
of this Agreement, the prevailing party shall be reimbursed by the other party
to the action for reasonable attorneys' fees and expenses relating to such
action.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 AMENDMENT.
This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the Shareholders' Representative, the Company and
the Buyer.
11.2 EXTENSION; WAIVER.
At any time prior to the Closing, the parties may (a) extend the time for
the performance of any of the obligations or other acts of the other parties,
(b) waive any inaccuracies in the representations and warranties contained in
this Agreement or in any document delivered pursuant to this Agreement and (c)
waive compliance with any of the agreements or conditions
-44-
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party, and any such waiver shall not operate or be
construed as a waiver of any subsequent breach by the other party.
11.3 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents referenced herein
(including, but not limited to, the Disclosure Letter, the Confidentiality
Agreement dated as of November 18, 1998, between Brown, Gibbons, Lang & Company,
L.P., on behalf of the Company, and the Buyer, the Confidentiality Agreement
dated as of October 20, 1998, between Brown, Gibbons, Lang & Company, L.P., on
behalf of the Company, and First Atlantic Capital, Ltd, the Related Documents
and the Exhibits (in their executed form) attached hereto) contain all of the
agreements among the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements or understandings among
the parties with respect thereto (including, but not limited to, the letter of
intent dated as of April 14, 1999, among the Buyer, Holding, the Company and
certain of the Shareholders).
11.4 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the Law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
11.5 NO THIRD-PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS.
Except as expressly provided herein, this Agreement shall not confer any
rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, representatives, heirs and estates, as the
case may be, including, without limitation, the indemnification obligations set
forth in Article 8. This Agreement shall not be assignable by any party hereto
without the consent of the other parties hereto (it being understood that the
Shareholders' Representative may consent on behalf of all Shareholders);
PROVIDED, HOWEVER, that anything contained herein to the contrary
notwithstanding, the Buyer may, without the prior written consent of any other
party, assign any or all of its rights and interests hereunder to any lender or
lenders providing financing to the Buyer as collateral security for such
financing.
-45-
11.6 HEADINGS.
Descriptive headings are for convenience only and shall not control or
affect in any way the meaning or construction of any provision of this
Agreement.
11.7 NOTICES.
All notices or other communications pursuant to this Agreement shall be in
writing and shall be deemed to be sufficient if delivered personally,
telecopied, sent by nationally-recognized, overnight courier, postage prepaid,
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(i) if to the Shareholders' Representative (or Holding or the
Company prior to Closing), to:
Key Equity Capital Corporation
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xx. Xxxx X. Xxxxx
Telecopier: (000) 000-0000;
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Telecopier: (000) 000-0000; and
(ii) if to the Shareholders, to the addresses set forth on Schedule
II;
(iii) if to the Buyer, to:
Xxxxx Plastics Corporation
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier: (000) 000-0000;
with a copy to:
First Atlantic Capital, Ltd.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx
Telecopier: (000) 000-0000;
-46-
and
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. X'Xxxxx, Esq.
Telecopier: (000) 000-0000.
All such notices and other communications shall be deemed to have been given and
received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of delivery by telecopy, on the date of such delivery and (iii)
in the case of delivery by nationally-recognized, overnight courier, on the
Business Day following dispatch.
11.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement.
11.9 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
domestic Laws of the State of New York without giving effect to any choice or
conflict of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the Laws of any jurisdiction
other than the State of New York.
11.10 INCORPORATION OF EXHIBITS AND SCHEDULES.
The Exhibits and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof. Any disclosure made on any schedule
referred to herein shall be deemed to be disclosure on any other schedule hereto
to the extent that such disclosure is reasonably responsive as an exception to
the representation or warranty that relates to such other schedule. Holding and
the Company shall have the right at any time on or prior to the Closing Date to
make modifications, supplements or updates to the Disclosure Letter, which
modifications, supplements and updates shall not be taken into account for
purposes of determining the satisfaction of the condition of the Buyer set forth
in Section 7.2(a). In the event the Closing occurs, however, such modifications,
supplements and updates to the Disclosure Letter shall be deemed for all
purposes to have been included in the original Disclosure Letter, effective as
of the date of this Agreement.
11.11 CONSTRUCTION.
Where specific language is used to clarify by example a general statement
contained herein, such specific language shall not be deemed to modify, limit or
restrict in any manner the construction of the general statement to which it
relates. The language used in this Agreement shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
-47-
11.12 REMEDIES.
Article VIII shall be the exclusive remedy for monetary damages owing from
any party to the other that arise from the matters described in Sections 8.1(a),
(b) and (c) or otherwise arising out of or relating to this Agreement, unless
any such breach constitutes fraud. Subject to the provisions of Section 10.2,
the parties shall each have and retain all other equitable rights and remedies
existing in their favor, including, without limitation, any actions for specific
performance and/or injunctive relief, to enforce or prevent any violations of
the provisions of this Agreement, but excluding the remedy of recission.
11.13 WAIVER OF JURY TRIAL.
Each of the parties hereto hereby irrevocably waives all right to trial by
jury in any action, Proceeding or counterclaim arising out of or relating to
this Agreement.
11.14 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES.
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached will not affect the incorrectness of or a breach
of a representation and warranty hereunder. Each representation, warranty and
covenant shall be given independent effect so that if a particular
representation, warranty or covenant is breached the fact that another
representation, warranty or covenant pertaining to the same or similar subject
matter is not breached will not affect the breach or enforceability of such
representation, warranty or covenant.
* * *
-48-
IN WITNESS WHEREOF, each of the parties hereto has duly executed
this Stock Purchase Agreement as of the date first written above.
XXXXX PLASTICS CORPORATION
By:/S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
CPI HOLDING CORPORATION
By: /S/ XXXX X. XXXXX
Name: Xxxx X. Xxxxx
Title: Vice President
CARDINAL PACKAGING, INC.
By: /S/ XXXX X. XXXXX
Name: Xxxx X. Xxxxx
Title: Vice President
THE SHAREHOLDERS:
KEY EQUITY CAPITAL CORPORATION
By: /S/ XXXXXXXX XXXXXX
Name: Xxxxxxxx Xxxxxx
Title: Vice President
XXXXXXXX STREET PARTNERS XVII
By: /S/ XXXXXXX XXXXXXXXX
Name: Xxxxxxx Xxxxxxxxx
Title: Partner
MID OHIO SECURITIES CORP. f/b/o W.W.
XXXXXXXXXXX XXX
By: /S/ XXXXXXX X. XXXXX
Name: Xxxxxxx X. Xxxxx
Title: Vice Presdient
/S/ XXXXX X. XXXXXXX
Xxxxx X. Xxxxxxx
KEY EQUITY PARTNERS III
By: /S/ XXXXXXXXXXX X. X'XXXXXXX
Name: Xxxxxxxxxxx X. X'Xxxxxxx
Title: Vice President
XXXXXX FINANCIAL, INC.
By: /S/ XXXXXXXX XXXXXX
Name: Xxxxxxxx Xxxxxx
Title: Vice President
/S/ XXXXXXX XXXXX
Xxxxxxx Xxxxx
/S/ XXXXX XXXXXXX
Xxxxx Xxxxxxx
/S/ XXXXXXX XXXXXXXX
Xxxxxxx Xxxxxxxx
/S/ XXXX XXXXX
Xxxx Xxxxx
ANNEX I
DEFINITIONS
The following terms used in the Agreement and Plan of Reorganization
shall have the following respective meanings:
"ACCRUED TAX LIABILITIES" has the meaning set forth in Section
2.4(a).
"AFFILIATE" means, with respect to any Person, (i) a director,
officer or stockholder of such Person, (ii) a spouse, parent, sibling or
descendant of such Person (or spouse, parent, sibling or descendant of any
director or executive officer of such Person), and (iii) any other Person that,
directly or indirectly through one or more intermediaries, Controls, or is
Controlled by, or is under common Control with, such Person.
"ARBITRATING ACCOUNTANTS" has the meaning set forth in Section
2.3(a).
"BEST KNOWLEDGE" of any Person shall mean and include (i) actual
knowledge and (ii) that knowledge which a prudent businessperson could have
obtained in the management of his business affairs after making due inquiry and
exercising due diligence which a prudent businessperson should have made or
exercised, as applicable, with respect thereto. In connection therewith, the
knowledge (both actual and constructive) of Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxxx,
Xxxx Xxxxx, and Xxxxxxx Xxxxx shall be imputed to be the knowledge of the
Company.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or a day
on which banking institutions in New York, New York are not required to be open.
"BUYER" has the meaning set forth in the caption.
"BUYER ENVIRONMENTAL INDEMNIFICATION" has the meaning set forth in
Section 8.2(e).
"BUYER GROUP" means the Buyer and its successors and assigns, and
each of its officers, directors, employees, representatives and Affiliates
(including the Company and Holding in the event the transactions contemplated
hereby are consummated), other than any Shareholder and any Person who is an
officer or employee of Holding or the Company prior to the Closing.
"CAPITALIZED LEASE OBLIGATIONS" has the meaning set forth in Section
2.1(a).
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation, and Liability Information System.
"CLOSING" has the meaning set forth in Section 1.5(a).
A-1
"CLOSING DATE" has the meaning set forth in Section 1.7(a).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the caption.
"CONFIDENTIAL INFORMATION" means Intellectual Property Rights of
Holding and the Company and all information of a proprietary or confidential
nature relating to Holding and the Company, or the Company's business excluding
any information that (i) is in the public domain as of the Closing Date, (ii)
after the Closing Date enters the public domain through no wrongful action or
inaction on the part of any Shareholder, and (iii) is communicated to a
Shareholder by a third party under no duty of secrecy or confidentiality to any
Person.
"CONTRACT" means any written or oral loan or credit agreement, note,
bond, mortgage, indenture, lease, sublease, purchase order or other agreement,
instrument, permit, concession, franchise or license.
"CONTROL" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"CORPORATE RIGHTS" has the meaning set forth in Section 1.3.
"DELAWARE STATUTE" has the meaning set forth in the preamble.
"DISCLOSURE LETTER" has the meaning set forth in Section 4.1.
"EMPLOYEE PLAN" means any "employee benefit plan" (as defined in
Section 3(3) of ERISA).
"EMPLOYMENT AGREEMENT AMENDMENTS" has the meaning set forth in
Section 9.2.
"ENCUMBRANCES" means and includes security interests, mortgages,
liens, pledges, charges, easements, reservations, restrictions, clouds,
equities, rights of way, options, rights of first refusal and all other
encumbrances, whether or not relating to the extension of credit or the
borrowing of money.
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means all Laws, Permits and
Contracts with Governmental Entities relating to or addressing pollution or
protection of the environment, public health and safety, or employee health and
safety, including, but not limited to, the Solid Waste Disposal Act, as amended,
42 U.S.C. ss.ss.6901, ET SEQ., the Clean Air Act, as amended, 42 U.S.C.
ss.ss.7401 ET SEQ., the Federal Water Pollution Control Act, as amended, 33
U.S.C. ss.ss.1251 ET SEQ., the Emergency Planning and Community Right-to-Know
Act, 42 U.S.C. ss.ss.11001 ET SEQ., the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. ss.ss.9601 ET SEQ., the
Hazardous Materials Transportation Uniform Safety Act, as amended, 49 U.S.C.
ss.1804 ET SEQ., the Occupational Safety and Health Act of 1970, the regulations
promulgated thereunder, and any similar Laws and other requirements having the
force or effect
A-2
of Law, and all Orders issued or promulgated thereunder, and all related common
law theories and in each case of the foregoing as on or prior to the date
hereof.
"ENVIRONMENTAL LIABILITIES" has the meaning set forth in Section
8.2(e).
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" means, with respect to any Person, any entity that
is a member of a "controlled group of corporations" with, or is under "common
control" with, or is a member of the same "affiliated service group" with such
Person as defined in Section 414(b), 414(c) or 414(m) of the Code.
"FINAL DETERMINATION DATE" has the meaning set forth in Section
2.4(b)(iii).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4.5.
"FUNDED INDEBTEDNESS" has the meaning set forth in Section 2.1(a).
"GAAP" has the meaning set forth in Section 2.4(a).
"GOVERNMENTAL ENTITY" means any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, Federal, state or local.
"HAZARDOUS MATERIALS" means any hazardous or toxic chemicals,
materials or substances; any pollutants or contaminants; or crude oil or any
fraction thereof (as such terms are defined under any Environmental, Health and
Safety Law).
"HOLDING" has the meaning set forth in the caption.
"HOLDING COMMON STOCK" has the meaning set forth in Section 4.3.
"HOLDING'S BY-LAWS" means the by-laws of Holding.
"HOLDING'S CHARTER" means the certificate of incorporation of
Holding.
"HSR ACT" has the meaning set forth in Section 7.1(d).
"INDEMNIFIED PERSONS" means the Buyer Group, Holding, the Company or
the Shareholders, as the case may be.
"INDEMNIFYING PERSONS" means the Buyer or the Shareholders, as the
case may be.
"INTELLECTUAL PROPERTY RIGHTS" means all industrial and intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service xxxx applications, copyrights, copyright applications, know-how, trade
secrets, proprietary processes and formulae, confidential information,
franchises, licenses, inventions, instructions, marketing materials, trade
dress, logos
A-3
and designs and all documentation and media constituting, describing or relating
to the foregoing, including, without limitation, manuals, memoranda and records.
"KECC" means Key Equity Capital Corporation.
"LATEST BALANCE SHEET" has the meaning set forth in Section 4.5.
"LATEST BALANCE SHEET DATE" has the meaning set forth in Section
4.5.
"LAW" means any law, statute, treaty, rule, directive or regulation
or Order of any Governmental Entity.
"LEASED PROPERTY" has the meaning set forth in Section 4.10(a).
"LIABILITY" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"LOSSES" means any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants' and
other professionals' fees), assessments, Tax deficiencies and Taxes incurred in
connection with the receipt of indemnification payments (including interest or
penalties thereon) arising from or in connection with any such matter that is
the subject of indemnification under Section 8.1.
"MANAGEMENT SHAREHOLDER" means each of Xxxxx Xxxxxxx, Xxxxxxx Xxxxx,
Xxxx Xxxxx and Xxxxxxx Xxxxxxxx.
"MATERIAL ADVERSE CHANGE" means, with respect to any Person, any
material adverse change in the business, operations, assets (including levels of
working capital and components thereof), condition (financial or otherwise),
operating results, Liabilities, employee relations or business prospects of such
Person or any material casualty loss or damage to the assets of such Person,
whether or not covered by insurance, but shall exclude any change in the U.S.
economy generally or in the industry in which such Person operates.
"MATERIAL ADVERSE EFFECT" on any Person means a material adverse
effect on the business, operations, assets (including levels of working capital
and components thereof), condition (financial or otherwise), operating results,
Liabilities, employee relations or business prospects of such Person, but shall
exclude any adverse effect of the U.S. economy generally or in the industry in
which such Person operates.
"NOVEMBER BALANCE SHEET" has the meaning set forth in Section
2.4(a).
"ORDERS" means judgments, writs, decrees, compliance agreements,
injunctions or orders of any Governmental Entity or arbitrator.
"OWNED REAL PROPERTY" has the meaning set forth in Section 4.10(a).
A-4
"PERCENTAGE INTEREST" means, as to each Shareholder, the percentage
figure that expresses the ratio between the number of shares of Holding Common
Stock owned by such Shareholder immediately prior to Closing and the number of
Shares.
"PERMITS" means all permits, licenses, authorizations,
registrations, franchises, approvals, certificates, variances and similar rights
obtained, or required to be obtained, from Governmental Entities.
"PERMITTED ENCUMBRANCES" means (i) Encumbrances for Taxes not yet
due and payable or being contested in good faith by appropriate proceedings and
for which there are adequate reserves on the books, (ii) workers or unemployment
compensation liens arising in the ordinary course of business; and (iii)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts that are not delinquent, (iv)
easements, covenants, conditions and restrictions of record as to which no
violation or encroachment exists, (v) any zoning or other governmentally
established restrictions or Encumbrances which do not materially interfere with
the Company's business as presently conducted and are not violated by existing
improvements, and (vi) railroad trackage agreements, utility, slope and drainage
easements, right-of-way easements and leases regarding signs, all whether or not
of record and which do not interfere with the conduct of the Company's business
as presently conducted and are not violated by existing improvements.
"PERSON" shall be construed broadly and shall include an individual,
a partnership, a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization or
a governmental entity (or any department, agency or political subdivision
thereof).
"POST CLOSING TAX RETURNS" has the meaning set forth in Section
9.6(a).
"POTENTIAL TRANSACTION" has the meaning set forth in Section 6.8(a).
"PROCEEDINGS" means actions, suits, claims, investigations or legal
or administrative or arbitration proceedings.
"REAL PROPERTY" has the meaning set forth in Section 4.10.
"RECORDED ATL" has the meaning set forth in Section 2.4(a).
"RELATED DOCUMENTS" means the Escrow Agreement.
"RELEASED PERSONS" has the meaning set forth in Section 6.9.
"REQUISITE RIGHTS" has the meaning set forth in Section 4.11(a).
"SHAREHOLDERS(S)" has the meaning set forth in the caption.
"SHAREHOLDER GROUP" means each of the Shareholders and their
respective successors and assigns, officers, directors, employees,
representatives and Affiliates.
A-5
"SHAREHOLDERS' REPRESENTATIVE" has the meaning set forth in
Section 6.10(a).
"SURVIVAL DATE" has the meaning set forth in Section 8.5.
"TAX" means any of the Taxes.
"TAX REFUND" has the meaning set forth in 9.6(b).
"TAX RETURNS" means Federal, state, local and foreign tax returns,
reports, statements, declarations of estimated tax and forms.
"TAXES" means, with respect to any entity, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, transfer, franchise,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property or windfall profits taxes, alternative or add-on minimum
taxes, customs duties and other taxes, fees, assessments or charges of any kind
whatsoever, together with all interest and penalties, additions to tax and other
additional amounts imposed by any taxing authority (domestic or foreign) on such
entity (if any) and (ii) any liability for the payment of any amount of the type
described in the immediately preceding clause (i) as a result of (A) being a
"transferee" (within the meaning of Section 6901 of the Code or any other
applicable law) of another entity, (B) being a member of an affiliated or
combined group or (C) any contractual obligation.
"THIRD-PARTY CLAIM" has the meaning set forth in Section 8.4.
"TRANSACTION EXPENSES" has the meaning set forth in Section 9.1.
"TRANSITION PERIOD" has the meaning set forth in Section 6.1.
"UNRECORDED ATL" has the meaning set forth in Section 2.4(a).
A-6
