Exhibit 10.2
RECAPITALIZATION AND STOCK PURCHASE AGREEMENT
Among
COLOR SPOT NURSERIES, INC.,
XXXXXX EQUITY CAPITAL CORPORATION,
X. X. XXXXXXXX CO., XXXXXXX X. XXXXXXXX, XXXXX XXXXXXXX,
XXXX X. XXXXXXX, XXXXXX X. XXXXXXXX AND
XXXXXXX X. XXXXXX
and
KCSN ACQUISITION COMPANY, L.P.
dated as of
December 31, 1996
TABLE OF CONTENTS
Page
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ARTICLE 1 REDEMPTION OF STOCK . . . . . . . . . . . . . . . . . . . . . 2
1.1 Redemption of Stock . . . . . . . . . . . . . . . . . . . . . 2
1.2 Consideration . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2 PURCHASE AND SALE OF STOCK. . . . . . . . . . . . . . . . . . 4
2.1 Transfer of Stock . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Consideration . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . 5
3.1 Corporate Organization. . . . . . . . . . . . . . . . . . . . 5
3.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Ownership of Stock. . . . . . . . . . . . . . . . . . . . . . 6
3.4 Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . 6
3.5 Balance Sheet and Income Statement. . . . . . . . . . . . . . 6
3.6 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . 7
3.7 No Approvals or Conflicts . . . . . . . . . . . . . . . . . . 7
3.8 Compliance with Law; Governmental Authorizations. . . . . . . 8
3.9 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.10 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 8
3.11 Absence of Certain Changes. . . . . . . . . . . . . . . . . . 8
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.13 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . 9
3.14 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . 9
3.15 Patents, Trademarks, Trade Names, Etc.. . . . . . . . . . . . 10
3.16 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.17 Environmental Compliance. . . . . . . . . . . . . . . . . . . 11
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.19 No Brokers' or Other Fees . . . . . . . . . . . . . . . . . . 13
3.20 Material Customers and Suppliers. . . . . . . . . . . . . . . 13
3.21 Real Property . . . . . . . . . . . . . . . . . . . . . . . . 13
3.22 Investment Company Act Status . . . . . . . . . . . . . . . . 14
3.23 Product Liability . . . . . . . . . . . . . . . . . . . . . . 14
3.24 Books and Records . . . . . . . . . . . . . . . . . . . . . . 14
3.25 Acquisition for Investment. . . . . . . . . . . . . . . . . . 14
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . 14
4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . 14
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4.3 No Approvals or Conflicts . . . . . . . . . . . . . . . . . . 15
4.4 Acquisition for Investment. . . . . . . . . . . . . . . . . . 15
4.5 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.6 No Knowledge of Breach. . . . . . . . . . . . . . . . . . . . 15
4.7 No Brokers' or Other Fees . . . . . . . . . . . . . . . . . . 15
ARTICLE 5 CONDITIONS TO THE SELLERS' AND
THE COMPANY'S OBLIGATIONS. . . . . . . . . . . . . . . . . . 16
5.1 Representations and Warranties. . . . . . . . . . . . . . . . 16
5.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Officer's Certificate . . . . . . . . . . . . . . . . . . . . 16
5.4 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.5 Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.6 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.7 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 Employment Agreements . . . . . . . . . . . . . . . . . . . . 16
5.9 8.0% Subordinated Convertible Notes . . . . . . . . . . . . . 17
5.10 Stockholders' Agreement . . . . . . . . . . . . . . . . . . . 17
5.11 Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 6 CONDITIONS TO PURCHASER'S OBLIGATIONS . . . . . . . . . . . . 17
6.1 Representations and Warranties. . . . . . . . . . . . . . . . 17
6.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 Officer's Certificate . . . . . . . . . . . . . . . . . . . . 17
6.4 Resignation of Directors. . . . . . . . . . . . . . . . . . . 17
6.5 Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.6 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.7 Existing Indebtedness . . . . . . . . . . . . . . . . . . . . 18
6.8 Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . . 18
6.9 Other Agreements. . . . . . . . . . . . . . . . . . . . . . . 18
6.10 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 7 COVENANTS AND AGREEMENTS. . . . . . . . . . . . . . . . . . . 18
7.1 Conduct of Business by Company. . . . . . . . . . . . . . . . 18
7.2 Access to Books and Records; Cooperation. . . . . . . . . . . 19
7.3 Filings and Consents. . . . . . . . . . . . . . . . . . . . . 19
7.4 WARN Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5 Supplements to Disclosure Schedule. . . . . . . . . . . . . . 20
7.6 Covenant to Satisfy Conditions. . . . . . . . . . . . . . . . 20
7.7 Exclusive Dealing . . . . . . . . . . . . . . . . . . . . . . 20
7.8 Director and Officer Liability and Indemnification. . . . . . 21
7.9 Contact with Customers and Suppliers. . . . . . . . . . . . . 21
7.10 8.0% Subordinated Convertible Notes . . . . . . . . . . . . . 21
7.11 COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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ARTICLE 8 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Procedure and Effect of Termination . . . . . . . . . . . . . 22
ARTICLE 9 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . 26
10.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 26
10.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.4 No Assignment. . . . . . . . . . . . . . . . . . . . . . . . 26
10.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.7 Complete Agreement . . . . . . . . . . . . . . . . . . . . . 29
10.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 29
10.9 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.11 Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . 30
10.13 Third Parties. . . . . . . . . . . . . . . . . . . . . . . . 30
10.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS . . . . . . . 31
10.15 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . 31
10.16 Sellers' Representative. . . . . . . . . . . . . . . . . . . 31
EXHIBIT 5.7 LEGAL OPINION [XXXXXXXXXX XXXXX XXXXXX & XXXXXXXXXX, P.C.]. 34
EXHIBIT 5.8 EMPLOYMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . 35
EXHIBIT 5.9 8.0% SUBORDINATED CONVERTIBLE NOTES . . . . . . . . . . . . 36
EXHIBIT 5.10 STOCKHOLDERS' AGREEMENT . . . . . . . . . . . . . . . . 37
EXHIBIT 6.8(a) LEGAL OPINION - [XXXXXXX X. XXXXXXXX, ESQ.]. . . . . . . 38
EXHIBIT 6.8(b) LEGAL OPINION - [XXXX XXXXXXX] . . . . . . . . . . . . . 39
EXHIBIT 6.8(c) LEGAL OPINION - [XXXXXX XXXXXX & ZAVIS]. . . . . . . . . 40
EXHIBIT 6.10 FINANCING PROPOSAL . . . . . . . . . . . . . . . . . . . 41
EXHIBIT 6.11 FEE AGREEMENT . . . . . . . . . . . . . . . . . . . . . 42
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SCHEDULE 1 SHAREHOLDERS, EXISTING SHARES, OPTION SHARES AND REDEEMED
SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 43
SCHEDULE 2 PENDING ACQUISITIONS . . . . . . . . . . . . . . . . . . 44
DISCLOSURE SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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RECAPITALIZATION AND STOCK PURCHASE AGREEMENT
This Recapitalization and Stock Purchase Agreement (this "Agreement"),
dated as of December 31, 1996, is entered into by and among Color Spot
Nurseries, Inc., a Delaware corporation (the "Company"), Xxxxxx Equity Capital
Corporation, a Delaware corporation ("Xxxxxx", or "Sellers' Representative"), X.
X. Xxxxxxxx Co., a California corporation ("MFV"), Xxxxxxx X. Xxxxxxxx
("Xxxxxxxx"), Xxxxx Xxxxxxxx ("Xxxxxxxx"), Xxxx X. Xxxxxxx ("Xxxxxxx"), Xxxxxx
X. Xxxxxxxx ("Xxxxxxxx") and Xxxxxxx X. Xxxxxx ("Xxxxxx")(MFV, Xxxxxxxx,
Halamuda and Bookspan are referred to herein individually as an "Executive
Manager" and collectively as the "Executive Managers"; Xxxxxx, Xxxxxxx and
Xxxxxx are referred to herein individually as a "Director Shareholder" and
collectively as the "Director Shareholders"; Xxxxxx, MFV, Xxxxxxxx and Xxxxxxxx
may be referred to herein individually as a "Redeeming Shareholder" and
collectively as the "Redeeming Shareholders"), and KCSN Acquisition Company,
L.P., a Delaware limited partnership ("Purchaser").
WHEREAS, the Redeeming Shareholders, Xxxxxxx, Bookspan and Xxxxxx,
together with Xxxx Xxxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxxx, Xxx Xxxxxxxxx,
Xxxx Xxxxx, Xxxx Xxxxxxxx, Xxxx Xxxxxxx and Xxxxxx Xxxxx (all such entities or
individuals are individually a "Shareholder" and collectively the
"Shareholders"), collectively own, beneficially and of record, 9,846,884 shares
(the "Existing Shares"), together with options to purchase (the "Management
Options") a collective additional 1,697,707 shares (the "Option Shares") (for a
total of 11,544,591 shares) (the Existing Shares and the Option Shares are
collectively, the "Shares"), of common stock, par value $.01 per share (the
"Common Stock"), of the Company;
WHEREAS, the Company desires to redeem (i) from Xxxxxx, all of the
Shares owned by Xxxxxx, and (ii) from the remaining Shareholders, the number of
Shares set forth opposite such Shareholder's name in the column labeled
"Redeemed Shares" on SCHEDULE 1 attached hereto (the "Redeemed Shares"), which
redemption shall be effected pursuant to this Agreement and/or pursuant to that
certain Put/Call Option Agreement of even date herewith among the Company and
each of the Shareholders other than Xxxxxx, MFV and Xxxxxxxx (the "Option
Agreement"), and each Shareholder desires to have its Shares so redeemed
pursuant to this Agreement and/or the Option Agreement; and
WHEREAS, Purchaser desires to purchase from the Company and the
Company desires to issue and to sell to the Purchaser, 4,343,110 shares of
Common Stock of the Company (the "New Shares"), upon the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE 1
REDEMPTION OF STOCK
1.1 REDEMPTION OF STOCK. On or prior to the Closing Date (as
defined in Section 1.3) and subject to the terms and conditions set forth in
this Agreement, each of the Redeeming Shareholders will sell, assign, transfer
and deliver to the Company all Redeemed Shares held by the Redeeming
Shareholders (except that Halamuda will sell only _____ Redeemed Shares pursuant
to this Agreement, including _____ Shares to be issued on exercise of Management
Options held by Halamuda), free and clear of all options, pledges, security
interests, liens or other encumbrances or restrictions on voting or transfer
("Encumbrances"), other than the restrictions imposed by Federal and state
securities laws (the "Redemption").
1.2 CONSIDERATION. On or prior to the Closing Date and subject to
the terms and conditions set forth in this Agreement, in reliance on the
representations, warranties, covenants and agreements of the parties contained
herein and in consideration of the sale, assignment, transfer and delivery of
the Redeemed Shares owned by the Redeeming Shareholders and to be redeemed
hereunder, the Company will pay to the Redeeming Shareholders the amounts set
forth in Sections 1.3(b)(i), (ii), (iii) and (v) hereof (such amount to be an
amount equal to $4.95037 multiplied by the number of Shares to be sold by them
hereunder) (collectively, the "Redemption Price"). The Company will purchase
the balance of the Redeemed Shares pursuant to the Option Agreement.
1.3 THE CLOSING. The closing (the "Closing") of the transactions
contemplated in this Agreement shall take place at the offices of Ropes & Xxxx,
________________________, New York, New York ______ at 9:00 a.m., local time,
on December 31, 1996.
(a) DELIVERIES BY REDEEMING SHAREHOLDERS. At or prior to the
Closing, the Redeeming Shareholders shall deliver or cause to be delivered to
the Company the following:
(i) certificates evidencing the Redeemed Shares to be
sold by such Redeeming Shareholders hereunder, which certificates shall be
properly endorsed for transfer or accompanied by duly executed stock
powers, in either case executed in blank or in favor of the Company, and
otherwise in a form acceptable for transfer on the books of the Company;
and
(ii) all other previously undelivered documents
required by this Agreement to be delivered by the Redeeming Shareholders to
the Company or the Purchaser, as the case may be, at or prior to the
Closing Date in connection with the transactions contemplated hereby.
(b) DELIVERIES BY THE COMPANY. At or prior to the Closing, the
Company shall deliver or cause to be delivered the following:
2
(i) to Xxxxxx, $27,552,592 by wire transfer of
immediately available funds to the account(s) designated by Xxxxxx;
(ii) to MFV [XXXXXXXX?] $6,155,236 by wire transfer of
immediately available funds to the account designated by Xxxxxxxx;
(iii) to Halamuda, $__________ by wire transfer of
immediately available funds to the account designated by Halamuda;
(iv) to Coast Business Credit, a division of Southern
Pacific Thrift and Loan Association (successor by merger to CoastFed
Business Credit Corporation) ("Coast"), an amount in cash equal to the
principal amount of all indebtedness of the Company and the "Subsidiary"
(as hereinafter defined) owed to Coast as of the Closing Date, all accrued
and unpaid interest thereon through the Closing Date and all other
obligations of the Company and the Subsidiary payable to Coast, which
amount shall in no event exceed $15,000,000;
(v) to Xxxxxx, the 8.0% Subordinated Convertible Notes
(as defined in Section 5.9, the "Notes") in the aggregate principal amount
of $7,100,000; and
(vi) all other previously undelivered documents
required by this Agreement to be delivered by the Company, if any, to the
Redeeming Shareholders at or prior to the Closing Date in connection with
the transactions contemplated hereby.
(c) All instruments and documents executed and delivered to the
Company pursuant hereto shall be in form and substance, and shall be executed in
a manner reasonably satisfactory to legal counsel to the Company and to the
Purchaser. All instruments and documents executed and delivered to the
Redeeming Shareholders pursuant hereto shall be in form and substance, and shall
be executed in a manner reasonably satisfactory to legal counsel to the
Redeeming Shareholders and to the Purchaser.
1.4 FURTHER ASSURANCES. After the Closing, each party hereto shall
from time to time, at the request of any other party and without further cost or
expense to such other party, execute and deliver such other instruments of
conveyance and transfer and take such other actions as such other party may
reasonably request in order to more effectively consummate the transactions
contemplated hereby, including the redemption by the Company of the Redeemed
Shares to be sold by the Redeeming Shareholders hereunder (as contemplated by
this Article 1), and to vest in Purchaser good and valid title to the New Shares
(as contemplated in Article 2).
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ARTICLE 2
PURCHASE AND SALE OF STOCK
2.1 TRANSFER OF STOCK. On the Closing Date and subject to the terms
and conditions set forth in this Agreement, the Company will issue and deliver
to Purchaser the New Shares, free and clear of all Encumbrances, other than the
restrictions imposed by Federal and state securities laws (the "Issuance").
2.2 CONSIDERATION. On the Closing Date and subject to the terms and
conditions set forth in this Agreement, in reliance on the representations,
warranties, covenants and agreements of the parties contained herein and in
consideration of the issuance and delivery of the New Shares, Purchaser will pay
to the Company the amount set forth in Section 2.3(b)(i) hereof (such amount to
be equal to the product of (i) $4.95037 and (ii) the number of New Shares)
(collectively, the "Purchase Price").
2.3 THE CLOSING.
(a) DELIVERIES BY THE COMPANY. At or prior to the Closing, the
Company shall deliver or cause to be delivered to Purchaser the following:
(i) certificates evidencing the New Shares;
(ii) resignations of the directors of the Company and
the "Subsidiary" (as hereinafter defined), as contemplated by and listed in
Section 6.4 hereof; and
(iii) all other previously undelivered documents
required by this Agreement to be delivered by the Company to Purchaser at
or prior to the Closing Date in connection with the transactions
contemplated hereby.
(b) DELIVERIES BY PURCHASER. At or prior to the Closing,
Purchaser shall deliver or cause to be delivered to the Company the following:
(i) $21,500,000 by wire transfer of immediately
available funds to the account(s) designated by the Company; and
(ii) all other previously undelivered documents
required by this Agreement to be delivered by Purchaser to the Company at
or prior to the Closing Date in connection with the transactions
contemplated hereby.
(c) All instruments and documents executed and delivered to
Purchaser pursuant hereto shall be in form and substance, and shall be executed
in a manner reasonably satisfactory to legal counsel to Purchaser, to the
Company and to the Redeeming Shareholders. All instruments and documents
executed and delivered to legal counsel to the Company pursuant
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hereto shall be in form and substance, and shall be executed in a manner
reasonably satisfactory to the Company, to the Purchaser and to the Redeeming
Shareholders.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Shareholder signatory hereto (each a "Seller" and collectively
the "Sellers"), severally (and not jointly) in the same proportion that such
Seller's ownership of Shares (as reflected in Section 3.3 of the Disclosure
Schedule attached hereto (the "Disclosure Schedule")) bears to the total number
of Shares prior to the Redemption and prior to the Issuance (the "Ownership
Allocation") (except with respect to representations and warranties contained in
Sections 3.3, 3.4 and 3.25 which relate to a specific Seller, which
representations and warranties are made solely by such Seller to whom or to
which such representation or warranty relates), hereby represents and warrants
to Purchaser, immediately prior to and at the moment of the Closing but not
taking into effect any transactions to be consummated in the moment immediately
subsequent to the Closing, to the extent indicated in each of the following
sections, which extent shall be unqualified unless otherwise stated, as follows:
3.1 CORPORATE ORGANIZATION. The Company is a corporation validly
existing and in good standing under the laws of the State of Delaware and Color
Spot Watsonville, Inc., a Delaware corporation (the "Subsidiary"), is a
corporation validly existing and in good standing under the laws of the State of
Delaware. The Company and the Subsidiary each has full corporate power and
authority to own its properties and assets and to carry on its business as now
being conducted and is duly qualified or licensed to do business as a foreign
corporation in good standing in the jurisdictions in which the ownership of its
property or the conduct of its business requires such qualification, except
jurisdictions in which the failure to be so qualified or licensed would not have
a material adverse effect on the business, results of operations, assets or
financial condition of the Company and the Subsidiary considered as a single
enterprise (hereinafter referred to as a "Material Adverse Effect"). Sellers
have delivered to Purchaser complete and correct copies of the Certificate of
Incorporation and all amendments thereto to the date hereof, and the Bylaws as
presently in effect of the Company and the comparable governing documents of the
Subsidiary. Except for the Subsidiary and as set forth in Section 3.1 of the
Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock or other equity securities of any corporation or have any direct
or indirect equity or ownership interest in any partnership, joint venture or
other business other than equity securities or ownership interests which are
immaterial in amount or significance.
3.2 CAPITAL STOCK. The authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock, par value $.01 per share of
which, (i) prior to the Redemption, only the Existing Shares will have been
issued and outstanding, and of which, (ii) subsequent to the Issuance, only the
Existing Shares not subject to the Redemption, the Option Shares covered by
Management Options to be exercised at Closing, and the New Shares will be issued
and outstanding, and no other shares of any other class or series of capital
stock of the
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Company are issued and outstanding. Except for the Management Options and as
set forth in Section 3.2(a) of the Disclosure Schedule, there are no
subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
transfer or voting of any shares of capital stock of the Company or the
Subsidiary, including any rights of conversion or exchange under any outstanding
securities or other instruments, other than restrictions imposed by Federal and
state securities laws. Except as set forth in Section 3.2(b) of the Disclosure
Schedule, all of the Shares and "Subsidiary Shares" (as defined below) have been
validly issued and are fully paid, nonassessable and free of preemptive rights.
All of the New Shares, when issued and paid for at Closing, will be validly
issued, fully paid and nonassessable.
3.3 OWNERSHIP OF STOCK. Each Seller is the record and beneficial
owner of the number of Existing Shares set forth opposite such Seller's name in
the column labeled "Total Existing Shares" on SCHEDULE 1 hereto. All of the
outstanding shares of capital stock of the Subsidiary (the "Subsidiary Shares")
are owned beneficially and of record by the Company. Except as set forth on
Section 3.3 of the Disclosure Schedule, the Subsidiary Shares owned by the
Company and the Existing Shares owned by the Sellers are owned free and clear of
all Encumbrances, other than the restrictions imposed by Federal and state
securities laws. Upon the consummation of the transactions contemplated hereby,
Purchaser will acquire title to the New Shares, free and clear of all
Encumbrances, other than the restrictions imposed by Federal and state
securities laws and Encumbrances arising as a result of any action taken by
Purchaser or any of its affiliates ("Affiliates") as defined in Rule 12b-2 of
the regulations promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
3.4 AUTHORIZATION, ETC. Each Seller has full power and authority
to execute and deliver this Agreement and to carry out the transactions
contemplated hereby. The Company, Xxxxxx and MFV have each duly approved and
authorized the execution and delivery by such party of this Agreement and the
Notes, as applicable, and the consummation by such parties of the transactions
contemplated hereby, and thereby no other corporate proceedings on the part of
Sellers are necessary to approve and authorize the execution and delivery by
Sellers and the Company of this Agreement or the Notes, as applicable, and the
consummation by Sellers and the Company of the transactions contemplated hereby
and thereby. This Agreement and the Notes, as applicable, have been duly and
validly executed by each Seller and the Company and, assuming this Agreement and
the Notes constitute the valid and binding agreement of the other parties hereto
and thereto, constitute a valid and binding agreement of each Seller and the
Company, enforceable against such Seller and the Company in accordance with its
terms, except that (i) the enforcement hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
3.5 BALANCE SHEET AND INCOME STATEMENT. Sellers have previously
delivered to Purchaser the audited consolidated balance sheet of the Company and
Subsidiary for the period ended June 30, 1996 and the audited consolidated
income statement of the Company and
6
Subsidiary for the 297-day period then ended (the "Audited Financial
Statements"). Except as set forth in the notes to the Audited Financial
Statements or as set forth in Section 3.5(a) of the Disclosure Schedule, the
Audited Financial Statements present fairly in all material respects the assets,
liabilities and results of operations and financial position of the Company and
Subsidiary as of the dates and for the periods indicated, and (including the
related notes and schedules thereto) have been prepared in accordance with
United States generally accepted accounting principles as consistently applied
by the Company and Subsidiary ("GAAP"). Sellers have previously delivered to
Purchaser the unaudited consolidated balance sheet of the Company and Subsidiary
as of September 30, 1996 (the "Balance Sheet") and the unaudited consolidated
income statement of the Company and Subsidiary for the three months then ended
(the "Income Statement" and, together with the Balance Sheet, the "Unaudited
Financial Statements"). Except as set forth in Section 3.5(b) of the Disclosure
Schedule, the Executive Managers each hereby represent and warrant, and the
Director Shareholders each hereby represent and warrant to its or his knowledge,
that except for the omission of any required notes thereto and for normal year-
end adjustments, such Unaudited Financial Statements have been prepared in all
material respects in accordance with GAAP.
3.6 NO UNDISCLOSED LIABILITIES. The Executive Managers each hereby
represent and warrant, and the Director Shareholders each hereby represent and
warrant to its or his knowledge, that (a) except as set forth on Section 3.6(a)
of the Disclosure Schedule, since June 30, 1996, no event or circumstance has
occurred which could not reasonably be expected to have a Material Adverse
Effect, (b) the Company has no outstanding indebtedness for borrowed money other
than as disclosed in Section 3.6(a) of the Disclosure Schedule, and (c) except
as disclosed in Section 3.6(b) of the Disclosure Schedule, as of the date
hereof, neither the Company nor the Subsidiary has any liabilities or
obligations, whether accrued, absolute or contingent, other than (i) liabilities
and obligations that are reflected, accrued or reserved for in the Balance
Sheet, (ii) obligations incurred in the ordinary course of business and
consistent with past practice since the date of the Balance Sheet and (iii)
other liabilities and obligations that would not reasonably be expected, in the
aggregate, to have a Material Adverse Effect.
3.7 NO APPROVALS OR CONFLICTS. Except as set forth in Section 3.7
of the Disclosure Schedule, neither the execution and delivery by Sellers and
the Company of this Agreement nor the consummation by Sellers and the Company of
the transactions contemplated hereby will (i) violate, conflict with or result
in a breach of any provision of the Certificate of Incorporation of the Company
or the Subsidiary or the By-Laws of the Company or the Subsidiary, (ii) violate,
conflict with or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties of the Sellers, the Company or the
Subsidiary or on any of the Sellers' interest in the Shares under, any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit, lease,
contract, agreement or other instrument to which the Sellers, the Company, the
Subsidiary or any of their respective properties may be bound, (iii) violate any
order, injunction, judgment, ruling, law or regulation of any court or
governmental authority applicable to the Sellers, the Company or the Subsidiary
or any of their respective properties or (iv) except for applicable requirements
of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (xxx
0
"XXX Xxx"), require any consent, approval or authorization of, or notice to, or
declaration, filing or registration with, any governmental or regulatory
authority, which, in the case of clauses (ii), (iii) and (iv) above, would have
a Material Adverse Effect.
3.8 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS. The Executive
Managers each hereby represent and warrant, and the Director Shareholders each
hereby represent and warrant to its or his knowledge, that (a) except as set
forth in Section 3.8(a) of the Disclosure Schedule, the Company and the
Subsidiary are not in violation of any order, injunction, judgment, ruling, law
or regulation of any court or governmental authority applicable to the property
or business of the Company or the Subsidiary which violation or violations in
the aggregate would have a Material Adverse Effect, and (b) except as set forth
in Section 3.8(b) of the Disclosure Schedule, the licenses, permits and other
governmental authorizations held by the Company and the Subsidiary are valid and
sufficient for the conduct of the Company's and the Subsidiary's businesses as
currently-conducted, except where the failure to hold such licenses, permits and
other governmental authorizations would not have a Material Adverse Effect.
3.9 LITIGATION. Except as set forth in Section 3.9 of the
Disclosure Schedule, as of the date hereof, there are no actions, proceedings or
investigations pending or, to the knowledge of Sellers, threatened against the
Company or the Subsidiary, or the transactions contemplated by this Agreement,
before any court or governmental or regulatory authority or body.
3.10 TITLE TO ASSETS. Except as set forth in Section 3.10 of the
Disclosure Schedule, and except with respect to assets disposed of in the
ordinary course of business since September 30, 1996, the Company and the
Subsidiary have good and valid title to all the properties and assets owned by
the Company or the Subsidiary and reflected on the Balance Sheet or which would
have been reflected on the Balance Sheet if acquired prior to September 30,
1996, free and clear of all Encumbrances of any nature except for (i) exceptions
to title as set forth in Section 3.10(a) of the Disclosure Schedule; (ii)
mortgages and encumbrances which secure indebtedness or obligations which are
set forth in Section 3.10(b) of the Disclosure Schedule; (iii) non-consensual
liens for "Taxes" (as defined in Section 3.12) not yet payable or any Taxes
being contested in good faith; (iv) liens arising as a matter of law in the
ordinary course of business which do not arise as a result of consensual acts by
the Company or the Subsidiary, provided that the obligations secured by such
liens are not delinquent or are being contested in good faith; and (v) such
imperfections of title and encumbrances, if any, as do not, in the aggregate,
have a Material Adverse Effect ((i)-(v) are collectively, "Permitted Liens").
The Company or the Subsidiary owns, or has valid leasehold interests in, all
material tangible properties and assets used in the conduct of the Company's
business.
3.11 ABSENCE OF CERTAIN CHANGES. The Executive Managers each hereby
represent and warrant, and the Director Shareholders each hereby represent and
warrant to its or his knowledge, that except as disclosed in Section 3.11 of the
Disclosure Schedule and as otherwise provided herein, since June 30, 1996 and
through the date of this Agreement, the business of the Company and the
Subsidiary has been conducted only in the ordinary course and consistent with
past practice in all material respects.
8
3.12 TAXES. (a) Except as disclosed in Section 3.12(a) of the
Disclosure Schedule, the Company, or an Affiliate or other representative of the
Company on its behalf, has (i) duly filed with the appropriate Federal, state,
local and foreign taxing authorities all "Tax Returns" (as defined below)
required to be filed by or with respect to the Company and the Subsidiary other
than those Tax Returns the failure of which to file would not have a Material
Adverse Effect, all of which Tax Returns are true and correct in all material
respects, and (ii) paid or made provision for in the Balance Sheet all material
Taxes (as defined below) of the Company and the Subsidiary shown as being owed
on such required Tax Returns. Except as set forth in Section 3.12(b) of the
Disclosure Schedule, as of the date hereof, none of the Sellers or the Company
has received any written notice of deficiency or assessment from any Federal,
state, local or foreign taxing authority with respect to liabilities for
material Taxes of the Company or the Subsidiary and to the knowledge of each
Seller, no other Seller has received any such notice. Any such deficiency or
assessment disclosed in Section 3.12(b) of the Disclosure Schedule is being
contested in good faith through appropriate proceedings.
(b) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States Federal, state, local or foreign taxing authority, including, but not
limited to, income, service, leasing, occupation, excise, property, sales and
use, transfer, franchise, payroll, withholding, social security or other taxes,
including any interest, penalties or additions attributable thereto.
(c) For purposes of this Agreement, "Tax Return" shall mean any
return, report, information return or other document (including any related or
supporting information) filed or required to be filed with any taxing authority
with respect to Taxes.
3.13 EMPLOYEE BENEFITS. Section 3.13 of the Disclosure Schedule sets
forth a true and complete list of each employee benefit plan within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), that is maintained for employees or former employees of the
Company or the Subsidiary and to which the Company is a party or obligated to
contribute (the "Plans"). Each Plan has been maintained in substantial
compliance with all applicable laws and has been operated in all material
respects in compliance with its terms. No Plan is subject to Title IV of ERISA
or the minimum funding requirements of Section 412 of the Internal Revenue Code
of 1986, as amended (the "Code"). The only Plan intended to be "qualified"
(within the meaning of Section 401(a) of the Code) is the Company's 401(k)
Savings Plan which Plan has applied for a favorable Determination Letter from
the Internal Revenue Service and, to the knowledge of Sellers, no event has
occurred nor condition exists which could reasonably be expected to result in a
Material Adverse Effect.
3.14 LABOR RELATIONS. The Executive Managers each hereby represent
and warrant, and the Director Shareholders each hereby represent and warrant to
its or his knowledge, that (a) neither the Company nor the Subsidiary is a party
to any collective bargaining agreement applicable to employees of the Company or
the Subsidiary, and (b) except as set forth in Section 3.14 of the Disclosure
Schedule, the Company and the Subsidiary are in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and are not engaged in any unfair
labor practice which has had
9
or is reasonably likely to have a Material Adverse Effect, and, as of the date
hereof, there is no labor strike, dispute, slowdown or stoppage actually pending
or, to the knowledge of Sellers, threatened against or affecting the Company or
the Subsidiary.
3.15 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Section 3.15(a) of the
Disclosure Schedule contains a list of all patents, trademarks, trade names and
copyrights (collectively, "Intellectual Property") used or owned by the Company
or the Subsidiary which are material to the Company and the Subsidiary
considered as a single enterprise and a list of all material licenses and other
agreements (collectively, "License Agreements") relating thereto. Except as set
forth in Section 3.15(b) of the Disclosure Schedule, (i) the consummation of the
transactions contemplated by this Agreement will not materially impair any right
to use the Intellectual Property or the License Agreements, and (ii) neither the
Company nor the Subsidiary has received written notice of any claims by any
person to the use of any such Intellectual Property, or challenging or
questioning the validity or effectiveness of any such License Agreement, which
claims, if adversely decided, would have a Material Adverse Effect.
3.16 CONTRACTS. The Executive Managers each hereby represent and
warrant, and the Director Shareholders each hereby represent and warrant to its
or his knowledge, that:
(a) Except as set forth in Section 3.13 of the Disclosure
Schedule, Section 3.16(a) of the Disclosure Schedule sets forth all of the
following contracts (collectively, "Material Contracts") to which the Company or
the Subsidiary is subject or by which any of their respective assets are bound:
(i) all leases of real property;
(ii) all collective bargaining agreements, employment
contracts, consulting contracts and severance and/or "stay bonus"
agreements or arrangements;
(iii) all license agreements (either as licensee or
licensor);
(iv) all contracts or commitments for the acquisition
or disposition of assets with a value in excess of $50,000 (other than
inventory purchase orders in the ordinary course of business);
(v) all supply contracts that are not cancelable on
ninety (90) days' (or less) notice;
(vi) all leases of personal property with a value in
excess of $50,000;
(vii) all product distribution agreements;
(viii) all non-compete or similar agreements;
10
(ix) all joint venture or similar agreements;
(x) all documents evidencing any lien, right of first
refusal or similar right with respect to the Company's assets;
(xi) all contracts involving consideration in excess of
$50,000 with "change of control" or similar provisions requiring the
consent of a third party to any change in ownership of the Company;
(xii) all contracts with any officer, director or
stockholder of the Company; and
(xiii) all other contracts involving consideration in
excess of $100,000 or that are otherwise, in the opinion of Sellers,
material to the Company's business.
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, (i) each of the Material Contracts is in full force and effect, except
where the failure to be in full force and effect would not have a Material
Adverse Effect and (ii) there are no existing defaults by the Company or
Subsidiary thereunder which would result in a Material Adverse Effect.
3.17 ENVIRONMENTAL COMPLIANCE. The Executive Managers each hereby
represent and warrant, and the Director Shareholders each hereby represent and
warrant to its or his knowledge, except as set forth on Schedule 3.17(a) of the
Disclosure Schedule and except for such of the following as, in the aggregate,
will not have a Material Adverse Effect:
(a) The Company is and has been since September 7, 1995 in
compliance at all times with all applicable environmental laws and
regulations (including common law) and all laws and regulations related to
occupational health and safety (collectively, "Environmental and Safety
Requirements"), and the Company has received no notice, report or
information regarding any liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), or any corrective, investigatory or
remedial obligations, arising under applicable Environmental and Safety
Requirements with respect to its past or present properties or operations.
(b) With respect to all operations and properties of the Company
conducted, owned or leased since September 7, 1995, the Company has
obtained, and is and has been in compliance at all times with all terms and
conditions of, all permits, licenses and other authorizations required
pursuant to Environmental and Safety Requirements for the occupation of its
properties and the conduct of its operations (all of which are listed on
Section 3.17(b) of the Disclosure Schedule).
(c) None of the following exists at any current or former property
owned or operated by the Company since September 7, 1995 (collectively, the
"Facilities") in violation of applicable Environmental and Safety
Requirements: hazardous or toxic
11
materials, substances, pollutants, contaminants or waste; asbestos-
containing material in any form or condition; polychlorinated biphenyl-
containing materials or equipment; or underground storage tanks.
(d) The transactions contemplated by this Agreement do not impose
any obligations under Environmental and Safety Requirements for site
investigation or cleanup or notification to or consent of any government
agencies or third parties. This representation and warranty is made by the
Executive Managers solely upon the basis of their knowledge.
(e) No facts, events or conditions relating to the Facilities or
operations of the Company either (i) occurring on or after September 7,
1995 or (ii) occurring prior to September 7, 1995 so long as such fact,
event or condition has been continually in existence since September 7,
1995 and is related to ongoing operations of the Facilities and such fact,
event or condition that is known (as defined in Section 10.11 of this
Agreement) to the Executive Managers will (x) prevent, hinder or limit
continued compliance with currently applicable Environmental and Safety
Requirements, (y) give rise to any corrective, investigatory or remedial
obligations on the part of Purchaser or the Company pursuant to currently
applicable Environmental and Safety Requirements, or (z) give rise to any
liabilities on the part of Purchaser or the Company (whether accrued,
absolute, contingent, unliquidated or otherwise) pursuant to currently
applicable Environmental and Safety Requirements, including without
limitation those liabilities relating to onsite or offsite hazardous
substance releases, personal injury, property damage or natural resources
damage.
(f) Except as set forth in Section 3.17(f) of the Disclosure
Schedule, the Company has delivered or made available to Purchaser true,
complete and correct copies of all environmental reports, analyses, tests
or monitoring in the possession of or initiated by the Company or any
Redeeming Shareholder during the past five years pertaining to any Facility
and a true, complete and correct list identifying all third party
facilities at which hazardous materials generated in connection with the
operations of the Facilities (by the Company) have been transported,
treated, stored, handled or disposed within the past five years.
The Company shall provide Purchaser or its agents reasonable access to the
Facilities prior to the Closing for the purpose of carrying out, at its own
expense, an environmental site assessment of the Facilities, provided that (i)
such environmental site assessment shall be conducted in a manner that does not
unreasonably interfere with the operations of the Facilities, (ii) Purchaser
shall obtain the Company's consent (not to be unreasonably withheld) before
undertaking any soil or groundwater sampling and (iii) any "Losses" (as
hereinafter defined) incurred by the Company which are the result of the
negligence of the Purchaser or its agents in conducting such site assessment,
shall be subject to indemnification by Purchaser alone pursuant to Section
9.1(b) hereof. Any site assessment performed shall be at the request of legal
counsel to Purchaser to the environmental consultant.
12
3.18 INSURANCE. Section 3.18 of the Disclosure Schedule lists all
material insurance policies covering the assets, employees and operations of the
Company and Subsidiary as of the date hereof. The Executive Managers each
hereby represent and warrant, and the Director Shareholders each hereby
represent and warrant to its or his knowledge, that all premiums for such
insurance policies have been paid when due and the Company has not received any
notice that any insurance company intends to cancel or not renew any such
insurance or substantially raise the premiums therefor.
3.19 NO BROKERS' OR OTHER FEES. Except for the fee payable to Xxxxxx
pursuant to Section 5.11 hereof, no broker, finder or investment banker is
entitled to any fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Sellers.
3.20 MATERIAL CUSTOMERS AND SUPPLIERS. The Executive Managers each
hereby represent and warrant, and the Director Shareholders each hereby
represent and warrant to its or his knowledge, that Section 3.20(a) of the
Disclosure Schedule sets forth the names of the ten suppliers of the Company and
the Subsidiary to whom the Company and the Subsidiary paid the greatest sum of
money in respect of products and materials sold to the Company and Subsidiary
and Section 3.20(b) of the Disclosure Schedule sets forth the ten customers of
the Company and the Subsidiary from whom the Company and the Subsidiary received
the greatest sum of money in respect of products purchased from the Company and
the Subsidiary between January 1, 1996 and the date of this Agreement.
3.21 REAL PROPERTY. The Executive Managers each hereby represent and
warrant, and the Director Shareholders each hereby represent and warrant to its
or his knowledge, that:
(a) The leases listed in Section 3.21(a) of the Disclosure
Schedule constitute all the real property leases which are used in the conduct
of the business of the Company and the Subsidiary as it is presently being
conducted and/or to which the Company or the Subsidiary is a party (the
"Leases," and such property, "Leased Property").
(b) Except as set forth in Section 3.21(b) of the Disclosure
Schedule, neither the Company nor the Subsidiary has sold, assigned, transferred
or otherwise disposed of, or granted any security interest in or lien on, any
Lease. Except as set forth in Section 3.21(b)(i), each Lease is valid and
binding on the parties thereto and is in full force and effect, except where the
failure to be in full force and effect would not have a Material Adverse Effect.
With respect to each Lease, (i) all accrued and payable rents required by each
Lease to be paid by the Company or the Subsidiary have been paid or adequate
provision for such payment has been made, and (ii) except as set forth in
Section 3.21(b)(i) of the Disclosure Schedule, no written notice of default or
termination has been given or received by the Company or the Subsidiary, and no
material event of default has occurred, no condition exists and no event has
occurred that, with the giving of notice or the lapse of time, would become a
material default or permit early termination, under the Lease. Except as set
forth in Section 3.21(b)(ii) of the Disclosure Schedule, no third-party
13
consent or approval under any material Lease is required for the consummation of
the transactions contemplated herein.
(c) The Company or the Subsidiary has good and valid title to,
free and clear of all Encumbrances, each of the real properties listed in
Schedule 3.21(c) hereto (the "Owned Property"), except for such Encumbrances as
(i) are listed in Section 3.21(c)(i) of the Disclosure Schedule or (ii) are
Permitted Liens. Except as set forth in Section 3.21(c)(ii) of the Disclosure
Schedule, all of the Owned Property and the Leased Property conforms in all
material respects to all zoning laws, ordinances and regulations. The Leased
Property and the Owned Property are all of the real property which is used for
the conduct of the business of the Company and the Subsidiary as it is presently
conducted.
3.22 INVESTMENT COMPANY ACT STATUS. The Company is not an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940.
3.23 PRODUCT LIABILITY. Except as set forth in Section 3.23 of the
Disclosure Schedule, neither the Company nor the Subsidiary has received written
notice of any claim or threatened claim against the Company or the Subsidiary
for product liability, nor, to the knowledge of Sellers, is there any basis for
any claim or threatened claim against the Company or the Subsidiary for product
liability.
3.24 BOOKS AND RECORDS. The financial books and records pertaining
to the business of the Company and the Subsidiary are and have been located and
maintained on the business premises of the Company.
3.25 ACQUISITION FOR INVESTMENT. Xxxxxx acknowledges that neither
the offer nor the sale of the Notes have been registered under the Securities
Act. Xxxxxx is acquiring the Notes solely for its own account and not with a
view to any distribution or disposition thereof and Xxxxxx agrees that the Notes
will not be transferred by Xxxxxx except in a transaction registered or exempt
from registration under the Securities Act of 1933, as amended, and the Rules
and Regulations in effect thereunder (the "Securities Act").
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers as follows:
4.1 ORGANIZATION. Purchaser is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2 AUTHORIZATION, ETC. Purchaser has full partnership power and
authority to execute and deliver this Agreement, and to carry out the
transactions contemplated hereby. The
14
general partner of Purchaser has duly approved and authorized the execution and
delivery by Purchaser of this Agreement and the consummation by Purchaser of the
transactions contemplated hereby, and no other proceedings on the part of
Purchaser are necessary to approve and authorize the execution and delivery by
Purchaser of this Agreement and the consummation by Purchaser of the
transactions contemplated hereby. This Agreement has been duly and validly
executed by Purchaser and, assuming this Agreement constitutes the valid and
binding agreement of Sellers, constitutes a valid and binding agreement of
Purchaser, enforceable against Purchaser in accordance with its terms, except
that (i) the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
4.3 NO APPROVALS OR CONFLICTS. Except as set forth in Section 4.3
of the Disclosure Schedule, neither the execution and delivery by Purchaser of
this Agreement nor the consummation by Purchaser of the transactions
contemplated hereby will (i) violate, conflict with or result in a breach of any
provision of the Certificate of Limited Partnership or Limited Partnership
Agreement of Purchaser, (ii) violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of Purchaser's
properties under, any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, lease, contract, agreement or other instrument to which
Purchaser or its subsidiaries or any of their respective properties may be
bound, (iii) violate any order, injunction, judgment, ruling, law or regulation
of any court or governmental authority applicable to Purchaser or its
subsidiaries or any of their respective properties, or (iv) require any consent,
approval or authorization of, or notice to, or declaration, filing or
registration with, any governmental or regulatory authority or other third
party, which, in the case of clauses (ii), (iii) and (iv) above, would have a
material adverse effect on Purchaser's ability to consummate the transactions
contemplated hereby.
4.4 ACQUISITION FOR INVESTMENT. Purchaser acknowledges that neither
the offer nor the sale of the New Shares has been registered under the
Securities Act. Purchaser is acquiring the New Shares solely for its own
account and not with a view to any distribution or other disposition of such New
Shares, and the New Shares will not be transferred except in a transaction
registered or exempt from registration under the Securities Act.
4.5 FINANCING. Purchaser, as of the Closing Date, will have
available cash or cash equivalents on hand in an amount sufficient to enable it
to pay in cash the Purchase Price for the New Shares as contemplated by Section
2.3(b)(i) of this Agreement.
4.6 NO KNOWLEDGE OF BREACH. Purchaser has no actual knowledge of
any breach of any representation set forth in Article 3 above.
4.7 NO BROKERS' OR OTHER FEES. Except for the fee in the amount of
$1,500,000 payable to Kohlberg & Company by the Company, no broker, finder or
investment
15
banker is entitled to any fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Purchaser.
ARTICLE 5
CONDITIONS TO THE SELLERS' AND
THE COMPANY'S OBLIGATIONS
The obligations of the Sellers and the Company to effect the Closing
under this Agreement are subject to the satisfaction, at or prior to the
Closing, of each of the following conditions, unless waived in writing by
Sellers' Representative.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Purchaser in this Agreement shall be true and correct on the
Closing Date as though such representations and warranties were made at such
date, subject to the qualifications thereto, if any, except for changes
expressly permitted or contemplated by this Agreement.
5.2 PERFORMANCE. Purchaser shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by Purchaser prior to the
Closing.
5.3 OFFICER'S CERTIFICATE. Purchaser shall have delivered to
Sellers a certificate, dated as of the Closing Date and executed by the
President or a Vice President of Purchaser, certifying to the fulfillment of the
conditions specified in Sections 5.1 and 5.2 hereof.
5.4 HSR ACT. All applicable waiting periods under the HSR Act with
respect to the transactions contemplated hereby shall have expired or been
terminated.
5.5 INJUNCTIONS. On the Closing Date there shall be no injunction,
writ, preliminary restraining order or other order in effect of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the transactions provided for herein not be consummated as provided herein.
5.6 CONSENTS. Those governmental and third party consents
identified in Section 5.6 of the Disclosure Schedule and necessary to effect the
Closing, which, if not obtained, would result in material liability to the
Sellers, shall have been obtained.
16
5.7 LEGAL OPINION. The Sellers shall have received an opinion,
dated as of the Closing Date and addressed to them, of Xxxxxxxxxx Xxxxx Xxxxxx &
Xxxxxxxxxx, P.C., special counsel to Purchaser, in substantially the form of
EXHIBIT 5.7 hereto.
5.8 EMPLOYMENT AGREEMENTS. The Company shall have executed and
delivered, effective after the Issuance, to each of Xxxxxxxx and Halamuda an
Employment Agreement, substantially in the form of EXHIBIT 5.8 hereto (the
"Employment Agreements"), to which the Company and each of Xxxxxxxx and Xxxxxxxx
are parties.
5.9 8.0% SUBORDINATED CONVERTIBLE NOTES. The Company, as part of
the Redemption, shall have executed and delivered the 8.0% Subordinated
Convertible Notes substantially in the form of EXHIBIT 5.9 hereto (the "Notes"),
together with any documents to be executed in connection therewith, to Xxxxxx.
5.10 STOCKHOLDERS' AGREEMENT. The Purchaser, the Company, Xxxxxx and
each other Shareholder shall have executed and delivered the Stockholders'
Agreement of the Company, effective after the Issuance, substantially in the
form of EXHIBIT 5.10 hereto (the "Stockholders' Agreement").
5.11 PAYMENT OF FEES. A fee to Xxxxxx in the amount of $1,029,395
shall have been paid by the Sellers in accordance with such Seller's Ownership
Allocation and the legal fees and expenses of Xxxxxx Xxxxxx & Xxxxx relating to
the transactions contemplated by this Agreement shall have been paid by the
Company and the legal fees and expenses of Xxxx Xxxxxxx shall have been paid by
the Company.
ARTICLE 6
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to effect the Closing under this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless waived in writing by Purchaser.
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Sellers in this Agreement shall be true and correct on the
Closing Date as though such representations and warranties were made at such
date, subject to the qualifications thereto, if any, except for changes
expressly permitted or contemplated by the terms of this Agreement.
6.2 PERFORMANCE. Sellers shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by Sellers prior to the
Closing.
17
6.3 OFFICER'S CERTIFICATE. Sellers and the Company shall have
delivered to Purchaser a certificate, dated as of the Closing Date and executed
by the President or a Vice President of the Company and by Sellers'
Representative, certifying to the fulfillment of the conditions specified in
Sections 6.1 and 6.2 hereof.
6.4 RESIGNATION OF DIRECTORS. Sellers shall have delivered to
Purchaser the written resignations of Xxxx Xxxxxxxxx and Xxxxxxx X. Xxxxx as
directors of the Company and the Subsidiary effective as of the Closing Date.
6.5 INJUNCTIONS. On the Closing Date there shall be no injunction,
writ, preliminary restraining order or other order in effect of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the transactions provided for herein not be consummated as provided herein.
6.6 CONSENTS. Those governmental and third party consents
identified in Section 6.7 of the Disclosure Schedule and necessary to effect the
Closing shall have been obtained.
6.7 EXISTING INDEBTEDNESS. All outstanding indebtedness for
borrowed money referred to in Section 1.3(b)(iv) shall have been discharged and
all liens securing the same shall have been released against payment pursuant to
Section 1.3(b)(iv) of this Agreement of the outstanding balance of such
indebtedness and any related obligation, and the Purchaser shall have received
reasonably satisfactory evidence of the foregoing.
6.8 LEGAL OPINIONS. The Purchaser shall have received an opinion,
dated as of the Closing Date and addressed to it, of (a) Xxxxxxx X. Xxxxxxxx,
Esq., Senior Counsel to Xxxxxx, in substantially the form of EXHIBIT 6.8(a)
hereto, (b) Xxxx Xxxxxxx, special counsel to the Sellers (other than Xxxxxx), in
substantially the form of EXHIBIT 6.8(b) hereto, and (c) Xxxxxx Xxxxxx & Xxxxx,
special counsel to the Company and Subsidiary, in substantially the form of
EXHIBIT 6.8(c) hereto.
6.9 OTHER AGREEMENTS.. (a) The Company and each Shareholder other
than Xxxxxx, MFV and Xxxxxxxx shall have executed and delivered the Option
Agreement, (b) each Shareholder shall have executed and delivered the
Stockholders Agreement, and (c) the Company and each of Xxxxxxxx and Halamuda
shall have executed and delivered the Employment Agreements.
6.10 FINANCING. The Company shall have received, on terms and
conditions no less favorable to the Company than the terms and conditions set
forth in the proposal letter attached hereto as EXHIBIT 6.10, financing in an
amount, together with equity from Purchaser in the amount of $21,500,000,
sufficient to enable the Company to effect the Redemption, to repay its existing
indebtedness, to pay all fees and expenses incurred by it in connection with the
transactions contemplated hereby and to satisfy the ongoing working capital
needs of the Company.
18
6.11 FEES. The Company shall have entered into a Fee Agreement with
Kohlberg & Co., L.L.C., a Delaware limited liability company, in substantially
the form of EXHIBIT 6.11 hereto. The legal fees and expenses of Xxxxxxxxxx
Xxxxx Xxxxxx & Xxxxxxxxxx shall have been paid by the Company.
ARTICLE 7
COVENANTS AND AGREEMENTS
7.1 CONDUCT OF BUSINESS BY COMPANY. Each of the Sellers and the
Company covenant that, except (i) for actions taken to implement this Agreement
and the transactions contemplated hereby, (ii) as disclosed in the Disclosure
Schedule or (iii) as consented to by Purchaser, which consent shall not be
unreasonably withheld, from and after the date of this Agreement and until the
Closing Date the Company shall, and each of the Sellers shall cause (or, in the
case of Xxxxxx, use its best efforts to cause), the Company to:
(a) use reasonable efforts consistent with good business
judgment to preserve intact the present business organization of the Company and
Subsidiary and generally operate the Company and Subsidiary in the ordinary and
regular course of business consistent with prior practices in all material
respects (including the Company's pending acquisitions listed on SCHEDULE 2
hereof (the "Pending Acquisitions")); and
(b) not (i) cause to be issued or sold any shares of capital
stock or other securities of the Company or Subsidiary or any options, warrants
or commitments of any kind with respect thereto; (ii) directly or indirectly
cause to be purchased, redeemed or otherwise acquired or disposed of any shares
of capital stock of the Company or Subsidiary; (iii) declare, set aside or pay
any dividend or other distribution with respect to capital stock; (iv) permit or
allow the Company or Subsidiary to borrow or agree to borrow any funds or incur,
whether directly or by way of guarantee, any obligation for borrowed money,
other than in the ordinary course of business and consistent with past practice;
(v) other than in connection with Ordinary Course Acquisitions, subject any of
the property or assets of the Company or Subsidiary (real, personal or mixed,
tangible or intangible) to any material mortgage, pledge, lien or encumbrance or
otherwise permit or allow the disposition of any material property or assets of
the Company or Subsidiary (real, personal or mixed, tangible or intangible),
other than in the ordinary course of business and consistent with past practice;
or (vi) agree to do any of the foregoing.
7.2 ACCESS TO BOOKS AND RECORDS; COOPERATION.
(a) Purchaser agrees that from the date hereof and until the
fifth anniversary of the Closing, during normal business hours, it shall permit,
or shall cause the Company to permit, at no charge, cost or expense to Purchaser
or the Company, and without disruption of Purchaser's or the Company's business,
the Shareholders party hereto and their respective auditors and other
representatives to have reasonable access to the properties, auditors and
officers of the Company and Subsidiary and to all books and records relating to
the Company and Subsidiary and to examine and take copies thereof.
19
(b) Purchaser agrees not to destroy at any time any files or
records which are subject to Section 7.2(a) without giving reasonable notice to
the Redeeming Shareholders, and within 30 days of receipt of such notice, any of
the Redeeming Shareholders may cause to be delivered to such Redeeming
Shareholders the records intended to be destroyed, at such Redeeming
Shareholder's expense.
7.3 FILINGS AND CONSENTS. Each of Sellers, on the one hand, and
Purchaser, on the other hand, shall use all reasonable efforts to obtain and to
cooperate in obtaining any consent, approval, authorization or order of, and in
making any registration or filing with, any governmental agency or body or other
third party required in connection with the execution, delivery or performance
of this Agreement. If required, the parties agree to cause to be made all
appropriate filings under the HSR Act within three business days of the date of
this Agreement and to diligently pursue early termination of the waiting period
under such act.
7.4 WARN ACT. Purchaser and Sellers agree that for purposes of the
United States Worker Adjustment and Retraining Notification Act (the "WARN
Act"), the Closing Date shall be the "effective date" as such term is used in
the WARN Act. Purchaser acknowledges and represents that it has no present
intent to engage in a "mass layoff" or "plant closing" with respect to the
Company or Subsidiary as defined in the WARN Act. Purchaser agrees that from
and after the Closing Date it shall be responsible for any notification required
under the WARN Act with respect to the Company and Subsidiary and shall
indemnify the Redeeming Shareholders and hold the Redeeming Shareholders
harmless from and against all fines and other payments which may become due
under the WARN Act with respect to the Company or Subsidiary.
7.5 SUPPLEMENTS TO DISCLOSURE SCHEDULE. From time to time prior to
the Closing, Sellers and Purchaser will promptly supplement or amend the
sections of the Disclosure Schedule relating to their respective representations
and warranties in this Agreement with respect to any matter, condition or
occurrence hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in their
respective sections of the Disclosure Schedule. No supplement or amendment by
either party shall have any effect for the purpose of (i) determining
satisfaction by Sellers of the conditions set forth in Sections 6.1 and 6.2
hereof or (ii) determining satisfaction by Purchaser of the conditions set forth
in Sections 5.1 and 5.2 hereof and, in the case of an amendment or supplement by
Sellers, the basket amount set forth in Section 9.1(a) shall be reduced by the
amount by which the aggregate amount of Losses incurred by the Purchaser
Indemnified Parties in connection with the matters so disclosed exceeds $100,000
(it being understood by the parties that the Sellers shall have no further
liability for such matters set forth in this Section 7.5).
7.6 COVENANT TO SATISFY CONDITIONS. Each party agrees to use all
reasonable efforts to insure that the conditions set forth in Article 5 and
Article 6 hereof are satisfied, insofar as such matters are within the control
of such party; PROVIDED, HOWEVER, that in no event shall the Sellers be required
to expend in excess of $25,000 in the aggregate in performing under Section 7.3
above and this Section 7.6.
20
7.7 EXCLUSIVE DEALING. During the period from the date of this
Agreement through the Closing (which shall be no later than December 31, 1996),
or the earlier termination of this Agreement pursuant to Article 8, the Company
and/or the Sellers shall not, directly or indirectly through any officer,
director, employee, agent, partner, affiliate or otherwise, enter into any
agreement, agreement in principle or other commitment (whether or not legally
binding) relating to any business combination with, recapitalization,
acquisition or purchase of all or a significant portion of the assets of, or
any material equity interest in, the Company or relating to any other similar
transaction (a "Competing Transaction"), or solicit, initiate or encourage the
submission of any proposal or offer from any person or entity (including any of
their officers, directors, employees and agents) relating to any Competing
Transaction, nor participate in any discussions or negotiations regarding, or
furnish to any person or entity any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage
any effort or attempt by any person or entity to effect a Competing Transaction.
The Company and/or the Sellers shall notify Purchaser promptly if any proposal
regarding a Competing Transaction (or any inquiry or contact with any person or
entity with respect thereto) is made, and shall advise Purchaser of the contents
thereof (and, if in written form, provide Purchaser with copies thereof).
7.8 DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION. For a
period of seven years after the Closing, Purchaser shall not permit the Company
or Subsidiary to amend, repeal or modify any provision in its respective
Certificate of Incorporation or Bylaws relating to the exculpation or
indemnification of former officers and directors (unless required by law), it
being the intent of the parties that the officers and directors of the Company
and Subsidiary prior to the Closing shall continue to be entitled to such
exculpation and indemnification to the fullest extent permitted under applicable
law.
7.9 CONTACT WITH CUSTOMERS AND SUPPLIERS. Purchaser and its
representatives shall contact and communicate with the employees (other than
Executive Managers), customers, suppliers and licensors of the Company and
Subsidiary in connection with the transactions contemplated hereby only with the
prior consent of the Sellers' Representative, which consent shall not be
unreasonably withheld but which may be conditioned upon a designee of Sellers'
Representative being present at any such meeting or conference.
7.10 8.0% SUBORDINATED CONVERTIBLE NOTES.
(a) Xxxxxx acknowledges that it has acquired the Notes for its
own account and that such Notes cannot be sold or transferred unless registered
under the Securities Act or unless an exemption from such registration is
available to Xxxxxx.
(b) Each Note shall bear the following legend:
"THE SECURITY OR SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE
21
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH ALL APPLICABLE
PROVISIONS OF STATE SECURITIES LAWS AND (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR (B) IF (I) THE PURCHASER AND
THE COMPANY HAS BEEN FURNISHED WITH A REASONABLY SATISFACTORY OPINION
OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
PROVISIONS OF SECTION 5 OF THE ACT AND (II) IF THE HOLDER IS A CITIZEN
OR RESIDENT OF ANY COUNTRY OTHER THAN THE UNITED STATES, OR THE HOLDER
DESIRES TO EFFECT ANY SUCH TRANSACTION IN ANY SUCH COUNTRY, THE
PURCHASER AND THE COMPANY HAVE BEEN FURNISHED WITH A REASONABLY
SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSACTION
WILL NOT VIOLATE THE LAWS OF SUCH COUNTRY."
7.11 COBRA. Purchaser shall cause the Company to maintain the Company's
health and welfare plans in such a manner so as not to give rise to any
liability to the Redeeming Shareholders under Part 6 of Subtitle B of Title I of
ERISA, Section 4980B of the Code or state continuation coverage laws
(collectively, "COBRA"), and the Redeeming Shareholders shall have no
responsibility or liability under COBRA on or after the Closing, provided that
this shall not relieve the Sellers for any breaches of any representations or
warranties contained in this Agreement.
ARTICLE 8
TERMINATION
8.1 TERMINATION. This Agreement may be terminated and abandoned at
any time prior to the Closing:
(a) by the mutual consent of Sellers' Representative and
Purchaser;
(b) by either Sellers' Representative or Purchaser in the event
the Closing has not occurred on or before December 31, 1996 (the "Cut-Off
Date"), unless the failure of such consummation shall be due to the failure of
the party seeking to terminate this Agreement to comply in all material respects
with the agreements and covenants contained herein to be performed by such party
on or before the Cut-Off Date; or
(c) by either Sellers' Representative or Purchaser in the event
any court or governmental agency of competent jurisdiction shall have issued an
order, decree or ruling or
22
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby and such order, decree or ruling or other
action shall have become final and nonappealable.
8.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination and abandonment of this Agreement by Sellers' Representative or
Purchaser pursuant to Section 8.1 hereof, written notice thereof shall forthwith
be given to the other parties. If the transactions contemplated by this
Agreement are terminated as provided herein:
(a) Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) All confidential information received by Purchaser with
respect to the business of the Company and the Subsidiary shall be treated in
accordance with the provisions of the Confidentiality Agreement, dated as of
______ 19__, between Purchaser and the Company, as well as the provisions of
Section 8 of that certain letter agreement dated October 25, 1996, among
Purchaser, Xxxxxx and Xxxxxxx Xxxxxxxx on behalf of the Shareholders other than
Xxxxxx (collectively, the "Confidentiality Agreement"), which shall survive the
termination of this Agreement in accordance with its terms; and
(c) No party to this Agreement will have any liability under
this Agreement to the other except (i) as stated in subparagraphs (a) and (b) of
this Section 8.2 and (ii) for any willful breach of any provision of this
Agreement and (iii) as provided in the Confidentiality Agreement.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION. As between Purchaser, on the one hand, and the
Sellers, on the other hand, the rights and obligations set forth in this Article
9 and in the Confidentiality Agreement will be the exclusive remedies of the
parties hereto with respect to any disputes relating to this Agreement, the
events giving rise to this Agreement and the transactions provided for herein or
contemplated hereby.
(a) INDEMNIFICATION BY THE SELLERS. Subject to the limits set
forth in this Section 9.1, each of the Redeeming Shareholders agree severally
(but not jointly), in proportion to the Ownership Allocation, to indemnify,
defend and hold Purchaser, its officers, directors, agents and Affiliates (the
"Purchaser Indemnified Persons"), harmless from and in respect of any and all
losses, damages, costs and reasonable expenses (including, without limitation,
reasonable expenses of counsel) (collectively, "Losses"), that they may incur
arising out of or due to any inaccuracy of any representation or the breach of
any warranty, covenant, undertaking or other agreement by such Seller contained
in this Agreement or the Disclosure Schedule, determined
23
without regard to any qualification as to materiality or Material Adverse Effect
set forth therein; PROVIDED, HOWEVER, that the Sellers shall not have any
liability to Purchaser as a result of the breach of any representation or
warranty to the extent that Purchaser had actual knowledge that such
representation or warranty was untrue or incorrect prior to the Closing Date.
Anything to the contrary contained herein notwithstanding, none of the Purchaser
Indemnified Persons shall be entitled to recover from the Sellers for any claims
for indemnity or damages with respect to any inaccuracy or breach of any
representations or warranties or breach of any covenants, undertakings or other
agreements, whether such claims are brought under this Section 9.1(a) or
otherwise, (i) with respect to any individual claim in an amount less than
$10,000 (it being understood that multiple claims arising from the same
operative facts or circumstances shall be deemed as a single claim) and
(ii) unless and until the total of all such claims in respect of Losses pursuant
to this Section 9.1(a) exceeds $570,000, and then only for the amount by which
such claims exceed such amount; PROVIDED, HOWEVER, that, none of Purchaser or
its officers, directors, agents or Affiliates shall be entitled to recover from
any Seller pursuant to this Section 9.1(a) more than forty percent (40%) of the
proceeds received by such Seller pursuant to this Agreement and/or the Option
Agreement (but excluding, with respect to Xxxxxx, the fee payable pursuant to
Section 5.11 hereof); PROVIDED FURTHER, that any recovery to be made by a
Purchaser Indemnified Person hereunder against Xxxxxx, once finally determined,
shall, to the extent outstanding, be deemed, at Xxxxxx'x option, setoff against
the principal amount outstanding under the Notes, then, if necessary, against
the interest payable thereon.
(b) INDEMNIFICATION BY PURCHASER AND THE COMPANY. Subject to
the limits set forth in this Section 9.1, Purchaser and the Company jointly and
severally agree to indemnify, defend and hold the Sellers, and their respective
officers, directors, agents and Affiliates, as that case may be, harmless from
and in respect of any and all Losses that they may incur arising out of or due
to any inaccuracy of any representation or the breach of any warranty, covenant,
undertaking or other agreement of Purchaser contained in this Agreement, or
arising out of any and all actions, suits, claims and administrative or other
proceedings of every kind and nature instituted or pending against the Sellers
or any of their respective officers, directors, agents or Affiliates, as the
case may be, at any time after the Closing Date to the extent that such Losses
(i) relate to or arise out of or in connection with the operations of the
Company subsequent to the Closing Date and (ii) do not constitute a breach of
the Sellers' representations or warranties in, or a default in the performance
of any of the Sellers' covenants under, this Agreement; PROVIDED, HOWEVER, that
neither Purchaser nor the Company shall have any liability to the Sellers as a
result of the breach of any representation or warranty to the extent that the
Sellers knew that such representation or warranty was untrue or incorrect prior
to the Closing Date.
(c) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The several
representations and warranties of the parties contained in this Agreement or in
any instrument delivered pursuant hereto will survive the Closing Date and will
remain in full force and effect thereafter (i) with respect to the
representations or warranties set forth in Sections 3.12 and 3.17, for a period
of three (3) years from the Closing Date, (ii) with respect to the
representations or warranties set forth in Section 3.3, indefinitely and (iii)
with respect to all other representations and warranties, for a period ending
April 30, 1998; PROVIDED, FURTHER, that such representations or warranties shall
survive (if at all) beyond such period with respect to any inaccuracy therein
24
or breach thereof, notice of which shall have been duly given within such
applicable period in accordance with Section 9.1(d) hereof.
(d) NOTICE AND OPPORTUNITY TO DEFEND. If there occurs an event
which a party asserts is an indemnifiable event pursuant to Section 9.1(a) or
9.1(b), the party or parties seeking indemnification shall notify the other
party or parties obligated to provide indemnification (the "Indemnifying Party")
promptly. If such event involves (i) any claim or (ii) the commencement of any
action or proceeding by a third person, the party seeking indemnification will
give such Indemnifying Party prompt written notice of such claim or the
commencement of such action or proceeding; PROVIDED, HOWEVER, that the failure
to provide prompt notice as provided herein will relieve the Indemnifying Party
of its obligations hereunder only to the extent that such failure prejudices the
Indemnifying Party hereunder. In case any such action shall be brought against
any party seeking indemnification and it shall notify the Indemnifying Party of
the commencement thereof, the Indemnifying Party shall be entitled to
participate therein and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to such party seeking
indemnification and, after notice from the Indemnifying Party to such party
seeking indemnification of such election so to assume the defense thereof, the
Indemnifying Party shall not be liable to the party seeking indemnification
hereunder for any legal expenses of other counsel or any other expenses
subsequently incurred by such party in connection with the defense thereof. The
party seeking indemnification agrees to cooperate fully with the Indemnifying
Party and its counsel in the defense against any such action or asserted
liability. The party seeking indemnification shall have the right to
participate at its own expense in the defense of such action or asserted
liability. In no event shall an Indemnifying Party be liable for any settlement
effected without its written consent.
(e) ADJUSTMENT FOR INSURANCE AND TAXES. The amount which an
Indemnifying Party is required to pay to, for or on behalf of any other party
(hereinafter referred to as an "Indemnitee") pursuant to this Section 9.1 shall
be adjusted (including, without limitation, retroactively) (i) by any insurance
proceeds actually recovered by or on behalf of such Indemnitee in reduction of
the related indemnifiable loss (the "Indemnifiable Loss") and (ii) to take
account of any tax benefit actually realized as a result of any Indemnifiable
Loss. Amounts required to be paid, as so reduced, are hereafter sometimes
called an "Indemnity Payment." If an Indemnitee shall have received or shall
have had paid on its behalf an Indemnity Payment in respect of an Indemnifiable
Loss and the parties in good faith believe that the Indemnitee is likely to
subsequently receive insurance proceeds in respect of such Indemnifiable Loss,
or realize any tax benefit as a result of such Indemnifiable Loss, then the
parties shall negotiate in good faith to determine the present value of such
anticipated insurance proceeds or tax benefit and the Indemnitee shall promptly
pay to the Indemnifying Party such amount or, if lesser, the amount of the
Indemnity Payment.
25
(f) INDEMNIFICATION UNDER PRIOR AGREEMENTS. Purchaser
acknowledges that the Company, and therefore indirectly, the Sellers, acquired a
significant portion of its assets through various stock or asset purchase
agreements as set forth and identified in Section 9.1(f) of the Disclosure
Schedule (the "Prior Agreements"). In the event that Purchaser notifies the
Sellers of an indemnifiable event hereunder in accordance with Section 9.1(d)
above and the Sellers reasonably believe that indemnification with respect to
such indemnifiable event is available to the Company pursuant to the Prior
Agreements, the Sellers may so advise Purchaser in accordance with Section 10.6
below and, thereafter, the Sellers shall have no further liability or obligation
to Purchaser in respect of such indemnifiable event unless and until the Company
shall have exercised reasonable commercial efforts (in no event to include the
appeal of an adverse decision in any judicial or arbitral proceeding) to enforce
such right of indemnification under the Prior Agreements. Upon Purchaser's
satisfaction of its obligations pursuant to the preceding sentence, the Sellers'
liability to Purchaser in respect of such indemnifiable event, if any, shall be
reduced to the extent of any recovery by the Company under the Prior Agreements,
net of related expenses.
(g) LIMITATION ON ENVIRONMENTAL INDEMNITY. Notwithstanding
anything to the contrary set forth in this Agreement, any obligation of the
Sellers to indemnify the Purchaser Indemnified Persons with respect to
environmental remediation shall be limited to Losses incurred by Purchaser
Indemnified Persons in connection with taking such actions or incurring such
costs as may be required by Environmental Laws or the valid order or judgment of
any court or other governmental authority implementing or enforcing such
Environmental Laws, and no Seller shall have any obligation to indemnify
Purchaser Indemnified Persons for Losses beyond actions required by
Environmental Laws or the valid order or judgment of any court or other
governmental authority implementing or enforcing such Environmental Laws. Such
costs of remediation must be reasonable costs incurred by the Company,
Subsidiary, or Purchaser, which are reasonably necessary to satisfy but not
exceed enforceable limits or standards imposed by Environmental Laws or the
valid order or judgment of any court or other governmental authority
implementing or enforcing such Environmental Laws so that the Company,
Subsidiary and Purchaser can make use of the assets in the operation of the
Company's and Subsidiaries business as currently conducted.
(h) NO REPRESENTATIONS REGARDING PROJECTIONS. Purchaser
explicitly agrees that none of the Sellers shall have any obligations
whatsoever, or be deemed to have made any representations or warranties of any
kind, with respect to any projections, financial or otherwise, of any future
performance or expectation of the Company or the Subsidiary.
ARTICLE 10
MISCELLANEOUS
10.1 FEES AND EXPENSES. Except as otherwise provided in this
Agreement, the Redeeming Shareholders shall bear their own respective expenses
and Purchaser shall bear its own expenses in connection with the negotiation and
consummation of the transactions contemplated by this Agreement. Each of the
Sellers and Purchaser shall bear the fees and expenses of any
26
broker or finder retained by such party or parties in connection with the
transactions contemplated herein.
10.2 GOVERNING LAW. This Agreement shall be construed under and
governed by the laws of the State of Delaware without regard to the conflicts of
laws provisions thereof.
10.3 AMENDMENT. This Agreement may not be amended, modified or
supplemented except upon the execution and delivery of a written agreement
executed by Purchaser and Sellers' Representative.
10.4 NO ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other parties hereto.
10.5 WAIVER. Any of the terms or conditions of this Agreement which
may be lawfully waived may be waived in writing at any time by each party which
is entitled to the benefits thereof. Any waiver of any of the provisions of
this Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce any
provision of this Agreement shall be deemed to or shall constitute a waiver of
such provision and no waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
10.6 NOTICES. Any notice, demand, or communication required or
permitted to be given by any provision of this Agreement shall be deemed to have
been sufficiently given or served for all purposes if (a) personally delivered,
(b) sent by a nationally recognized overnight courier service, to the recipient
at the address below indicated or (c) delivered by facsimile which is confirmed
in writing by sending a copy of such facsimile to the recipient thereof pursuant
to clause (a) or (b) above:
If to Purchaser:
c/o Kohlberg & Company, LLC
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxxxx Xxxxx
27
with a copy to:
Xxxxxxxxxx Hyatt Xxxxxx & Xxxxxxxxxx, P.C.
000 - 00xx Xxxxxx
00xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxx Xxxxxxx, Esq.
If to the Company:
Color Spot Nurseries, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxxxxx X. Xxxxxxxx
with a copy to:
Xxxxxx Xxxxxx & Xxxxx
1999 Avenue of the Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxxx X. Xxxx, Esq.
If to Xxxxxx:
Xxxxxx Equity Capital Corporation
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxx Xxxxxxxxx
Xxxxxxx X. Xxxxx
28
With copies to:
Xxxxxx International, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
and:
Xxxxxx Xxxxxx & Zavis
1999 Avenue of the Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxxx X. Xxxx, Esq.
If to any Seller other than Xxxxxx:
c/o Color Spot Nurseries, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxxxxx X. Xxxxxxxx
with copies to:
Xxxx Xxxxxxx
Lake Xxxxxxx Plaza
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxxxx X. Xxxxxx, Esq.
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
Except as otherwise provided herein, any notice under this Agreement will be
deemed to have been given (x) on the date such notice is personally delivered or
delivered by confirmed facsimile, or (y) the next succeeding business day after
the date such notice is delivered to the overnight courier service if sent by
overnight courier; PROVIDED that in each case notices received after
29
4:00 p.m. (local time of the recipient) shall be deemed to have been duly given
on the next business day.
10.7 COMPLETE AGREEMENT. This Agreement, the Confidentiality
Agreement and the other documents and writings referred to herein or delivered
pursuant hereto contain the entire understanding of the parties with respect to
the subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and thereof. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
10.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.9 PUBLICITY. Sellers' Representative and Purchaser will consult
with each other and will mutually agree upon any publication or press release of
any nature with respect to this Agreement or the transactions contemplated
hereby and shall not issue any such publication or press release prior to such
consultation and agreement except as may be required by applicable law, in which
case the party proposing to issue such publication or press release shall use
reasonable efforts to consult in good faith with the other party or parties
before issuing any such publication or press release.
10.10 HEADINGS. The headings contained in this Agreement are for
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
10.11 KNOWLEDGE. For purposes of this Agreement, the term "knowledge"
means, with respect to Purchaser, the actual knowledge of Xxxxx X. Xxxxxxxx, W.
Xxxxxx Xxxxx III and Xxxxxx X. Xxxxxxx, with respect to the Executive Managers,
the actual knowledge of Xxxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx and Xxxxx
Xxxxxxxx, with respect to the Director Shareholders (other than Xxxxxx), the
actual knowledge of such Director Shareholder, and with respect to Xxxxxx, the
actual knowledge of Xxxx Xxxxxxxxx and Xxxxxxx X. Xxxxx.
10.12 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
10.13 THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation, other than the parties hereto
and their permitted successors or assigns, any rights or remedies under or by
reason of this Agreement.
10.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PARTIES
HERETO HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR
00
XXXXXXX XXXXX LOCATED WITHIN THE AREA ENCOMPASSED BY THE STATE OF CALIFORNIA,
COUNTY OF CONTRA COSTA, AND IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS.
THE PARTIES HERETO EACH ACCEPT FOR ITSELF AND HIMSELF, AS THE CASE MAY BE, AND
IN CONNECTION WITH ITS OR HIS, AS THE CASE MAY BE, RESPECTIVE PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION AND VENUE OF THE
AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREE TO BE BOUND BY ANY NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. THE PARTIES HERETO EACH DESIGNATE THE XXXXXXXX-XXXX
CORPORATION SYSTEM, INC. AND SUCH OTHER PERSONS AS MAY HEREINAFTER BE SELECTED
BY THE SELLERS' REPRESENTATIVE WHO IRREVOCABLY AGREES IN WRITING TO SO SERVE AS
AGENT TO RECEIVE ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY THE PARTIES HERETO TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE
MAILED BY XXXXXXXX-XXXX OR SUCH OTHER PERSONS BY REGISTERED MAIL TO THE PARTIES
HERETO, AS PROVIDED HEREIN, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE
LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS.
10.15 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW,
THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE
PARTIES HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH
MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE SCOPE
OF THIS WAIVER IS INTENDED TOME ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES HERETO
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. THE PARTIES HERETO FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS OR HIS, AS THE CASE MAY BE, LEGAL COUNSEL, AND
THAT EACH KNOWINGLY AND VOLUNTARILY WAVES ITS OR HIS, AS THE CASE MAY BE, JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY
31
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY.
IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL BY THE COURT.
10.16 SELLERS' REPRESENTATIVE. Each Seller, for purposes of this
Agreement and the transactions contemplated hereby, hereby irrevocably appoints
Xxxxxx as Sellers' Representative.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
32
IN WITNESS WHEREOF, each of Purchaser, the Company and the Sellers
have executed this Agreement, or caused this Agreement to be executed by their
duly authorized officers, as of the day and year first above written.
KCSN ACQUISITION COMPANY, L.L.P., a Delaware
limited partnership
By: KCSN Management Company, L.P.,
Its general partner
By: KCSN GP, Inc.,
Its general partner
By:_______________________________________________
Xxxxxx X. Xxxxxxx
Vice President
COLOR SPOT NURSERIES, INC., a Delaware corporation
By:_______________________________________________
Xxxxxxx X. Xxxxxxxx
Chairman/CEO
XXXXXX EQUITY CAPITAL CORPORATION, a Delaware
corporation
By:_______________________________________________
Name:_________________________________________
Title:________________________________________
X.X. XXXXXXXX CO., a California corporation
By:_______________________________________________
Xxxxxxx X. Xxxxxxxx
33
President
__________________________________________________
Xxxxxxx X. Xxxxxxxx
__________________________________________________
Xxxxx Xxxxxxxx
__________________________________________________
Xxxx X. Xxxxxxx
__________________________________________________
Xxxxxx X. Xxxxxxxx
__________________________________________________
Xxxxxxx X. Xxxxxx
34
EXHIBIT 5.7
LEGAL OPINION
35
EXHIBIT 5.8
EMPLOYMENT AGREEMENT
36
EXHIBIT 5.9
8.0% SUBORDINATED CONVERTIBLE NOTES
37
EXHIBIT 5.10
STOCKHOLDERS' AGREEMENT
38
EXHIBIT 6.8(A)
LEGAL OPINION - [XXXXXXX X. XXXXXXXX, ESQ.]
39
EXHIBIT 6.8(B)
LEGAL OPINION - [XXXX XXXXXXX]
40
EXHIBIT 6.8(C)
LEGAL OPINION - [XXXXXX XXXXXX & ZAVIS]
41
EXHIBIT 6.10
FINANCING PROPOSAL
42
EXHIBIT 6.11
FEE AGREEMENT
43
SCHEDULE 1
SHAREHOLDERS, EXISTING SHARES, OPTION SHARES
AND REDEEMED SHARES
-------------------------------------------------------------------------------------------------
SHAREHOLDERS EXISTING OPTION TOTAL REDEEMED
SHARES SHARES SHARES SHARES
-------------------------------------------------------------------------------------------------
Xxxxxx Equity Capital Corporation 7,000,000 N/A 7,000,000 7,000,000
X.X. Xxxxxxxx Co. 500,000 N/A 500,000 500,000
Xxxxxxx X. Xxxxxxxx 1,786,084 573,346 2,359,430 743,482
Xxxxx Xxxxxxxx 150,000 573,346 723,346 383,838
Xxxxxx X. Xxxxxxxx 40,800 57,335 98,135 32,720
Xxxx Xxxxx N/A 57,335 57,335 19,117
Xxxx Xxxxxxxx N/A 57,335 57,335 19,117
Xxxx Xxxxxxx 100,000 57,335 157,335 52,459
Xxxxxxx X. Xxxxxx 10,000 57,335 67,335 22,451
Xxxxxx X. Xxxxxxx 10,000 57,335 67,335 22,451
Xxx Xxxxxxxxx 25,000 57,335 82,335 27,453
Xxxx Xxxxxxx N/A 25,000 25,000 8,336
Xxxxxx Xxxxx N/A 10,000 10,000 -
Xxxx X. Xxxxxxx 125,000 57,335 182,335 103,434
Xxxxxxx X. Xxxxxx 100,000 57,335 157,335 52,459
TOTALS 9,846,884 1,697,707 11,544,591 8,753,479
44
SCHEDULE 2
PENDING ACQUISITIONS
1. Acquisition of assets of Sunnyside Plants, Inc.
2. Acquisition of assets of Signature Trees.
45
DISCLOSURE SCHEDULE
46
