EXECUTION COPY
ASSET PURCHASE AGREEMENT
dated as of August 31, 1998
between
FIVE STAR ACQUISITION CORP.
as Purchaser
and
FIVE STAR GROUP, INC.
as Seller
TABLE OF CONTENTS
Page
Section No.
ARTICLE I
SALE OF ASSETS AND CLOSING 1
1.01 Assets 1
1.02 Liabilities 4
1.03 Purchase Price; Allocation 5
1.04 Options 6
1.05 Closing 6
1.06 Passage of Title at Closing 7
1.07 Assignment of Seller's Contracts 7
1.08 Further Assurances 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER 8
2.01 Organization of Seller 8
2.02 Authority 9
2.03 No Conflicts 9
2.04 Governmental Approvals and Filings 9
2.05 Subsidiaries and Other Equity Investments 10
2.06 Financial Statements 10
2.07 Absence of Changes 10
2.08 Title to and Condition of Properties and Assets 11
2.09 Tax Matters 11
2.10 Legal Proceedings 12
2.11 Employee Benefit Plans and Other Arrangements 12
2.12 Real Property 12
2.13 Intellectual Property Rights 13
2.14 Contracts 13
2.15 Licenses 13
2.16 Affiliate Transactions 13
2.17 Environmental Matters 14
2.18 Accounts Receivable 14
2.19 Inventory 14
2.20 Title; Entire Business 14
2.21 Brokers. 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER 15
3.01 Organization 15
3.02 Authority 15
3.03 No Conflicts 15
3.04 Governmental Approvals and Filings 16
3.05 Legal Proceedings 16
3.06 Brokers 16
3.07 Investigation by Purchaser 16
ARTICLE IV
COVENANTS OF SELLER 17
4.01 Access, Information and Documents 17
4.02 Conduct of Business Pending Closing 17
4.03 Approval by Seller's Shareholders 18
4.04 Cooperation with Respect to Financing 18
4.05 Consents and Approvals 18
4.06 Delivery of Assets 18
4.07 Accounts Receivable 18
4.08 Corporate Name 19
4.09 Missing or Incomplete Schedules 19
ARTICLE V
COVENANTS OF PURCHASER 19
5.01 Consents and Approvals 19
5.02 Confidentiality 19
5.03 Financing. 19
5.04 Closing Date Balance Sheet 19
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER 20
6.01 Representations and Warranties 20
6.02 Performance 20
6.03 Regulatory Consents and Approvals 20
6.04 Third Party Consents 21
6.05 Deliveries 21
6.06 Physical Properties 21
6.07 Non-Competition Agreement. 21
6.08 Financing 21
6.09 Guarantee with respect to Real Property Leases 21
6.10 Management Services Agreement 21
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 22
7.01 Representations and Warranties 22
7.02 Performance 22
7.03 Regulatory Consents and Approvals 22
7.04 Third Party Consents 22
7.05 Deliveries 22
7.06 Non-Competition Agreement 22
7.07 Sale of Stock 23
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS 23
ARTICLE IX
INDEMNIFICATION 23
9.01 Seller's Indemnification Obligations 23
9.02 Purchaser's Indemnification Obligations 23
9.03 Method of Asserting Claims 24
9.04 Limits on Indemnification 26
9.05 Indemnification as Sole Remedy 26
9.06 Expenses 26
ARTICLE X
TERMINATION 26
10.01 Termination by Purchaser 26
10.02 Termination by Seller 26
10.03 Effect of Termination 27
ARTICLE XI
DEFINITIONS 27
11.01 Definitions 27
ARTICLE XII
MISCELLANEOUS 33
12.01 Notices 33
12.02 Entire Agreement 34
12.03 Expenses 34
12.04 Arbitration of Claims 35
12.05 Public Announcements 36
12.06 Waiver 36
12.07 Payment of Transfer Taxes 36
12.08 Amendment 36
12.09 No Third Party Beneficiary 36
12.10 No Assignment; Binding Effect 37
12.11 Headings; References to Sections, Exhibits
and Schedules 37
12.12 Invalid Provisions 37
12.13 Governing Law 37
12.14 Counterparts 37
SCHEDULES
Schedule 1 Disclosure Schedule
Schedule 2 Purchaser Disclosure Schedule
EXHIBITS
Exhibit A Promissory Note
Exhibit B General Assignment and Xxxx of Sale
Exhibit C Officer's Certificate
Exhibit D Secretary's Certificate
Exhibit E Certification of Nonforeign Status
Exhibit F Assumption Agreement
Exhibit G Officer's Certificate regarding Representations
and Warranties
Exhibit H Secretary's Certificate
Exhibit I Non-Competition Agreement
Exhibit J Conveyance of Common Stock of Purchaser
This ASSET PURCHASE AGREEMENT, dated as of August 31, 1998, is
made and entered into between FIVE STAR ACQUISITION CORP., a Delaware
corporation ("Purchaser") and wholly owned subsidiary of American Drug Company,
a Delaware corporation ("American Drug"), and FIVE STAR GROUP, INC, a Delaware
corporation ("Seller"). Capitalized terms not otherwise defined herein have the
meanings set forth in Section 11.01.
WHEREAS, Seller is engaged in the business of distributing
home decorating, hardware and finishing products in the Northeastern United
States (the "Business"); and
WHEREAS, Seller desires to sell, transfer and assign to
Purchaser, and Purchaser desires to purchase and acquire from Seller,
substantially all of the assets, inventory, accounts receivable, properties,
rights and business of Seller, and in connection therewith, Purchaser has agreed
to assume certain of the liabilities of Seller, all on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01. Assets. (a) Assets Transferred. On the terms and subject
to the conditions set forth in this Agreement, Seller is selling, transferring,
conveying, assigning and delivering to Purchaser, and Purchaser is purchasing
and paying for, at the Closing, free and clear of all Liens other than Permitted
Liens, all of Seller's right, title and interest in, to and under all of the
assets and properties of Seller, as the same shall exist as of the date hereof
but excluding the Excluded Assets described in Section 1.01(b) (collectively,
the "Assets"). The Assets include, without limitation, all of Seller's rights,
title and interests in and to the following:
(i) Real Property Leases. The leases of real property
described in Schedule 1.01(a)(i) hereto to which Seller is the lessee,
together with any options to purchase the underlying property and
leasehold improvements thereon, and in each case all other rights,
subleases, licenses, permits, deposits and profits appurtenant to or
related to such leases and subleases (the "Real Property Leases");
(ii) Inventory. All inventories of finished goods, office
and other supplies, parts, mailing and packaging materials and other
accessories related thereto wherever located, which are owned or held
for use by Seller, including any of the foregoing purchased subject to
any conditional sales or title retention agreement in favor of any
other Person, together with all rights of Seller against suppliers of
such inventories (the "Inventory");
(iii) Accounts Receivable. All accounts receivable and
rights to receive payments arising in the conduct of the Business and
any Security Agreements related thereto, including any rights of Seller
with respect to any third party collection procedures or any other
Actions or Proceedings which have been commenced in connection
therewith (the "Accounts Receivable");
(iv) Tangible Personal Property. All furniture, fixtures,
equipment and other tangible personal property, wherever located, owned
or held for use by Seller (including, without limitation, the items
listed in Schedule 1.01(a)(iv) of the Disclosure Schedule), including
any of the foregoing purchased subject to any conditional sales or
title retention agreement in favor of any other Person (the "Tangible
Personal Property");
(v) Personal Property Leases. The leases or subleases of
tangible personal property described in Schedule 1.01(a)(v) of the
Disclosure Schedule to which Seller is the lessee or sublessee,
together with any options to purchase the underlying property (the
"Personal Property Leases");
(vi) Business Contracts. To the extent their transfer is
permitted under the terms thereof, all Contracts (other than the Real
Property Leases, the Personal Property Leases and the Accounts
Receivable) to which Seller is a party and which are utilized in the
conduct of the Business, including without limitation Contracts
relating to employees subject to collective bargaining agreements,
suppliers, sales representatives, distributors, purchase orders and
marketing arrangements (together, the "Business Contracts");
(vii) Prepaid Expenses. All prepaid expenses relating to the
Business, including, without limitation, the items listed in Schedule
1.01(a)(vii) of the Disclosure Schedule (the "Prepaid Expenses");
(viii) Intangible Personal Property. All Intellectual
Property owned or held for use by Seller (including Seller's goodwill
therein) and all rights, privileges, claims, causes of action and
options relating or pertaining to the Business or the Assets,
including, without limitation, the items listed in Schedule
1.01(a)(viii) of the Disclosure Schedule (the "Intangible Personal
Property");
(ix) Licenses. All Licenses owned or held for use by Seller,
including, without limitation, the Licenses listed in Schedule
1.01(a)(ix) of the Disclosure Schedule (the "Business Licenses");
(x) Security Deposits. All security deposits deposited by or
on behalf of Seller as lessee or sublessee under the Real Property
Leases (the "Tenant Security Deposits");
(xi) Books and Records. All Books and Records used or held
for use in the conduct of the Business or otherwise relating to the
Assets, and the minute books, stock transfer books and corporate seal
of Seller (the "Business Books and Records");
(xii) Customer Lists. All lists of Seller's current, lapsed
and prospective customers, advertisers or subscribers and all other
mailing lists and records, in whatever format (the "Customer Lists"),
and all of Seller's copyrights or other Intellectual Property rights
therein;
(xiii) Goodwill. All of the goodwill related to the Assets
and the Business (the "Goodwill");
(xiv) Cash. All of Seller's cash, commercial paper,
certificates of deposit and other bank deposits, treasury bills and
other cash equivalents (the "Cash"); and
(xv) Other Assets and Properties. All other assets and
properties of Seller used or held for use in connection with the
Business except as otherwise provided in Section 1.01(b).
(b) Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, the following assets and properties of
Seller (the "Excluded Assets") shall be excluded from and shall not
constitute Assets:
(i) Intercompany Indebtedness. The rights of the Seller in,
to and under all Intercompany Loans, including the Seller's rights to
receive payments thereunder and any other benefit or collateral derived
from security agreements, guarantees or other pledges related thereto;
(ii) Employee Benefit Plans. All assets owned or held by any
Benefit Plans;
(iii) Tax Refunds. All refunds or credits, if any, of
Taxes due to or from Seller which cannot be assigned by Law (the "Tax
Refunds");
(iv) Certain Capital Stock. Seller's ownership interest in
339,843 shares of the capital stock of Interferon Sciences, Inc., a
Delaware corporation;
(v) Litigation Claims. Any rights (including
indemnification) and claims and recoveries under litigation of Seller
against third parties arising out of or relating to events prior to the
Closing Date;
(vi) Excluded Obligations. The rights of Seller in, to and
under all Contracts of any nature, the obligations of Seller under
which expressly are not assumed by Purchaser pursuant to Section
1.02(b); and
(vii) Seller's rights under this Agreement.
1.02 Liabilities. (a) Assumed Liabilities. In connection with
the sale, transfer, conveyance, assignment and delivery of the Assets pursuant
to this Agreement, on the terms and subject to the conditions set forth in this
Agreement, upon execution and delivery of this Agreement, Purchaser will assume
and agree to pay, perform and discharge when due the following obligations of
Seller arising in connection with the operation of the Business, as the same
shall exist as of the Closing Date (the "Assumed Liabilities"), and no others:
(i) Real Property Lease Obligations. All obligations of
Seller under the Real Property Leases arising and to be performed on or
after the Closing Date and excluding any such obligations arising or to
be performed prior to the Closing Date;
(ii) Accounts Payable. All obligations of Seller with
respect to accounts payable arising in the ordinary course of business
since the Interim Financial Statement Date (the "Accounts Payable");
(iii) Personal Property Lease Obligations. All obligations
of Seller under the Personal Property Leases arising and to be
performed on or after the Closing Date, and excluding any such
obligations arising or to be performed prior to the Closing Date;
(iv) Other Stated Liabilities. All obligations of Seller
incurred in the ordinary course of business since the date of the
Audited Financial Statements;
(v) Obligations under Contracts and Licenses. All
obligations of Seller under the Business Contracts and Business
Licenses arising and to be performed on or after the Closing Date, and
excluding any such obligations arising or to be performed prior to the
Closing Date;
(vi) Tax Liabilities. All obligations of Seller relating to
the New Jersey and Connecticut sales and use tax audits in the maximum
amount of $350,000; and
(vii) Accrued Expenses. All obligations of Seller with
respect to accrued expenses reflected or reserved against in the
balance sheet in the Audited Financial Statements or those incurred in
the ordinary course of business since the Audited Financial Statements,
including without limitation the items listed in Schedule 1.02(a)(vi)
hereto (the "Accrued Expenses").
(b) Retained Liabilities. Except for the Assumed
Liabilities, Purchaser shall not assume by virtue of this Agreement or
the transactions contemplated hereby, and shall have no liability for,
any Liabilities of Seller (including, without limitation, any debt or
liability incurred by Seller pursuant to that certain Loan Agreement
dated August 18, 1997 between Seller and Fleet Bank National
Association, Summit Bank, The Dime Savings Bank of New York, FSB and
Fleet Bank, National Association, as Agent (collectively, the "Banks"))
of any kind, character or description whatsoever (the "Retained
Liabilities"). Seller shall discharge in a timely manner or shall make
adequate provision for all of the Retained Liabilities.
1.03 Purchase Price; Allocation. (a) Purchase Price. The
aggregate purchase price (the "Purchase Price") for the Assets is $17,500,000 in
cash (the "Cash Portion"), as adjusted pursuant to Section 1.03(c) below, in
addition to the $5,000,000 Subordinated Note from Purchaser in favor of Seller
(the "Note"), guaranteed by American Drug, in form and substance acceptable to
Seller and Purchaser, taking into account requirements of the Banks providing
the financing for the Cash Portion of the Purchase Price, including the
requirement that payment of principal and interest on the Subordinated Note is
subject to certain milestones to be achieved by the Purchaser.
(b) Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets in a manner consistent with values as set forth on
Schedule 1.03(b) hereto. Purchaser and Seller each agree: (i) that any such
allocation shall be consistent with Section 1.03(a) and the requirements of
section 1060 of the Code and the regulations thereunder; (ii) that it shall
complete jointly and file separately Form 8594 with its Federal Income Tax
Return consistent with such allocation for the tax year in which the Closing
occurs; and (iii) that, except as required by Law, no party will take a position
on any income, transfer or gains Tax Return, before any Governmental or
Regulatory Authority charged with the collection of any such Tax or in any
judicial proceeding, that is in any manner inconsistent with the terms of any
such allocation without the consent of the other party.
(c) Adjustment. The Cash Portion of the Purchase Price shall
be adjusted as follows: on Closing, Seller shall notify Purchaser in writing to
the total amount then outstanding under its Loan Agreement with the Banks (the
"Lender Debt"), including principal, interest thereon and pre-payment or early
termination penalties or fees (if any) that will be incurred upon early
termination of the Loan Agreement. The Cash Portion of the Purchase Price shall
be increased or decreased, as the case may be, to equal the Lender Debt.
1.04 Options. American Drug shall grant to certain of Seller's
executive officers, directors and employees hereto as of the Closing Date stock
options (the "Options"), pursuant to American Drug's 1994 Stock Option Plan, to
acquire an aggregate of shares of common stock, par value $.01 per share, of
American Drug.
1.05 Closing. (a) The closing of the purchase and sale of the
Assets (the "Closing") will take place at the offices of Xxxxxx, Xxxxx & Xxxxxxx
LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as
Purchaser and Seller mutually agree, at 10:00 A.M. local time, on the second
business day following the satisfaction of each of the conditions set forth in
Articles VI and VII but in no event later than [September 30], 1998 (the
"Closing Date"). The Closing Date may be postponed to a later time and date by
mutual agreement of the parties. For the purposes of convenience of the parties,
the transactions contemplated by this Agreement shall be deemed to be effective
as of 12:01 A.M. on [September 30], 1998, irrespective of the date of the
Closing Date.
(b) Documents to be Delivered by Seller to Purchaser. At the
Closing, Seller will deliver to Purchaser:
(i) a general instrument of sale, conveyance,
assignment, transfer and delivery with full covenants of warranty as to
Seller's good and marketable title to all the Assets, subject, in the
case of non-material contracts and software licenses, to the consent or
approval of third parties, in the form of Exhibit A (the "General
Assignment");
(ii) such specific instruments of sale, conveyance,
assignment, transfer and delivery with full covenants of warranty as to
Seller's good and marketable title to such of the Assets included
within such general instrument of sale, conveyance, assignment,
transfer and delivery as Purchaser shall reasonably request (the
General Assignment and such other instruments being collectively
referred to herein as the "Assignment Instruments");
(iii) all Seller's contracts, books, records and
other data relating to the Assets and Seller's operations (except
records relating to Excluded Assets and Retained Liabilities, and all
other records which Seller is required by law to keep in its
possession, as to which Seller will furnish to Purchaser at any time or
from time to time after the Closing Date, copies or transcripts);
(iv) a certificate of Seller in the form of Exhibit C
certifying as to the accuracy of Seller's representations and
warranties at and as of the Closing and that Seller has performed and
complied with all of the terms, provisions and conditions to be
performed and complied with by Seller at or before the Closing;
(v) a certificate of Seller in the form of Exhibit D
certifying as to certain corporate matters, together with all of the
attachments referred to therein;
(vi) a certificate of Seller in the form attached
hereto as Exhibit E (the "FIRPTA Certificate"); and
(vii) such other certificates and documents as
Purchaser or its counsel may reasonably request.
(c) Documents to be Delivered by Purchaser to Seller. At the
Closing, Purchaser will deliver to Seller:
(i) the Cash Portion of the Purchase Price by wire
transfer of immediately available funds to such account as Seller has
directed;
(ii) an executed Note;
(iii) an instrument of assumption of the Assumed
Liabilities in the form of Exhibit F (the "Assumption Agreement");
(iv) a certificate of Purchaser in the form of
Exhibit G certifying as to the accuracy of Purchaser's representations
and warranties at and as of the Closing and that Purchaser has
performed and complied with all of the terms, provisions and conditions
to be performed and complied with by Purchaser at or before the
Closing;
(v) a certificate of Purchaser in the form of Exhibit
H certifying as to certain corporate matters, together with all of the
attachments referred to therein; and
(vi) such other certificates and documents as Seller or its
counsel may reasonably request.
1.06 Passage of Title at Closing. Upon delivery of the
instruments of sale, conveyance, assignment, transfer and delivery, title to the
Assets shall pass to Purchaser at the Closing. At the Closing, Seller will put
Purchaser in full, complete and quiet possession and enjoyment of all of the
Assets and from and after the Closing the ownership and operation of the Assets
and the business of Seller to be sold to Purchaser pursuant to this Agreement
shall be for the account and risk of Purchaser. Purchaser shall be under no
liability for any debt, liability or obligation of Seller incurred after the
Closing or arising out of any transaction by Seller or any event occurring with
respect to Seller after the Closing.
1.07 Assignment of Seller's Contracts. Nothing in this
Agreement shall be deemed to constitute an assignment or an attempt to assign
any contract or other agreement to which Seller is a party if the attempted
assignment thereof without the consent of the other party to such contract or
agreement would constitute a breach thereof or affect in any way the rights of
Seller thereunder. If after Seller has used its best efforts to obtain the
consent of any such other party to such contract or agreement, such consent
shall not be obtained at or prior to the Closing, or an attempted assignment
thereof at the Closing would be ineffective and would affect the rights of
Seller thereunder, Seller will cooperate with Purchaser in any reasonable
arrangement designed to provide for Purchaser the benefits under any such
contract or agreement, including the enforcement, at the cost and for the
benefit of Purchaser, of any and all rights of Seller against such other party
thereto arising out of the breach or cancellation thereof by such other party or
otherwise.
1.08 Further Assurances. (a) At any time or from time to time
after the Closing, at Purchaser's request and without further consideration,
Seller shall execute and deliver to Purchaser such other instruments of sale,
transfer, conveyance, assignment and confirmation, provide such materials and
information and take such other actions as Purchaser may reasonably deem
necessary or desirable in order more effectively to transfer, convey and assign
to Purchaser, and to confirm Purchaser's title to, all of the Assets, and, to
the full extent permitted by Law, to put Purchaser in actual possession and
operating control of the Assets and to assist Purchaser in exercising all rights
with respect thereto, and otherwise to cause Seller to fulfill its obligations
under this Agreement and the Operative Agreements.
(b) At any time or from time to time after the Closing, at
Seller's request and without further consideration, Purchaser shall execute and
deliver to Seller such other instruments of assumption, provide such materials
and information and take such other actions as Seller may reasonably deem
necessary or desirable in order more effectively to have Purchaser assume, agree
to pay, perform and discharge when due all of the Assumed Liabilities, and
otherwise to cause Purchaser to fulfill its obligations under this Agreement and
the Operative Agreements.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as disclosed in the disclosure schedule attached as
Schedule 1 hereto (the "Disclosure Schedule"), Seller represents and warrants to
Purchaser:
2.01 Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has full power and authority to conduct the Business as now
conducted and to own, use and lease the Assets. Seller is duly qualified,
licensed or admitted to do business and is in good standing in all jurisdictions
in which the conduct or nature of its business makes such qualification,
licensing or admission necessary and in which the failure to be so qualified,
licensed or admitted and in good standing could reasonably be expected to have a
material adverse effect on the validity or enforceability of this Agreement or
any of the Operative Agreements to which it is a party or on the ability of
Seller to perform its obligations hereunder or thereunder.
2.02 Authority. Seller has full power and authority to execute
and deliver this Agreement and the Operative Agreements to which it is a party,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby, including, without limitation, to
sell, transfer, convey, assign and deliver (pursuant to this Agreement) the
Assets. The execution and delivery by Seller of this Agreement and the Operative
Agreements to which it is a party, and the performance by Seller of its
obligations hereunder and thereunder, have been duly and validly authorized by
the Board of Directors of Seller, no other corporate action on the part of
Seller being necessary. This Agreement and the Operative Agreements have been
duly and validly executed and delivered by Seller and, assuming due
authorization, execution and delivery of this Agreement and the Operative
Agreements by Purchaser will, when executed and delivered by Seller, constitute
legal, valid and binding obligations of Seller enforceable against Seller in
accordance with their terms.
2.03 No Conflicts. Assuming all consents, approvals,
authorizations and other actions listed in Schedule 2.03 of the Disclosure
Schedule have been obtained and except for such requirements, defaults,
breaches, violations or other occurrences that would not individually or in the
aggregate have a material adverse effect on the ability of Seller to perform its
obligations under this Agreement, neither the execution, delivery or performance
of this Agreement nor consummation of any of the transactions provided for in
this Agreement (i) will violate or conflict with the Certificate of
Incorporation or By-Laws of Seller, (ii) will result in any material breach or
default under any provision of any material contract or agreement of any kind to
which Seller is a party or by which Seller is bound or to which any material
property or asset of Seller is subject, (iii) is prohibited by or requires
Seller to obtain or make any consent, authorization, approval, registration or
filing under any statute, law, ordinance, regulation, rule, judgment, decree or
order of any court or governmental agency, board, bureau, body, department or
authority, applicable to Seller, (iv) will cause any acceleration of maturity of
any note, instrument or other obligation to which Seller is a party or by which
Seller is bound or with respect to which Seller is an obligor or guarantor or
(v) will result in the creation or imposition of any lien, claim, charge,
restriction, equity or encumbrance of any kind whatsoever upon or give to any
other person any interest or right (including any right of termination or
cancellation) in or with respect to any of the material properties, assets,
business, agreements or contracts of Seller.
2.04 Governmental Approvals and Filings. Except as disclosed
in Section 2.04 of the Disclosure Schedule and except where the failure to
obtain such consents, approvals or filings would not individually or in the
aggregate have a material adverse effect on the ability of Seller to perform its
obligations under this Agreement and would not individually or in the aggregate
have a material adverse effect, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority applicable to Seller on
the part of Seller is required in connection with the execution, delivery and
performance of this Agreement or any of the Operative Agreements to which Seller
is a party or the consummation of the transactions contemplated hereby or
thereby.
2.05 Subsidiaries and Other Equity Investments. Other than
Seller's ownership interest in the capital stock of Interferon Sciences, Inc., a
Delaware corporation, Seller does not own, directly or indirectly any shares of
capital stock of any corporation or any equity investment in any partnership,
association or other business organization (a "Subsidiary").
2.06 Financial Statements. Seller has made available to
Purchaser true and complete copies of the following financial statements: the
audited balance sheets of Seller as at December 31, 1995, 1996 and 1997 and
related statements of income and retained earnings and changes in financial
position for the fiscal years ended on those dates, together with supporting
schedules and the reports thereon of KPMG Peat Marwick certified public
accountants (collectively, the "Audited Financial Statements"). The Audited
Financial Statements, including the notes thereto, are complete and correct and
present fairly and accurately the financial position of Seller as at the
respective dates of said balance sheets and the results of operations and
changes in financial position of Seller for the respective periods then ended in
conformity with generally accepted accounting principles applied on a basis
consistent with that of the preceding periods.
2.07 Absence of Changes. Except as set forth in Schedule 2.07
of the Disclosure Schedule and except for the execution and delivery of this
Agreement, since December 31, 1997 Seller has not:
(a) had any material adverse change in its condition (financial or
otherwise), operations, business, properties, assets, or liabilities, other than
changes in the ordinary course of business;
(b) suffered any damage, destruction or loss of physical property
(whether or not covered by insurance) materially adversely affecting its
condition (financial or otherwise) or operations;
(c) incurred or agreed to incur any indebtedness for borrowed money;
(d) paid or obligated itself to pay in excess of $500,000 in the
aggregate for fixed assets;
(e) suffered any substantial loss or waived any substantial right that
has had individually or in the aggregate a material adverse effect;
(f) sold, transferred or otherwise disposed of, or agreed to sell,
transfer or otherwise dispose of, any assets having a fair market value at the
time of sale, transfer or disposition of $100,000 or more in the aggregate, or
cancelled, or agreed to cancel, any debts or claims, other than in the ordinary
course of business;
(g) mortgaged, pledged or subjected to any charge, lien, claim or
encumbrance, or agreed to mortgage, pledge or subject to any charge, lien, claim
or encumbrance, any of its material properties or assets that has had
individually or in the aggregate any material adverse effect;
(h) increased, or agreed to increase, the compensation or bonuses or
special compensation of any kind of any of its officers, employees or agents
over the rate being paid to them on June 30, 1998, other than normal merit
and/or cost-of-living increases pursuant to customary arrangements consistently
followed, or adopted or increased any benefit under any insurance, pension or
other employee benefit plan, payment or arrangement made to, for or with any
such officer, employee or agent;
(i) made or permitted any material amendment or termination of any
material contract, agreement or license to which it is a party other than in the
ordinary course of business that has had individually or in the aggregate any
material adverse effect;
(j) had any resignation or termination of employment of any of its key
officers or employees or knows of any impending or threatened resignation or
resignations or termination or terminations of employment that would have a
material adverse effect on its operations or business;
(k) made any change in its accounting methods or practices with respect
to its condition, operations, business, properties, assets or liabilities; or
(l) entered into any transaction not in the ordinary course of its
business.
2.08 Title to and Condition of Properties and Assets. Except
as set forth in Schedule 2.08 of the Disclosure Schedule, Seller has good and
marketable title to, or valid leasehold interests in, all of its properties and
assets, including, without limitation, (i) all those used in their respective
businesses and (ii) those reflected in the balance sheet of Seller referred to
in Section 2.06 (except as sold or otherwise disposed of in the ordinary course
of business), subject to no mortgage, pledge, conditional sales contract, lien,
security interest, right of possession in favor of any third party, claim or
other encumbrance, except the lien of current taxes not yet due and payable or
imperfections of title and liens, the existence of which do not have
individually or in the aggregate a material adverse effect.
2.09 Tax Matters. Except as set forth in Schedule 2.09 of the
Disclosure Schedule, (i) all tax returns required to be filed by Seller or with
respect to taxes of the Business are accurate in all material respects and have
been filed in a timely manner (taking into account all lawful extensions of due
dates), other than those tax returns as to which the failure to file would not
have a material adverse effect on the ability of Seller to perform its
obligations under this Agreement or the Operative Agreements, and (ii) all taxes
shown to be due on such filed tax returns have been paid or adequate provision
in accordance with GAAP has been made for the payment therefor.
2.10 Legal Proceedings. () Except as set forth in Schedule
2.10 of the Disclosure Schedule, there are no Actions or Proceedings pending or,
to the knowledge of Seller, threatened against, Seller with respect to any of
Seller's assets and properties which (i) if asserted and decided adversely to
Seller, could materially and adversely affect the operations or the business of
Seller, (ii) questions the validity of this Agreement or the Operative
Agreements or (iii) seeks to delay, prohibit or restrict in any manner any
action taken or contemplated to be taken by Seller under this Agreement or the
Operative Agreements.
2.11 Employee Benefit Plans and Other Arrangements. All
Benefit Plans are listed in Section 2.11 of the Disclosure Schedule, and copies
of all documentation relating to such Benefit Plans have been delivered or made
available to Purchasers. Except as disclosed in Section 2.11 of the Disclosure
Schedule:
(a) each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with the
requirements of all applicable Law, including ERISA and the Code, and no Benefit
Plan is a "defined benefit plan" within the meaning of section 414(j) of the
Code;
(b) no Benefit Plan is a multiemployer plan within the meaning
of section 3(37) of ERISA;
(c) no direct, contingent or secondary liability has been
incurred or is expected to be incurred by Seller or any ERISA Affiliate under
Title IV of ERISA and neither Seller nor any ERISA Affiliate has incurred any
liability for any tax imposed under section 4971 through 4980B of the Code or
civil liability under section 502(i) or (l) of ERISA;
(d) no benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement, and no Benefit Plan provides
health or death benefit coverage beyond the termination of an employee's
employment, except as required Law.
2.12 Real Property. (a) Seller has no ownership or other
interest in or title to any real property other than its interests in the Real
Property Leases. Seller has a valid and subsisting leasehold estate in and the
right to quiet enjoyment of the real properties subject to the Real Property
Leases for the full term thereof. Each Real Property Lease is a legal, valid and
binding agreement, enforceable in accordance with its terms, of Seller and, to
Seller's knowledge, of each other Person that is a party thereto, and except as
set forth in Section 2.12 of the Disclosure Schedule, there is no, nor has
Seller received any notice of any, material default (or any condition or event
which, after notice or lapse of time or both, would constitute a material
default) by Seller, or to Seller's knowledge, by any party thereunder.
(b) Seller has delivered to Purchaser prior to the date hereof
true and complete copies of all Real Property Leases (including any amendments
and renewal letters).
(c) The premises subject to the Real Property Leases are in
all material respects in good operating condition and in a state of good
maintenance and repair, ordinary wear and tear excepted, are adequate and
suitable for the purposes for which they are presently being used and, to the
knowledge of Seller, there are no condemnation or appropriation proceedings
pending or threatened against any of such.
2.13 Intellectual Property Rights. Section 1.01(a)(viii) of
the Disclosure Schedule lists all material items of Intellectual Property used
by or needed by Seller in the operation of the Business, except the absence of
which would not have individually, or in the aggregate, have a material adverse
effect.
2.14 Contracts. Schedule 2.14 of the Disclosure Schedule
contains a true and correct list of each agreement, understanding, instrument or
contract, whether or not written (a "Contract") involving more than $100,000;
(ii) any collective bargaining agreement with any labor union or other employee
representative of a group of employees; (iii) any joint venture, partnership or
other similar agreement involving a sharing of profits, losses, costs or
liabilities in respect of the Business with any other person; and (iv) any
amendment, supplement, and modification (whether oral or written) in respect of
any of the foregoing. Except as set forth in Schedule 2.14, each Contract listed
in Schedule 2.14 is a valid and binding agreement of Seller and is in full force
and effect. Except as set forth in Schedule 2.14, neither Seller nor, to
Seller's knowledge, any other party is in material default under any Contract
listed in Schedule 2.14, other than defaults which have been cured or waived and
defaults which would not be expected to have a material adverse effect.
2.15 Licenses. Section 1.01(a)(ix) of the Disclosure Schedule
contains a true and complete list of all Business Licenses owned or held for use
by Seller which are material to the operation of the Business except for such
business licenses the absence of which would not have individually or in the
aggregate a material adverse effect. Seller is in compliance, in all material
respects, with the requirements applicable to each Business License listed.
2.16 Affiliate Transactions. (a) Except as set forth in
Schedule 2.16, no officer, director, Affiliate or Associate of Seller or any
Associate of any such officer, director or Affiliate provides or causes to be
provided any assets, services or facilities used or held for use in connection
with the Business.
(b) The Business does not provide or cause to be provided any
assets, services or facilities to any officer, director, Affiliate or Associate
of Seller. Each of the transactions, if any, listed in Section 2.17 of the
Disclosure Schedule is engaged in on an arm's-length basis.
2.17 Environmental Matters. To Seller's knowledge, Seller has
obtained all Licenses which are required in respect of the Business or the
Assets under applicable Environmental Laws, except where the failure to so
comply would not individually or in the aggregate have a material adverse
effect. Seller has conducted the Business in compliance in all material respects
with the terms and conditions of all such Licenses and with any applicable
Environmental Law, except where the failure to so comply would not individually
or in the aggregate have a material adverse effect.
2.18 Accounts Receivable. Except as set forth in Schedule
2.18, the Accounts Receivable: (i) arose from bona fide sales transactions in
the ordinary course of business and are payable on such accounts' ordinary trade
terms; (ii) to Seller's knowledge, are legal, valid and binding obligations of
the respective debtors enforceable in accordance with their terms; (iii) to
Seller's knowledge, are not subject to any valid set-off or counterclaim; (iv)
do not represent obligations for goods sold on consignment, on approval or on a
sale-or-return basis or subject to any other repurchase or return arrangement;
(v) except as set forth in Schedule 2.18, to Seller's knowledge, are collectible
in the ordinary course of business consistent with past practice in the
aggregate recorded amounts thereof, net of any applicable reserve reflected in
the balance sheet in the Audited Statements; and (vi) except as set forth in
Schedule 2.18, to Seller's knowledge, are not the subject of any Actions or
Proceedings brought by or on behalf of Seller.
2.19 Inventory. Except as set forth in Schedule 2.19, of the
Disclosure Schedule, all Inventory of the Seller acquired in the ordinary course
of business in an arm's length third party transaction consists of finished
products which exist (i) in first class condition and saleable through normal
trade channels, (ii) not subject to any lien, claim, encumbrance, or security
interest except as set forth in Schedule 2.19, of the Disclosure Schedule, (iii)
Inventory to which the Seller has title, (iv) located at the Seller's premises
in New Jersey or Connecticut, (v) not returned, damaged or defective goods, (vi)
not xxxx and hold goods and (vii) not goods that have been repossessed by
Seller.
2.20 Title; Entire Business. Seller has and is conveying to
Purchaser good and valid title to all of the Assets, free and clear of all Liens
other than Permitted Liens, and such Liens with respect to the Assumed
Liabilities. The sale of the Assets by Seller to Purchaser pursuant to this
Agreement effectively conveys to Purchaser the entire Business and all of the
tangible and intangible property used by Seller (whether owned, leased or held
under license by Seller, by any of Seller's Affiliates or Associates or by
others) in connection with the conduct of the Business as heretofore conducted
by Seller (except for the Excluded Assets).
2.21 Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by Seller directly
with Purchaser without the intervention of any Person on behalf of Seller in
such a manner as to give rise to any valid claim by any Person against Purchaser
for a finder's fee, brokerage commission or similar payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as disclosed in the disclosure schedule attached as
Schedule 2 hereto (the "Purchaser Disclosure Schedule"), Purchaser represents
and warrants to Seller:
3.01 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Purchaser is duly qualified, licensed and admitted to do business and is in good
standing in all jurisdictions in which the conduct or nature of its business,
makes such qualification, licensing or admission necessary and in which the
failure to be so qualified, licensed or admitted and in good standing could
reasonably be expected to have a material adverse effect on the validity or
enforceability of this Agreement or any of the Operative Agreements which it is
a party or on the ability of Purchaser to perform its obligations hereunder or
thereunder.
3.02 Authority. Purchaser has full power and authority to
execute and deliver this Agreement and the Operative Agreements to which it is a
party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby, including, without limitation, to
purchase (pursuant to this Agreement) the Assets, and to assume (pursuant to
this Agreement) the Assumed Liabilities. The execution and delivery by Purchaser
of this Agreement and the Operative Agreements to which it is a party, and the
performance by Purchaser of its obligations hereunder and thereunder, have been
duly and validly authorized by Purchaser. This Agreement and the Operative
Agreements have been duly and validly executed and delivered by Purchaser and,
assuming due authorization, execution and delivery of this Agreement and the
Operative Agreements by Seller will, when executed and delivered by Purchaser,
constitute legal, valid and binding obligations of Purchaser enforceable against
Purchaser in accordance with their terms.
3.03 No Conflicts. Except as set forth on Schedule 3.03 of the
Purchaser Disclosure Schedule, and except for such requirements, defaults,
breaches, violations or other occurrences that would not in the aggregate have a
material adverse effect on the ability of Purchaser to perform its obligations
under this Agreement, neither the execution, delivery or performance of this
Agreement nor consummation of any of the transactions provided for in this
Agreement (i) will violate or conflict with the Certificate of Incorporation or
By-Laws of Purchaser, (ii) will result in any breach of or default under any
provision of any contract or agreement of any kind to which Purchaser is a party
or by which Purchaser is bound or to which any property or asset of Purchaser is
subject, (iii) is prohibited by or requires Purchaser to obtain or make any
consent, authorization, approval, registration or filing under any statute, law,
ordinance, regulation, rule, judgment, decree or order of any court or
governmental agency, board, bureau, body, department or authority, or of any
other person, (iv) will cause any acceleration of maturity of any note,
instrument or other obligation to which Purchaser is a party or by which
Purchaser is bound or with respect to which Purchaser is an obligor or guarantor
or (v) will result in the creation or imposition of any lien, claim, charge,
restriction, equity or encumbrance of any kind whatsoever upon or give to any
other person any interest or right (including any right of termination or
cancellation) in or with respect to any of the properties, assets, business,
agreements or contracts of Purchaser.
3.04 Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory Authority
on the part of Purchaser is required in connection with the execution, delivery
and performance of this Agreement or the Operative Agreements to which it is a
party or the consummation of the transactions contemplated hereby or thereby.
3.05 Legal Proceedings. There are no Actions or Proceedings
pending or, to the knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its assets and properties which could reasonably
be expected to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the Operative Agreements.
3.06 Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by Purchaser directly
with Seller without the intervention of any Person on behalf of Purchaser in
such manner as to give rise to any valid claim by any Person against Seller for
a finder's fee, brokerage commission or similar payment.
3.07 Investigation by Purchaser. Purchaser and its employees,
agents and accounting and legal representatives have conducted their own
independent review and analysis of the business, operations, technology, assets,
liabilities, results of operations, financial condition and prospects of the
Business and acknowledge that Seller has provided Purchaser with reasonable
access to the personnel, properties, premises and records of the Business for
this purpose. In entering into this Agreement, Purchaser has relied solely upon
its own investigation and analysis, and Purchaser acknowledges that neither
Seller nor any of its affiliates, nor any of their respective directors,
officers, employees, controlling persons, agents, representatives or any other
Person makes or has made, other than as specifically made in this Agreement, any
representation or warranty, either express or implied, as to the accuracy or
completeness of any of the information provided or made available to Purchaser
or its Affiliates, or their respective directors, officers, employees,
controlling persons, agents, representatives or any other Person.
ARTICLE IV
COVENANTS OF SELLER
Seller covenants and agrees that Seller will comply with all
covenants and provisions of this Article IV, except to the extent Purchaser may
otherwise consent in writing.
4.01 Access, Information and Documents. Pending the Closing,
Seller will give to Purchaser and to its agents and Representatives access
during normal working hours, upon prior notice, to any and all of the
properties, assets, books, records and other documents of Seller to enable
Purchaser to make such examination of the business, properties, assets, books,
records and other documents of Seller as Purchaser may reasonably request. In
connection with such access, Purchaser shall, and shall cause its agents and
Representatives to, use their best efforts to minimize any disruption of the
Business.
4.02 Conduct of Business Pending Closing. From the date hereof
until the Closing, except as set forth in Schedule 4.02 of the Disclosure
Schedule or consented to by Purchaser in writing:
(a) Seller will carry on its business and operations in a good
and diligent manner on an arms-length basis and substantially in the manner
carried on as of the date hereof and Seller will not engage in any activity or
transaction or make any commitment to purchase or spend other than in the
ordinary course of its business as heretofore conducted;
(b) Seller will not pay or obligate itself to pay any compensation,
commission or bonus to any director, officer, employee or independent contractor
as such, except for the regular compensation and commissions payable to such
director, officer, employee or independent contractor at the rate in effect on
the date of this Agreement;
(c) Seller will continue to carry insurance insuring its properties and
operations for its benefit, in amounts deemed adequate by its Board of Directors
or management, against all risks usually insured against by persons operating
similar properties or conducting similar operations in the localities where such
properties are located or such operations are conducted under valid and
enforceable policies issued by insurers of recognized responsibility;
(d) Seller will use its best efforts to preserve its business
organization intact, to keep available to Purchaser the services of its
employees and independent contractors and to preserve for Purchaser its
relationships with suppliers, licensees, distributors and customers and others
having business relationships with it;
(e) Seller will not, and will not obligate itself to, sell or otherwise
dispose of or pledge or otherwise encumber any of its properties or assets
except in the ordinary course of business and Seller will maintain its
facilities, machinery and equipment in good operating condition and repair,
subject only to ordinary wear and tear;
(f) Seller will not amend its Articles of Incorporation or By-Laws;
(g) Seller will not engage in any activity or transaction other than in
the ordinary course of its business as heretofore conducted; and
(h) Without limiting the foregoing, Seller will consult with Purchaser
regarding all significant developments, transactions and proposals relating to
its business or the Assets.
4.03 Approval by Seller's Shareholders. Seller shall cause a
meeting of its Shareholder to be called and held for the purpose of voting upon
this Agreement and the transactions contemplated hereby or, in the alternative,
Seller shall obtain a consent of the Shareholders pursuant to Section 141 of the
Delaware General Corporation Law, not later than five days following the date of
this Agreement or on such later date as Purchaser and Seller may agree. Seller
shall recommend to its shareholders the approval of, and shall otherwise use its
best efforts to cause its shareholder to approve, this Agreement and the
consummation of the transactions contemplated hereby.
4.04 Cooperation with Respect to Financing. Seller agrees to
cooperate in any reasonable manner with Purchaser in connection with the
obtaining of any financing including, without limitation, the financing referred
to in Section 6.08 of this Agreement.
4.05 Consents and Approvals. Seller shall use its reasonable
best efforts to obtain prior to the Closing all material consents,
authorizations and approvals under all statutes, laws, ordinances, regulations,
rules, judgments, decrees and orders of any court or governmental agency, board,
bureau, body, department or authority or of any other person required to be
obtained by Seller in connection with the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby,
including those consents set forth in Schedule 2.03 of the Disclosure Schedule.
except where failure to obtain such consents would not have a material adverse
effect.
4.06 Delivery of Assets. At the Closing, Seller will deliver
or make available to Purchaser at the locations at which the Business is
conducted all of the Assets, and if, at any time after the date hereof, Seller
discovers in its possession or under its control any other Assets, it will
forthwith deliver such other Assets to Purchaser.
4.07 Accounts Receivable. To the extent that, following the
Closing, Seller, or any Affiliate or Associate of Seller, shall receive any
monies or properties payable to Purchaser in respect of any Assets conveyed to
Purchaser hereunder, Seller shall promptly account for and pay over, or cause to
be paid over, such monies to Purchaser.
4.08 Corporate Name. On or within five days of the Closing
Date, Seller will change its corporate name and will not, directly or
indirectly, use or do business under or allow any of their respective Affiliates
to use or do business under or assist any other Person in using or doing
business under any name or trademark incorporating the words "FIVE STAR" or any
other name or trademark confusingly similar to such names and marks.
4.09 Missing or Incomplete Schedules. Seller shall furnish to
Purchaser any missing or incomplete Schedules or Exhibits hereto no later than
September 20, 1998. Seller acknowledges and agrees that, upon the receipt of
such Schedules or Exhibits, Purchaser shall have seven days to review such
Schedules or Exhibits and raise any issues in respect thereof with Seller. In
any event, if Purchaser is not satisfied in its reasonable discretion with such
Schedules and Exhibits, Purchaser may elect to terminate this Agreement in
accordance with Section 10.01 hereof.
ARTICLE V
COVENANTS OF PURCHASER
5.01 Consents and Approvals. Purchaser shall use its best
efforts to obtain prior to the Closing all consents, authorizations and
approvals under all statutes, laws, ordinances, regulations, rules, judgments,
decrees and orders of any court or governmental agency, board, bureau, body,
department or authority or of any other person required to be obtained by
Purchaser in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
5.02 Confidentiality. Purchaser shall exert reasonable
efforts, at least as stringent as those employed by it for the preservation and
maintenance of its own proprietary information and trade secrets, to preserve
and maintain all proprietary information and trade secrets of Seller received or
confirmed in documentary form by Purchaser from Seller and shall not disclose to
any third person or use any such proprietary information or trade secret for
personal advantage, except that Purchaser shall be free to use and disclose all
or any of such proprietary information and trade secrets which (a) were already
in Purchaser's possession at the time of disclosure to Purchaser; (b) are a
matter of public knowledge; (c) have been or are hereafter published other than
through Purchaser; or (d) are lawfully obtained by Purchaser from a third person
without restrictions of confidentiality.
5.03 Financing. Purchaser shall use its best efforts to obtain
the financing referred to in Section 6.08 of this Agreement.
5.04 Closing Date Balance Sheet. (a) As soon as practicable
after the Closing Date, Purchaser shall prepare a Closing Date Balance Sheet
setting forth the Purchaser's computation of the Closing Date Net Tangible Book
Value, which Closing Date Balance Sheet will fairly present the financial
position of Seller (other than in respect of the Excluded Assets and the
Excluded Liabilities) as at the Closing Date in accordance with GAAP (the
"Closing Date Balance Sheet"). For purposes of this calculation, Net Tangible
Book Value means assets less liabilities, exclusive of the Lender Debt.
Purchaser will deliver the Closing Date Balance Sheet to Seller within 45 days
after the Closing Date, provided however that Purchaser shall have no obligation
to deliver a Closing Date Balance Sheet if the Net Tangible Book Value is
greater than or equal to the Purchase Price. If the Net Tangible Book Value is
less than the Purchase Price as shown on the Closing Date Balance Sheet, Seller
shall have a 30-day period to respond in writing to Purchaser that it disagrees
with Purchaser's computation of the Net Tangible Book Value ("Notice of
Disagreement").
(b) Purchaser and Seller shall promptly attempt to resolve
such disagreement on or before 30 days after receipt by Purchaser of the Notice
of Disagreement. If Purchaser and Seller are unable to resolve such
disagreement, Purchaser and Seller agree to retain a mutually acceptable
nationally recognized accounting firm to resolve such disagreement. The
accounting firm shall make its own calculation of the Net Tangible Book Value
and shall notify Purchaser and Seller within 30 days after being so retained. In
such event, the calculation of the Net Tangible Book Value shall be final and
binding on Purchaser and Seller.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions
(unless waived in whole or in part by Purchaser):
6.01 Representations and Warranties. Each of the
representations and warranties made by Seller in this Agreement shall be true
and correct in all material respects on and as of the Closing Date as though
such representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall have been true and correct in all material respects on and as of such
earlier date, except as contemplated by this Agreement or the Operative
Agreements and to the extent Purchaser shall waive the same.
6.02 Performance. Seller shall have performed and complied in
all material respects with each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Seller at or before the
Closing.
6.03 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Purchaser and Seller to perform their
obligations under this Agreement and the Operative Agreements and to consummate
the transactions contemplated hereby and thereby (a) shall have been duly
obtained, made or given, (b) shall be in form and substance reasonably
satisfactory to Purchaser, (c) shall not be subject to the satisfaction of any
material condition that has not been satisfied or waived and (d) shall be in
full force and effect, and all terminations or expirations of waiting periods
imposed by any Governmental or Regulatory Authority necessary for the
consummation of the transactions contemplated by this Agreement and the
Operative Agreements shall have occurred.
6.04 Third Party Consents. The consents (or in lieu thereof
waivers) listed in Schedule 6.04 of the Disclosure Schedule, and all other
consents (or in lieu thereof waivers) to the performance by Purchaser and Seller
of their obligations under this Agreement and the Operative Agreements or to the
consummation of the transactions contemplated hereby and thereby as are required
under any Contract to which Purchaser or Seller is a party or by which any of
their respective Assets are bound and where the failure to obtain any such
consent (or in lieu thereof waiver) could reasonably be expected, individually
or in the aggregate with other such failures, to materially adversely affect
Purchaser, the Assets, the Assumed Liabilities or the Business or otherwise
result in a material diminution of the benefits of the transactions contemplated
by this Agreement and the Operative Agreements to Purchaser, (a) shall have been
obtained, (b) shall be in form and substance reasonably satisfactory to
Purchaser, (c) shall not be subject to the satisfaction of any condition that
has not been satisfied or waived and (d) shall be in full force and effect.
6.05 Deliveries. Seller shall have delivered to Purchaser duly
executed copies of the General Assignment and the other Assignment Instruments.
6.06 Physical Properties. There shall have occurred no
material damage to or destruction or loss of (whether or not covered by
insurance) any of Seller's facilities, machinery, equipment or other assets.
6.07 Non-Competition Agreement. Seller shall have entered into
the Non- Competition Agreement (a form of which is attached hereto as Exhibit J)
with GP Strategies Corporation.
6.08 Financing. Purchaser shall have received proceeds equal
to the Cash Portion of the Purchase Price from one or more financing sources, on
terms reasonably satisfactory to Purchaser, to enable Purchaser to consummate
the transactions contemplated hereby.
6.09 Guarantee with respect to Real Property Leases. GP
Strategies Corporation shall remain as guarantor of the Real Property Leases and
shall have duly executed and delivered any documents or instruments required by
Landlord in connection therewith.
6.10 Management Services Agreement. GP Strategies Corporation
and Purchaser shall have entered into a Management Services Agreement pursuant
to which GP Strategies Corporation shall provide certain management services to
Purchaser after the consummation of the transactions contemplated herein.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions
(unless waived in whole or in part by Seller in its sole discretion):
7.01 Representations and Warranties. Each of the
representations and warranties made by Purchaser in this Agreement shall be true
and correct on and as of the Closing Date as though such representation or
warranty was made on and as of the Closing Date.
7.02 Performance. Purchaser shall have performed and complied
with each agreement, covenant and obligation required by this Agreement to be so
performed or complied with by Purchaser at or before the Closing.
7.03 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Seller and Purchaser to perform their
obligations under this Agreement and the Operative Agreements and to consummate
the transactions contemplated hereby and thereby (a) shall have been duly
obtained, made or given, (b) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (c) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements shall
have occurred.
7.04 Third Party Consents. All consents (or in lieu thereof
waivers) to the performance by Seller of its obligations hereunder and to the
consummation of the transactions contemplated hereby as are required under the
Contracts listed in Schedule 6.04 of the Disclosure Schedule (a) shall have been
obtained, (b) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (c) shall be in full force and effect.
7.05 Deliveries. Purchaser shall have delivered to Seller a
duly executed copy of the Assumption Agreement.
7.06 Non-Competition Agreement. GP Strategies Corporation
shall have duly executed and delivered to Seller the Non-Competition Agreement
attached hereto as Exhibit J.
7.07 Sale of Stock. GP Strategies Corporation shall have sold
to certain directors and executive officers of Seller an aggregate of
approximately 1.8 million shares of the common stock of American Drug Company in
the amounts set forth in Exhibit K hereto.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
Except as otherwise provided herein, all representations, warranties,
covenants and agreements contained in this Agreement, and any schedule or
certificate delivered at the Closing pursuant to this Agreement shall survive
the Closing for a period of one year; provided, however, that the
representations, warranties, covenants and agreements with respect to matters
covered by Section 2.09 shall survive until 30 days after the expiration of any
statute of limitation periods applicable to such matters.
ARTICLE IX
INDEMNIFICATION
9.01 Seller's Indemnification Obligations. Subject to the
terms and conditions of this Article IX, Seller shall indemnify and hold
Purchaser harmless against and be liable for any and all losses, costs and
expenses (including, without limitation, legal and other expenses), except as
expressly limited by the terms of Section 9.04, resulting from or relating to:
(a) any material misrepresentation or breach of any warranty
of Seller contained in this Agreement or in any Schedule of Seller or any
certificate delivered by Seller at the Closing;
(b) any material breach of any covenant of Seller contained in
this Agreement; and
(c) any debt, liability or obligation of Seller other than the
Assumed Liabilities;
and any and all actions, suits, demands, assessments or judgments with respect
to any claim arising out of or relating to the subject matter of the
indemnification.
9.02 Purchaser's Indemnification Obligations. Subject to the
terms and conditions of this Article IX, Purchaser agrees to indemnify and hold
Seller harmless against any and all losses, costs and expenses (including,
without limitation, legal and other expenses), except as expressly limited by
the terms of Section 9.04, resulting from or relating to:
(a) any misrepresentation or breach of warranty of Purchaser
contained in this Agreement or in any Schedule of Purchaser or in any
certificate delivered by Purchaser at the Closing;
(b) any breach of any covenant of Purchaser contained in this
Agreement; and
(c) any of the Assumed Liabilities;
and any and all actions, suits, demands, assessments or judgments with respect
to any claim arising out of or relating to the subject matter of the
indemnification.
9.03 Method of Asserting Claims. All claims for
indemnification by any Indemnified Party under Sections 9.01 or 9.02 will be
asserted and resolved as follows:
(a) If at any time a claim shall be made or threatened, or an
action or proceeding shall be commenced or threatened, against an Indemnified
Party which could result in liability of the Indemnifying Party under its
indemnification obligations hereunder, the Indemnified Party shall give to the
Indemnifying Party prompt notice of such claim, action or proceeding. Such
notice shall state the basis for the claim, action or proceeding and the amount
thereof (to the extent such amount is determinable at the time when such notice
is given) and shall permit the Indemnifying Party to assume the defense of any
such claim, action or proceeding (including any action or proceeding resulting
from any such claim). Failure by the Indemnifying Party to notify the
Indemnified Party of its election to defend any such claim, action or proceeding
within a reasonable time, but in no event more than fifteen days after notice
thereof shall have been given to the Indemnifying Party, shall be deemed a
waiver by the Indemnifying Party of its right to defend such claim, action or
proceeding; provided, however, that the Indemnifying Party shall not be deemed
to have waived its right to contest and defend against any claim of the
Indemnified Party for indemnification hereunder based upon or arising out of
such claim, action or proceeding.
(b) If the Indemnifying Party assumes the defense of any such
claim, action or proceeding, the obligation of the Indemnifying Party as to such
claim, action or proceeding shall be limited to taking all steps necessary in
the defense or settlement thereof and, provided the Indemnifying Party is held
to be liable for indemnification hereunder, to holding the Indemnified Party
harmless from and against any and all losses, damages and liabilities caused by
or arising out of any settlement approved by the Indemnifying Party or any
judgment or award rendered in connection with such claim, action or proceeding.
The Indemnified Party may participate, at its expense, in the defense of such
claim, action or proceeding provided that the Indemnifying Party shall direct
and control the defense of such claim, action or proceeding. The Indemnified
Party agrees to cooperate and make available to the Indemnified Party all books
and records and such officers, employees and agents as are reasonably necessary
and useful in connection with the defense. The Indemnifying Party shall not, in
the defense of such claim, action or proceeding, consent to the entry of any
judgment or award, or enter into any settlement, except in either event with the
prior consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim,
action or proceeding.
(c) If the Indemnifying Party does not assume the defense of
any such claim, action or proceeding, the Indemnified Party may defend against
such claim, action or proceeding in such manner as it may deem reasonably
appropriate. The Indemnifying Party agrees to cooperate and make available to
the Indemnified Party all books and records and such officers, employees and
agents as are reasonably necessary and useful in connection with the defense. If
the Indemnifying Party, within ten days after notice shall have been given to it
by the Indemnified Party of the latter's intention to effect a settlement of any
such claim, action or proceeding, which notice shall describe with particularity
the terms of any such proposed settlement, shall not deposit with an escrowee
mutually satisfactory to the Indemnified Party and the Indemnifying Party a sum
equivalent to the total amount demanded in such claim, action or proceeding or
deliver to the Indemnified Party a surety bond or an irrevocable letter of
credit for such sum in form and substance reasonably satisfactory to the
Indemnified Party, then the Indemnified Party may settle such claim, action or
proceeding on the terms detailed in its notice to the Indemnifying Party, and
the Indemnifying Party shall be deemed to have agreed to the terms of such
settlement and shall not thereafter in any proceeding by the Indemnified Party
for indemnification question the propriety of such settlement. If the
Indemnifying Party makes an escrow deposit or delivers a surety bond or letter
of credit as aforesaid and thereafter the Indemnified Party settles such claim,
action or proceeding, then in any proceeding by the Indemnified Party for
indemnification in the event the Indemnifying Party is held liable for
indemnification hereunder, the Indemnified Party shall have the burden of
proving the amount of such liability of the Indemnifying Party, and the amount
of the payments made in settlement of any claim, action or proceeding shall not
be determinative as between the Indemnified Party and the Indemnifying Party of
the amount of such indemnification liability, except that the amount of the
settlement payments shall constitute the maximum amount of the indemnification
liability of the Indemnifying Party. Such escrow deposit, surety bond or letter
of credit shall by their respective terms be payable to the Indemnified Party in
an amount determined in accordance with the last sentence of this paragraph (C)
and in the event the Indemnifying Party is held liable for indemnification
hereunder. If the Indemnifying Party neither makes an escrow deposit nor
delivers a surety bond or letter of credit as aforesaid, so that no settlement
of such claim, action or proceeding is effected, in any proceeding by the
Indemnified Party for indemnification in the event the Indemnifying Party is
held liable for indemnification hereunder, such liability shall be for the
amount of any judgment or award rendered with respect to such claim or in such
action or proceeding and of all expenses, legal and otherwise, incurred by the
Indemnified Party in the defense against such claim, action or proceeding.
(d) In the event an Indemnified Party or Indemnifying Party
shall cooperate in the defense or make available books, records, officers,
employees or agents, as required by the terms of paragraphs (B) and (C),
respectively, of this Section 9.02 the party to which such cooperation is
provided shall pay the out-of-pocket costs and expenses (including legal fees
and disbursements) of the party providing such cooperation and of its officers,
employees and agents reasonably incurred in connection with providing such
cooperation, but shall not be responsible to reimburse the party providing such
cooperation for such party's time or the salaries or costs of fringe benefits or
other similar expenses paid by the party providing such cooperation to its
officers and employees in connection therewith.
9.04 Limits on Indemnification of Purchaser. No
indemnification shall be payable under this Article IX by Purchaser unless and
until the amount of all claims for indemnification against Purchaser exceeds
$100,000 in the aggregate, whereupon indemnification by Purchaser shall be
payable for such amounts exceeding, in the aggregate $100,000.
9.05 Limits on Indemnification of Seller. No claim made be
made against Seller for indemnification under this Article IX unless the Net
Tangible Book Value is less than the Purchase Price based on the Closing Date
Balance Sheet as determined pursuant to Article 5.04 and the aggregate amount of
Purchaser's loss exceeds $250,000. In the event that the Net Tangible Book Value
is less than the Purchase Price and the aggregate amount of Purchaser's loss
exceeds $250,000, Purchaser agrees that Seller may satisfy any and all
indemnification obligations incurred pursuant to Section 9.01 by reducing the
principal amount of the Note that constitutes a portion of the Purchase Price by
the amount equal to the excess of the Purchase Price over the Closing Date Net
Tangible Book Value in accordance with the procedures set forth in Section 5.04,
with any amount in excess of the principal amount of the Note to be paid by
Seller.
9.06 Indemnification as Sole Remedy. The parties hereto agree
that a claim for indemnification made pursuant to this Agreement shall be the
sole remedy for any party which suffers any Loss as a result of, arising out of
or otherwise attributable to this Agreement or the purchase and sale of the
Assets contemplated hereby. The provisions of this Section 9.05 shall survive
any termination of this Agreement pursuant to Article 10.
9.07 Expenses. Without otherwise affecting the provisions of
Section 12.04(d) of this Agreement, in the event that any Indemnifying Party
makes a claim for indemnification that is groundless or without merit, the party
against whom such claim is made shall have the opportunity to recover from the
claiming party reasonable attorney's fees and expenses incurred in the defense
of such claim.
ARTICLE X
TERMINATION
10.01 Termination by Purchaser. Purchaser may, without
liability to Seller, terminate this Agreement by notice to Seller (i) at any
time prior to the Closing if a material default shall be made by Seller in the
observance or in the due and timely performance of any of the material terms
hereof to be performed by Seller that cannot be cured at or prior to the
Closing, (ii) within seven days after delivery of Seller's Schedules or Exhibits
in accordance with Section 4.09 hereof, if the Purchaser is dissatisfied, in its
reasonable discretion, with such Schedules or Exhibits or (iii) at the Closing
if any of the conditions precedent to the performance of Purchaser's obligations
at the Closing shall not have been fulfilled in all material respects.
10.02 Termination by Seller. Seller may, without liability to
Purchaser, terminate this Agreement by notice to Purchaser (i) at any time prior
to the Closing if default shall be made by Purchaser in the observance or in the
due and timely performance of any of the terms hereof to be performed by
Purchaser that cannot be cured at or prior to the Closing, or (ii) at the
Closing if any of the conditions precedent to the performance of Seller's
obligations at the Closing shall not have been fulfilled.
10.03 Effect of Termination. If this Agreement is terminated,
this Agreement, shall no longer be of any force or effect and there shall be no
liability on the part of any party or its respective directors, officers or
shareholders except, in the case of termination because of a material default or
material breach resulting from the willful fault of another party, the aggrieved
party or parties may recover from the defaulting party the amount of expenses
incurred by such aggrieved party or parties in connection with this Agreement
and the transactions contemplated hereby which the aggrieved party or parties
would otherwise have to bear pursuant to Section 13.03 of this Agreement.
ARTICLE XI
DEFINITIONS
11.01 Definitions. (a) As used in this Agreement, the
following defined terms shall have the meanings indicated below:
"AAA" has the meaning ascribed to it in Section 12.04(c).
"Accounts Payable" has the meaning ascribed to it in Section
1.02(a)(ii).
"Accounts Receivable" has the meaning ascribed to it in
Section 1.01(a)(iii).
"Accrued Expenses" has the meaning ascribed to it in Section
1.02(a)(vii).
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract or
otherwise and, in any event and without limitation of the previous sentence, any
Person owning ten percent (10%) or more of the voting securities of a second
Person shall be deemed to control that second Person.
"Agreement" means this Asset Purchase Agreement and the
Exhibits, the Disclosure Schedule and the Schedules hereto and the certificates
delivered in accordance with Sections 1.05(b) and (c), as the same shall be
amended from time to time.
"Arbitration Notice" has the meaning ascribed to it in Section
12.04(b).
"Assets" has the meaning ascribed to it in Section 1.01(a).
"Assignment Instruments" has the meaning ascribed to it in
Section 1.05(b)(ii).
"Associate" means, with respect to any Person, any corporation
or other business organization of which such Person is an officer or partner or
is the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Assumed Liabilities" has the meaning ascribed to it in
Section 1.02(a).
"Assumption Agreement" has the meaning ascribed to it in
Section 1.05(c)(ii).
"Audited Financial Statements" has the meaning ascribed to it
in Section 2.06.
"Benefit Plan" means any Plan established by Seller, or any
predecessor or Affiliate of Seller, existing at the Closing or prior thereto, to
which Seller contributes or has contributed on behalf of any employee of Seller,
former employee or director of Seller, or under which any employee, former
employee or director of Seller or any beneficiary thereof is covered, is
eligible for coverage or has benefit rights.
"Books and Records" of any Person means all files, documents,
instruments, papers, books and records relating to the business, operations,
condition of (financial or other), results of operations and assets and
properties of such Person, including, without limitation, financial statements,
Tax Returns and related work papers and letters from accountants, budgets,
pricing guidelines, ledgers, journals, deeds, title policies, minute books,
stock certificates and books, stock transfer ledgers, Contracts, Licenses,
customer and subscription lists, computer files and programs, retrieval
programs, editorial files, operating data and plans and environmental studies
and plans.
"Business" has the meaning ascribed to it in the forepart of
this Agreement.
"Business Books and Records" has the meaning ascribed to it in
Section 1.01(a)(xi).
"Business Contracts" has the meaning ascribed to it in Section
1.01(a)(vi).
"Business Licences" has the meaning ascribed to it in Section
1.01(a)(ix).
"Cash" has the meaning ascribed to it in Section 1.01(a)(xiv).
"Closing" means the closing of the transactions contemplated
by Section 1.05.
"Closing Date" has the meaning ascribed to it in Section
1.05(a).
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Contract" means any agreement, lease, evidence of
indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"Customer Lists" has the meaning ascribed to it in Section
1.01(a)(xii).
"Disclosure Schedule" has the meaning ascribed to it in
Article II.
"Dispute" has the meaning ascribed to it in Section 12.04(a).
"Environmental Law" means any Law relating to human health,
safety or protection of the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants or Hazardous Materials in the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), or otherwise relating to the
treatment, storage, disposal, transport, handling or release of any Hazardous
Material.
"Excluded Assets" has the meaning ascribed to it in Section
1.01(b).
"FIRPTA Certificate" has the meaning as ascribed to it in
Section 1.05(b)(vi).
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"General Assignment" has the meaning ascribed to it in Section
1.05(b)(i).
"Goodwill" has the meaning ascribed to it in Section
1.01(a)(xiii).
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"Hazardous Material" means: (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCBs); (B) any chemicals, materials, substances or wastes which are now or
hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import, under any Environmental Law; and (C) any other
chemical, material, substance or waste, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental or Regulatory Authority.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article IX.
"Indemnifying Party" means any Person against whom a claim for
indemnification are being asserted under any provision of Article IX.
"Initiating Party" has the meaning ascribed to it in Section
12.04(b).
"Intangible Personal Property" has the meaning ascribed to it
in Section 1.01(a)(viii).
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, publication
titles, service marks and service xxxx rights, service names and service name
rights, brand names, inventions, processes, formulae, copyrights and copyright
rights, trade dress, business and product names, logos, slogans, trade secrets,
industrial models, processes, designs, methodologies, computer programs
(including all source codes) and related documentation, technical information,
manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, trademarks, service marks and
copyrights.
"Intercompany Loans" means obligations between Seller and GP
Strategies Corporation and MXL Industries, Inc.
"Inventory" has the meaning ascribed to it in Section
1.01(a)(ii).
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any and all damages, fines, Taxes, fees,
penalties, deficiencies, losses and expenses (including, without limitation,
interest, court costs, fees of attorneys, accountants and other experts or other
expenses of litigation or other proceedings or of any claim, default or
assessment).
"Non-Competition Agreement" means that non-competition
agreement, dated as of the Closing, between Seller and GP Strategies
Corporation.
"Note" means that note, dated as of the Closing, by Purchaser
in favor of Seller.
"Operative Agreements" means, collectively, the General
Assignment and the other Assignment Instruments, the Assumption Agreement and
the other Assumption Instruments.
"Options" has the meaning ascribed to it in Section 1.04.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent, (iii) any lease
disclosed in the Disclosure Schedule, and (iv) any minor imperfection of title
or similar Lien which individually or in the aggregate with other such Liens
does not materially impair the value or use of the property subject to such
Lien.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company, limited liability
partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.
"Personal Property Leases" has the meaning ascribed to it in
Section 1.01(a)(v).
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, without limitation,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
"Prepaid Expenses" has the meaning ascribed to it in Section
1.01(a)(vii).
"Purchase Price" has the meaning ascribed to it in Section
1.03(a).
"Purchaser" has the meaning ascribed to it in the forepart of
this Agreement.
"Purchaser Disclosure Schedule" has the meaning ascribed to it
in Article III.
"Real Property Leases" has the meaning ascribed to it in
Section 1.01(a)(i).
"Representatives" means the officers, directors, employees,
agents, counsel, accountants, financial advisors, consultants and other
representatives of any Person.
"Retained Liabilities" has the meaning ascribed to it in
Section 1.02(b).
"Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax.
"Seller" has the meaning ascribed to it in the forepart of
this Agreement.
"Subsidiary" has the meaning ascribed to it in Section 2.05.
"Tangible Personal Property" has the meaning ascribed to it in
Section 1.01(a)(iv).
"Tax Refunds" has the meaning ascribed to it in Section
1.01(b)(iii).
"Tax Returns" means any returns, reports or statements or any
amendment thereto (including any information returns) required to be filed for
purposes of a particular Tax.
"Taxes" means all Federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, payroll, employment, excise, property, alternative or
add-on minimum, environmental or other taxes, assessments, duties, fees, levies
or other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax or additional amounts
with respect thereto.
"Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Tenant Security Deposits" has the meaning ascribed to it in
Section 1.01(a)(x).
"Transfer Tax" means any sales (including, without limitation,
bulk sales) and use Taxes on the sale of the Assets.
(b) Unless the context of this Agreement otherwise requires:
(i) words of any gender include each other gender; (ii) words using the singular
or plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby", "hereto" and derivative or similar words
refer to this entire Agreement; and (iv) the terms "Article" or "Section" refer
to the specified Article or Section of this Agreement. All accounting terms used
herein and not expressly defined herein shall have the meanings given to them
under GAAP.
ARTICLE XII
MISCELLANEOUS
12.01 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
Five Star Acquisition Corp.
0000 Xxxxx Xxxxxx Xxx. X.X.
Xxxxxxxxxx, X.X. 00000
Attention:
American Drug Company
0000 Xxxxx Xxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention:
and:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
If to Seller, to:
Five Star Group Inc.
Facsimile No.:
Attention:
with a copy to:
GP Strategies Corporation
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.:
Attention: Xxxxxx Xxxxxx
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon confirmed receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given upon receipt (in each case regardless of whether
such notice, request or other communication is received by any other Person to
whom a copy of such notice is to be delivered pursuant to this Section). Any
party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
12.02 Entire Agreement. This Agreement and the Operative
Agreements supersede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof, and contain the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof.
12.03 Expenses. If the Closing is not consummated, each of the
parties will pay all of its own legal and accounting fees and other expenses
incurred in the preparation of this Agreement and the performance of the terms
and provisions of this Agreement. If the Closing is consummated, and except as
otherwise provided in Section 12.07, Seller will pay out of the proceeds
received by Seller all of Seller's legal and accounting fees and other expenses
incurred in the preparation of this Agreement and the performance of the terms
and provisions of this Agreement and all sales, real estate transfer, capital
gains and income taxes incurred by Seller as a result of the sale contemplated
by this Agreement, it being intended that Seller shall not make any expenditure
for the same prior to the Closing and that Purchaser shall not assume any
liability with respect to the same. In addition, if the Closing is consummated,
all real estate taxes and personal property taxes and sewer rents and all such
other taxes, charges and assessments if any, relating to the Real Properties
shall be apportioned between Seller and Purchaser on the Closing Date on the
basis of the tax year in which it is payable. If the Closing Date shall occur
before the tax rate for any tax year is fixed, the apportionment of taxes shall
be upon the basis of the tax rate for the next preceding year for which the tax
rate is fixed applied to the latest assessed valuation.
12.04 Arbitration of Claims. (a) Except as set forth in
Section 5.04, any dispute, claim, controversy or difference between or among the
parties arising out of this Agreement or the transactions contemplated hereby (a
"Dispute"), including without limitation any dispute between an Indemnified
Party and any Indemnifying Party under Article IX, which the parties are unable
to resolve themselves shall be submitted to and resolved by arbitration as
herein provided.
(b) A party demanding arbitration under this Agreement (an
"Initiating Party") shall initiate such arbitration by delivering written notice
(the "Arbitration Notice") to the party with whom arbitration is sought. Any
Arbitration Notice shall contain a statement setting forth the nature of the
Dispute, the amount involved, if any, and the remedy sought.
(c) Any Dispute subject to arbitration shall be arbitrated in
New York, New York under the commercial rules then in effect of the American
Arbitration Association (the "AAA"). Each party to such arbitration agrees that
any award of the arbitrator shall be final, conclusive and binding and that they
will not contest any action by any other party thereto in accordance with an
award of the arbitrator. It is specifically understood and agreed that any party
may enforce any award rendered pursuant to the arbitration provisions of this
Section 12.04 by bringing suit in any court of competent jurisdiction. The
Initiating Party shall request the AAA to designate one arbitrator, who shall be
qualified as an arbitrator under the standards of the AAA and who is not
affiliated with any party in interest to such arbitration and who has
substantial professional experience with regard to corporate legal matters. The
arbitrator shall consider the dispute at issue at a mutually agreed upon time
within sixty (60) days (or such longer period as may be acceptable to the
parties or as directed by the arbitrator) of the designation of the arbitrator.
The arbitration proceeding shall include an opportunity for the parties to
conduct discovery in advance of the proceeding. Notwithstanding the foregoing,
the parties agree that they will attempt, and they intend that they and the
arbitrator should use their best efforts in that attempt, to conclude the
arbitration proceeding and have a final decision from the arbitrator within one
hundred twenty (120) days from the date of selection of the arbitrator;
provided, however, that the arbitrator shall be entitled to extend such 120-day
period for a total of two one hundred twenty (120) day periods. The arbitrator
shall immediately deliver a written report with respect to the dispute to each
of the parties who shall promptly act in accordance therewith.
(d) All fees, costs and expenses (including reasonable
attorneys' fees and expenses) incurred by the party that prevails in any such
arbitration commenced pursuant to this Section 12.04, or any judicial action or
proceeding seeking to enforce the agreement to arbitrate disputes as set forth
in this Section 12.04 or seeking to enforce any order or award of any
arbitration commenced pursuant to this Section 12.04 may be assessed against the
party or parties that do not prevail in such arbitration in such manner as the
arbitrator or the court in such judicial action, as the case may be, may
determine to be appropriate under the circumstances. All costs and expenses
attributable to the arbitrator shall be allocated among the parties to the
arbitration in such manner as the arbitrator shall determine to be appropriate
under the circumstances.
(e) Notwithstanding the foregoing, it is hereby agreed that no
arbitrator shall have any power to add to, alter or modify the terms and
conditions of this Agreement or any other agreement executed and delivered in
connection herewith or to decide any issue which does not arise from the
interpretation or application of the provisions of this Agreement.
12.05 Public Announcements. Seller and Purchaser will obtain
the other party's prior approval of any press release to be issued announcing
the transactions contemplated by this Agreement.
12.06 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
12.07 Payment of Transfer Taxes. Purchaser shall pay all
Transfer Taxes imposed by Law on Seller arising out of or in connection with the
transactions effected pursuant to this Agreement, and Purchaser shall indemnify,
defend and hold harmless Seller with respect to such Transfer Taxes. Seller
shall duly and timely file all Tax Returns with respect to such Transfer Taxes
payable as a result of the consummation of the transactions contemplated by this
Agreement.
12.08 Amendment. This Agreement may be amended, supplemented
or modified only by a written instrument duly executed by or on behalf of each
party hereto.
12.09 No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention of
the parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnification under Article X.
12.10 No Assignment; Binding Effect. Neither this Agreement
nor any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto and any
attempt to do so will be void, except (a) for assignments and transfers by
operation of Law and (b) that Purchaser may assign any or all of its rights,
interests and obligations hereunder (including, without limitation, its rights
under Article IX) to a wholly-owned subsidiary or an Affiliate, provided that
any such subsidiary or Affiliate agrees in writing to be bound by all of the
terms, conditions and provisions contained herein. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
12.11 Headings; References to Sections, Exhibits and
Schedules. The headings of the Sections, paragraphs and subparagraphs of this
Agreement are solely for convenience and reference and shall not limit or
otherwise affect the meaning of any of the terms or provisions of this
Agreement. The references herein to Sections, Exhibits and Schedules, unless
otherwise indicated, are references to sections of and exhibits and schedules to
this Agreement.
12.12 Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
12.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to a
contract executed and performed in such state without giving effect to the
conflicts of laws principles thereof.
12.14 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties as of the date first above written.
FIVE STAR ACQUISITION CORP.
By:
Name:
Title:
FIVE STAR GROUP, INC.
By:
Name:
Title:
