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Exhibit 10.1
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 12th day of August, 1998,
by and between Xxxxxx Greetings, Inc., a Delaware corporation (the "Seller") and
PFW Acquisition Corp., a Delaware corporation (the "Buyer").
WHEREAS, the Seller is the owner of all of the issued and outstanding
shares of the common stock of The Paper Factory of Wisconsin, Inc., a Wisconsin
corporation (the "Company"); and
WHEREAS, the Buyer desires to purchase all of the issued and
outstanding shares of the common stock of the Company, and the Seller desires to
sell such shares to the Buyer, all upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises hereinafter set forth, promise and agree as follows:
ARTICLE I
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PURCHASE AND SALE OF SUBJECT SHARES
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1.1. PURCHASE AND SALE. At the Closing, subject to the terms and
conditions hereinafter set forth, the Buyer shall purchase from the Seller, and
the Seller shall sell to the Buyer, 1,085 shares of the issued and outstanding
common stock of the Company and 2,000 shares of the 5% Cumulative Preferred
Stock of the Company (collectively, the "Subject Shares"), representing all of
the issued and outstanding capital stock of the Company, free and clear of all
liens, claims, encumbrances and restrictions.
1.2. PURCHASE PRICE FOR THE SUBJECT SHARES. The purchase price for the
Subject Shares shall be the Closing Adjusted Net Book Value of the Company as
provided in Paragraph 2.1, below (the "Purchase Price"). For purposes of the
Closing and subject to adjustment as hereinafter set forth, the parties shall
estimate the Closing Adjusted Net Book Value of the Company based on the balance
sheet of the Company as of June 30, 1998, attached hereto as EXHIBIT 1.2 and
such estimate shall be the Estimated Purchase Price (the "Estimated Purchase
Price"). The Estimated Purchase Price shall be adjusted and paid as provided in
Paragraph 1.3 and Article II, below.
1.3. PAYMENT OF ESTIMATED PURCHASE PRICE. Subject to adjustment as
hereinafter set forth, at the Closing, the Buyer shall pay the Estimated
Purchase Price to the Seller by wire transfer of immediately available funds to
such bank account as the Seller directs.
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ARTICLE II
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ADJUSTMENTS TO ESTIMATED PURCHASE PRICE
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2.1. ADJUSTED NET BOOK VALUE ADJUSTMENT. The parties hereto agree that
the Estimated Purchase Price shall be adjusted in the event that the Closing
Adjusted Net Book Value (as defined below) of the Company shall be either less
than or more than the Estimated Purchase Price. In the event the Closing
Adjusted Net Book Value shall be less than the Estimated Purchase Price, then
the Estimated Purchase Price shall be reduced by the amount by which the Closing
Adjusted Net Book Value shall be less than the Estimated Purchase Price. In the
event the Closing Adjusted Net Book Value shall be greater than the Estimated
Purchase Price, then the Estimated Purchase Price shall be increased by the
amount by which the Closing Adjusted Net Book Value shall be greater than the
Estimated Purchase Price.
2.1.1. DEFINITIONS.
(a) For purposes hereof, the "Closing Adjusted Net
Book Value" shall mean the sum of (i) the Closing
Stockholder's Equity (as defined below), plus (ii) the Closing
Intercompany Borrowings (as defined below), PLUS (iii) the
Closing Current Federal Income Tax Liability (as defined
below).
(b) For purposes hereof, the "Closing Stockholder's
Equity" shall mean an amount equal to the difference between
the book value of the assets including good will of the
Company as of the Closing Date (as defined below) determined
in accordance with generally accepted accounting principles in
the United States applied on a basis consistent with the prior
year-end audited financial statements of the Company ("GAAP"),
except as specified on EXHIBIT 2.2 attached hereto, MINUS the
book value of the liabilities of the Company as of the Closing
Date determined in accordance with GAAP, except as specified
on EXHIBIT 2.2 attached hereto.
(c) The amount of such "Closing Intercompany
Borrowings" reflected on the Closing Balance Sheet as defined
hereinafter shall be the "Closing Intercompany Borrowings" for
purposes hereof, and shall include all net advances from
Seller (but not accounts payable to Seller) and at Closing all
such advances shall be deemed repaid.
(d) For purposes hereof the "Closing Current Federal
Income Tax Liability" shall mean an amount equal to all
accrued and unpaid Federal income taxes
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payable by the Company on the income of the Company with
respect to periods ending on or prior to the Closing Date. The
amount of such Closing Current Federal Income Tax Liability
reflected on the Closing Balance Sheet shall be the Closing
Current Federal Income Tax Liability for purposes hereof.
2.2. CALCULATION OF CLOSING ADJUSTED NET BOOK VALUE.
(a) Deloitte & Touche LLP (the "Seller's
Accountants") shall deliver to Seller and Seller shall deliver
to the Buyer and Xxxxxx Xxxxxxxx LLP (the "Buyer's
Accountants") as soon as possible after the Closing, at the
Seller's sole cost and expense, an audited balance sheet of
the Company as of the Closing Date (the "Closing Balance
Sheet"). The Closing Balance Sheet shall be prepared in
accordance with GAAP, except as specified on EXHIBIT 2.2
attached hereto. There shall accompany the Closing Balance
Sheet calculations of the Closing Adjusted Net Book Value, the
Closing Stockholder's Equity, the Closing Intercompany
Borrowings, and the Closing Current Federal Income Tax
Liability in accordance with GAAP, except as specified on
EXHIBIT 2.2 attached hereto. To facilitate preparation of the
Closing Balance Sheet, the Company shall provide to the
Seller's Accountants such access to the books and records of
the Company and to personnel of the Company as the Seller's
Accountants shall request, provided the access to personnel is
during normal business hours and does not unreasonably
interfere with the Company's business, to allow the Seller's
Accountants to prepare the Closing Balance Sheet. After the
delivery of the Closing Balance Sheet to Buyer and the Buyer's
Accountants, the Buyer's Accountants shall examine the Closing
Balance Sheet. To facilitate such examination, the Seller
shall provide the Buyer's Accountants with such assistance and
such access to the books and records of the Company as the
Buyer's Accountants shall request and copies of any work
papers, schedules and other documents prepared or utilized in
connection with the Seller's Accountants' determination of the
Closing Adjusted Net Book Value and the preparation of the
Closing Balance Sheet. Such work papers, schedules and other
documents shall be made available as soon as practicable
following any request therefor.
(b) The calculation by the Seller's Accountants of
the Closing Adjusted Net Book Value shall be final and binding
on the parties hereto unless, within sixty (60) days after the
date when the Closing Balance Sheet was delivered to the
Buyer, the Buyer shall have delivered written notice of
objection (a "Notice of
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Objection") to the Seller. The Notice of Objection shall state
in reasonable detail the nature of the Buyer's objections to
the Seller's Accountants' determination of the Closing
Adjusted Net Book Value as provided in this Agreement, such
objections being only as to failure with respect to GAAP. The
Buyer and the Seller shall thereafter promptly consult with
each other and their respective accountants with respect to
the objections. If the Buyer and the Seller are unable to
reach agreement within thirty (30) days after the Notice of
Objection has been given, at the request of either party, the
objections shall be resolved by arbitration as provided in
Subparagraph (c) of this Paragraph 2.2 of this Agreement.
(c) All disputes concerning the calculation of the
Closing Adjusted Net Book Value which cannot be resolved
within the time period referred to in the preceding sentence,
may, upon written notice of either party, be submitted to
arbitration with the American Arbitration Association (the
"AAA"), in accordance with the rules of the AAA. The
arbitration shall be conducted by three arbitrators, each of
whom shall be a certified public accountant. One arbitrator
shall be appointed by each of Buyer and Seller within ten (10)
days of notice of arbitration being received by one of the
parties from the other party, and the two appointed
arbitrators shall select a third arbitrator. If a party shall
fail to appoint an arbitrator or if the two arbitrators shall
fail to appoint a third arbitrator within ten (10) days of the
last one of them to be appointed, such party's arbitrator or
the third arbitrator shall be selected in accordance with the
rules and procedures of the AAA. The arbitration shall take
place in Chicago, Illinois. Each of the parties agrees to
provide such information as the arbitrators shall request for
purposes of resolving the dispute. Any award issued by the
arbitrators shall be final and binding on the parties.
Judgment upon such award may be entered in any court having
jurisdiction. Each of the parties shall bear its own costs in
connection with the arbitration, unless either (i) the
arbitrators otherwise determine or (ii) the net awarded either
party shall exceed $15,000.00 in which case the other party
shall pay all costs of both parties to the arbitration.
2.3. PAYMENT OF ADJUSTMENT. Within fifteen (15) days after (i) the last
day on which a Notice of Objection may be given if no such Notice of Objection
is given, or (ii) the resolution of any objections either by the parties or by
the arbitration in accordance with Paragraph 2.2 above if a Notice of Objection
is given:
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(a) if the Closing Adjusted Net Book Value exceeds the
Estimated Purchase Price, then the Buyer shall pay such excess amount,
together with simple interest on such excess amount from the Closing
Date through the date of payment at the rate per annum of 8%, to the
Seller in immediately available funds to such bank account as the
Seller may designate in writing; and
(b) if the Estimated Purchase Price exceeds the Closing
Adjusted Net Book Value, then the Seller shall pay such excess amount,
together with simple interest on such excess amount from the Closing
Date through the date of payment at the rate per annum of 8%, to the
Buyer in immediately available funds to such bank account as the Buyer
may designate in writing.
ARTICLE III
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CLOSING
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3.1. TIME AND PLACE OF CLOSING. The consummation of the transactions
contemplated hereunder (the "Closing") shall take place at the offices of The
Paper Factory of Wisconsin, Inc. at 10:00 A.M. on September 1, 1998, or such
other date as the parties hereto may mutually agree upon in writing; PROVIDED
that if the Closing does not occur on any of such agreed dates, then subject to
Article XIV below, upon at least seven (7) business days' written notice given
by Buyer to Seller or by Seller to Buyer after the conditions precedent to the
Buyer's obligations stated in Article IV, below, have been satisfied (the
"Closing Date"). All of the transactions which take place at the Closing shall
be deemed to have taken place simultaneously, and no delivery or payment shall
be considered to have been made until all transactions to be taken at Closing
have been completed.
3.2. SELLER'S DELIVERIES TO THE BUYER. At the Closing, the Seller shall
deliver (or cause the Company to deliver, as the case may be) to the Buyer the
following:
(a) Certificates for the Subject Shares, duly endorsed in
blank or accompanied by stock powers duly endorsed in blank.
(b) Evidence reasonably satisfactory to the Buyer of delivery
to the Company of the originals of all contracts, commitments,
franchises, licenses, permits or instruments evidencing rights or
obligations of the Company and possession of all of the assets of the
Company and all books (including, but not limited to, minute books),
records and other documents relating to the Company or the conduct of
its business which may be in the possession of the Seller or any third
parties and counterparts of which are not
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otherwise to be found in the business records of the
Company.
(c) The resignations of such officers, such members of the
Board of Directors and any such trustees, custodians or authorized
signatories under any employee benefit plan of the Company as the Buyer
may designate provided however that as of the Closing Date the Company
may set up its own account and roll over all existing accounts for the
401(K) plan for the Company, provided such roll over does not breach
any representation and warranty under this Agreement or any agreement
now existing between the Company and the Seller.
(d) Minutes of the shareholders and the Board of Directors of
the Company electing Xxxxxxx X. Xxxxxxxxx, Xxxx Xxxxxx and Xxxx Xxxxx
as new members of the Board of Directors and the following persons as
officers of the Company in the capacity set forth below opposite their
respective names:
President Xxxxxxx Xxxxxx
Executive Vice President Xxxxxxx Xxxxxxx Xxxxxxx
Vice President - Merchandising Xxxxxxx Xxxxxx Xxxxxxxx
Vice President - Operations Xxxxxxx Xxxx Xxxxxxxx
Vice President - Retail Development Xxxxxx Xxx Rose
Vice President Xxxxxxx Xxxxxxx
Vice President Xxxxxxx X. Xxxxxxxxx
Secretary/Treasurer Xxxxxx Xxxx Xxxxxxxxx
Assistant/Secretary Xxxxx Xxxx
Assistant/Treasurer Xxxxx Xxxx
(e) A general release, in form and substance reasonably
satisfactory to the Buyer and its counsel, dated as of the Closing Date
and executed by the Seller, of any and all claims which Seller may have
against the Company, its directors, officers, agents or employees,
except such claims as may arise under this Agreement and the agreements
and documents executed in connection herewith and under any guarantees
by the Seller of extant leases to the Company which guarantees have not
been called prior to the Closing Date and for accounts payable by the
Company to Seller for product purchases except to the extent they are
included in Closing Intercompany Borrowings and except for accounts
payable for invoices received by the Company after the Closing Date for
inventory received by the Company on or prior to the Closing Date.
(f) An opinion of Seller's counsel, Xxxx, Stettinius &
Hollister LLP, dated as of the Closing Date, in form and substance
satisfactory to Buyer and Buyer's legal counsel.
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(g) A certificate from the Secretary of the Seller in a form
satisfactory to the Buyer and the Buyer's legal counsel, setting forth
the resolutions adopted by the Board of Directors of the Seller
authorizing the execution of this Agreement and all documents to be
executed in connection herewith and the taking of any and all actions
necessary to consummate the transactions contemplated hereby.
(h) The consents, approvals, authorizations, permits and
licenses (including, without limitation, consents of landlords to real
property leases with the Company sufficient to allow any transfer of
such leases pursuant to this Agreement) which the Buyer reasonably
deems necessary to carry out the transactions contemplated hereby, all
in a form reasonably satisfactory to the Buyer as set out in EXHIBIT
3.2(H) for the landlords set out in EXHIBIT 4.5.
(i) A certificate executed by an authorized officer of the
Seller stating that (i) the warranties and representations made by
Seller as set forth in this Agreement were true, complete and correct
when made and are true, complete and correct as of the Closing Date;
(ii) all obligations of Seller under this Agreement required to have
been performed or complied with before or as of the Closing Date have
been performed or complied with as required in this Agreement; and
(iii) as of the Closing Date, the Company has no obligations for (1)
Federal income tax with respect to periods prior to Closing, (2) any
Intercompany Borrowings; or (3) Phase I or Phase II payments to current
or former owners or employees of the Company.
(1) A Supply Agreement in the form of attached EXHIBIT 3.2(J)
(the "Supply Agreement"), duly executed by the Seller and the Company,
and such transfer documents as may be required therein.
(k) All documentation necessary to change the Company's
banking accounts and safe deposit arrangements, borrowing
authorizations and the persons authorized to sign thereon to the
following: Xxxxx Xxxx, Xxxxxxx X. Xxxxxxxxx and Xxxxxxxxxx Xxxxx.
(l) An Assignment in a form satisfactory to Buyer of all
rights to the Company to enforce protection of the Company's
intellectual property rights, proprietary information and
advertisements, including against prior prospective purchasers of the
stock or assets of the Company.
(m) Releases in a recordable form satisfactory to Buyer and
Buyers counsel releasing all extant security interests in the assets of
the Company other than those for the assets in the Company's stores to
secure the leases for
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such stores, the form of release to be supplied within five business
days of Closing.
3.3. BUYER'S DELIVERIES TO THE SELLER. At the Closing, the Buyer shall
deliver to the Seller, the following:
(a) The payment of the Estimated Purchase Price by wire
transfer as described in Paragraph 1.3, above.
(b) The opinion of the Buyer's counsel, Xxxxxxx X. Xxxxxxxx,
in a form satisfactory to Seller and Seller's legal counsel.
(c) A certificate executed by an authorized officer of the
Buyer stating that (i) the warranties and representations made by the
Buyer as set forth in this Agreement were true, complete and correct
when made and are true, complete and correct as of the Closing Date;
and (ii) all obligations of the Buyer under this Agreement required to
have been performed or complied with before or as of the Closing Date
have been performed or complied with as required in this Agreement.
ARTICLE IV
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CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
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Each and every obligation of the Buyer under this Agreement shall be
subject to the fulfillment, prior to or at Closing, of each of the following
conditions. If any of the following conditions to Closing shall not have been
satisfied, the Buyer may elect to terminate this Agreement as contemplated by
Article XIV hereof without liability to the Buyer, or to consummate the
transactions contemplated hereby. If the Buyer elects to terminate this
Agreement and if such failure shall be as a result of a breach of any provision
of this Agreement by the Seller, including, without limitation, the Seller's
failure to deliver any item required to be delivered pursuant to Paragraph 3.2,
above, the Buyer may seek appropriate remedies for any and all damages, costs
and expenses incurred by the Buyer by reason of such breach including, without
limitation, indemnification pursuant to Article XIII, below.
4.1. SELLER'S REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Seller as set forth in this Agreement
shall be true and correct on and as of the Closing Date with the same effect as
though each such representation and warranty had been made or given on and as of
the Closing Date.
4.2. SELLER'S COVENANTS. The Seller shall have performed and complied
with all of the terms, covenants and conditions set
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forth herein which are to be performed or complied with by the Seller before or
as of the Closing Date.
4.3 MATERIAL ADVERSE CHANGES. There shall not have occurred since
December 31, 1997, any changes in the assets, liabilities, conditions, results,
operations or prospects of the business of the Company which have a material
adverse effect on the Company.
4.4. LOSS OR DAMAGE TO THE ASSETS OF THE COMPANY. No damage or loss to
or condemnation of any of the assets of the Company shall have occurred, between
the date hereof and the Closing Date which (after consideration of any insurance
proceeds or other recoveries to which the Company is entitled with respect
thereto) would have a material adverse effect on the Company.
4.5. APPROVALS. The Company shall have received, at or before the
Closing, all consents, approvals, authorizations, permits and licenses
identified in EXHIBIT 4.5 attached hereto.
4.6. RIGHTS OF INSPECTION. The Buyer and its accountants, attorneys and
other representatives shall have completed an appropriate and satisfactory due
diligence review of the books, records and operations of the Seller (that are
relevant to the Company) and the Company. No such examination or review shall be
deemed to be a waiver by the Buyer of or a release of the Seller from any
representations, warranties, covenants, conditions, liabilities or obligations
set forth in this Agreement.
4.7. COMPLETION OF DELIVERIES. Prior to or at the Closing, the Seller
shall have delivered to the Buyer all items required to be delivered by the
Seller pursuant to Paragraph 3.2 of this Agreement.
4.8. ENVIRONMENTAL AUDIT. Prior to the Closing, the Buyer shall have
received, at the Buyer's sole cost and expense, a Phase I Environmental Audit
(as hereinafter defined) which confirms that the headquarters and distribution
center of the Company are in compliance with Environmental Law (as defined in
Paragraph 6.19, below), or that any noncompliance with respect thereto does not
have a material adverse effect on the Company. For purposes hereof, "Phase I
Environmental Audit" shall mean a review consistent with custom and practice in
the industry in the United States (with respect to acquisitions) for such Phase
I audits for the purposes of determining whether the Company complies with
Environmental Law and whether there exists any condition or circumstance with
respect to the headquarters or distribution center of the Company which requires
or will require cleanup, removal or other remedial action under Environmental
Law on the part of the Company. Such audit may include some or all of the
following, as determined by the reasonable professional judgment of the person
retained by Buyer to perform such Phase I Environmental Audit:
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(a) On site inspection of the headquarters and distribution
center of the Company, including review of site geology, hydrogeology,
demography, land use and population;
(b) Taking and analyzing of air samples and testing of
underground tanks;
(c) Reviewing facility permits, compliance records and
regulatory correspondence, and interviewing enforcement staff at
regulatory agencies;
(d) Reviewing the operations of the Company and its
procedures;
(e) Reviewing the operating assets of the Company located at
its headquarters and distribution center and their compliance with
Environmental Law;
(f) Interviewing past and present employees of the Seller
and/or the Company; and
(g) Taking and analyzing soil borings and installing
groundwater monitoring xxxxx and analyzing samples taken from such
xxxxx.
4.9. LEGAL ACTIONS OR PROCEEDINGS; LAWS. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person or legal or administrative proceeding shall have been instituted or
threatened which alleges the unenforceability or illegality of any aspect of the
transactions contemplated hereby or which otherwise seeks to affect, or could
affect, the transactions contemplated hereby or impose damages or penalties upon
any party hereto if such transactions are consummated. No rules, guidelines,
laws or regulations shall have been issued or published as proposed to be
issued, between the date hereof and the Closing Date, which would have an
adverse effect, either before or after the Closing, on the Company, or its
officers, directors or shareholders as a result of such position or status as
officer, director or shareholder.
4.10. XXXX-XXXXX-XXXXXX. The Buyer and the Seller shall have filed, if
required by law, proper pre-merger notification forms with the United States
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice (the "DOT') under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act"), and shall have responded appropriately to any
"second request" under the HSR Act (a "Second Request"), and the waiting periods
following the filing of proper pre-merger notification forms by the Buyer and
the Seller, together with any waiting period following compliance with such
Second Request, shall have expired, whether
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pursuant to early termination or by passage of time. The Buyer shall pay the
filing fees for such filings.
ARTICLE V
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CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
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Each and every obligation of the Seller under this Agreement shall be
subject to the fulfillment, prior to or at Closing, of each of the following
conditions. If any of the following conditions to Closing shall not have been
satisfied, Seller may elect to terminate this Agreement as contemplated by
Article XIV, hereof without liability to the Seller, or to consummate the
transactions contemplated hereby. If the Seller elects to terminate this
Agreement, and if such failure shall be as a result of a breach of any provision
of this Agreement by the Buyer, including, without limitation, the Buyer's
failure to deliver any item required to be delivered pursuant to Paragraph 3.3,
above, the Seller may seek appropriate remedies for any and all damages, costs
and expenses incurred by the Seller by reason of such breach including, without
limitation, indemnification pursuant to Article XIII, below.
5.1. BUYER'S REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Buyer as set forth in this Agreement shall
be true and correct on and as of the Closing Date with the same effect as though
each such representation and warranty had been made or given on and as of the
Closing Date.
5.2. BUYER'S COVENANTS. The Buyer shall have performed and complied
with all of the terms, covenants and conditions set forth herein which are to be
performed or complied with by the Buyer before or as of the Closing Date.
5.3. COMPLETION OF DELIVERIES. Prior to or at Closing, the Buyer shall
have delivered to the Seller all items required to be delivered by the Buyer
pursuant to this Agreement.
5.4. LEGAL ACTIONS OR PROCEEDINGS. No suit, action, investigation,
inquiry or other proceeding by any governmental authority or other person or
legal or administrative proceeding shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated hereby
or which otherwise seeks to affect, or could affect, the transactions
contemplated hereby or impose damages or penalties upon any party hereto if such
transactions are consummated.
5.5. XXXX-XXXXX-XXXXXX. The Buyer and the Seller shall have filed, if
required by law, proper pre-merger notification forms with the FTC and the DOJ
under the HSR Act, and the waiting period following the filing of proper
pre-merger notification
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forms by the Buyer and the Seller shall have expired, whether pursuant to early
termination or by passage of time.
ARTICLE VI
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WARRANTIES AND REPRESENTATIONS OF THE SELLER
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Except as set out in the Disclosure Schedule of Schedule 6 to this
Agreement, and except as specifically stated in the sections of this Article VI,
the Seller hereby warrants and represents to the Buyer and its permitted
assigns, which warranties and representations shall be true and correct as of
the date hereof, notwithstanding any investigation made by or information
furnished to the Buyer in connection herewith, that:
6.1. DUE ORGANIZATION. The Company is a corporation duly organized and
validly existing under the laws of Wisconsin. The Company has the power and
authority to own, lease and operate its properties and conduct its business as
heretofore conducted. The Company is not a party or subject to any agreement or
commitment restricting the conduct of its business as heretofore conducted. The
Company is qualified to do business and is in good standing as a foreign company
in the jurisdictions described in SCHEDULE 6.1 attached hereto which are all of
the jurisdictions where the nature of the Company's activities and properties
would require the Company to be so qualified and where the failure to be so
qualified would have an adverse effect on the Company.
6.2. AUTHORITY AND ENFORCEABILITY. The Seller has the power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
agreements and instruments contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby have been duly approved by the
Board of Directors of the Seller, and no additional corporate action is required
in connection therewith. This Agreement constitutes, and when executed and
delivered each of the agreements and instruments to be delivered and executed as
contemplated herein will constitute, a valid and binding agreement of the
Seller, enforceable against it in accordance with their terms. The Seller has
full right, power and authority to sell, transfer and deliver to the Buyer full
legal and beneficial ownership of the Subject Shares.
6.3. NO VIOLATION. Except as set forth in SCHEDULE 6.3 attached hereto,
and except for the pre-merger notification with the FTC and DOJ under the HSR
Act, the execution and delivery hereof and the agreements and instruments
contemplated hereby, the consummation of the transactions contemplated hereby
and thereby, and compliance with the terms and provisions hereof and thereof by
the Seller will not: (i) to the Seller's knowledge, contravene any applicable
law, rule or regulation, or any order,
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writ, judgment, injunction, decree, determination or award which affects or
binds the Seller or the Company or any of the Company's assets; (ii) to the
Seller's knowledge, require any consent, approval, authorization, license,
permit, registration, filing, recording or waiver under any applicable law, rule
or regulation, under any order, writ, judgment, injunction, decree,
determination or award which affects or binds the Seller or the Company, or any
of the Company's assets, or under any governmental or judicial license,
franchise, permit or approval held by the Company or which affects or binds the
Company or any of the Company's assets; (iii) result in the creation or
imposition of any lien, claim or encumbrance upon any of the Company's assets;
or (iv) conflict with, or result in any violation of, any provision of the
Articles of Incorporation or By-Laws of the Seller or the Company.
6.4. NO BREACH OF CONTRACT. Except as disclosed in SCHEDULE 6.4 (which
can be amended as of the Closing Date to reflect real estate leases that may be
breached as of the Closing Date by the sale of the Subject Shares to Buyer)
attached hereto, to the Seller's knowledge, the execution and delivery hereof
and the agreements and instruments contemplated hereby, the consummation of the
transactions contemplated hereby and thereby, compliance with the terms and
provisions hereof and thereof by the Seller and the continuation of the business
of the Company after the Closing Date in the same manner as conducted prior to
the Closing Date, will not: (i) conflict with or result in a breach of or
default under, or cause or permit the termination or acceleration of the
maturity of or otherwise impair any contract, agreement, lease, commitment,
indenture, loan or credit agreement or any other agreement or instrument to
which the Seller or the Company is a party or by which the Company or any of the
Company's assets may be affected or is bound at the Closing Date; or (ii)
require any consent, approval or waiver under any contract, agreement, lease,
commitment, indenture, loan or credit agreement or any other agreement or
instrument to which the Seller or the Company is a party or by which the Company
or any of its assets may be affected or is bound.
6.5. SUBSIDIARIES. Except as disclosed on SCHEDULE 6.5 attached hereto,
since the date of its incorporation, the Company has not owned, and does not now
own, any capital stock of any equity in, or any other ownership or investment
interest in, any corporation, partnership, joint venture or other business
entity. Except as disclosed in SCHEDULE 6.5 attached hereto, no entity has
merged with or consolidated into the Company.
6.6. BY-LAWS. The copies of the Articles of Incorporation and By-Laws
of the Company attached as SCHEDULE 6.6 are true and correct copies of said
Articles of Incorporation and By-Laws, and all amendments thereto.
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14
6.7. OUTSTANDING CAPITAL STOCK OF THE COMPANY; TITLE TO SUBJECT SHARES.
The authorized capital stock of the Company consists of 10,100 shares of common
stock ($1.00 par value) of which 1,085 shares are validly issued and
outstanding, fully paid and nonassessable and 2,000 shares of 5% Cumulative
Preferred Stock, $1.00 par value, all of which are validly issued and
outstanding, fully paid and nonassessable. The Company is not authorized to
issue any other class of capital stock and holds no shares of its capital stock
in its treasury. The Subject Shares constitute all of the issued and outstanding
shares of stock of the Company of whatever class, series or designation, and the
Seller is the record and beneficial owner of all of the Subject Shares. The
Company has not issued any shares of capital stock or any other securities in
violation of any preemptive rights or any applicable securities or other laws,
and there are no outstanding options, contracts, warrants, calls, puts,
subscriptions, rights or demands of any character or nature relating to the
authorized or issued capital stock, or any other capital stock, of the Company.
There are no voting agreements, understandings or arrangements, whether written
or oral, which govern the voting of any capital stock of the Company, the
management of the Company or the sale or transfer of the capital stock of the
Company. The Subject Shares are owned by the Seller free and clear of all liens,
claims, encumbrances, charges and assessments of every nature whatsoever and are
subject to no restrictions on transfer. Upon delivery to the Buyer of stock
certificates representing the Subject Shares at Closing as contemplated hereby,
the Buyer will acquire good and marketable title to the Subject Shares free of
all liens, claims, encumbrances, charges, assessments and transfer restrictions
of every nature whatsoever.
6.8. MINUTE BOOKS OF COMPANY. The stock certificate and transfer books
and minute books of the Company delivered to the Buyer are true and complete.
6.9. FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 6.9 are
financial statements ("Financial Statements") consisting of (i) audited balance
sheets and related audited statements of income and cash flows for the Company
for the fiscal years ended December 31, 1997, December 31, 1996 and December 31,
1995 (and the notes contained therein or attached hereto), and (ii) an unaudited
balance sheet of the Company as of June 30, 1998 (the "Recent Balance Sheet").
All Financial Statements are true, complete and correct, present fairly the
assets, liabilities and financial condition, the results of operations and cash
flows of the Company for the years and periods included therein in all material
respects and were prepared in accordance with GAAP. The Recent Balance Sheet of
the Company is true, complete and correct, has been completed in accordance with
GAAP except as set out in SCHEDULE 6.9 and presents fairly in all material
respects the assets and liabilities of the Company, subject to normal year-end
audit adjustments. The Closing Balance Sheet delivered
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15
to Buyer shall be true, complete and correct and will be completed in accordance
with GAAP and EXHIBIT 2.2 attached hereto.
6.10. UNDISCLOSED OBLIGATIONS OR LIABILITIES. Except as described in
SCHEDULE 6.10 attached hereto, to the Seller's knowledge, there are no
obligations or liabilities, secured or unsecured (whether accrued, absolute,
contingent or otherwise), of or relating to the business of the Company except
for the: (i) liabilities and obligations reflected or reserved for on the
Financial Statements or specifically disclosed in the Exhibits or Disclosure
Schedules attached to this Agreement; and (ii) liabilities or obligations
incurred by the Company in its ordinary course of business since June 30, 1998,
which individually or in the aggregate do not have a material adverse effect on
the Company.
6.11. TANGIBLE PERSONAL PROPERTY. The Company neither owns nor has
owned any Real Property except as described on SCHEDULE 6.11 attached hereto. As
to the personal property which the Company owns, including, but not limited to,
the assets of the Company reflected on the Recent Balance Sheet, the Company has
good and marketable title to such property, free and clear of all liens, claims
and encumbrances, except for liens identified in SCHEDULE 6.11 attached hereto.
To the Seller's knowledge as to the tangible personal property which the Company
leases, each such lease is valid and enforceable in all material respects and
except a set out in SCHEDULE 6.11, may be canceled or transferred by the Company
without making a payment thereunder or causing a breach thereof and to Seller's
knowledge, the Company is not in breach of any of the provisions of any such
lease. To the Seller's knowledge, all such personal property owned or leased by
the Company is in good condition, good working order and repair, reasonable wear
and tear excepted, and is suitable for the purpose being used.
6.12. LEASED REAL PROPERTY.
(a) Except as disclosed in SCHEDULE 6.12(A) attached hereto,
to Seller's knowledge, (i) no parcel of property leased by the Company
(the "Leased Real Property") is in violation of any applicable laws or
regulations affecting the Company's use and occupancy of such property,
and (ii) the current use of each such parcel is not a special use
exception or a legal, nonconforming use. Seller has not received any
such notification of any violation, exception or use.
(b) As to the Leased Real Property, except as disclosed in
SCHEDULE 6.12(B) attached hereto, to the Seller's knowledge, there have
been no: (i) actual or proposed special assessments; (ii) pending or
threatened condemnation proceedings; (iii) pending or threatened
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litigation or administrative actions; (iv) mechanic's or materialmen's
liens; (v) other matters adversely affecting the value or use thereof;
(vi) structural or mechanical defects; (vii) planned or commenced
improvements which may result in an assessment or otherwise affect such
Leased Real Property; (viii) governmental agency or court order
requiring the repair, alteration or correction of any existing
condition with respect to such Leased Real Property; or (ix) pending or
threatened changes in any zoning laws or ordinances which may affect
the Leased Real Property.
(c) To the Seller's knowledge, except as they may be owned by
landlords of the Leased Real Property or subject to any such landlord's
liens, the fixtures and other improvements located on the Leased Real
Property have been approved by all necessary governmental authorities,
have been maintained in accordance with normal maintenance practices,
are (taken as a whole) in good condition, good working order and
repair, reasonable wear and tear excepted, are suitable for the purpose
for which they are being used. Except as they may be owned by landlords
of the Leased Real Property or subject to any such landlord's liens,
the Company has, or will have as of Closing, good and marketable title
to the fixtures and other improvements on the Leased Real Property,
free and clear of all liens, claims and encumbrances.
(d) Except as disclosed in SCHEDULE 6.12(D) attached hereto
each lease for the Leased Real Property is valid and enforceable in all
material respects until the Closing Date, and solely as of the Closing
Date, except as disclosed on EXHIBIT 3.2(H), may be canceled or
transferred by the Company without making a payment thereunder or
causing a breach thereof and, to the knowledge of Seller, the Company
is not in breach of any of the provisions of any such lease.
6.13. LITIGATION. To the knowledge of Seller, except as disclosed in
SCHEDULE 6.13 attached hereto, (i) there is no suit, action or arbitration, nor
any legal or administrative or other proceeding, before or by any governmental
agency, pending, and no such suit, action, arbitration or administrative or
other proceeding is threatened, against the Company or relating to the Company's
property, assets or business, and (ii) no event has occurred which could form a
reasonable basis for any claim or cause of action, including, but not limited
to, any tort claim, against the Company. The Company is not in default with
respect to any order, writ, injunction or decree of any governmental authority
or instrumentality or any court.
6.14. TAXES. The Company has filed in a timely manner with the
appropriate governmental agencies all tax returns and tax reports required to be
filed, and all taxes, whether reflected
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thereon or otherwise, have been paid. There are no agreements by the Company for
the extension of time for the assessment or payment of any tax except as are
disclosed on SCHEDULE 6.14. The periods for which the Company has been audited
by a governmental authority with respect to its taxes are disclosed on SCHEDULE
6.14 attached hereto. No tax deficiencies have been proposed or assessed against
the Company. There are no pending, or to the Seller's knowledge, threatened
audits, investigations or claims for or relating to any liability in respect of
taxes and there are no matters under discussion with any governmental
authorities with respect to taxes that are likely to result in an obligation by
the Company to pay any additional amount of taxes. For purposes of this
Agreement, "tax" or "taxes" means all federal, county, local, foreign and other
taxes or assessments, including, without limitation, income, estimated income,
business, occupation, franchise, property (real and personal), sales,
employment, gross receipts, use, transfer, ad valorem, profits, license,
capital, payroll, withholding, unemployment, excise, goods and services,
severance, or stamp tax, and including, but not limited to, interest, penalties
and additions in connection with such taxes for which the Company is or may be
liable for any period ending prior to the Closing Date.
6.15. EMPLOYEES.
(a) To Seller's knowledge, the Company is in compliance with
all laws and regulations which relate in any fashion to the employment
of labor, employee civil rights or equal employment opportunities. To
Seller's knowledge, no proceedings involving the Seller or the Company
are before any court, government agency or instrumentality or
arbitrator relating to labor or employment matters, and there is no
pending investigation involving the Seller or the Company by any
governmental agency, or threatened claim involving the Company by any
such agency or other person relating to labor or employment matters.
(b) No person or party (including, but not limited to,
governmental agencies of any kind, including foreign governments) has
made any claim still pending, and to Seller's knowledge there is no
basis for any claim, against the Company arising out of any statute,
ordinance or regulation relating to discrimination to, or wrongful
termination of, employees (or job applicants) or employee practices or
occupational or safety and health standards.
(c) To the Seller's knowledge, the Company has no written
severance obligations with respect to any employees terminated prior to
the Closing Date.
6.16. UNEMPLOYMENT COMPENSATION. To the Seller's knowledge, the
Company has made all required payments to its unemployment compensation reserve
accounts with the appropriate
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18
governmental departments and all such unemployment compensation reserve accounts
have positive balances.
6.17. BENEFIT PLANS. Except as set out in SCHEDULE 6.17, there is no
funding deficiency with respect to any profit sharing, pension or retirement
plan, program, arrangement or agreements or other employee benefit plan, program
or agreement maintained or contributed to or required to be contributed to, for
the benefit of any employee or terminated employee of the Company, whether
formal or informal (the "Plan" or "Plans"), and the fair market value of all
assets of each such Plan are currently sufficient to satisfy all liabilities to
plan participants and beneficiaries, determined as if such Plan were being
terminated. No facts exist which might constitute grounds for the termination of
any Plan by a governmental authority or court. With respect to each Plan: (a)
the provisions of such Plan are in material compliance with all applicable laws;
and (b) the Company and each fiduciary of such Plan is in material compliance
with all applicable laws, including, but not limited to, fiduciary and
prohibited transaction rules, participation and vesting provisions, reporting
and disclosure requirements and fiduciary requirements. No Plan is currently
under audit or review by any federal or state governmental authority, and no
such audit or review is contemplated or under consideration. No actions or
claims (except those routinely submitted in the ordinary course of Plan
administration) are currently pending or threatened against any such Plan.
6.18. GUARANTEE; POWERS OF ATTORNEY. Except as reflected in the
Financial Statements, to the Seller's knowledge, the Company is not obligated as
a guarantor or cosigner or otherwise liable for any written obligation of any
kind of any other person or entity. The Company has not granted any written
power of attorney to any person.
6.19. ENVIRONMENTAL LAW.
a. Definitions. For purposes of this Agreement;
"ENVIRONMENTAL LAW" shall mean all Laws (as
hereinafter defined) pertaining to health, safety, natural
resources, wildlife or the environment, or the management,
manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, release,
threatened release, abatement, removal, remediation or
handling of, or exposure to, any petroleum products or
Hazardous Substances (as hereinafter defined) and all
amendments, modifications and additions thereto.
"ENVIRONMENTAL CLAIM" shall mean any investigation,
notice, violation, demand, allegation, action, suit,
injunction, order, consent decree,
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penalty, fine, lien, proceeding or claim (whether
administrative, judicial or private in nature) arising (i)
pursuant to, or in connection with, an actual or alleged
violation of any Environmental Law; (ii) in connection with
any Hazardous Substances; (iii) from any abatement, removal,
remedial, corrective or other response action in connection
with Hazardous Substances, Environmental Law or other order of
a governmental authority; or (iv) from any actual or alleged
damage, injury, threat, or harm to health, safety, natural
resources, wildlife or the environment.
"HAZARDOUS SUBSTANCES" shall mean and include any
substance, chemical, compound, product, solid, gas, liquid,
wastes, byproduct, material, pollutant or contaminant defined
or regulated as a hazardous substance under any Laws,
asbestos, PCB's, radon and urea formaldehyde foam, petroleum
and petroleum products except Helium.
"GOVERNMENTAL APPROVAL" shall mean any permit,
license, variance, certificate, closure, exemption, decision,
action or approval of a governmental authority.
"LAWS" shall mean all federal, provincial and local
statutory laws, ordinances, codes, rules, guidance,
regulations, approvals or requirements of any governmental
authority, court orders, administrative orders, executive
orders, consent decrees, injunctions, judgments, and common
law.
b. REPRESENTATIONS AND WARRANTIES. To Seller's knowledge
(except for home office facility and the distribution center of the
Company as to which the knowledge limitation does not apply) except as
set forth on SCHEDULE 6.19 attached hereto:
(1) Except for materials used in the ordinary course
of the Company's business in a manner that complies with
applicable law in all respects, there are no Hazardous
Substances on, in, above or under the Leased Real Property or
any adjacent property, including without limitation any
Hazardous Substances originating or emanating from any other
property that are present in, on, under or above the Leased
Real Property and no Hazardous Substances originating or
emanating from the Leased Real Property that are present in,
on, under or above any other property;
(2) The Leased Real Property and any property
formerly owned, leased or operated by the Company have
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20
never been used to generate, treat, store, dispose of
or transport Hazardous Substances;
(3) Neither the Seller nor the Company has received
any notice from any governmental agency or any third party
notifying either of them of any Hazardous Substances which
have been generated or disposed of on the Leased Real Property
or any property formerly owned, leased or operated by the
Company, or which have migrated on, in, under, above or to the
Leased Real Property from any adjacent property or which have
migrated, emanated or originated from the Leased Real Property
or any property formerly owned, leased or operated by the
Company onto any other property;
(4) The Company has obtained all necessary
Governmental Approval for its operations and the Leased Real
Property required by any Environmental Law;
(5) There are no underground storage tanks and there
have never been any underground storage tanks located on, in,
under, or about the Leased Real Property or any other property
formerly owned, leased or operated by the Company except for
such tanks used in the ordinary course of business and in
compliance with Environmental Law;
(6) No Environmental Claim with respect to any
portion of the Leased Real Property or property contiguous or
adjacent to the Leased Real Property or any other property
formerly owned, leased or operated by the Company is
threatened or pending;
(7) The Company and the Leased Real Property are and
at all times in the past have been in compliance with any and
all Environmental Laws;
(8) Consummation of the transactions contemplated by
this Agreement does not (a) impose any obligations under any
Environmental Law, including without limitation for the
investigation or cleanup of the Leased Real Property or (b)
require notification to or consent of any governmental
authority or third party pursuant to any Environmental Law;
(9) The Leased Real Property does not contain and has
never contained any (a) aboveground storage tanks except for
such tanks used in the ordinary course of business and in
compliance with Environmental Law, (b) asbestos-containing
material, PCBs, radon, or urea formaldehyde foam, or (c)
landfills or dumps;
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(10) There are no conditions or occurrences at the
Leased Real Property or any adjacent property or any other
property formerly owned, leased or operated by the Company
which could form the basis for an Environmental Claim against
the Leased Real Property or the Company;
(11) No action or failure to act by the Company has
occurred and no event has occurred with respect to the Leased
Real Property which, with the passage of time, giving of
notice, or both, would constitute a violation of any
Environmental Law;
(12) No septic systems exist on, in or under the
Leased Real Property; and
(13) Attached hereto as SCHEDULE 6.19 is a copy of
all environmental claims, reports, studies, assessments and
audits with respect to any environmental matter or
Environmental Law.
6.20. BROKERS AGENTS. Except as listed on SCHEDULE 6.20 attached
hereto, neither the Seller nor the Company is obligated to pay any agent,
finder, broker or other representative any fee or commission in connection with
the sale of Subject Shares or the consummation of the transactions contemplated
hereby.
6.21. TRADEMARKS, PATENTS, ETC. To the Seller's knowledge, (i) the
Company is the sole and exclusive owner of all rights to all of the patents,
trademarks, trade names and copyrights listed on SCHEDULE 6.21 and the Company's
advertisements and has the sole and exclusive right to use such patents,
trademarks, trade names and copyrights listed in Schedule 6.21 and the Company's
advertisements, in each case without the payment of any royalties or similar
charges; (ii) there are no claims, demands or proceedings instituted, pending or
threatened by any other person pertaining to or challenging the right of the
Company to use any patents, trademarks, trade names, copyrights or other
proprietary rights used by the Company, alleging that any of them or any other
application by the Company infringes or otherwise violates the patent, trade
name, trademark, copyright or other rights of any other person, and there is no
basis for any claim or demand of such nature; and (iii) no person or entity is
making any unauthorized use of any of the patents, trademarks, trade names,
copyrights or other proprietary rights owned by the Company.
6.22. DEPOSITS AND ACCOUNTS. SCHEDULE 6.22 attached hereto identifies
all deposits, accounts, surety bonds, or other similar items owned, made by or
in effect with respect to the Company or its business, including, but not
limited to: (i) all banking accounts, safe deposit arrangements and borrowing
authorizations maintained by the Company and the persons authorized to sign on
behalf of the Company with respect thereto; and (ii) to Sellers
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knowledge, all deposits or bonds made, maintained or purchased by the Company to
secure obligations under workers' benefit laws or similar legislation, under
contracts or leases to which the Company is a party, or under public or
statutory obligations relating to the business of the Company.
6.23. CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 6.23(A) attached hereto sets forth a true and
complete list of all written contracts, agreements and instruments of
the Company (except leases which are disclosed on Schedule 6.12(a) and
agreements disclosed on SCHEDULE 6.23(B)) involving obligations of or
to the Company in the amount of Fifteen Thousand Dollars ($15,000) or
more. Copies of each of such contracts, agreements and instruments, and
all amendments and modifications thereof have been made available to
the Buyer for review and were identified as SCHEDULE 6.23(A). The
Company is not a party to or bound by any other written contract or
other instrument which relates to the business of the Company, except
those described in SCHEDULE 6.23(A) or those made in the ordinary
course of business at a competitive price for an amount less than
Fifteen Thousand Dollars ($15,000) (except leases which are disclosed
on SCHEDULE 6.12(A) and agreements disclosed on SCHEDULE 6.23(B)). Each
contract, agreement and instrument listed in SCHEDULE 6.23(A) is valid
and binding against the Company and the other parties thereto and is in
full force and effect in accordance with its terms. Neither the Company
nor, to the Seller's knowledge, any other party to such a contract,
agreement or instrument is in breach or default under such contract,
agreement or instrument (with or without the lapse of time, or the
giving of notice, or both).
(b) Except as identified in SCHEDULE 6.23(B) attached hereto,
the Company is not a party to or bound by: (i) any contract or
arrangement with shareholders, directors, officers, employees, agents,
sales representatives, consultants, distributors or dealers; (ii) any
written employment agreements, or any other written agreements or
arrangements involving key employees of the Company that contain any
severance or termination pay liabilities or obligations; or (iii) any
bonus, vacation pay, sick pay, group insurance, deferred compensation,
stock purchase, stock option, profit sharing, pension, retirement or
other employee benefit plans or arrangements involving such employees.
6.24. INSURANCE. SCHEDULE 6.24 attached hereto identifies all policies
of insurance owned by the Company or the Seller relating to the business or
assets of the Company as of the date hereof. The policies of insurance listed on
SCHEDULE 6.24 are in an amount, with such deductibles and against such risks and
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losses as are reasonable for the business and assets of the Company. All such
policies are in full force and effect, and all premiums thereon are paid to
date. No notice of cancellation has been sent to the Seller or the Company with
respect to any such policy. SCHEDULE 6.24 sets forth a current summary
description of each claim made by the Company under, or which has been made
against the Company and has been paid or defended in accordance with the terms
of, any insurance policy of the Seller or the Company within three (3) years
prior to the date hereof.
6.25. COMPLIANCE WITH LAWS. To the Seller's knowledge, the Company is
in compliance with all provisions of all local, federal and foreign laws,
ordinances, rules and regulations of any governmental authority or
instrumentality applicable to its operations or with respect to which compliance
is a condition of engaging in its business as currently conducted and has all
permits, licenses, certificates and other governmental authorizations necessary
to conduct its business as presently conducted.
6.26. TRANSACTIONS WITH AFFILIATES. Except as disclosed on SCHEDULE
6.26 attached hereto, since January 1, 1995, no director, officer or employee of
the Company or the Seller nor any ancestor, sibling, descendent or spouse of any
such person, nor any person in which any of the foregoing have a material
interest, has or had: (i) any interest in any entity which on a recurring basis
purchases, sells or furnishes to the Company any goods or services; (ii) a
beneficial interest in any contract, commitment or understanding to which the
Company is a party or by which the Company is bound or affected; (iii) any
interest or claim against the Company or any assets of the Company; or (iv) any
interest in any assets used in the business of the Company.
ARTICLE VII
-----------
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer hereby represents and warrants to the Seller, which
representations and warranties shall be true and correct as of the date hereof,
notwithstanding any investigation made by or information furnished to the Seller
in connection herewith, that:
7.1. ORGANIZATION AND AUTHORITY OF BUYER. The Buyer is a corporation
duly organized and validly existing under the laws of Delaware. The Buyer has
the corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby.
7.2. NO BREACH OF LAW BY BUYER. The execution and delivery hereof and
the instruments and agreements contemplated hereby, the consummation of the
transactions contemplated hereby and thereby, and compliance with the terms and
provisions hereof and
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thereof will not: (i) to the Buyer's knowledge, contravene any applicable law,
rule or regulation, or any order, writ, judgment, injunction, decree,
determination or award which affects or binds the Buyer or any of its assets;
(ii) to the Buyer's knowledge require any consent, approval, authorization,
license, permit, registration, filing, recording or waiver after any applicable
law, rule or regulation, under any order, writ, judgment, injunction, decree,
determination or award which affects or binds the Buyer or any of its assets, or
under any governmental or judicial license, franchise, permit or approval held
by the Buyer or which affects or binds the Buyer or any of its assets; (iii)
result in the creation or imposition of any lien, claim or encumbrance upon any
of the Buyer's assets; or (iv) conflict with, or result in any violation of, any
provision of the Articles of Incorporation or By-Laws of the Buyer.
7.3. NO BREACH OF CONTRACT BY BUYER. To the Buyer's knowledge, the
execution and delivery hereof and the instruments and agreements contemplated
hereby, the consummation of the transactions contemplated hereby and thereby,
and compliance with the terms and provisions hereof and thereof by the Buyer
will not: (i) conflict with or result in a breach of or default under, or cause
or permit the termination or acceleration of the maturity of, or otherwise
impair any contract, agreement, lease, commitment, indenture, loan or credit
agreement or any other agreement or instrument to which the Buyer is a party or
by which the Buyer or any of its assets may be affected or is bound; or (ii)
require any consent, approval or waiver under any contract, agreement, lease,
commitment, indenture, loan or credit agreement or any other agreement or
instrument to which the Buyer is a party or by which the Buyer or any of its
assets may be affected or is bound.
7.4. ENFORCEABILITY. This Agreement has been duly executed and
delivered by the Buyer and constitutes a legal, valid and binding obligation of
the Buyer enforceable in accordance with its terms.
7.5. BROKERS: AGENTS. The Buyer is not obligated to pay any agent,
finder, broker or other representative any fee or commission in connection with
the sale of Subject Shares or the consummation of the transactions contemplated
hereby.
7.6. INVESTMENT REPRESENTATIONS. The Buyer is acquiring the Subject
Shares for investment and not for the purpose or with a view towards resale, and
the Buyer will not effect any transfer or disposition of any of the Subject
Shares in violation of any applicable securities or blue sky laws or
regulations, including, but not limited to, the Securities Act of 1933, as
amended. The Buyer is not a party to any agreement that requires the Buyer to
sell, transfer or assign the Subject Shares or the assets of the Company.
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ARTICLE VIII
------------
DISCLOSURE SCHEDULES
--------------------
The Schedules and information set forth in the Disclosure Schedules
attached hereto specifically refer to the Paragraph of this Agreement to which
such Schedule and information is responsive and each such Schedule and
information shall be deemed to have been disclosed with respect to any other
Paragraph of this Agreement for any other purpose to which such disclosure is
applicable and reasonably apparent. All capitalized terms used in the Disclosure
Schedules and not otherwise defined therein shall have the same meanings as are
ascribed to such terms in this Agreement. The Disclosure Schedules shall not
vary, change or alter the literal meaning of the representations and warranties
of the Seller contained in this Agreement, other than creating specific, limited
exceptions thereto which are directly responsive to the language of the
warranties and representations contained in this Agreement.
ARTICLE IX
----------
PRE-CLOSING COVENANTS OF SELLER
-------------------------------
Except and to the extent the Buyer may otherwise permit in writing, the
Seller covenants and agrees as follows:
9.1. CONDUCT OF BUSINESS IN ORDINARY COURSE. Until the Closing, the
Seller shall cause the Company to carry on its business diligently and
substantially in the manner as heretofore conducted, and shall not permit the
Company to make or initiate any unusual or novel methods of purchase, sale,
management, accounting, or operation, or make any adjustments in the pricing of
its products or services not consistent with the Seller's past business
practices. The Seller shall not permit the Company to enter into any contract or
commitment to engage in any transaction not in the ordinary course of its
business or not consistent with its past business practices. The Seller shall
cause the Company to use its best efforts in the ordinary course of business to
preserve its business organization, including, but not limited to, present key
employees, and its relationships with suppliers, customers and others having
business relations with the Company. Without limiting the scope of the
foregoing, the Seller shall cause the Company to, and the Company shall:
(a) Use, preserve and maintain its properties and assets on a
basis consistent with past practices;
(b) Maintain all insurance covering the Company or its
business, properties or assets in effect as of the date hereof;
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26
(c) Pay all debts and obligations incurred by the Company in
the operation of its business as the same become due and payable,
except to the extent the Company is contesting such debts or
obligations in good faith by appropriate proceedings and have
established appropriate reserves therefor;
(d) Maintain its books, accounts and records in the usual
manner and on a basis consistent with past practice;
(e) Prior to Closing and within five (5) days after the Seller
has knowledge of the date of the damage, destruction or loss described
below, notify the Buyer in writing if the Company suffers any damage,
destruction or loss (whether or not covered by insurance and regardless
of the cause thereof) affecting the condition (financial or otherwise),
assets, business or prospects of the Company;
(f) Comply with all of the provisions of all contracts,
agreements, leases and commitments involving the Company, its assets or
properties, and notify the Buyer in writing, prior to Closing and
within five (5) days of the date of any breach or noncompliance with
any such provisions by the Company or any other person.
Furthermore, and without limiting the scope of the foregoing, the
Seller shall not permit the Company to, and the Company shall not, except in the
ordinary course of business and consistent with past practices:
(g) Make any capital expenditures (as determined under GAAP)
or commitments with respect thereto (including, but not limited to,
capital leases);
(h) Grant any severance or termination pay to, or increase
benefits payable under any existing severance or termination pay
policies with, or enter into or modify any employment agreements with
employees, agents and/or representatives;
(i) Adopt or amend or increase compensation or benefits
payable under, or take any actions which might result in adverse tax or
other consequences with respect to, any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
collective bargaining agreement, or other plan, agreement, trust, fund
or arrangement for the benefit of any employee or class of employees;
(j) Commit any act or omit to do any act, or permit any act or
omission to act, which will or may cause a material breach of any
contract, agreement, lease or commitment involving the Company, its
assets or properties;
- 26 -
27
(k) Incur, or agree to incur, any material obligation or
liability, absolute, accrued, contingent or otherwise, whether due or
to become due, except current liabilities incurred in the ordinary
course of business (none of which has or will have a material adverse
effect on the Company);
(l) Discharge or satisfy, or agree to discharge or satisfy,
any lien, charge or encumbrance, or pay or agree to pay any obligation
or liability, absolute, accrued, contingent or otherwise, whether due
or to become due, other than current liabilities shown on the Recent
Balance Sheet and current liabilities incurred since the date of the
Recent Balance Sheet in the ordinary course of business;
(m) Declare or make, or agree to declare or make, any payment
of dividends or other distribution to its shareholder;
(n) Mortgage, pledge or subject to, or agree to mortgage,
pledge or subject to, lien, charge, security interest or any other
encumbrance or restriction any of its properties or business or its
assets, tangible or intangible;
(o) Sell, transfer, lease or agree to sell, transfer, or lease
or otherwise dispose of or agree to dispose of any of its assets with a
book value in excess in the aggregate of Ten Thousand Dollars
($10,000), except for products sold in the ordinary course of business
at a competitive price, or cancel or compromise, or agree to cancel or
compromise, any debt or claim, or waive or release, or agree to waive
or release, any right of substantial value;
(p) Issue or sell, or agree to issue or sell, any shares of
its capital stock or other securities, or issue, grant or sell, or
agree to issue, grant or sell, any options, rights or warrants with
respect thereto, or acquire or redeem or agree to acquire or redeem any
capital stock or other securities of any person or entity or any
interest in any business enterprise;
(q) Enter into, or agree to enter into, any agreement or lease
without the prior written consent of the Buyer unless such agreement or
lease is entered into by the Company in the ordinary course of business
at a competitive price and its obligations thereunder do not exceed the
amount of Ten Thousand Dollars ($10,000);
(r) Amend its Articles of Incorporation or By-Laws
(s) Change any of the Company's banking or safe deposit
arrangements, borrowing authorizations or other accounts or the person
authorized to sign thereon, or
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28
execute or terminate powers of authority, except as approved in writing
by the Buyer; or
(t) Appoint any person to be an officer of the Company or a
member of the Company's Board of Directors, or remove any person from
any such position.
9.2. INSPECTION. Until the Closing, the Seller shall, and shall cause
the Company to, provide the Buyer and its authorized representatives and agents:
(i) full access during normal business hours to all offices, and other
properties, books, records, contracts and documents; and (ii) all such
information with respect to the business and affairs of the Company and the
Seller (that is relevant to the Company) they may reasonably request. Without
limiting the generality of the foregoing, the Seller shall cause the Company to
provide access to the Company's home office facility and distribution centers
for the purpose of allowing Buyer to complete the Phase I Environmental Audit.
9.3. NO SOLICITATION. Until the Closing, the Seller shall not, nor
shall the Seller permit the Company or any of its officers, directors,
employees, agents, representatives or affiliates, nor shall any such persons
assist any person to, directly or indirectly, (a)(i) initiate contact with or
solicit any inquiries or proposals by, (ii) enter into any discussions or
negotiations or agreements with, (iii) disclose directly or indirectly any
information not customarily disclosed concerning the business and properties of
the Company to, or offer any access to its properties, books and records to, any
person in connection with any possible proposal regarding a sale of the capital
stock of the Company, a merger or consolidation with the Company, a sale of all
or a substantial portion of the assets of the Company, or any similar
transaction, or (b) assist or participate in, facilitate or encourage any effort
or attempt by any person or entity to do any of the foregoing; PROVIDED, that
the Seller may notify persons inquiring about such a transaction that a
definitive agreement was executed with respect to the sale of the Subject
Shares. Notwithstanding anything to the contrary contained herein, actions taken
directly by the Company or any of its employees without the concurrence, consent
or directive of the Seller will not result in a breach of this paragraph by the
Seller.
9.4. CONSENTS. The Seller shall use all reasonable efforts to take or
cause to be taken all actions and to do or cause to be done all things
necessary, proper or advisable under applicable laws and regulations to satisfy
the conditions set forth in Article IV hereof and to consummate and make
effective the transactions contemplated hereby, including without limitation:
obtaining and providing to Buyer all consents, approvals, permits and licenses
listed in EXHIBIT 4.5, all in a form reasonably satisfactory to the Buyer and
its legal counsel, which are necessary or desirable to the consummation of the
transactions
- 28 -
29
contemplated hereby or the continued operation of the business of the Company
after Closing in the ordinary course of business including, but not limited to,
consents from government and regulatory agencies, lenders, equipment lessors,
landlords, manufacturers, suppliers and other parties whose approval may be
necessary to avoid the acceleration of any indebtedness, the termination of or
the causation of a payment obligation under, contracts, leases, licenses or
permits affecting the Company or its business properties.
9.5. HSR NOTIFICATION. Unless the Seller and the Buyer each shall have
received advice of their respective counsel that no such filing is required, as
soon practicable (but no later than five (5) business days) after the execution
of this Agreement, the Seller (along with the Buyer) shall file, or cause to be
filed, with the FTC and the DOJ pursuant to the HSR Act, correct notification
and documentary material required in connection with the transaction described
in this Agreement. Thereafter, the Seller shall promptly file (along with the
Buyer) any additional information requested as soon as practicable after receipt
of a request for additional information from the FTC or DOJ and shall use
reasonable efforts to obtain early termination of the applicable waiting period
under the HSR Act. The Seller shall cooperate with the Buyer in exchanging such
information and shall provide such reasonable assistance as may be requested in
connection with such filing. All materials and forms filed by the Seller with
the FTC and DOJ pursuant to the HSR Act shall be true and correct.
ARTICLE X
---------
PRE-CLOSING COVENANT OF BUYER
-----------------------------
Unless the Buyer and the Seller each shall have received advice of
their respective counsel that no such filing is required, as soon as practicable
(but no later than five (5) business days) after the execution of this
Agreement, the Buyer (along with the Seller) shall file, or cause to be filed,
with the FTC and the DOJ pursuant to the HSR Act, correct notification and
documentary material required in connection with the transactions described in
this Agreement. Thereafter, the Buyer shall promptly file (along with the
Seller) any additional information requested as soon as practicable after
receipt of a request for additional information by the FTC or DOJ and shall use
reasonable efforts to obtain early termination of the applicable waiting period
under the HSR Act. The Buyer shall cooperate with the Seller in exchanging such
information and shall provide such reasonable assistance as may be requested in
connection with such filing. All materials and forms filed by the Buyer with the
FTC and the DOJ pursuant to the HSR Act shall be true and correct.
- 29 -
30
ARTICLE XI
----------
COVENANTS
---------
11.1. COOPERATION. The Buyer and the Seller each covenant and agree
that they shall cooperate with each other and shall cause their respective
officers, employees, agents, accountants and representatives to cooperate with
each other after the Closing to ensure the orderly transfer of the Subject
Shares from the Seller to the Buyer and the rights under Paragraph 3.2(1) and to
minimize any disruption to the business of the Company that might result from
the transactions contemplated hereby.
11.2. PUBLICITY. The Seller and the Buyer each covenant and agree that
they agree to issue on the date hereof a public announcement concerning the
transactions contemplated hereby in the form of EXHIBIT 11.2 attached hereto. No
other public release or announcement concerning the transactions contemplated
hereby shall be issued by the Buyer or the Seller unless such release or
announcement is approved by the Buyer and the Seller prior to its issuance.
11.3. EXECUTION OF ADDITIONAL DOCUMENTS. From time to time, as and when
requested by a party hereto, Buyer and Seller covenant that each party hereto
shall execute and deliver, or cause to be executed and delivered, all such
documents and instruments and shall take, or cause to be taken, all such further
or other actions as such other party may reasonably deem necessary or desirable
to consummate the transactions contemplated by this Agreement.
11.4. CONSENTS. In the event any consent described in Paragraph 9.4 is
not obtained on or prior to the Closing Date and the Buyer elects to consummate
the transactions contemplated herein despite the Seller's failure to obtain such
consent, the Seller shall continue to use commercially reasonable efforts to
obtain any such consent after the Closing Date until such time as such approval
has been obtained, and the Seller will cooperate with the Buyer in any lawful
and economically feasible arrangement to provide that the Company shall continue
to receive its interest in the benefits subject to such consent.
11.5. TAX MATTERS.
(a) Seller agrees to include the income of the Company in its
consolidated federal income tax return and any state or local return,
report or form that has been prepared on a consolidated, unitary or
combined basis for all periods through the Closing Date, and to pay any
taxes attributable to such income. For any taxable period of the
Company that includes (but does not end on) the Closing Date, the Buyer
shall timely prepare and file or cause to be timely prepared and filed,
with the appropriate authorities all tax returns,
- 30 -
31
reports and forms, provided that any taxes attributable to periods on
or before the Closing Date shall be reflected as liabilities of the
Company on the Closing Date Balance Sheet and Seller shall ultimately
be responsible therefor. For any period of the Company that ends on or
before the Closing Date, Seller shall timely prepare and file, or cause
to be timely prepared and filed, with the appropriate authorities all
tax returns, reports and forms required to be filed, in a manner
consistent with the past tax practices of the Company, and will pay all
taxes due on the filing of such returns, reports and forms.
(b) Seller, the Company and Buyer shall reasonably cooperate
and shall cause their officers, employees, agents, auditors and
representatives to cooperate in preparing and filing all returns,
reports and forms relating to taxes, including maintaining and making
available to each other all records necessary in connection with taxes
and in resolving all disputes and audits with respect to all taxable
periods relating to taxes.
11.6. OTHER. Seller shall continue the Company's present utilization of
Seller's UPS shipping and U.S. Custom Bonds and any other facility of the Seller
used by the Company prior to the Closing Date and letters of credit for existing
orders of the Company for purchases of merchandise as of the Closing Date (but
not for orders placed after the Closing Date) for 90 days following the Closing
Date (except such 90 day limitations shall not apply to Letters of Credit, which
shall be kept open until they are drawn or expire in accordance with their
terms) in a manner as requested by the Company from time to time during such
period.
ARTICLE XII
-----------
COVENANT NOT TO COMPETE
-----------------------
12.1. NON-COMPETITION. The Seller agrees that for a period of five (5)
years after the Closing, it shall not either directly or indirectly (including,
without limitation, through any affiliate), whether as agent, stockholder
(except as the holder of not more than five percent (5%) of the equity
securities of a publicly-held enterprise provided that such holder does not
render advice or assistance to such enterprise), employer, employee, consultant,
representative, trustee, partner, owner, proprietor, franchisor or otherwise:
(a) Acquire an ownership interest in, operate, franchise or
otherwise engage in or enter into any aspects of the business of any
"Competitor" (as hereinafter defined);
- 31 -
32
(b) Contact, solicit or entice, or attempt to contact, solicit
or entice, any supplier, customer or prospective customer of the
Company so as to cause, or attempt to cause, any of said suppliers,
customers or prospective customers not to do business with the Company
or to purchase products or services sold by the Company from any source
other than the Company; or
(c) Except for Xxxxx Xxxxx, hire any person who is currently
an employee of the Company, or induce, or attempt to induce, any such
person to leave the employ of the Company and/or accept employment
elsewhere, provided however that the Seller shall at Seller's cost
provide the current function performed by Xxxxx Xxxxx for six (6)
months from the Closing Date if during such period she is hired by the
Seller.
For purposes of this Paragraph 12.1, the term "Competitor"
shall mean any business, incorporated or otherwise, which sells at
retail, or offers at retail, services and/or products in North America
competitive with those sold or offered in the Company as of the Closing
Date.
Notwithstanding the foregoing, the Seller may (i) at any time acquire
an ownership interest in or otherwise engage in or enter into a business which
has retail operations competitive with the retail operations of the Company as
of the Closing Date if the revenues from such competitive retail operations for
any calendar year represent less than ten percent (10%) of the aggregate
revenues of such business for such calendar year, and (ii) the Seller may
operate in the Cincinnati, Ohio area at or adjacent to the corporate
headquarters one (1) retail store; and (iii) the Seller may acquire an ownership
interest in or otherwise engage in or operate six (6) or fewer retail stores
that are open for not more than six (6) months per twelve (12) month period for
the purpose of liquidating merchandise owned by the Seller from time to time,
subject to the terms of the Supply Agreement.
12.2. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. The Seller
acknowledges and agrees that it shall not, at any time following the date
hereof, disclose any Company Confidential Information (as hereinafter defined)
to anyone other than to employees and representatives of the Company except any
such Company Confidential Information which is required to be disclosed by the
Seller in connection with any court action or any proceeding before any
administrative body or pursuant to any law but only after the Seller has given
written notice to the Buyer of the requirement to disclose such Company
Confidential Information and has given the Buyer a reasonable opportunity to
contest the need for such disclosure and the Seller shall cooperate with the
Buyer in connection with any such contest. For purposes of this Paragraph 12.2,
the term "Company
- 32 -
33
Confidential Information" shall mean all non-public and all proprietary
information relating to the Company, its customers, products and services
including, without limitation, the following: (i) information concerning pricing
policies of the Company, prices charged by the Company to its customers, the
volume of orders of such customers and all other information concerning the
transactions of the Company with its customers or proposed customers; (ii) the
customer lists of the Company; (iii) information concerning the marketing
programs or strategies of the Company; (iv) financial information concerning the
Company; (v) information concerning salaries or wages paid to, the work records
of and other personnel information relating to employees of the Company; and
(vi) all other confidential and proprietary information of the Company.
12.3. ENFORCEMENT. In addition to all other legal remedies available to
the Buyer for the enforcement of the covenants of this Article XII, the Seller
hereby agrees that the Buyer shall be entitled to an injunction by any court of
competent jurisdiction to prevent or restrain any breach or threatened breach
hereof The Seller further agrees that if any of the covenants set forth herein
shall at any time be adjudged invalid to any extent by any court of competent
jurisdiction, such covenant shall be deemed modified to the extent necessary to
render it enforceable.
ARTICLE XIII
------------
INDEMNIFICATION
---------------
13.1. SURVIVAL. The representations and warranties contained in this
Agreement shall survive Closing as set forth in the table below. In the event a
claim for indemnification is asserted prior to the expiration of the period set
forth below relative to any representations and warranties, such claim and any
corresponding indemnity shall survive until finally determined as provided
below. Any claim for indemnification under this Article XIII made in writing
prior to the expiration of the applicable survival period, and the rights of
indemnity with respect thereto, shall survive such expiration until resolved or
judicially determined and any such claim not so made in writing prior to the
expiration of such applicable survival period shall be deemed to have been
waived.
Representation and
Warranty Paragraph Number Survival Period
------------------------- ---------------
6.1, 6.14, 6.19, 7.1, 7.4 Until expiration of all
applicable statutes of
limitations
- 33 -
34
7.6 Three (3) years after the filing
of the applicable tax return with
the Internal Revenue Service
6.2, 6.7 Indefinite (i.e., no
expiration date)
All other paragraphs of Two (2) years after the
VI and VII Closing
13.2. CERTAIN LIMITATIONS.
(a) The Seller's aggregate liability for any breach(es) of
representation or warranty on the part of the Seller under this
Agreement shall be limited to fifty percent (50%) of the Purchase
Price; PROVIDED, that such limitation shall not apply to liability for
breach(es) of the representations and warranties contained in
Paragraphs 6.1, 6.2, 6.7, 6.9 and/or 6.14, above. No party shall assert
claims for indemnification against the Seller or Buyer, respectively,
for any breach(es) of representation or warranty on the part of the
Seller or Buyer, respectively, under this Agreement unless and until
the aggregate amount of Losses (as defined below) of such party arising
out of all such breaches by the Seller or Buyer, respectively, exceeds
Two Hundred Fifty Thousand Dollars ($250,000) (the "Threshold Amount");
PROVIDED, that once the aggregate amount of such Losses of such party
exceeds the Threshold Amount, such party shall be entitled to
indemnification of all of such Losses. Notwithstanding the foregoing,
for purposes of determining whether the amount of Losses for which
Seller or Buyer, respectively, is required to provide indemnification
under Paragraph 13.3 or 13.4, respectively, below, exceeds the
Threshold Amount, all representations, warranties, covenants and
agreements of the Seller or Buyer, respectively, hereunder shall be
read so as to exclude therefrom any reference to "material",
"materiality" or "material adverse effect" or any similar
qualification.
(b) The Buyer's aggregate liability for any breach(es) of
representation or warranty on the part of the Buyer under this
Agreement shall be limited to fifty percent (50%) of the Purchase
Price; PROVIDED, that such limitation shall not apply for breach(es) of
the representations and warranties contained in Paragraphs 7.1 and/or
7.4, above. No party shall assert claims for indemnification hereunder
against the Buyer for any breach(es) of representation or warranty on
the part of the Buyer under this Agreement unless and until the
aggregate amount of Losses of such party arising out of all such
breaches by the Buyer exceeds the Threshold Amount; PROVIDED, that once
the aggregate amount of such Losses of such party exceeds the Threshold
Amount, such
- 34 -
35
party shall be entitled to indemnification of all of such
Losses.
13.3. INDEMNIFICATION BY THE SELLER. The Seller shall indemnify, defend
and hold the Buyer, the Company and their officers, directors, employees and
agents harmless from and against any and all losses, liabilities, damages,
claims, costs and expenses, including, but not limited to, interest, penalties,
reasonable attorneys' fees, and other professional fees and all amounts paid in
defense or settlement of any of the foregoing (collectively referred to as
"Losses"), arising out of or resulting from:
(a) the falsity or breach of any of the representations or
warranties made by the Seller herein, or in any document, agreement or
certificate executed and/or delivered pursuant hereto, provided that
once the Threshold Amount for such Losses is exceeded, for purposes of
determining indemnification for Buyer, the representations and
warranties, covenants and agreements of the Seller shall be read so as
to exclude therefrom any reference to "material", "materiality" or
"material adverse effect" or any similar qualification;
(b) any breach or nonfulfillment of any agreement or covenant
of the Seller contained herein or in any document, agreement or
certificate executed and/or delivered pursuant hereto, provided that
once the Threshold Amount for such Losses is exceeded, for purposes of
determining indemnification for Buyer, the representations and
warranties, covenants and agreements of the Seller shall be read so as
to exclude therefrom any reference to "material", "materiality" or
"material adverse effect" or any similar qualification; or
(c) any obligation of the Company for (i) taxes with respect
to periods prior to Closing, (ii) any Intercompany Borrowings, (iii)
any amounts due or which may become due as a result of the Company's
participation in Phase I and Phase II payments to current or former
owners or employees of the Company, including any Losses arising out of
the existing proceeding with Xxxxxx X. Xxxxxxxx, (iv) claims that the
Company does not own all copyrights relating to the Company's
advertisements as of the Closing Date, (v) agreements with respect to
prior potential purchasers of the stock or assets of the Company, (vi)
accounts payable to Seller for products received by the Company prior
to or on the Closing Date for which no invoice for the full amount is
received by the Company on or before the Closing Date or (vii) full
vesting and cost of splitting of any 401(k) plan; provided that
indemnifications under this subparagraph (c) are not subject to any
Threshold Amount but shall be for all
- 35 -
36
Losses of the Buyer or the Company and their officers, directors,
employees and agents.
13.4. INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify, defend
and hold the Seller, its officers, directors, employees and agents harmless from
and against any and all Losses arising out of or resulting from:
(a) the falsity or breach of any representation or warranty
made by the Buyer herein or in any document, agreement or certificate
executed and/or delivered pursuant hereto, provided that once the
Threshold Amount for such Losses is exceeded, for purposes of
determining indemnification for Seller, the representations and
warranties, covenants and agreements of the Buyer shall be read so as
to exclude therefrom any reference to "material", "materiality" or
"material adverse effect" or any similar qualification; or
(b) any breach or nonfulfillment of any agreement or covenant
of the Buyer contained herein or in any document, agreement or
certificate executed and/or delivered pursuant hereto, provided that
once the Threshold Amount for such Losses is exceeded, for purposes of
determining indemnification for Seller, the representations and
warranties, covenants and agreements of the Buyer shall be read so as
to exclude therefrom any reference to "material", "materiality" or
"material adverse effect" or any similar qualification; or
(c) any guarantee given by Seller for Leases of the Company
disclosed in this Agreement or outstanding Letters of Credit given by
Seller for the purchase of product extant at Closing without being
called or drawn on or compensated to Seller in some other manner and
under which Seller is required to pay as a result of a breach after
Closing by Buyer or the Company for guarantees or by drawing down on a
Letter of Credit after Closing and for payments made by Seller for
actual utilization by the Company under Paragraph 11.6, all only to the
extent not paid as part of the Purchase Price.
13.5. PROCEDURE RELATIVE TO INDEMNIFICATION.
(a) In the event that any party hereto shall claim that it is
entitled to be indemnified pursuant to the terms of this Article XIII,
it (the "Claiming Party") shall so notify the party against which the
claim is made (the "Indemnifying Party") in writing of such claim
within sixty (60) days after the Claiming Party receives notice of any
action, proceeding, demand or assessment or otherwise has received
notice of any claim of a third party that may reasonably be expected to
result in a claim for
- 36 -
37
indemnification by the Claiming Party against the Indemnifying Party,
or within such earlier period of time as may be reasonably necessary to
allow the Indemnifying Party to respond to any pleading or other
document for which a timely response is required; PROVIDED, that
failure to timely give such notification shall not affect the
indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of
such failure. Such notice shall specify the breach of representation,
warranty or agreement claimed by the Claiming Party and the Losses
incurred by, or imposed upon, the Claiming Party on account thereof If
such Losses are liquidated in amount, the notice shall so state and
such amount shall be deemed the amount of the claim of the Claiming
Party. If the amount is not liquidated, the notice shall so state and
in such event a claim shall be deemed asserted against the Indemnifying
Party on behalf of the Claiming Party, but no payment shall be made on
account thereof until the amount of such claim is liquidated and the
claim is finally determined.
(b) The following provisions shall apply to any claim of the
Claiming Party which is based upon (1) a suit, action or proceeding
filed or instituted by any third party, or (2) any form of proceeding
or assessment instituted by any governmental entity:
(i) The Indemnifying Party shall, upon receipt of
such written notice and at its expense, defend such claim in
its own name or, if necessary, in the name of the Claiming
Party. The Claiming Party will cooperate with and make
available to the Indemnifying Party such assistance and
materials as may be reasonably requested of it, and the
Claiming Party shall have the right, at its expense, to
participate in the defense. The Indemnifying Party shall have
the right to settle and compromise such claim only with the
consent of the Claiming Party (which consent shall not be
unreasonably withheld). If the proceeding involves a matter
solely of concern to the Claiming Party and not subject to
indemnification under this Article XIII in addition to the
claim for which indemnification under this Article XIII is
being sought, such matter of sole concern shall be within the
sole responsibility of the Claiming Party and its counsel.
(ii) In the event the Indemnifying Party shall notify
the Claiming Party that it disputes any claim made by the
Claiming Party and/or it shall refuse or choose not to conduct
a defense against such claim, then the Claiming Party shall
have the right to conduct a defense against such claim and
shall have the right to settle and compromise such claim
without the consent
- 37 -
38
of the Indemnifying Party. Once the amount of such claim is
liquidated and the claim is finally determined, the Claiming
Party shall be entitled to pursue each and every remedy
available to it at law or in equity to enforce the
indemnification provisions of this Article XIII and, in the
event it is determined, or the Indemnifying Party agrees, that
it is obligated to indemnify the Claiming Party for such
claim, the Indemnifying Party agrees to pay all costs,
expenses and fees, including all reasonable attorneys' fees,
which may be incurred by the Claiming Party in attempting to
enforce indemnification under this Article XIII, whether the
same shall be enforced by suit or otherwise.
13.6. EXCLUSIVE REMEDY. The parties hereto acknowledge that the sole
damage remedy for any claims of the nature described in Paragraph 13.3 or 13.4
hereof shall be the indemnity set forth in this Article XIII; PROVIDED, that
this Paragraph 13.6 shall not limit (i) a party's remedy for the fraudulent
conduct of another party, (ii) a party's right to injunctive relief, or (iii)
the provisions of Article II, above, regarding determination of the Closing
Adjusted Net Book Value and the appropriate payments as a result thereof.
ARTICLE XIV
-----------
TERMINATION
-----------
14.1. TERMINATION. This Agreement, and the transactions contemplated
hereby, may not be terminated except as follows:
(a) Upon the mutual consent of the Buyer and Seller;
(b) By the Buyer, if any of the conditions to its obligations
set forth in Article IV, hereof shall not have been satisfied or waived
at the time of Closing or such other date agreed by the parties
pursuant to Paragraph 3.1, above;
(c) By the Seller, if any of the conditions to its obligations
set forth in Article V, hereof shall not have been satisfied or waived
at the time of Closing or such other date agreed by the parties
pursuant to Paragraph 3.1, above; or
(d) By the Buyer or the Seller if Closing has not occurred on
or before September 30, 1998 (or such other later date as the parties
have agreed in writing); PROVIDED, that the right to terminate this
Agreement pursuant to this Paragraph 14.1(d) shall not be available to
any party whose failure to fulfill or perform any obligation under this
- 38 -
39
Agreement (which has not been cured) is the cause of, or has resulted
in, the failure to close on or before such date.
14.2. REMEDIES. If the Buyer or Seller shall terminate this Agreement
pursuant to the provisions of this Article XIV, such termination shall not waive
or terminate any rights or remedies which the terminating party may have against
the other parties hereto, whether at law or equity, and such termination shall
not affect the confidentiality obligations of any party hereto. Nothing
contained herein shall be deemed to require any party to terminate this
Agreement rather than to proceed with the Closing if a condition precedent to
the obligations of such party has not been satisfied.
ARTICLE XV
----------
CONFIDENTIALITY
---------------
15.1. NON-DISCLOSURE.
(a) If Closing occurs, Seller thereafter shall carry out the
terms of Article XII, above, including without limitation, the
nondisclosure and noncompetition provisions set forth therein.
(b) If Closing has not occurred, for a period of two (2) years
after the date hereof, the parties shall, and shall ensure that their
officers, directors, employees, affiliates, agents and representatives
shall, hold in strict confidence, and not use in any way except in
connection with the consummation of the transactions contemplated by
this Agreement, all Confidential Information (as hereinafter defined)
obtained in connection with the transactions contemplated hereby,
except any such Confidential Information which (i) was generally known
to the public prior to its being furnished to any party hereto, or (ii)
is required to be disclosed by such party or its officers, directors,
employees, affiliates, agents or representatives in connection with any
court action or any proceeding before any administrative body or
pursuant to any statute, rule or regulation of any governmental entity
or in connection with securing any consent or approval required
hereunder, and then only after such party has given written notice to
the other parties of the intention to so disclose such Confidential
Information and has given the other parties a reasonable opportunity to
contest the need for such disclosure, and such party shall cooperate
with the other parties in connection with any such dispute.
15.2. OBLIGATIONS UPON TERMINATION OF AGREEMENT. In the event that this
Agreement is terminated pursuant to Article XIV, above, the parties and their
officers, directors, employees,
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affiliates, agents and representatives shall promptly destroy or, upon the
request of the party from which such information was obtained, return to such
party, all Confidential Information of such party and any copies or extracts
thereof.
15.3. REMEDIES. In addition to all other legal remedies available to
the parties for the enforcement of the covenants of this Article XV the parties
shall be entitled to an injunction by any court of competent jurisdiction to
prevent or restrain any breach or threatened breach hereof; and the parties
acknowledge that the parties have no adequate remedy at law for the breach of
such covenants.
15.4. DEFINITION. For purposes of this Article XV, the term
"Confidential Information" shall mean all valuable proprietary information of
any party hereto received by another party hereto or by its officers, directors,
employees, agents, representatives or affiliates pursuant to the negotiation of;
provisions of; or communications relating to this Agreement.
ARTICLE XVI
-----------
MISCELLANEOUS
-------------
16.1. EXPENSES. Each of the Buyer and the Seller shall pay its own
expenses and costs relating to the negotiation, execution and performance of
this Agreement, PROVIDED, that the aggregate expenses and costs of the Seller
and the Company relating to the negotiation, execution and performance of this
Agreement to the extent that such aggregate expenses and costs do not exceed Six
Hundred Thousand Dollars ($600,000) shall be paid by the Company immediately
after the Closing if billed to the Company.
16.2. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
hand delivered, including, but not limited to, by courier, or when sent by
facsimile (transmission confirmed), or two (2) days after being mailed,
certified or registered mail, with postage prepaid addressed as follows (or to
such other person or address as the party to receive such notice may have
designated from time to time by notice in writing pursuant hereto):
If to Buyer: PFW Acquisition Corp.
0000 Xxxxx Xxxxxxx Xxx.
Xxx Xxxxx, Xxxxxx 00000
Fax:
Attention: President
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With copies to: Chamberlain, Hrdlicka, White,
Xxxxxxxx & Xxxxxx
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
If to Seller: Xxxxxx Greetings, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx and Chief
Executive Officer
16.3. CERTAIN DEFINITIONS.
(a) Unless the context clearly otherwise requires, as used
herein, the term "Agreement" means this Agreement and the Exhibits,
Schedules, documents and instruments executed and delivered pursuant
hereto. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Article, Paragraph or other subdivision. The use of the
neuter pronoun "it" shall also refer as appropriate to the masculine
and/or feminine gender. The use of the singular herein shall, where
appropriate, be deemed to include the plural and vice versa. As used
herein, the word "person" refers to any individual, corporation,
partnership, trust, governmental body or authority or other
organization or entity. As used herein, the term "including" means
"including, but not limited to."
(b) For purposes of this Agreement and interpretation of the
phrases "to the Seller's knowledge," "known by the Seller," and similar
words or phrases used herein referring to facts or other information
known to the Seller, the Seller shall be deemed to have knowledge of a
matter if any officer, director, or management personnel of the Seller
has actual knowledge of the matter, including without limitation, Xxxxx
Xxxxxxx, Xxxx Xxxx, Xxxxx Xxxxxx, and Xxxxx Xxxxxx.
(c) For purposes of this Agreement, but subject to Paragraphs
13.2, 13.3 and 13.4 above and except for preparing Disclosure
Schedules, "material," "materiality," or "material adverse effect" with
respect to the Company shall mean, an effect or effects which,
individually or in aggregate, (i) after taking into consideration the
relative amount, the absolute amount and the nature of the item, would
cause a reasonably prudent buyer to conclude that such effect adversely
affects the assets, liabilities, condition (financial or otherwise),
results, operations or prospects of the Company, as the case may be, in
a manner or amount
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which would be material, and (ii) has or will have a direct financial
consequence of Two Hundred and Fifty Thousand Dollars ($250,000.00) or
more. For purposes of preparing Disclosure Schedules, "material",
"materiality", or "material adverse effect" with respect to the Company
shall have the meaning as set out above in this subparagraph (c) except
"Fifteen Thousand Dollars ($15,000.00) or more" shall be inserted in
place of "Two Hundred and Fifty Thousand Dollars ($250,000.00) or
more." The terms "material", "materiality" and "material adverse
effect" shall not be deemed to limit a party's remedy for the
fraudulent conduct of another party.
16.4. HEADINGS. The headings to Articles and Paragraphs of this
Agreement are for reference only and shall not be used in construing the
provisions hereof or otherwise affect the meaning hereof.
16.5. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original but all of which shall
constitute but one and the same agreement and shall become binding upon the
parties when each party hereto has executed one or more counterparts.
16.6. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the Seller and the Buyer and supersedes all prior
agreements and understandings related to the subject matter hereof There are no
representations, warranties, covenants, promises or agreements on the part of
either party to the other party hereto which are not explicitly set forth
herein.
16.7. MODIFICATIONS; WAIVERS. Any modification or amendment of or with
respect to any provisions of this Agreement or any agreement, instrument or
document delivered pursuant hereto shall not be effective unless it shall be in
writing and signed by the Seller and the Buyer and shall designate specifically
the terms and provisions so modified. Any waiver of or with respect to any
provisions of this Agreement or any agreement, instrument or document delivered
pursuant hereto shall not be effective unless it shall be in writing and signed
by the party against whom it is sought to be enforced.
16.8. BENEFIT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. The Seller may not assign its rights or delegate its obligations
hereunder without the written consent of the Buyer. After the Closing, the Buyer
may assign all or any of its rights or obligations to any one or more parties in
connection with the sale of the Subject Shares or the sale of all or
substantially all of the assets of the Company to a related or unrelated party.
Except with respect to permitted assigns hereunder, this Agreement shall not be
deemed to confer
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any rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
one or more counterparts, all of which shall be read together and be construed
as one and the same instrument as of the day, month and year first above
written.
XXXXXX GREETINGS, INC.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Executive V.P. - Finance and
Operations
PFW ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxx
---------------------------------
Assistant Secretary
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