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EXHIBIT 2.1
STOCK AND ASSET PURCHASE AGREEMENT
AMONG
U.S. INDUSTRIES, INC., JUSI HOLDINGS, INC., USI OVERSEAS HOLDINGS LIMITED,
AND
USI CANADA, INC.
AND
RACING CHAMPIONS CORPORATION,
RACING CHAMPIONS, INC., RCNA HOLDINGS, INC.,
RACING CHAMPIONS WORLDWIDE LIMITED,
AND
RACING CHAMPIONS LIMITED
DATED
APRIL 13, 1999
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SCHEDULES
2.1 Purchase Price Allocation
2.2 Accounting Principles
4.3 Consents of Third Parties
4.4 Capitalization of the Subsidiaries
4.6 Financial Statements
4.7 Absence of Certain Liabilities and Changes
4.8 Taxes
4.9 Material Contracts
4.10 Labor Matters
4.11 Employee Benefit Plans and Benefit Arrangements
4.12 Litigation
4.13 Real Property
4.14 Intellectual Property
4.15 Environmental Matters
4.16 Permits and Licenses
4.17 Insurance
4.20 Year 2000 Compliance
4.21 Title to Tangible Assets
6.2 Conduct of the Business Pending the Closing
6.3 Employee and Employee Benefit Matters
6.13 Treasury Matters
7.1(f) Consents and Waivers
8.1(a) Transfer of Certificates for Certain Foreign Shares
9.6 Foreign Subsidiaries Tax Schedule
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EXHIBITS
Exhibit A Form of Xxxx of Sale
Exhibit B Form of Assumption Agreement
Exhibit C Form of Tax Affidavit
Exhibit D Tax Sharing Agreement
Exhibit E Registration Rights Agreement
Exhibit F Form of Opinion of General Counsel of USI
Exhibit G Legend for Parent Common Stock
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STOCK AND ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
SECTION 1. SALE AND PURCHASE OF SHARES AND
ASSETS; ASSUMPTION OF LIABILITIES............................... 2
SECTION 2. PURCHASE PRICE.................................................. 3
2.1 Purchase Price.................................................. 3
2.2 Adjustment of Purchase Price.................................... 4
2.3 Payment of Purchase Price....................................... 5
SECTION 3. CLOSING......................................................... 7
3.1 Date of Closing................................................. 7
3.2 Termination..................................................... 7
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES............ 9
4.1 Organization, Standing and Authority of the Sellers
and the Subsidiaries............................................ 9
4.2 Authorization of Agreement...................................... 9
4.3 Consents of Third Parties.......................................10
4.4 Capitalization of the Subsidiaries..............................10
4.5 Ownership of Shares and Certain Assets..........................11
4.6 Financial Statements............................................12
4.7 Absence of Certain Liabilities and Changes......................12
4.8 Taxes...........................................................14
4.9 Material Contracts..............................................16
4.10 Labor Matters...................................................18
4.11 Employee Benefit Plans and Benefit Arrangements.................19
4.12 Litigation; Compliance with Laws................................23
4.13 Real Property...................................................24
4.14 Intellectual Property...........................................25
4.15 Environmental Matters...........................................28
4.16 Permits and Licenses............................................31
4.17 Insurance.......................................................31
4.18 Investment......................................................31
4.19 Brokers.........................................................32
4.20 Year 2000 Compliance............................................32
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4.21 Title to Assets.................................................33
4.22 Accounts Receivable.............................................33
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER PARTIES.............33
5.1 Buyers' Organization............................................33
5.2 Authorization of the Agreement..................................33
5.3 Consents of Third Parties.......................................34
5.4 Litigation......................................................34
5.5 Financing.......................................................34
5.6 Investment......................................................35
5.7 Capitalization of Parent and Its Subsidiaries...................35
5.8 Due Authorization and Validity of Shares........................36
5.9 List of Parent Common Stock.....................................36
5.10 Private Offering................................................36
5.11 SEC Reports; Financial Statements...............................36
5.12 Brokers.........................................................37
SECTION 6. FURTHER AGREEMENTS OF THE PARTIES...............................37
6.1 Access to Information...........................................37
6.2 Conduct of the Business Pending the Closing.....................37
6.3 Employee Benefit Matters........................................38
6.4 Other Action....................................................39
6.5 Notices.........................................................40
6.6 HSR Act.........................................................40
6.7 Expenses........................................................40
6.8 Publicity.......................................................40
6.9 Transfer Taxes..................................................41
6.10 Preservation of Records.........................................41
6.11 Certain Post-Closing Assistance.................................41
6.12 Treasury Matters; Intercompany Debt.............................42
6.13 No Shopping.....................................................43
6.14 Consents........................................................43
6.15 Further Assurances..............................................43
6.16 Resignations....................................................44
SECTION 7. CONDITIONS OF CLOSING...........................................44
7.1 Conditions Precedent to Obligations of Buyers...................44
7.2 Conditions Precedent to Obligations of Sellers..................45
SECTION 8. DOCUMENTS TO BE DELIVERED AT THE CLOSING........................46
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8.1 Documents to be Delivered by Sellers............................46
8.2 Documents to be Delivered by Buyers.............................47
SECTION 9. INDEMNIFICATION AND RELATED MATTERS.............................48
9.1 Indemnification.................................................48
9.2 Determination of Damages and Related Matters....................55
9.3 Time and Manner of Certain Claims...............................58
9.4 Procedure for Indemnification...................................58
9.5 Environmental Indemnification...................................60
9.6 Additional Provisions regarding Foreign Taxes...................64
SECTION 10. MISCELLANEOUS...................................................64
10.1 Entire Agreement................................................64
10.2 Governing Law...................................................64
10.3 Table of Contents and Headings..................................64
10.4 Notices.........................................................65
10.5 Severability....................................................66
10.6 Amendment; Waiver...............................................66
10.7 Binding Effect; Assignment......................................67
10.8 Best Knowledge..................................................67
10.9 Counterparts....................................................67
10.10 Bulk Sales Laws.................................................67
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STOCK AND ASSET PURCHASE AGREEMENT
This Stock and Asset Purchase Agreement, dated as of April 13,
1999, is among U.S. Industries, Inc., a Delaware corporation ("USI"), JUSI
Holdings, Inc., a Delaware corporation (the "Domestic Seller"), USI Overseas
Holdings Limited, an English company (the "Foreign Seller") and USI Canada,
Inc., a Canadian corporation (the "Canadian Seller") (Domestic Seller, Foreign
Seller and Canadian Seller are individually referred to herein as a "Seller" and
collectively referred to herein as the "Sellers"; and USI and the Sellers are
individually referred to herein as a "Seller Party" and collectively referred to
herein as the "Seller Parties"), and Racing Champions Corporation, a Delaware
corporation ("Parent"), Racing Champions, Inc., an Illinois corporation (the
"Domestic Buyer"), Racing Champions Worldwide Limited, an English company (the
"Foreign Buyer"), RCNA Holdings, Inc., a Delaware corporation (the "North
American Buyer"), and Racing Champions Limited, a Hong Kong company (the "Hong
Kong Buyer") (Domestic Buyer, Foreign Buyer, North American Buyer and Hong Kong
Buyer are individually referred to herein as the "Buyer" and collectively
referred to herein as the "Buyers", and the Buyers and the Parent are
individually referred to herein as a "Buyer Party" and collectively referred to
herein as the "Buyer Parties").
RECITALS
A. Domestic Seller owns all of the issued and outstanding
shares of common stock, no par value, as set forth on Schedule 4.4 (the
"Domestic Shares") of The Ertl Company, Inc., a Delaware corporation (the
"Domestic Subsidiary"). The Domestic Subsidiary owns all of the issued and
outstanding shares of capital stock of Ertl Direct, Inc., a Delaware corporation
(the "Ertl Subsidiary"). Foreign Seller owns all of the issued and outstanding
shares of capital stock as set forth on Schedule 4.4 (the "Foreign Shares") of
Britains Petite Limited, an English company ("Britains"), Ertl de Mexico S.A. de
C.V., a Mexican corporation ("Ertl Mexico"), Ertl (Europe) Limited, an English
company ("Ertl Europe"), Ertl (Hong Kong) Limited, a Hong Kong company ("Ertl
Hong Kong") and Ertl Italia S.r.L., an Italian corporation ("Ertl Italy"). The
Canadian Seller owns, among other things, certain assets utilized in Canada to
conduct operations there which are being sold hereunder (such operations being
referred to as "Ertl Canada"). Britains, Ertl Mexico, Ertl Europe, Ertl Hong
Kong, Ertl Italy and, except where the context otherwise requires, Ertl Canada,
shall be referred to herein individually as a "Foreign Subsidiary", and
collectively as the "Foreign Subsidiaries". The
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Domestic Subsidiary, the Ertl Subsidiary and the Foreign Subsidiaries shall be
collectively referred to herein as the "Subsidiaries". The Domestic Shares and
the Foreign Shares shall be collectively referred to herein as the "Shares".
B. Subject to the terms and conditions stated herein, (i) the
Domestic Seller wishes to sell and the Domestic Buyer wishes to purchase all of
the Domestic Shares owned by the Domestic Seller which constitute 100% of the
issued and outstanding shares of the capital stock of the Domestic Subsidiary;
(ii) the Foreign Seller wishes to sell and the Foreign Buyer wishes to purchase
from the Foreign Seller all of the Foreign Shares of Britains, Ertl Europe and
Ertl Italy owned by the Foreign Seller which constitute 100% of the issued and
outstanding shares of the capital stock of Britains, Ertl Europe and Ertl Italy;
(iii) the Foreign Seller wishes to sell and the North American Buyer wishes to
purchase from the Foreign Seller all of the Foreign Shares of Ertl Mexico owned
by the Foreign Seller which constitute 100% of the issued and outstanding shares
of the capital stock of Ertl Mexico; (iv) the Foreign Seller wishes to sell and
the Hong Kong Buyer wishes to purchase from the Foreign Seller all of the
Foreign Shares of Ertl Hong Kong owned by the Foreign Seller which constitute
100% of the issued and outstanding shares of the capital stock of Ertl Hong
Kong; and (v) the Canadian Seller wishes to sell and the North American Buyer
wishes to purchase from the Canadian Seller the assets of Ertl Canada subject to
the assumption by the Foreign Buyer of certain of the liabilities of Ertl
Canada.
C. The term "Domestic Business" shall mean the business and
operations conducted by the Domestic Subsidiary taken as a whole. The term
"Foreign Business" shall mean the business and operations conducted by the
Foreign Subsidiaries (including Ertl Canada) taken as a whole. The term
"Business" shall mean the Domestic Business and the Foreign Business taken as a
whole.
AGREEMENTS
The parties hereby agree as follows:
SECTION 1.1. SALE AND PURCHASE OF SHARES AND ASSETS; ASSUMPTION OF LIABILITIES.
Subject to the terms and conditions of this Agreement, at the closing
referred to in Section 3 (the "Closing"):
(a) the Domestic Seller shall sell, assign, transfer, convey
and deliver to the Domestic Buyer free and clear of all claims, liens, title
defects, adverse claims, mortgages, easements, pledges, charges, transfer
restrictions, rights
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of first refusal, preemptive rights, options, security interests or other
encumbrances (collectively, "Liens"), and the Domestic Buyer shall purchase,
acquire and accept from the Domestic Seller, the Domestic Shares;
(b) the Foreign Seller shall sell, assign, transfer, convey
and deliver to the Foreign Buyer, free and clear of all Liens, and the Foreign
Buyer shall purchase, acquire and accept from the Foreign Seller, the Foreign
Shares of Britains, Ertl Europe and Ertl Italy;
(c) the Foreign Seller shall sell, assign, transfer, convey
and deliver to the North American Buyer, free and clear of all Liens, and the
North American Buyer shall purchase, acquire and accept from the Foreign Seller,
the Foreign Shares of Ertl Mexico;
(d) the Foreign Seller shall sell, assign, transfer, convey
and deliver to the Hong Kong Buyer, free and clear of all Liens, and the Hong
Kong Buyer shall purchase, acquire and accept from the Foreign Seller, the
Foreign Shares of Ertl Hong Kong; and
(e) the Canadian Seller shall sell, assign, transfer, convey
and deliver to the North American Buyer the assets of Ertl Canada as more fully
described in the Form of Xxxx of Sale attached hereto as Exhibit A and the North
American Buyer shall assume certain of the liabilities of Ertl Canada as more
fully described in the Form of Assumption Agreement attached hereto as Exhibit
B.
SECTION 2. PURCHASE PRICE.
2.1 Purchase Price.
(a) The purchase price for the Shares and the assets of Ertl
Canada shall be $104,500,000 (the "Initial Price"), subject to post-closing
adjustment pursuant to Section 2.2 (as adjusted, the "Purchase Price"). The
Purchase Price shall be payable as provided in Section 2.3. All amounts set
forth in this Agreement shall be U.S. Dollars unless otherwise stated.
(b) The Purchase Price shall be allocated in accordance with
Schedule 2.1, to which allocation Buyers and Sellers agree to be bound. Buyers
and Sellers agree to file all returns and reports including, without limitation,
all federal, state, local and foreign income and franchise tax returns, on the
basis of such allocation.
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2.2 Adjustment of Purchase Price.
(a) The Purchase Price shall be adjusted as follows:
(i) For purposes hereof, "Final Net Worth" shall
mean the assets of the Business less the liabilities of the Business, as
reflected in the Final Balance Sheet referred to in Section 2.2(b). "Target Net
Worth" shall mean $81,483,000.
(ii) If the amount of the Final Net Worth
determined in accordance with this Section is less than the Target Net Worth,
the Purchase Price shall equal the Initial Price minus the amount by which the
Target Net Worth exceeds the Final Net Worth.
(iii) If the amount of the Final Net Worth is greater
than the Target Net Worth, the Purchase Price shall equal the Initial Price plus
the amount by which the Final Net Worth exceeds the Target Net Worth.
(b) The Final Net Worth shall be determined as of the
commencement of business on the day immediately preceding the day of the Closing
with respect to all items other than the cash transactions of the Business and
shall be determined as of the close of business on the day of the Closing with
respect to the cash transactions of the Business (such determination times are
referred to herein as the "Determination Time") on the basis of the balance
sheet of the Business as of the Determination Time (the "Final Balance Sheet");
provided, however, that cash transactions for this two-day period will be
debited or credited to the related balance sheet account (e.g., accounts
receivable, accounts payable or net worth) as of the commencement of business
on the day immediately preceding the day of Closing. The Final Balance Sheet
shall be prepared by Buyers in accordance with U.S. generally accepted
accounting principles ("GAAP") as supplemented by the principles set forth in
Schedule 2.2 (GAAP as so supplemented, the "Accounting Principles").
(c) Buyers shall use their best efforts to deliver to Sellers
the Final Balance Sheet within forty-five (45) days after the Closing. During
the period from the Closing Date (as defined in Section 3.1) until the date of
delivery of the Final Balance Sheet, Sellers shall give Buyers and other
appropriate personnel such assistance as Buyers shall reasonably request during
normal business hours in order to enable them to prepare the Final Balance
Sheet. Ernst & Young LLP or such other independent accounting firm engaged by
Sellers at Sellers' sole expense (which shall not be the Unrelated Accounting
Firm referred
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to below) ("Sellers' Auditor") shall have the opportunity to
observe the taking of the inventory of the Business in connection with the
preparation of the Final Balance Sheet, and to examine the work papers,
schedules and other documents prepared by Buyers in connection with their
preparation of the Final Balance Sheet.
(d) Within thirty (30) days following the delivery of the
Final Balance Sheet, Sellers shall deliver to Buyers a notice of objection (an
"Objection Notice") or a notice of acceptance (an "Acceptance Notice") with
respect to the Final Balance Sheet. Such Final Balance Sheet shall be final and
binding on the parties if an Acceptance Notice is delivered to Buyers or if no
Objection Notice is delivered to Buyers within such thirty (30) day period. Any
Objection Notice shall specify in reasonable detail the items on the Final
Balance Sheet which are disputed and shall describe in reasonable detail the
basis for the objection, as well as the amount in dispute. If an Objection
Notice is given, the parties shall consult with each other with respect to the
objection. If the parties are unable to reach agreement within fifteen (15) days
after an Objection Notice has been given, any unresolved disputed items shall be
promptly referred to KPMG Peat Marwick LLP or another firm of independent public
accountants mutually acceptable to Buyers and Sellers (the "Unrelated Accounting
Firm"). The Unrelated Accounting Firm shall be directed to render a written
report on the unresolved disputed issues with respect to the Final Balance Sheet
within 30 days after the dispute is submitted to them and to resolve only those
issues of dispute set forth in the Objection Notice. The resolution of the
dispute by the Unrelated Accounting Firm shall be final and binding on the
parties. The fees and expenses of the Unrelated Accounting Firm shall be borne
equally by Sellers and Buyers.
2.3 Payment of Purchase Price.
(a) Initial Price. At the Closing, Buyers shall pay to
Sellers an amount equal to the Initial Price by:
(i) wire transfer of $83,500,000 in immediately
available funds to an account or accounts designated by USI in writing at least
three (3) business days prior to the Closing Date;
(ii) delivery to USI of a certificate or
certificates representing 1,500,000 shares of Common Stock, par value $0.01 per
share, of Parent ("Parent Common Stock"); and
(iii) if the average of the daily closing trading
prices of a share of Parent Common Stock as reported by Nasdaq for the 20
trading days
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ending on and including the last trading day prior to the Closing Date (the
"ATP") is less than $14.00, an additional payment equal to $21,000,000 minus the
product of (A) 1,500,000 multiplied by (B) the ATP. If the ATP is equal to or
greater than $12.00 and less than $14.00, the Domestic Buyer will make the
payment required by this clause (iii) in immediately available funds to the
account designated in clause (i) above. If the ATP is less than $12.00, Domestic
Buyer may elect to make any part of the payment required by this clause (iii)
either (x) in immediately available funds to the account designated in clause
(i) above, or (y) by delivery to USI of a certificate or certificates
representing the number of shares Parent Common Stock equal to the amount of the
payment required by this clause (iii) which the Domestic Buyer elects to make in
shares of Parent Common Stock divided by the ATP. If the ATP is less than
$12.00, the Domestic Buyer may also elect, in lieu of the issuance of all or any
part of the shares of Parent Common Stock issuable pursuant to clause (ii)
above, to make a payment in immediately available funds to the account
designated in clause (i) equal to the product of [a] number of shares of Parent
Common Stock issuable pursuant to clause (ii) which Domestic Buyer elects not to
issue multiplied by [b] the ATP. Notwithstanding the foregoing, the Buyers will
not pay more than $104,500,000 in the aggregate in cash and/or shares of Parent
Common Stock (valued based on the ATP) for the Initial Price pursuant to this
Section 2.3(a).
(b) Adjustment. If Sellers deliver to Buyers the Acceptance
Notice referred to in Section 2.2(d) or fail to deliver an Objection Notice
within the thirty (30) day period required by Section 2.2(d), then (i) in the
event the Final Net Worth is less than the Target Net Worth, Sellers shall
within two (2) business days after the delivery of such Acceptance Notice or the
expiration of such thirty (30) day period, as the case may be, pay to Buyers,
the amount, if any, by which the Target Net Worth exceeds the Final Net Worth,
or (ii) in the event the Final Net Worth exceeds the Target Net Worth, Buyers
shall within two (2) business days after the delivery of such Acceptance Notice
or the expiration of such thirty (30) day period, as the case may be, pay to
Sellers the amount, if any, by which the Final Net Worth is greater than the
Target Net Worth. Alternatively, if Sellers deliver to Buyers the Objection
Notice referred to in Section 2.2(c), within two (2) business days after such
delivery, (y) Sellers shall pay to Buyers the amount, if any, by which the
undisputed portion of the Final Net Worth is less than the Target Net Worth, or
(z) Buyers shall pay to Sellers the amount, if any, by which the undisputed
portion of the Final Net Worth is greater than the Target Net Worth. Within two
(2) business days after the resolution of any dispute by the parties or the
Unrelated Accounting Firm relating to the Objection Notice, Sellers shall pay to
Buyers, or Buyers shall pay to Sellers, as the case may be, the amount of any
further adjustment required.
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Any payment pursuant to this Section 2.3(b) shall be
made by a single certified or bank cashier's check to an entity designated by
USI or the Domestic Buyer, as the case may be, or, at the recipient's option, by
wire transfer of immediately available funds to a single account designated by
USI or the Domestic Buyer, as the case may be, and shall be accompanied by
payment of an amount determined by computing simple interest on the amount of
that payment at the rate of interest announced publicly by Bank of America in
San Francisco from time to time as its "reference rate" (on the basis of a
365-day year) from the Closing Date to the date of payment.
SECTION 3. CLOSING.
3.1 Date of Closing. The Closing shall take place at the offices of
Weil, Gotshal & Xxxxxx LLP at 000 Xxxxx Xxxxxx, Xxx Xxxx, XX (or at such other
place as the parties may agree in writing) at 10:00 a.m. on a date to be
mutually designated by Sellers and Buyers, which shall be no later than five (5)
business days after the date when each of the conditions specified in Article 7
has been fulfilled (or waived by the party entitled to waive that condition).
The date on which the Closing is held is referred to in this Agreement as the
"Closing Date". At the Closing, the parties shall execute and deliver the
documents referred to in Section 8.
3.2 Termination.
(a) This Agreement may be terminated at any time prior to
the Closing:
(i) by mutual written agreement executed by the
Seller Parties and the Buyer Parties;
(ii) by either Buyers, on the one hand, or
Sellers, on the other hand, by giving written notice of such termination to the
other, if the Closing shall not have occurred on or prior to April 16, 1999,
unless the failure to consummate the Closing by such date has been caused by the
action or failure to act of the party seeking to terminate this Agreement, which
action or failure to act constitutes a breach of this Agreement;
(iii) by Buyers, so long as Buyers are not then in
breach in any material respect of their obligations under this Agreement, upon a
breach of any covenant or agreement on the part of Sellers set forth in this
Agreement, or if any representation or warranty of Sellers shall have been or
become untrue, in each case such that the conditions set forth in Section 7.1(a)
or (b) would not be
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satisfied and such breach or untruth (A) cannot be cured by the Closing Date or
(B) has not been cured within 30 days of the date on which USI receives written
notice thereof from Buyers; or
(iv) by Sellers, so long as Sellers are not then
in breach in any material respect of their obligations under this Agreement,
upon a breach of any covenant or agreement on the part of Buyers set forth in
this Agreement, or if any representation or warranty of Buyer shall have been or
become untrue, in each case such that the conditions set forth in Section 7.2(a)
or (b) would not be satisfied and such breach or untruth (A) cannot be cured by
the Closing Date or (B) has not been cured within 30 days of the date on which
the Domestic Buyer receives written notice thereof from Sellers.
(b) In the event of termination of this Agreement by any
or all of the parties pursuant to this Section 3.2, written notice thereof shall
forthwith be given to the other party or parties hereto and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned, without
further action by any of the parties hereto. If this Agreement is terminated as
provided herein;
(i) upon written request therefor, each party will
redeliver all documents, work papers and other material of any other party or
the Subsidiaries relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, to the party furnishing the same;
(ii) all information received by the Buyers, by the
Sellers or by any of their respective counsel, accountants, and other agents and
representatives which is governed by the letter agreement, dated August 31, 1998
(the "Confidentiality Agreement"), from Patricoff & Co. Capital Corp. to Parent
shall continue to be governed by the provisions of the Confidentiality
Agreement;
(iii) all filings, applications and other submissions
made with respect to the transactions contemplated by this Agreement shall, to
the extent practicable, be withdrawn from the agency or other person to which
made; and
(iv) none of the parties shall have any liability or
further obligation arising out of this Agreement except (A) for any liability
resulting from its breach of this Agreement prior to termination, (B) as
provided in paragraphs (i), (ii) and (iii) above, and (C) Sellers' and Buyers'
obligations under Section 6.1(b) shall survive the termination of this
Agreement.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES. The Seller
Parties jointly and severally represent and warrant to Buyers that:
4.1 Organization, Standing and Authority of the Sellers and the
Subsidiaries. USI, the Domestic Seller, the Domestic Subsidiary and the Ertl
Subsidiary each is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation, and USI and the
Domestic Seller each has full corporate power and authority to enter into and
perform this Agreement and the applicable agreements and instruments to be
delivered at the Closing pursuant to Section 8.1 (the "Seller Ancillary
Documents"), and to own and operate its properties and to conduct its business
as currently conducted. The Foreign Seller, the Canadian Seller and each Foreign
Subsidiary each is a corporation duly organized under the laws of the country of
its incorporation and the Foreign Seller and the Canadian Seller each has full
corporate power and authority to enter into and perform this Agreement, and the
applicable Seller Ancillary Documents, and to own and operate its properties and
to conduct its business as currently conducted. Each Subsidiary is qualified to
do business and is in good standing in each jurisdiction in which the nature of
its business or the properties owned, operated or leased by it requires
qualification, except where the failure to be so qualified or in good standing
would not have a material adverse effect upon the businesses, operations,
assets, results of operations, properties, or condition (financial or otherwise)
of the Business or the Subsidiaries, taken as a whole ("Material Adverse
Effect"). Sellers have delivered to Buyers complete and correct copies of the
articles or certificate of incorporation, by-laws and any charter or similar
document adopted or filed in connection with the creation, formation or
organization of any Subsidiary or any Seller (collectively, the "Charter
Documents").
4.2 Authorization of Agreement. Each Seller Party has all requisite
corporate power and authority to execute and deliver this Agreement and the
applicable Seller Ancillary Documents and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement, and the applicable Seller Ancillary Documents by each Seller Party
have been duly authorized by all necessary corporate action of each Seller Party
and this Agreement constitutes, and when executed, the Seller Ancillary
Documents to which such Seller Party is a party will constitute, the legal,
valid and binding obligation of each Seller Party enforceable against it in
accordance with their respective terms, except to the extent enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights in general and
subject to general principles of
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equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
4.3 Consents of Third Parties. Subject to receipt of the consents,
waivers and approvals, and delivery of the notices, referred to in Schedule 4.3,
the execution, delivery and performance of this Agreement and the Seller
Ancillary Document and the consummation of the transactions contemplated hereby
and thereby by each Seller Party will not (i) violate or conflict with the
Charter Documents of any Seller or any Subsidiary or the certificate of
incorporation or by-laws of USI, (ii) conflict with, or result in the breach of,
or termination of, or constitute a default under (whether with notice or lapse
of time or both), or accelerate, terminate or cancel or permit the acceleration,
termination or cancellation of the performance required by, or require the
giving of any notice to or obtaining of any consent from any person pursuant to,
any material indenture, mortgage, lien, lease, agreement, commitment or other
instrument, or any material order, judgment or decree, to which any Seller
Party, any Subsidiary or any of their respective affiliates is a party or by
which any Seller Party, any Subsidiary or any of their respective affiliates or
any of their properties are bound, (iii) constitute a violation of any law,
regulation, order, writ, judgment, injunction, statute, code, ordinance, rule or
decree (collectively, "Laws") applicable to any Seller Party, any Subsidiary or
any of their respective affiliates, or (iv) result in the creation of any
material Lien upon the capital stock, properties or assets of any Subsidiary. No
consent, permit, approval or authorization of any government or political
subdivision thereof, whether federal, state, local or foreign, or any regulatory
or administrative agency or authority, or any court, agency or tribunal
(collectively, "Governmental Authority") is required on the part of any Seller
Party, any Subsidiary or any of their respective affiliates in connection with
the execution, delivery and performance of this Agreement, except for:
(a) filings with the Federal Trade Commission and the
Department of Justice, pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 0000 (xxx "XXX Xxx");
(b) filings with the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor and any other governmental
entity with respect to the transfer of assets and liabilities of Employee
Benefit Plans (defined below) pursuant to this Agreement; and
(c) change of control notifications described on Schedule 4.3.
4.4 Capitalization of the Subsidiaries. The capitalization of each
Subsidiary is set forth on Schedule 4.4. None of the Shares were issued in
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violation of any Laws or any Contracts (as defined below). All of the
outstanding shares of capital stock of each Subsidiary were duly authorized for
issuance and are validly issued, fully paid and non-assessable and none of such
shares is held in treasury. Except for this Agreement and as set forth on
Schedule 4.4, there are no outstanding options, warrants, subscriptions, calls,
agreements, commitments or rights of any kind to acquire, issue, deliver,
transfer or redeem any shares of any class of securities or any securities or
other instruments convertible or exchangeable into or for any shares of any
class of securities of any Subsidiary, nor are there any obligations to issue
any such options, warrants, subscriptions, calls, agreements, commitments,
rights or securities. Except as set forth on Schedule 4.4, there are no
restrictions of any kind on the transfer of the Shares or the assets of Ertl
Canada. Except for the ownership of the Ertl Subsidiary by the Domestic
Subsidiary, none of the Subsidiaries, directly or indirectly, owns or controls
any capital stock or other interest or participation in any other corporation or
business entity, nor is any Subsidiary subject to any obligations or
requirements to make any investment or provide any funds in or to any
individual, partnership, joint venture, corporation, trust, unincorporated
organization, association or limited liability company ("Person").
4.5 Ownership of Shares and Certain Assets. The Domestic Seller is, and
at the Closing will be, the record and beneficial owner of all of the Domestic
Shares, free and clear of any Lien, and the Foreign Seller is, and at the
Closing will be, the record and beneficial owner of all of the Foreign Shares
free and clear of any Lien. All of the issued and outstanding Shares are duly
authorized and validly issued, fully paid, nonassessable and free of preemptive
rights. None of the Shares is, or will be at the Closing, subject to any
agreement or understanding with respect to voting or transfer thereof. At the
Closing, (a) the Domestic Seller will transfer and deliver to the Domestic Buyer
good and valid title to all the Domestic Shares, free and clear of any Lien, (b)
the Foreign Seller will transfer and deliver to the Foreign Buyer good and valid
title to all the Foreign Shares of Ertl Europe, Britains and Ertl Italy, free
and clear of any Lien, (c) the Foreign Seller will transfer and deliver to the
North American Buyer good and valid title to all the Foreign Shares of Ertl
Mexico, free and clear of any Lien, other than one share which is held by a
nominee of the Foreign Seller, good and valid title to which will be transferred
to a nominee of the North American Buyer, free and clear of any Lien, and (d)
the Foreign Seller will transfer and deliver to the Hong Kong Buyer good and
valid title to all the Foreign Shares of Ertl Hong Kong, free and clear of any
Lien, other than one share which is held by a nominee of the Foreign Seller,
good and valid title to which will be transferred to a nominee of the Hong Kong
Buyer, free and clear of any Lien. The Canadian Seller has, and at the Closing
will have, good and valid title to the assets of Ertl Canada and at the Closing
will transfer and deliver to the Foreign Buyer good and valid title to the
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assets of Ertl Canada free and clear of any Lien subject to the assumption by
the Foreign Buyer of the liabilities of Ertl Canada.
4.6 Financial Statements.
(a) The unaudited pro forma balance sheet of the Business,
dated as of January 2, 1999 (the "Preliminary Balance Sheet"), and the related
pro forma statements of operations and cash flows for the three months then
ended, set forth in Schedule 4.6, have been prepared in accordance with the
Domestic Subsidiary's past practice, consistently applied, for inclusion in
USI's consolidated financial statements.
(b) The combined balance sheets of the Subsidiaries as of
September 30, 1998, 1997 and 1996, and the related combined statements of
operations, changes in invested capital, and cash flows for the years then
ended, set forth in Schedule 4.6, present fairly the combined financial
position, assets and liabilities of the Subsidiaries at September 30, 1998 1997
and 1996 and the combined results of their operations, changes in financial
condition and cash flows for the years then ended, in conformity with GAAP
applied on a consistent basis.
4.7 Absence of Certain Liabilities and Changes. Except to the
extent reflected or reserved for in the Preliminary Balance Sheet, the
Subsidiaries do not have any liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent or otherwise) except
(i) liabilities or obligations incurred in the ordinary course of business
consistent with past practice since the date of the Preliminary Balance Sheet
pursuant to contracts listed on Schedule 4.9, (ii) other liabilities or
obligations not required to be shown on a balance sheet prepared in accordance
with the Accounting Principles incurred in the ordinary course of business
consistent with past practice and which are not material in nature or amount
individually or in the aggregate, and (iii) liabilities and obligations
disclosed on Schedule 4.7. Since the date of the Preliminary Balance Sheet, the
Subsidiaries have operated the Business in the ordinary course and, except as
set forth on Schedule 4.7, there has not been:
(a) any Material Adverse Effect;
(b) any material change in the accounting methods,
practices or principles of the Subsidiaries;
(c) (i) any grant or payment of, or commitment to pay, any
severance or termination pay by the Subsidiaries to any officer, director,
employee, consultant, agent or other representative of the Subsidiaries or any
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increase in compensation or benefits payable by the Subsidiaries under existing
employment agreements or severance or termination pay policies to any of their
employees other than (x) in the ordinary course of business consistent with past
practices, including without limitation normal merit increases for salaried
employees, provided that such increases do not exceed $225,000 in the aggregate,
or (y) increases or grants required by contracts disclosed in the Schedules
hereto,; or (ii) any entering into, amendment or termination of any employment
agreement with respect to any employee of any Subsidiary or any contract with
any labor union or association representing any employee of any Subsidiary;
(d) any entering into, amendment or termination of any
Material Contract (as defined in Section 4.9), or any entering into, amendment
or termination of any other Contract (as defined in Section 4.9) outside of the
ordinary course of business consistent with past practice or that has had or
could reasonably be expected to have a Material Adverse Effect;
(e) any amendments to the Charter Documents or merger with or
into or consolidation with any other Person, subdivision or reclassification, in
any manner, of the Shares or any other form of equity of the Subsidiaries or
changes or agreements to change in any manner the rights of any Shares or any
other form of equity of the Subsidiaries;
(f) any issuance, sale, purchase or redemption, or agreements
to issue, sell, purchase or redeem, any Shares or any options, warrants,
convertible or exchangeable securities, subscriptions, rights (including
preemptive rights), stock appreciation rights, calls or commitments of any
character whatsoever relating to the Shares or any other form of equity;
(g) any adoption of a plan of liquidation or resolutions
providing for the liquidation, dissolution, merger, consolidation or other
reorganization of any of the Subsidiaries;
(h) any sale, lease, transfer or assignment of any assets,
tangible or intangible, of any Subsidiary other than for a fair consideration in
the ordinary course of business consistent with past practice;
(i) any Lien imposed upon any assets, tangible or intangible,
of any Subsidiary;
(j) any capital expenditure, or delay or failure to make any
capital expenditure (or series of related capital expenditures) by any
Subsidiary outside the ordinary course of business consistent with past
practice;
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(k) any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of related capital
investments, loans and acquisitions) by any Subsidiary;
(l) any issuance of any note, bond or other debt security by
any Subsidiary or creation, incurrence, assumption or guaranty by any Subsidiary
of any indebtedness for borrowed money or capitalized lease obligation either
involving more than $100,000 singly or $500,000 in the aggregate;
(m) any delay or postponement by any Subsidiary of the payment
of material accounts payable or other material liabilities outside the ordinary
course of business consistent with past practice;
(n) any direct or indirect acceleration or taking of any steps
to accelerate receipt (or actual receipt) of payment of any material accounts
receivable or other material current assets by any Subsidiary outside the
ordinary course of business consistent with past practice;
(o) any cancellation, compromise, waiver or release by any
Subsidiary of any material right or claim (or series of related material rights
and claims) outside the ordinary course of business consistent with past
practice;
(p) any declaration, setting aside or payment by any
Subsidiary of any dividend or making by any Subsidiary of any distribution with
respect to its capital stock (whether in cash or in kind) or redemption,
purchase or other acquisition by any Subsidiary of any of its capital stock;
(q) any adoption, amendment, modification or termination by
any Subsidiary of any bonus, profit sharing, incentive, severance or other plan,
contract or commitment for the benefit of any of its directors, officers and
employees (or taking by any Subsidiary of any such action with respect to any
other Employee Benefit Plan or Benefit Arrangement (as defined in Section
4.11)); and
(r) any existing or new agreement or arrangement made by a
Subsidiary to take any action that would cause any representations or warranties
in this Agreement to be untrue or incorrect.
4.8 Taxes. Except as set forth on Schedule 4.8, (i) each Subsidiary has
filed (or caused to be filed) in a timely manner, and each consolidated,
combined, affiliated or unitary group of which any Subsidiary is or has been a
member (each
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such group, an "Affiliated Group") has filed (or caused to be filed) in a timely
manner all Federal, state, local and foreign returns, reports, statements and
forms required to be filed under the Internal Revenue Code of 1986, as amended
(the "Code") or applicable state, local or foreign Tax laws (the "Tax Returns")
and such Tax Returns are true, complete and correct in all material respects;
(ii) each Subsidiary has paid (or the Affiliated Group of which the Subsidiary
is or was a member has paid) all Taxes (whether or not shown on any Tax
Returns); (iii) there is no outstanding agreement, waiver or consent providing
for an extension of the statutory period of limitations with respect to any
Taxes or Tax Returns of any Subsidiary and no power of attorney granted by any
Subsidiary or any Affiliated Group with respect to any tax matter is currently
in force; (iv) no tax liens (except for liens for Taxes not yet due) have been
filed and there is no action, suit, proceeding, investigation, audit or claim
now pending against any Subsidiary with respect to any Tax, or with respect to
which any Subsidiary could be jointly or severally liable under Treasury
Regulation Section 1.1502-6 or any comparable state, local or foreign tax
provisions, nor is there any assessment asserted by any taxing authority; (v)
each Subsidiary has complied with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes and is not liable for any Taxes
for failure to comply with such laws, rules and regulations, (vi) no Subsidiary
is a party to or is otherwise bound by any agreement or understanding providing
for the allocation or sharing of Taxes or has any obligation or liability under
any such agreement or understanding to which it was once a party or otherwise
bound; (vii) no Subsidiary is required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by such Subsidiary and no Subsidiary has knowledge
that the Internal Revenue Service has proposed any such adjustment or change in
accounting method; (viii) no Subsidiary has filed with respect to any item a
disclosure statement pursuant to Section 6662 of the Code or any comparable
disclosure with respect to foreign, state and/or local tax statutes for any tax
year ended after December 31, 1995; (ix) no Subsidiary has filed any agreement
or consent under Section 341(f) of the Code; and (x) no property of any Domestic
Subsidiary is "tax-exempt use property" within the meaning of Section 168(h) of
the Code nor property that Domestic Buyer will be required to treat as being
owned by another person pursuant to Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986. Schedule 4.8 contains a list of all pending or
threatened federal income tax audits conducted by the Internal Revenue Service
or any state, local or foreign governmental authority with respect to Taxes of
any Subsidiary that ended within three years of the date of this Agreement. The
Domestic Seller is not a "foreign person" within the meaning of Section
1445(b)(2) of the Code and will furnish an affidavit of this status
substantially in the form of Exhibit C. For purposes of this Agreement, "Tax" or
"Taxes" means any tax, duty,
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fee, assessment or charge of any nature whatsoever imposed by any government or
taxing authority, domestic or foreign, including, without limitation, any gross
or net income, gross or net receipts, minimum, sales, use, ad valorem, value
added, customs, import, duty, stamp, transfer, franchise, withholding, payroll,
employment, excise, occupation, premium or property tax or fee, together with
any interest, penalty, addition to tax or additional amount imposed with respect
thereto.
4.9 Material Contracts. Schedule 4.9 includes lists of all agreements,
contracts, promises, undertakings, or understandings (whether written or oral
and whether express or implied) to which any Subsidiary is a party, under which
any Subsidiary has or may acquire any rights or has or may become subject to any
liability or obligation, or by which any Subsidiary or its assets may be
affected (collectively "Contracts") of the following types (such Contracts are
collectively, the "Material Contracts"):
(a) all patent, trademark, servicemark, trade-name, copyright,
royalty, license, inventor and other intellectual property Contracts that
involve an annual payment by a Subsidiary to another party of more than $30,000
for any one Contract;
(b) all Contracts for the purchase or lease of any materials,
supplies, equipment, merchandise or services that involve an annual expenditure
by a Subsidiary of more than $50,000 for any one Contract or series of related
Contracts;
(c) all leases with respect to any personal property under
which a Subsidiary is either lessor or lessee that involve annual payments or
receipts of $50,000 or more;
(d) all Contracts, mortgages, indentures, notes, installment
obligations, letters of credit, and other instruments relating to any
indebtedness, including, without limitation, any indebtedness for borrowed
money, any indebtedness evidenced by notes, debentures or similar instruments,
any capitalized lease obligations, any mandatory redemption or dividend rights
on capital stock required to be paid in cash, any reimbursement obligations, and
any obligations secured by Liens, that may require payments by one or more
Subsidiaries of more than $50,000 for any one Contract or series of related
Contracts;
(e) all distributor, representative, management, marketing,
printing, advertising and agency Contracts that involve an annual payment by a
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Subsidiary of more than $30,000 for any one Contract or series of related
Contracts;
(f) all government Contracts and all other agreements with
customers that involve an annual payment to or by a Subsidiary of more than
$50,000 for any one Contract or series of related Contracts.
(g) all Contracts with any current or former officer,
director, employee, shareholder, option holder, or warrant holder of any
Subsidiary;
(h) all Contracts under which any Subsidiary has agreed to
indemnify or guarantee the obligations of any Person or to share tax liability
with any Person, with a potential liability of more than $50,000;
(i) all Contracts limiting the freedom of any Subsidiary to
engage in any line of business or in any geographic area;
(j) all Contracts relating to the acquisition by any
Subsidiary of any operating business or the shares or other interests of any
Person;
(k) except as disclosed in Schedule 4.11, employment,
consulting or severance agreements, collective bargaining agreements, or
pension, profit-sharing, incentive compensation, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance, severance
pay, or retirement plans or agreements; and
(l) any other Contract outside the ordinary course of business
consistent with past practice which requires payments to or from any Subsidiary
of more than $50,000 in the aggregate or which may have a Material Adverse
Effect.
Sellers have made available to Buyers complete and correct
copies of all items listed or required to be listed on Schedule 4.9 that are in
writing, and the descriptions contained in Schedule 4.9 of all items listed or
required to be listed therein that are not in writing are complete and correct.
Except as disclosed in Schedule 4.9, no Subsidiary and, to the best knowledge of
Sellers, no other party to a Material Contract, is in material default under the
terms of any Material Contract, and, to the best knowledge of Sellers, no
condition or state of facts exists (or would exist upon giving of notice or
lapse of time or both) which may result in a material breach of or default under
any Material Contract. Each of the Material Contracts is valid and in full force
and effect, and no party has notified any Seller or any Subsidiary in writing of
its intention to cease to
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perform any material services required to be performed by it or withhold any
material payment required to be made by it thereunder.
4.10 Labor Matters.
(a) Except as set forth on Schedule 4.10(a), there are no
collective bargaining agreements in effect relating to the employees of any
Subsidiary, or any other contract or commitment to any labor union or
association representing any employee of any Subsidiary, nor does any labor
union or collective bargaining agent represent any employee of any Subsidiary.
To the best of Seller's' knowledge, except as set forth on Schedule 4.10(a),
there is no organizational effort currently being made or threatened to organize
employees of any Subsidiary for the purpose of forming or joining any labor
union. Except as set forth on Schedule 4.10(a), within the past two years, (i)
there has been no strike, slow-down, work stoppage, arbitration or other
material work-related dispute involving any Subsidiary, and no such action is
now pending or, to the best of Sellers' knowledge, threatened, and (ii) no
proceeding against any Subsidiary or controversy or dispute between any
Subsidiary and any Employee is pending or, to the best of Sellers' knowledge,
threatened relating to the alleged violation of any legal requirement pertaining
to labor relations or employment matters, including any charge, complaint or
petition filed by any Employee or labor organization with the National Labor
Relations Board, the Equal Employment Opportunity Commission, the U.S.
Department of Labor or any comparable Governmental Authority, any of which could
reasonably be expected to result in a material liability. Each Subsidiary is in
compliance in all material respects with the terms of, and is not currently in
default in any material respect under, any collective bargaining agreement or
other labor union contract covering any Employees.
(b) Except as set forth on Schedule 4.10(b), no Subsidiary has
incurred or will incur any liability or obligation under the Worker Adjustment
and Retraining Notification Act ("WARN") or similar state or foreign Laws,
including with respect to the provision of any notice of any plant closing or
mass layoff taking place up to and including the Closing Date solely
attributable to terminations of employment prior to the Closing, which remains
unpaid or unsatisfied or which has not been accrued for. Except as set forth on
Schedule 4.10(b), no Subsidiary or Seller has laid off more than 10% of its
Employees at any single site of employment in any 90-day period during the last
12 months. As of the Closing, the Domestic Subsidiary has 256 full-time, active
employees at plants #1 and #2 in Dyersville, Iowa. During the 90 days
immediately prior to Closing, the Domestic Subsidiary has terminated the
employment of not more than two employees.
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4.11 Employee Benefit Plans and Benefit Arrangements.
(a) Definitions.
(i) The term "Employees" shall mean all current and
former employees of the Subsidiaries, including employees on approved leaves of
absence (whether family leave, workers' compensation, medical leave or
otherwise) and the term "Employee" shall mean any of the Employees.
(ii) The term "Employee Benefit Plans" shall mean
each and all "employee benefit plans" as defined in Section 3(3) of ERISA,
including any Foreign Benefit Plans (as defined below) maintained or contributed
to by a Subsidiary or Seller or any trade or business under common control with
a Subsidiary or Seller, within the meaning of Section 414 of the Code (an "ERISA
Affiliate"), or any predecessor or in which a Subsidiary or Seller on ERISA
Affiliate or any predecessor participates or participated and which provides
benefits to Employees which shall include (a) any such plans that are "employee
welfare benefit plans", as defined in Section 3(1) of ERISA, including, but not
limited to, retiree medical and life insurance plans ("Welfare Plans") and (b)
any such plans that are "employee pension benefit plans" as defined in Section
3(2) of ERISA or to which any of the Subsidiaries contribute or may become
liable to contribute that is a "retirement benefits scheme" ("Retirement
Benefits Scheme") as defined in Section 611 of the UK Income and Corporation
Taxes Act 1988 ("ICTA") ("Pension Plans") except for any Welfare Plan or Pension
Plan not sponsored by, and not contributed to by, the Domestic Subsidiary, and
which does not cover any Employees.
(iii) The term "Benefit Arrangements" shall mean any
life and health insurance, cafeteria plans, dependent care assistance programs,
adoption assistance programs, hospitalization, savings, bonus, stock option,
stock purchase, stock appreciation right, deferred compensation, incentive
compensation, holiday, vacation, termination, severance pay, sick pay, sick
leave, disability, tuition refund, service award, company car, scholarship,
relocation, patent award, fringe benefit, contracts, collective bargaining
agreements, individual employment, consultancy, termination contracts or
severance contracts, plans and other policies or practices of the Subsidiaries
or Sellers providing employee or executive compensation or benefits to
Employees, other than Employee Benefit Plans. Benefit Arrangements shall also
include all employee programs for Employees of any Foreign Subsidiary.
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(b) Schedule 4.11 lists all Employee Benefit Plans and all
Benefit Arrangements. Such Schedule also indicates whether any Pension Plans
listed thereon participate in trusts sponsored by entities other than the
Subsidiaries for investment of plan assets (the "Master Trusts"). With respect
to each of the Employee Benefit Plans and Benefit Arrangements, Sellers have
delivered or made available to Buyers, as applicable, true, correct and complete
copies of any: (i) plans or programs and related trust documents and amendments
thereto; (ii) the most recent summary plan descriptions and the most recent
annual report (Form 5500 Series); (iii) the most recent actuarial valuation; and
(iv) the most recent determination letter received from the Internal Revenue
Service (or in the case of any Retirement Benefits Scheme, the Inland Revenue
approval letter). All such reports (Form 5500 Series) with respect to each
Employee Benefit Plans have been properly filed in all material respects
including the payment in full of any late fees, interest and penalties, if, and
to the extent applicable.
(c) Except as shown on Schedule 4.11, (i) each Subsidiary is
in compliance in all material respects with the terms of each Employee Benefit
Plan or Benefit Arrangement and each Employee Benefit Plan or Benefit
Arrangement has been maintained in all material respects in accordance with the
requirements prescribed by all applicable statutes, orders or governmental rules
or regulations including, without limitation, ERISA and the Code (and in the
case of any Retirement Benefits Scheme, ICTA); (ii) each Pension Plan intended
to qualify under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service with respect to such
qualification, or would receive a favorable determination letter if submitted to
the Internal Revenue Service; its related trust has been determined to be exempt
from taxation under Section 501(a) of the Code or in the case of any Retirement
Benefits Scheme is exempt approved under Chapter I of Part XIV of ICTA or is
awaiting such approval; and, to the best of Sellers' knowledge, nothing has
occurred since the date of such letter (or in the case of any Retirement
Benefits Scheme, such approval) that would adversely affect such qualification
or exemption; (iii) there are no actions or proceedings (other than routine
claims for benefits) pending or, to the best of the Subsidiaries' or Sellers'
knowledge, threatened, and no past or current proceedings under the Employee
Plans Compliance Resolution System, with respect to any such Employee Benefit
Plan or Benefit Arrangement or against the assets of any such Employee Benefit
Plan or any fiduciary to any such Employee Benefit Plan or Benefit Arrangement
with respect to such plans or arrangements; and (iv) pursuant to the terms of
each Employee Benefit Plan or Benefit Arrangement for which Buyers or the
Subsidiaries shall have liability following the Closing (other than such
Employee Benefit Plans or Employee Benefit Arrangements which cover employees
subject to a collective bargaining agreement as such Employee Benefit Plans and
Employee Benefit Arrangements
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may not be unilaterally terminated), each can be terminated within 31 days,
without payment of any additional contribution or amount other than liabilities
for benefits accrued in the ordinary course through the date of termination and
without the vesting or acceleration of any benefits promised by such Employee
Benefit Plan or Benefit Arrangement.
(d) With respect to any Employee Benefit Plan or Benefit
Arrangement, where applicable, (i) there has been no non-exempt "prohibited
transaction" (including without limitation as a result of any of the
transactions contemplated hereby) within the meaning of Section 4975(c) of the
Code or Section 406 of ERISA involving the assets of any Employee Benefit Plan
or Benefit Arrangement; and (ii) except as shown on Schedule 4.11, neither a
Subsidiary nor Seller is or was during the preceding six years obligated to
contribute to any multi-employer plan covering Employees which would give rise
to any obligation by a Subsidiary or Seller and neither a Subsidiary nor Seller
has assumed any obligation of any predecessor of a Subsidiary or Seller with
respect to any multi-employer plan covering Employees.
(e) Except as shown on Schedule 4.11 or as required by Section
4980B of the Code, no Employee Benefit Plan or Benefit Arrangement provides
medical or death benefits with respect to Employees beyond their retirement or
other termination of employment. Any continuation coverage provided under any
Welfare Plans is in good-faith compliance with Section 4980B of the Code and is
at the expense of the participant or beneficiary. True and correct copies of the
most recent reports (the "FASB Reports") regarding post-retirement benefits
under Employee Benefit Plans, other than pension benefits, prepared in
accordance with Financial Accounting Standards Board Statement No. 106 as
amended, have been delivered to the Buyer. There has been no adverse change in
the benefit formulas in the Employee Benefit Plans covered by any such FASB
Report since the date of such report with respect to the Employees.
(f) No accumulated funding deficiency or unpaid required
installments within the meaning of Section 412 of the Code exists with respect
to any Employee Benefit Plan that is subject to Title IV of ERISA (a "Title IV
Plan"). With respect to each Title IV Plan, there has not occurred any
reportable event within the meaning of Section 4043 of ERISA or the regulations
thereunder. The Pension Benefit Guaranty Corporation has not instituted or, to
the knowledge of a Subsidiary or Seller, threatened a proceeding to terminate
any Title IV Plan.
(g) With respect to the merger or spin-off of any Employee
Benefit Plans or any assets thereunder occurring prior to the Closing Date, all
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applicable IRS Forms have been timely filed by the Subsidiary or Seller and any
and all rules set forth in ERISA or the Code or the regulations thereunder
providing for the protection of participants in such Employee Benefit Plans have
been followed in all material respects, including, but not limited to, the rule
providing that each participant of any such plan will be entitled to a benefit
after the merger or spin-off equal to or exceeding the benefit before such
merger or spin-off and, in the case of a merger or spin-off between two defined
contribution Employee Benefit Plans, the rule providing that each participant
shall have an account balance after the merger at least equal to their account
balance before such merger or spin-off.
(h) No Employee Benefit Plan or Benefit Arrangement or any
other agreement, program, policy or other arrangement by or to which any
Subsidiary or any Seller is a party, is bound or is otherwise liable, by its
terms or in effect could reasonably be expected to require any payment or
transfer of money, property or other consideration on account of or in
connection with the transactions contemplated by this Agreement which payment
would constitute an "excess parachute payment" within the meaning of Section
280G of the Code. The consummation of the transactions contemplated by this
Agreement will not result in the payment, vesting or acceleration of any benefit
which would constitute a liability of Buyers or any Subsidiary.
(i) Each Foreign Employee Benefit Plan (as defined below) has
been maintained in all material respects in compliance with its terms and with
the requirements of any and all applicable laws and has been maintained, where
required, in good standing with applicable regulatory entities. Neither the
Subsidiaries nor the Sellers have incurred any obligations in connection with
the termination of or withdrawal from any Foreign Employee Benefit Plan, or have
any unfunded liability with respect to benefits under any such Foreign Employee
Benefit Plan. "Foreign Employee Benefit Plan" means (i) any plan, fund or other
similar program established or maintained outside the United States of America
by a Subsidiary or Seller primarily for the benefit of Employees residing
outside of the United States of America which plan, fund or other similar
program provides retirement income for such Employees, results in a deferral of
income for such Employees in contemplation of retirement or provides payments to
be made to such Employees upon termination of employment, and which plan is not
subject to ERISA or the Code, and (ii) any plan, fund or other similar program
established or maintained outside the United States of America by a Subsidiary
or Seller primarily for the benefit of Employees residing outside of the United
States of America which plan, fund or similar program is not described in (i)
above including, but not limited to, any plan, fund or other similar program
established or
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maintained outside the United States of America by a Subsidiary or Seller
providing benefits comparable to those provided under Welfare Plans.
(j) Each individual who receives continuation coverage under
Section 4980B of the Code and part 6 of Subtitle B of Title I of ERISA ("COBRA")
with respect to any Subsidiary makes payments for such coverage that are not
less than the cost to the Subsidiaries of such coverage, and, if Buyers or the
Subsidiaries do not change any plan pursuant to which COBRA coverage is made,
each individual who receives COBRA coverage after the Closing Date because such
individual is a qualified beneficiary whose qualifying event occurred prior to
the Closing Date or whose qualifying event occurred in connection with a covered
employee whose last employment was prior to the Closing Date will be required to
make payments for such coverage that are not less than the cost to the
Subsidiaries of such coverage. Notwithstanding the foregoing, the vision care
portion of the cost of COBRA coverage is intended to cover the total cost of
such self-insured benefit, and such employee-paid cost, together with any
accrual on the Final Balance Sheet specifically relating to COBRA costs for
employees who terminated employment prior to the Closing Date, will not be less
than the cost to the Subsidiaries for such coverage.
4.12 Litigation; Compliance with Laws.
(a) There are no judicial or administrative actions,
proceedings or investigations pending or, to the best of the Sellers' knowledge,
threatened, that question the validity of this Agreement or any action taken or
to be taken by the Sellers in connection with this Agreement. There is no
litigation, proceeding or governmental investigation pending or, to the best of
Sellers' knowledge, threatened, or any order, injunction or decree outstanding,
against Sellers that, if adversely determined, would individually or in the
aggregate, have an adverse effect on the Sellers' ability to perform their
obligations under this Agreement.
(b) (i) No Subsidiary is in material violation of any
applicable Law, or any other applicable requirement of any Governmental
Authority, and (ii) no written notice has been received by any Seller, any
Subsidiary or any of their respective affiliates alleging any such material
violations.
(c) Except as disclosed in Schedule 4.12, there are no
judicial, legal, regulatory, arbitration or administrative actions, proceedings
or governmental investigations (a "Suit") pending against any Subsidiary or, to
the best of Sellers' knowledge, threatened against any Subsidiary, and no
Subsidiary is subject to any outstanding injunction, order, decree, ruling or
charge.
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4.13 Real Property.
(a) Schedule 4.13(a) sets forth a true and complete list of
all of the real property of the Business owned by the Subsidiaries (the "Owned
Property"). Except as set forth on Schedule 4.13, the Subsidiaries have good,
valid and marketable fee simple title to each parcel of Owned Property free and
clear of all Liens, other than (i) those reflected or reserved against in the
Preliminary Balance Sheet, (ii) those reflected in any title abstracts with
respect to the Owned Property that are listed on Schedule 4.13, copies of which
have been previously provided to Buyers, (iii) imperfections of title,
easements, encroachments, rights-of-way, pledges, charges, restrictions and
encumbrances, including, without limitation, survey matters, landlord's liens,
mechanics' liens, repairmen's liens and other similar liens, if any, that do not
materially detract from the value of the property subject thereto or materially
interfere with the manner in which it is currently being used in the Business or
materially impair the operations of the Business, and (iv) taxes and general and
special assessments not yet due and payable without penalty or interest (Liens
of the type referred to in clauses (i) through (iv) above being hereinafter
referred to as "Permitted Liens"). Sellers have previously delivered to Buyers
surveys of the Owned Property dated October 23, 1998 and April 7, 1999, and such
surveys are accurate, correct and complete.
(b) Schedule 4.13(b) sets forth a true and complete list of
all of the real property leases in effect as of the date hereof with respect to
the Business under which any Subsidiary is a lessee (collectively, the "Leased
Property"). Sellers have made available to Buyers true, correct and complete
copies of all such Leases, including all amendments, modifications and renewals
thereof. All such Leases are valid, binding and enforceable in accordance with
their terms, and are in full force and effect as of the date hereof. There are
no existing material defaults by any Subsidiary beyond any applicable grace
periods under such Leases, and no Subsidiary has received any notice of any
material default. Except as set forth in Schedule 4.13, the consummation of the
transactions contemplated by this Agreement will not constitute a default, or
give rise to a right of termination, cancellation or acceleration of any right
under, any of the Leases. The Owned Property and the Leased Property shall be
collectively referred to herein as the "Real Property".
(c) The Real Property set forth on Schedule 4.13(a) and
4.13(b) constitutes all real property owned, used or occupied by any of the
Subsidiaries. Except as set forth on Schedule 4.13, there are no leases,
contracts, options, agreements or enforceable rights or obligations relating to
or affecting the Real Property to which any Subsidiary is a party or by which
the Real Property is
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otherwise bound or affected. To the best of Sellers' knowledge, except as set
forth on Schedule 4.7(j), there are no material structural or nonstructural
defects (including, without limitation, inadequacy for normal use of mechanical
systems and fixtures) in any building or its systems or fixtures (including,
without limitation, the HVAC system, plumbing system, electrical system,
sprinkler system and sewer and water systems) or other improvements situated on
the Real Property and all building systems, fixtures, structures, fixtures and
improvements, owned, leased or used any of the Subsidiaries, are in all material
respects in good condition and working order (reasonable wear and tear excepted)
and are adequate in quality and quantity for the normal operation of the
Business and the Real Property. To the best of Sellers' knowledge, except as set
forth on Schedule 4.7(j), none of the Real Property is located in a recognized
wetland, flood prone area, flood risk area, flood plain or similarly restricted
area or is subject to any shoreland regulations. To the best of Sellers'
knowledge, none of the Seller Parties or the Subsidiaries has any notice or
knowledge of capital expenditures on the Real Property (excluding only normal
repairs made consistently with past practice) that would be necessary to conduct
the Business as presently conducted. The Subsidiaries have all easements and
rights, including without limitation, easements for all utilities, services,
roadways, and other ways of ingress and egress, adequate and sufficient to
conduct the Business. Neither the whole nor any portion of the Real Property has
been condemned, requisitioned or otherwise taken by any public authority, and no
notice of such condemnation, requisition or taking has been served upon any of
the Subsidiaries or any of the Seller Parties. None of the Seller Parties' have
received notice of the commencement of any public improvements and, to the best
of Seller's knowledge, there are no public improvements planned which may
reasonably be expected to result in special assessments against or otherwise
materially and adversely affect any of the Real Property. To the best of
Sellers' knowledge, no governmental agency has issued any work order, and there
have been no court orders requiring repairs, alterations or corrections of any
condition on the Real Property.
4.14 Intellectual Property.
(a) The term "Intellectual Property" as used herein includes
all foreign and domestic (i) patents, industrial design registrations,
inventions (whether or not patentable and whether or not reduced to practice)
and applications therefor, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof
(collectively, "Patents"); (ii) trademarks, service marks, trade names,
fictitious names, Internet domain names, d/b/a's, collective marks,
certification marks, logos, symbols, trade dress, other indicia of source, and
registrations and applications for registration therefor (collectively,
"Trademarks"); (iii) trade secrets, know-how,
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and confidential and proprietary information (including processes, schematics,
databases, formulae, drawings, prototypes, models, designs and customer lists)
(collectively, "Trade Secrets"); (iv) published and unpublished works of
authorship, copyrights therein and thereto, and registrations and applications
for registration therefor (collectively, "Copyrights"); and (v) all other
proprietary rights ("Other Proprietary Rights").
(b) Schedule 4.14(b) contains a complete and accurate list of
all registered Intellectual Property owned by each Subsidiary, each license,
agreement or permission any third party has granted to any Subsidiary for
Intellectual Property and each license, agreement or other permission which any
Subsidiary has granted to any third party with respect to any of its
Intellectual Property. Except as otherwise indicated in Schedule 4.14(b), (i)
each Subsidiary exclusively owns all right, title and interest in and to, and
exclusively holds full legal, equitable and beneficial ownership of, the
Intellectual Property owned by such Subsidiary (including without limitation the
exclusive right to use, sell, transfer, assign and license same without payment
to any third parties), free and clear of all Liens, and (ii) each Subsidiary has
the right to use the Intellectual Property licensed or currently used by such
Subsidiary.
(i) All of the issued Patents owned or, to the best of
Sellers' knowledge, used by each Subsidiary are currently in compliance with
formal legal requirements (including without limitation payment of filing,
examination and maintenance fees and proofs of working or use) and are not
subject to any maintenance fees or Taxes or actions falling due within ninety
(90) days after the date of the Closing. In each case where an issued Patent is
held by the Subsidiaries by assignment, the assignment has been duly recorded
with the U.S. Patent and Trademark Office and all other jurisdictions of
registration. All products made, used or sold under the issued Patents have been
marked with the proper patent notice.
(ii) All Trademarks owned or, to the best of Sellers'
knowledge, used by each Subsidiary that have been registered with the United
States Patent and Trademark Office and/or any other jurisdiction are currently
in compliance with formal legal requirements (including without limitation the
timely post-registration filing of affidavits of use and incontestability and
renewal applications) and are not subject to any maintenance fees or taxes or
taxes or actions falling due within ninety (90) days after the date of the
Closing. In each case where a Trademark is held by the Subsidiaries by
assignment, the assignment has been duly recorded with the United States Patent
and Trademark Office and all other jurisdictions of registration. All products
and materials containing a Trademark bear the proper notice where permitted by
law.
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(iii) Schedule 4.14(b)(iii) sets forth a description of
all measures (including, without limitation, entering into confidentiality and
non-disclosure agreements with officers, directors, employees, and consultants
of the Subsidiaries and other persons with access to the Trade Secrets) taken by
the Subsidiaries to protect the secrecy, confidentiality and value of the Trade
Secrets of the Subsidiaries.
(iv) All of the Copyrights owned or used by each
Subsidiary that have been registered with the United States Copyright Office are
currently in compliance with formal legal requirements and are not subject to
any fees or taxes or actions falling due within ninety (90) days after the date
of the Closing. In each case where a Copyright is held by the Subsidiaries by
assignment, the assignment has been duly recorded with the United States
Copyright Office and all other jurisdictions of registration. All copies of
works encompassed by the Copyrights have been marked with the proper copyright
notice.
(c) Any Intellectual Property owned by any third party and
used in the operation of the business of any Subsidiary prior to the Closing was
obtained by the Subsidiaries under a license to the Subsidiaries from the owner
or agent of the owner of such Intellectual Property, which license is binding
and enforceable and the use of all such Intellectual Property prior to the
Closing by the Subsidiaries has not violated the terms of any such license in
any material respect.
(d) Except as disclosed on Schedule 4.14(d) attached hereto,
within the past three years, no claim or position has ever been asserted in
writing or, to the knowledge of Sellers, threatened that any Patents, Trademarks
or Copyrights are invalid, unenforceable, unpatentable, unregisterable or
cancelable, and, to the knowledge of Sellers, no valid basis for any such claim
or position exists.
(e) Except as disclosed on Schedule 4.14(e), no claim or
position has ever been asserted in writing or, to the knowledge of Sellers,
threatened that any Subsidiary has violated any Intellectual Property rights or
breached any agreement granting any Subsidiary Intellectual Property rights,
and, to the knowledge of Sellers, no valid basis for such claim or position
exists.
(f) Except as disclosed on Schedule 4.14(f), no Suit is
currently pending or, the best of Seller's knowledge, threatened concerning any
claim or position that any Subsidiary has violated any Intellectual Property
rights or
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breached any agreement granting any Subsidiary Intellectual Property rights,
and, to the knowledge of Sellers, no valid basis for any such Suit exists.
(g) Except as disclosed on Schedule 4.14(g), no Person has
violated or been alleged to have violated, in any material respects, any
Subsidiary's rights in or to any Intellectual Property, nor is any Suit pending
concerning any such violation or alleged violation, nor, to the knowledge of
Sellers, does any valid basis exist for such Suit.
(h) The Intellectual Property identified on Schedule 4.14(b)
comprises all of the Intellectual Property rights necessary for the operation of
the Business as currently conducted. Except as set forth on Schedule 4.14(h),
all Intellectual Property owned or used by the Subsidiaries or in connection
with the Business immediately prior to the Closing and which is material
individually or in the aggregate to the Subsidiaries or the Business will be
owned or available for use by the Subsidiaries or in connection with the
Business on substantially similar terms and conditions following the Closing.
4.15 Environmental Matters. Except as disclosed on Schedule 4.15
and its enumerated sections,
(a) the operations of the Subsidiaries, the Business and the
Real Property, are in material compliance with all applicable Environmental
Laws;
(b) no Hazardous Materials are present in, or have been
Released to, the soils, surface water, groundwater or air on, in, at, upon or
beneath the Real Property, nor have any Hazardous Materials migrated from the
Real Property, in a manner or concentration not in compliance with any
applicable Environmental Law or Environmental Permits;
(c) the Subsidiaries have obtained and currently maintain all
Environmental Permits necessary for their operations and are in material
compliance with such Environmental Permits, and there are no oral or written
notices or proceedings pending nor, to the Sellers' knowledge, threatened
alleging a violation of any Environmental Permit or seeking to revoke any
Environmental Permit;
(d) except for costs and obligations incurred in order to
maintain compliance with Environmental Laws and Environmental Permits in the
ordinary course of its business, none of the Subsidiaries or the Real Property
are in receipt of or subject to any Environmental Claim or Order arising out of,
or relating in any
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way to, any (w) Environmental Laws, (x) Remedial Action, (y) Environmental
Claim, or (z) Release or threatened Release of any Hazardous Material;
(e) there are no legal proceedings pending or, to the Sellers'
knowledge, threatened against the Subsidiaries or involving the Real Property
alleging the violation of or making a claim under any Environmental Law or
Environmental Permit; and
(f) none of the Subsidiaries nor, to the Sellers' knowledge,
any owner or occupant of the Real Property, has filed any notice with any
Environmental Authority under any Law reporting the presence of a Hazardous
Material at, in, on, beneath or from, or the Release of a Hazardous Material
into the environment at, the Owned Property or the Leased Property except as
required pursuant to applicable Environmental Law or Environmental Permits.
The following definitions shall be applicable to
Sections 4.15 and 9.5:
"Environmental Authority" means any governmental or
regulatory body, or political subdivision thereof, whether federal, state, local
or foreign, or any agency, instrumentality or authority thereof, or any court or
arbitrator (public or private) having jurisdiction over or in any way regulating
or enforcing any Environmental Law.
"Environmental Claim" means any claim, third party
information request, summons, petition, decree, appeal, suit, consent, decree or
order, demand, notice or administrative ruling with respect to any Environmental
Law, Environmental Permit or Order or which may result in any Environmental
Costs and Liabilities.
"Environmental Costs and Liabilities" means any and
all losses, liabilities, obligations, damages, fines, penalties, judgments,
actions, claims, costs and expenses (including, without limitation, fees,
disbursements and expenses of legal counsel, experts, engineers and consultants
and the costs of investigation and feasibility studies and Remedial Action)
together with all deed, well or use restrictions or notices which materially
diminish the market value of any Real Property, arising from or relating to any
Hazardous Material, Release, Remedial Action, Environmental Law, Environmental
Permit or Order.
"Environmental Law" means any applicable federal,
state, local, or foreign law (including common law), statute, code, ordinance,
rule, regulation or other requirement relating to the environment or natural
resources,
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and includes, but is not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq.,
the Hazardous Material Transportation Act, 49 U.S.C. ss. 1801 et seq., the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., the
Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Clean Air Act, 33 U.S.C. ss.
2601 et seq., the Toxic Substance Control Act, 15 U.S.C. ss. 2601 et seq., the
Federal Insecticide Fungicide, and Rodenticide Act, 7 U.S.C. ss. 136 et seq.,
and the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq., as such laws have
been amended or supplemented, and the regulations promulgated pursuant thereto,
and all analogous state, local or foreign statutes, codes, regulations and
policies.
"Environmental Permit" means any permit, approval,
authorization, license, variance, registration, or permission required under any
applicable Environmental Law or order of or from any Environmental Authority.
"Hazardous Material" mean any substance, material or
waste which is regulated by any Environmental Authority or pursuant to any
Environmental Law including, without limitation, any material, substance or
waste which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, which includes, but is not limited to, petroleum, petroleum
products, asbestos, urea formaldehyde and polychlorinated biphenyls.
"Order" means any notice, notice of violation,
information request, order, consent, consent order, injunction, judgment,
decree, consent decree, ruling, writ, assessment or arbitration award.
"Release" means any release, spill, emission,
leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal,
discharge, emission, dispersal, leaching, or migration of any Hazardous Material
into any media, whether air, soil, water or groundwater.
"Remedial Action" means all actions, including,
without limitation, any capital expenditures, required by any applicable
Environmental Authority, Environmental Law or Environmental Permits, to (i)
clean up, remove, treat, or in any other way address any Hazardous Material;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material; (iii) perform pre-remedial studies and investigations
or post-remedial monitoring; or (iv) bring facilities on any property owned,
operated or leased by the Sellers and the facilities located and operations
conducted thereon into compliance with all Environmental Laws. Remedial Action
shall not be pursued to a standard which is
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unrelated to the operation of the Business as of the Closing Date or use of the
Real Property for industrial, manufacturing or warehousing purposes.
4.16 Permits and Licenses. Except as set forth in Section 4.15(c), the
Subsidiaries have all material permits, licenses, franchises and other
authorizations (collectively, the "Permits") necessary or required for the
conduct of the Business as currently conducted. All such Permits, licenses,
franchises and authorizations are listed on Schedule 4.16 and are valid and in
full force and effect and the Business is in compliance with the terms and
conditions of such Permits except to the extent that any such non-compliance,
individually or in the aggregate, will not or could not reasonably be expected
to have a Material Adverse Effect or to adversely affect the ability of any
Seller to perform its obligations under this Agreement, and no proceeding is
pending, or, to the knowledge of the Sellers, threatened, to revoke, suspend,
modify, cancel or limit any Permit in a manner that will or could reasonably be
expected to have a Material Adverse Effect or to adversely affect the ability of
any Seller to perform its obligations under this Agreement.
4.17 Insurance. Schedule 4.17 lists all insurance policies pursuant to
which the Subsidiaries are insured as of the date of this Agreement. Such
policies are in full force and effect and, to the knowledge of the Sellers,
sufficiently insure against risks and liabilities customary for the Business.
The Subsidiaries are not in material default with respect to any provision
contained in any such policy and have not failed to give any notice or present
any pending material claim under any such policy or binder in due and timely
fashion. The Subsidiaries have not received a notice of cancellation or
nonrenewal of any such policy. The Sellers have no knowledge of any material
inaccuracy in any application for such policies, any failure to pay premiums
when due or any similar state of facts which might form the basis for
termination or material adverse modification of any such insurance. The Sellers
have no knowledge of any act, event or occurrence that could give rise to a
claim under any director and officer insurance policy held on behalf of the
Subsidiaries.
4.18 Investment. Each Seller (a) understands that the shares of Parent
Common Stock issuable pursuant to this Agreement have not been, and except as
provided in the Registration Rights Agreement attached hereto as Exhibit E will
not be, registered under the Securities Act of 1933, as amended (the "Securities
Act"), or under any state securities laws, and are being offered and sold in
reliance upon federal and state exemptions for transactions not involving any
public offering; (b) is acquiring the shares of Parent Common Stock solely for
its own account for investment purposes, and not with a view to the distribution
thereof; (c) is a sophisticated investor with knowledge and experience in
business and
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financial matters; (d) has received certain information concerning the shares of
Parent Common Stock and has had the opportunity to obtain additional information
as desired in order to evaluate the merits and the risks inherent in holding the
shares of Parent Common Stock; (e) is able to bear the economic risk and lack of
liquidity inherent in holding the shares of Parent Common Stock; and (f) is an
"accredited investor" (as defined in Rule 501(a) of Regulation D under the
Securities Act).
4.19 Brokers. No broker, finder or investment banker (other than
Patricoff & Co. Capital Corp., a true and correct copy of whose engagement
agreement has been provided to Buyers) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of any of the Sellers,
and Sellers will pay all fees and expenses of Patricoff & Co. Capital Corp.
4.20 Year 2000 Compliance.
(a) Definitions.
(i) The term "Year 2000 Compliant" means, with
respect to a Person's Information Technology, that the Information Technology is
designed to be used prior to, during and after the calendar Year 2000 A.D., and
the Information Technology used during each such time period will accurately
receive, provide and process date/time data (including, but not limited to,
calculating, comparing and sequencing) from, into and between the 20th and 21st
centuries, including the years 1999 and 2000, and leap-year calculations and
will not malfunction, cease to function or provide invalid or incorrect results
as a result of date/time data to the extent other Information Technology, used
in combination with such Information Technology, properly exchanges date/time
data with it.
(ii) "Information Technology" with respect to a
Person means all computer software, computer firmware, computer hardware
(whether general or specific purpose), terminal devices and related
communications networks, and other similar or related items of automated,
computerized or software systems that are used by such Person in the conduct of
its business, whether leased, licensed or owned.
(b) The Sellers and the Subsidiaries have made
commercially reasonable efforts to evaluate whether the Information Technology
of each of the Subsidiaries is Year 2000 Compliant. The Sellers and the
Subsidiaries have evaluated whether critical Information Technology of the
Subsidiaries is Year 2000 Compliant. As of March 26, 1999, all critical
Information Technology of the
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Subsidiaries has either been replaced or brought to compliance, except as set
forth in Schedule 4.20. Major critical dates have been tested successfully on
the Domestic Subsidiary's Information Technology.
4.21 Title to Assets. Except as set forth on Schedule 4.21, each of the
Subsidiaries has good and valid title to all of the assets it owns or purports
to own and a valid leasehold interest in all of the assets it leases or purports
to lease, free and clear of any Liens (other than Permitted Liens with respect
to the Owned Property). The assets of the Subsidiaries (including the assets of
Ertl Canada), as of immediately following the Closing, will be adequate, in
quality and quantity, for the Buyers and the Subsidiaries to conduct the
Business as currently conducted. Each tangible asset of the Subsidiaries has
been maintained in accordance with normal industry practice and is in good
operating condition and repair (reasonable wear and tear excepted), and none of
such assets is in need of maintenance or repairs except for ordinary, routine
repairs that are not material in nature or cost.
4.22 Accounts Receivable. The accounts receivable of the Business as
reflected on the Preliminary Balance Sheet have arisen from bona fide
transactions in the ordinary course of business consistent with past practice.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER PARTIES.
The Buyer Parties jointly and severally represent and warrant to
Sellers as follows:
5.1 Buyers' Organization. Each Buyer Party is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the full corporate power and authority
to enter into and to perform this Agreement and the agreements and instruments
to be delivered by such Buyer Party at the Closing pursuant to Section 8.2 (the
"Buyer Ancillary Documents").
5.2 Authorization of Agreement. Each Buyer Party has all requisite
corporate power and authority to execute and deliver this Agreement and the
applicable Buyer Ancillary Documents and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Buyer Ancillary Documents, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action of the Buyer Parties and this Agreement constitutes,
and when executed, the Buyer Ancillary Documents to which such Buyer Party is
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a party will constitute, the legal, valid and binding obligation of each Buyer
Party, enforceable against it in accordance with their respective terms, except
to the extent enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3 Consents of Third Parties. The execution, delivery and performance
of this Agreement and the Buyer Ancillary Documents and the consummation of the
transactions contemplated hereby and thereby by each Buyer Party will not (i)
violate or conflict with the certificate of incorporation, by-laws or other
constitutional documents of the Buyer Parties; (ii) conflict with, or result in
the breach or termination of, or constitute a default under (whether with notice
or lapse of time or both), or accelerate or permit the acceleration of the
performance required by, or require the giving of any notice to or obtaining any
consent from any person pursuant to, any material indenture, mortgage, lien,
lease, agreement, commitment or other instrument or any material order, judgment
or decree, to which any Buyer Party is a party or by which it or its properties
are bound; or (iii) constitute a violation of any Law applicable to any Buyer
Party, other than violations, conflicts, breaches, terminations, accelerations
and defaults specified in the foregoing clauses (ii) and (iii) which could not
reasonably be expected to adversely affect any Buyer Party's ability to perform
its obligations under this Agreement. No consent, permit, approval or
authorization of any Governmental Authority is required on the part of Buyers in
connection with the execution, delivery and performance of this Agreement and
the Buyer Ancillary Documents, except for filings with the Federal Trade
Commission and the Department of Justice pursuant to the HSR Act.
5.4 Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or, to the best of Buyers' knowledge,
threatened, that question the validity of this Agreement or any action taken or
to be taken by the Buyer Parties in connection with this Agreement. There is no
litigation, proceeding or governmental investigation pending or, to the best of
Buyers' knowledge, threatened, or any order, injunction or decree outstanding,
against the Buyer Parties that, if adversely determined, would have a material
adverse effect upon the Buyer Parties' ability to perform its obligations under
this Agreement or the Buyer Ancillary Documents.
5.5 Financing. Buyers have all funds, or have delivered copies of
commitments from financial institutions as to the provision of funds, as
necessary to pay the Initial Price and related fees and expenses, and (assuming
the availability of any such funding from financial institutions) Buyers have
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the financial capacity to perform all of their other obligations under this
Agreement and the closing documents to be executed hereunder.
5.6 Investment. Buyers are purchasing the Shares for investment
purposes and not with a present view to resell or distribute the Shares, and
will not sell the Shares in violation of applicable federal, state or foreign
securities laws.
5.7 Capitalization of Parent and Its Subsidiaries.
(a) The authorized capital stock of Parent consists of 28,000,000
shares of Parent Common Stock, of which, as of April 9, 1999, 16,085,997 shares
were issued and outstanding and no shares were held in treasury. All of the
issued and outstanding shares of Parent Common Stock have been validly issued,
and are fully paid, nonassessable and free of preemptive rights. As of April 9,
1999, 1,771,459 shares of Parent Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
outstanding options or warrants to purchase shares of Parent Common Stock (the
"Parent Stock Options"). Since April 9, 1999, no shares of the Parent's capital
stock have been issued other than pursuant to the exercise of Parent Stock
Options. Except as set forth above in this Section 5.7, as of the date hereof,
there are outstanding (i) no shares of capital stock or other voting securities
of Parent, (ii) no securities of Parent or its subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of the Parent,
(iii) no options or other rights to acquire from Parent or its subsidiaries, and
no obligations of Parent or its subsidiaries to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Parent, and (iv) no equity equivalents, or interests in the
ownership or earnings, of the Parent or its subsidiaries or other similar rights
(including stock appreciation rights) (collectively, "Parent Securities"). There
are no outstanding obligations of the Parent or its subsidiaries to repurchase,
redeem or otherwise acquire any Parent Securities.
(b) All of the outstanding capital stock of the Parent's
subsidiaries is owned by the Parent, directly or indirectly, free and clear of
any Lien or any other limitation or restriction (including any restriction on
the right to vote or sell the same, except as may be provided as a matter of
law). There are no securities of the Parent or its subsidiaries convertible into
or exchangeable for, no options or other rights to acquire from the Parent or
its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly of, any capital stock or other ownership interests in, or
any other securities of, any subsidiary of the Parent. There are no outstanding
contractual obligations of the Parent or its subsidiaries to repurchase,
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redeem or otherwise acquire any outstanding shares of capital stock or other
ownership interests in any subsidiary of the Parent.
5.8 Due Authorization and Validity of Shares. The shares of Parent
Common Stock to be issued pursuant to this Agreement have been duly authorized
and, when delivered as contemplated hereby, will be validly issued, fully paid
and non-assessable and will not be subject to any preemptive or similar rights.
5.9 Listing of Parent Common Stock. The outstanding Parent Common Stock
is listed on NASDAQ, and the listing agreement with respect thereto is in full
force and effect. No action has been taken or, to the best of Buyers' knowledge,
threatened by NASDAQ with respect to the delisting or permanent suspension from
trading of the Parent Common Stock.
5.10 Private Offering. Assuming the representations of the Sellers are
true and complete, the issuance and delivery of the shares of Parent Common
Stock to Sellers pursuant to this Agreement is exempt from the registration and
prospectus delivery requirements of the Securities Act.
5.11 SEC Reports; Financial Statements.
(a) Parent has filed all required forms, reports and documents with
the Securities and Exchange Commission (the "SEC") since June 13, 1997 (the
"Parent SEC Reports"), each of which complied in all material respects with all
applicable requirements of the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), each as in effect on the dates such
forms, reports and documents were filed. None of the Parent SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Parent included in the
Parent SEC Reports complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto and fairly present, in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments).
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(b) The Buyers have heretofore made available to USI a complete
and correct copy of any material amendments or modifications, which have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by Parent with the SEC pursuant to the Exchange Act.
5.12 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any of the Buyers.
SECTION 6. FURTHER AGREEMENTS OF THE PARTIES.
6.1 Access to Information.
(a) Prior to the Closing, Buyers may make such investigation of the
business and properties of the Subsidiaries as Buyers may desire, and USI may
make such investigation of the Buyer as USI may desire, and upon reasonable
notice, each party shall give to the other party and their counsel, accountants
and other representatives reasonable access, during normal business hours
throughout the period prior to the Closing, to the property, books, commitments,
agreements, records, files and personnel of the Subsidiaries and Buyer
respectively, and, if pertinent, the Sellers, and each party shall furnish to
the other party during that period all copies of documents and information
concerning the Business and Buyer respectively, as such party may reasonably
request subject to applicable law.
(b) Each party shall hold, and shall cause its counsel, accountants
and other agents and representatives to hold, all such information and documents
in accordance with, and subject to the terms of, the Confidentiality Agreement.
6.2 Conduct of the Business Pending the Closing. Until the Closing,
except as otherwise set forth in Schedules 2.2, 4.7 and 6.2 or contemplated by
this Agreement, Sellers shall cause the Subsidiaries to conduct their respective
businesses and operations in their ordinary course consistent with past practice
and to comply with the provisions set forth below:
(a) none of USI, the Sellers or the Subsidiaries shall take any
actions, or fail to take any reasonable action within their control, which would
cause any of the representations or warranties in Article 4 to be or become
untrue in any material respect;
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(b) Sellers shall promptly notify Buyers of, and furnish to Buyers
any information that Buyers may reasonably request with respect to the
occurrence of, any event or the existence of any state of facts that would
result in any of Sellers' representations and warranties not being true if they
were made at any time prior to or as of the date of the Closing or materially
impair the ability of the Sellers to perform any of the transactions
contemplated hereby; and
(c) the Subsidiaries shall use commercially reasonable efforts to
maintain and preserve the Business intact, to retain their present Employees so
that they will be available to Buyers after the Closing and to maintain and
preserve their relationships with customers, licensors, suppliers and others so
that those relationships will be preserved after the Closing.
6.3 Employee Benefit Matters.
(a) For a period of six months following the Closing Date, Buyers
shall, or shall cause the Subsidiaries to, continue in effect the health and
medical plans referenced on Schedule 4.11 (the "Ertl Company Medical Plans") and
the severance plans and policies referenced on Schedule 4.11 (the "Subsidiary
Severance Plans") for employees employed by the Subsidiaries, and Buyers shall
not, and shall not allow the Subsidiaries to, amend or modify any Ertl Company
Medical Plan or Subsidiary Severance Plan to reduce the benefits provided
thereunder. Buyers or the Subsidiaries shall be solely responsible for any
liability arising as a result of (i) the termination of employment, including a
constructive termination, by Buyer or any of the Subsidiaries of any Employee
after the Closing and (ii) Buyer's or the Subsidiaries' failure to offer
employment to Employees of Ertl Canada. The Subsidiaries shall continue to make
continuation coverage under COBRA available to each individual who is a
qualified beneficiary whose qualifying event occurred prior to the Closing Date
or whose qualifying event occurred in connection with a covered employee whose
last employment was prior to the Closing Date.
(b) Transfer of Assets of the Pension Plans. After the Closing
Date, Sellers shall cause the assets related to the Ertl Company Retirement
Income Plan for Hourly Employees (the "Hourly Plan") held in a Master Trust (the
"Master Trust"), to be transferred to a successor trust established by Domestic
Buyer (the "New Pension Trust"). Such transfer shall occur as soon as reasonably
practicable following receipt by Domestic Buyer of an opinion of counsel to
Domestic Seller that the Master Trust meets the requirements of Sections 401(a)
and 501(a) of the Code and the receipt by Domestic Seller of notification from
Domestic Buyer that the New Pension Trust has been established. The amount of
assets transferred from the Master Trust to the New Pension Trust for the Hourly
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Plan shall be equal to the fair market value of the assets related to the Hourly
Plan on the date of transfer. Domestic Seller shall use its best efforts to
transfer amounts pursuant to this Section 6.3 in cash.
(c) Interim Administration of Pension Plans. Prior to the transfer
of the assets of the Hourly Plan to the New Pension Trust pursuant to Section
6.3(b), Domestic Seller shall continue the administration of the Hourly Plan.
For purposes of the preceding sentence, "administration of the Hourly Plan"
shall include all actions required on a routine basis for the proper maintenance
of the Hourly Plan including, but not limited to, transfer to the Master Trust
of any employer, previously funded by Buyers' funds, and the payment of all
benefits or other distributions to participants required by the provisions of
the Hourly Plan. As consideration for the Domestic Seller's obligation to
continue the administration of the Hourly Plan, Domestic Buyer agrees to
reimburse Domestic Seller, within 15 days of the delivery of proper invoices
identifying the charges associated with the Hourly Plan and services provided,
for reasonable pro rata out-of-pocket expenses incurred by Domestic Seller in
administration of the Hourly Plan including, but not limited to, the routine
fees charged by the Hourly Plan's trustee, actuary or other third-parties as set
forth on Schedule 6.3(c). If the transfer to the New Pension Trust has still not
occurred by September 30, 1999, Domestic Buyer shall continue to reimburse
Domestic Seller for the applicable portion of all fees incurred by the Domestic
Seller in the administration of the Hourly Plan and the Domestic Buyer shall in
addition pay the Domestic Seller $5,000 for each month after September 30, 1999,
pro rata by calendar days, unless the transfer has not occurred by September 30,
1999 through the failure of Domestic Seller to satisfy its responsibilities
under Section 6.3(b) of this Agreement.
(d) Sellers and Buyers agree to provide each other with such
records and information as they may reasonably request in order to carry out
their respective obligations under this Section 6.3. During the period following
the Closing and prior to the transfer of assets of the Hourly Plan to the New
Pension Trust pursuant to Section 6.3(b), Domestic Seller shall promptly forward
to Domestic Buyer any correspondence or written communications received from the
IRS or the Department of Labor with respect to any Transfer Plan.
6.4 Other Action. Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use all commercially reasonable efforts to
take or cause to be taken all action and to do or cause to be done all things
reasonably necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement.
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6.5 Notices. Each party shall promptly notify the other party in
writing of, and furnish to such party any information that such party may
reasonably request with respect to, the occurrence of any event or the existence
of any state of facts that would (a) result in the party's representations and
warranties not being true if they were made at any time prior to or as of the
Closing Date, or (b) impair the party's ability to perform its obligations under
this Agreement, provided, however, that the delivery of any notice pursuant to
this Section 6.5 shall not cure any breach of any representation or warranty
requiring disclosure of such matter prior to the date of this Agreement, shall
not have any effect for the purpose of determining the satisfaction of the
conditions set forth in Article 7 of this Agreement and shall not otherwise
limit or affect the remedies available to the party receiving such notice,
including, without limitation, the remedies under Article 9 of this Agreement.
6.6 HSR Act. As promptly as practicable after the execution of this
Agreement, each party shall, in cooperation with the other, file any reports or
notifications and pay any fees that may be required to be paid by it under
applicable law including filings under the HSR Act with the Federal Trade
Commission and the Antitrust Division of the Department of Justice, and shall
furnish to the other all such information in its possession as may be necessary
for the completion of the reports or notifications to be filed by the other.
Each party will use its commercially reasonable efforts to obtain any early
termination of the applicable waiting period, and shall promptly make any
further filings pursuant thereto that may be necessary, proper or advisable.
6.7 Expenses. Except as otherwise specifically provided in this
Agreement, Buyers and Sellers shall bear their own respective expenses incurred
in connection with this Agreement and in connection with all obligations
required to be performed by each of them under this Agreement.
6.8 Publicity. Buyers and Sellers shall consult with each other before
issuing any press release or otherwise making any public statements concerning
this Agreement or the transactions contemplated by this Agreement and, except as
may be required by applicable law or any listing agreement with or regulation or
rule of any stock exchange or The Nasdaq Stock Market, Inc. on which the
securities of the parent or other affiliated entity of either any Seller or any
Buyer are listed or traded, will not issue a press release or otherwise make
such public statement prior to such consultation. If Buyers or Sellers, or
parent or other affiliated entity of such parties, are so required to issue a
press release or otherwise make a public statement they shall inform and provide
draft copies to the other party hereto for review and comment prior to issuing
it.
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6.9 Transfer Taxes. Any sales taxes, real property transfer taxes,
stamp duty, stamp duty reserve tax, recording fees or any other taxes (other
than income taxes which shall be paid by each party) payable as a result of the
sale of the Shares or the assets of Ertl Canada or any other action contemplated
by this Agreement shall be paid (a) 50% by the Sellers, and (b) 50% by the
Buyers (up to a maximum of $30,000 payable by the Buyers, and the Sellers shall
pay any amount of Buyers' portion of such taxes in excess of $30,000), with the
first $20,000 of Buyers' portion to be paid by Sellers. If Buyers or Sellers
make any payment in excess of their respective apportionment of such taxes, such
party shall be promptly reimbursed by the other party.
6.10 Preservation of Records. Buyers agree, at their own expense that
they (a) shall preserve and keep the records of the Subsidiaries which were in
existence at the time of the Closing for a period of seven years from the
Closing, or for any longer periods as may be required by any government agency
or ongoing litigation, and (b) shall make such records available to the Sellers
as may be reasonably required. In the event Buyers wish to destroy such records
after the time specified above, it shall first give sixty (60) days' prior
written notice to the Sellers and Sellers shall have the right at their option
and expense, upon prior written notice given to the Buyers within that sixty
(60) day period, to take possession of the records within ninety (90) days after
the date of the notice to the Sellers.
6.11 Certain Post-Closing Assistance.
(a) Buyers shall, at no cost or expense to Sellers, prepare all
customary accounting, tax, employment, benefits-related and similar reports for
the Subsidiaries for periods up to the Closing Date which are reasonably
requested by Sellers, provided that such requests by Sellers shall not
unreasonably interfere with the operation of the business of the Subsidiaries or
the Buyers or take an unreasonable amount of time of the personnel of the
Subsidiaries or the Buyers, and the Buyers shall, at no cost or expense to
Sellers, prepare the final USI Financial Reporting and Tax packages
substantially in the format previously provided to Buyers. Sellers agree to
provide Buyers, at no cost or expense to Buyers, with information in the
possession and control of Sellers in respect of accounting, employment,
benefits-related and similar reports for the Buyers after the Closing Date to
the extent reasonably requested by Buyers.
(b) Buyers agree to cause the appropriate personnel of the
Subsidiaries to assist Sellers in the prosecution or defense of any claims and
litigation (including counterclaims and tax refund claims filed by the Sellers)
for which Sellers have indemnified Buyers hereunder or which Buyers have not
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assumed, provided that such assistance does not unreasonably disrupt the
business operations of the Subsidiaries. In addition to Seller's indemnification
obligations pursuant to Article 9, Sellers shall reimburse the Buyers for any
reasonable out-of-pocket travel and similar out-of-pocket expenses incurred by
Buyers' or the Subsidiaries' personnel in performing these functions.
6.12 Treasury Matters; Intercompany Debt.
(a) Sellers shall continue to cause the funding of the
Subsidiaries' checks, in accordance with past practices, which are presented for
payment through the day prior to the Closing Date. Sellers shall have no
obligation to fund checks which are presented for payment on and after the
Closing Date, provided that there is an accrual equal to such amounts on the
Final Balance Sheet therefor. Buyers shall assume all of the bank accounts of
the Business on the Closing Date and be prepared to fund the above-mentioned
checks which are presented for payment on and after the Closing Date. Amounts
received in the lockbox and depository accounts of the Business through the
close of business on the Closing Date shall be retained by Sellers
notwithstanding that, consistent with past practices, such collections may not
be credited to Sellers or their affiliates until after the Closing Date.
(b) Certain of the Subsidiaries are party to or financially
supported by certain letters of credit and guarantees, related to the Business,
in respect of which the Sellers or their affiliates are subject to continuing
obligations (the "Credit Support Documents"), each of which is set forth on
Schedule 6.12. The parties shall use their commercially reasonable efforts to
terminate the Credit Support Documents as soon as practicable after the Closing.
Buyers shall use their commercially reasonable efforts to cause the obligations
which are secured by the Credit Support Documents to be secured or discharged in
such a manner that the Sellers or their affiliates will not be required to make
any payments relating to the periods after the Closing under the Credit Support
Documents in relation thereto. Should any such payments be required of and paid
by Sellers, Buyers shall reimburse such Seller making payment upon demand. It is
understood that the Subsidiaries shall not have any right to incur any new
obligations secured or supported by the Credit Support Documents after the
Closing and Buyers shall cause the Subsidiaries not to incur any such
obligations.
(c) The Seller Parties shall cause any and all liabilities and
obligations owed by any of the Subsidiaries to any of the Seller Parties or any
of the Seller Parties' affiliates (including, without limitation, the Promissory
Note dated June 1, 1995 from the Domestic Subsidiary to U.S.I American Holdings,
Inc. in the principal amount of $62,992,000, and Promissory Note dated May 31,
1995
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from the Domestic Subsidiary to U.S.I American Holdings, Inc. in the principal
amount of $69,008,000) to be terminated or canceled prior to the Closing Date
without any adverse tax consequences or other costs to any of the Subsidiaries
on or after the Closing Date.
6.13 No Shopping. The Sellers will not, and will cause the Subsidiaries
and their respective affiliates, representatives and agents not to, directly or
indirectly, (a) solicit, initiate or encourage, discuss or respond to
(including, without limitation, by way of furnishing any nonpublic information
concerning the business, properties or assets of the Subsidiaries) any proposal
or offer from a Person other than the Buyers, or enter into any agreement with
or accept any offer from any person other than the Buyers, for a merger, tender
offer, exchange offer, reorganization, liquidation, dissolution, purchase or
sale of assets outside the ordinary course of business consistent with past
practice, sale of shares of capital stock or debt securities, any other business
combination or similar transactions involving the Subsidiaries or for the
acquisition of an equity interest in, or a substantial portion of the assets of,
the Subsidiaries, or any division, operating or principal business unit of the
Subsidiaries or (b) furnish any information with respect to, assist or
participate in or in any other manner facilitate any effort or attempt by any
person to do or seek to do any of the foregoing.
6.14 Consents. Each of the parties hereto will use its commercially
reasonable efforts to obtain consents of all Persons and Governmental
Authorities necessary to the consummation by such party of the transactions
contemplated by this Agreement (including, without limitation, commercially
reasonable efforts by the Seller Parties to obtain all consents and to make all
pre-closing notices (and cooperate with all post-closing notices) disclosed on
Schedule 4.3) and will use its commercially reasonable efforts to cooperate with
each of the other parties hereto in obtaining such consents. Notwithstanding the
foregoing, the Buyer Parties hereby waive and release any and all claims they
may have based on any failure by the Seller Parties to obtain, or to use
reasonable efforts to obtain, the consents set forth on Schedule 4.14(h).
6.15 Further Assurances. From time to time, without further
consideration, the Sellers and the Subsidiaries will, at their own expense,
execute and deliver, or, to the extent not within their discretion, shall use
their commercially reasonable efforts to cause to be executed and delivered,
such documents to the Buyers as the Buyers may reasonably request in order to
consummate the transactions contemplated hereby more effectively and to vest in
the Buyers good title to the Shares and the assets of Ertl Canada. From time to
time, without further consideration, the Buyers will, at their own expense,
execute and deliver, or, to the extent not within their discretion, shall use
their
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commercially reasonable efforts to cause to be delivered, such documents as the
Sellers may reasonably request in order to consummate the transactions
contemplated hereby more effectively. In case at any time after the Closing Date
any further action is necessary or desirable to carry out the purposes of this
Agreement, each party to this Agreement will take or cause its proper officers
and directors to take all such necessary action.
6.16 Resignations. Sellers shall cause the delivery of resignations
effective as of the Closing Date of all officers and directors of the
Subsidiaries.
SECTION 7. CONDITIONS OF CLOSING.
7.1 Conditions Precedent to Obligations of Buyers. The obligation of
Buyers to consummate the purchase under this Agreement is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by Buyers):
(a) all representations and warranties of Sellers contained in this
Agreement that are expressly qualified by a reference to materiality or Material
Adverse Effect shall be true and correct in all respects as so qualified and all
of the representations and warranties of Sellers that are not so qualified shall
be true and correct in all material respects, at and as of the date of this
Agreement and at and as of the time of the Closing with the same effect as
though made again at, and as of, that time (except that representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date);
(b) Sellers shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by Sellers prior to or at the Closing;
(c) Buyers shall have been furnished with the documents referred to
in Section 8.1;
(d) the waiting period under the HSR Act with respect to the
filings (including any extension thereof) made as contemplated under Section 6.6
shall have expired or been terminated;
(e) no provision of any applicable law or regulation shall prohibit
Sellers, and there shall not be in effect any injunction or restraining order
issued by a court of competent jurisdiction in any action or proceeding against
Sellers regarding the consummation of the sale and purchase of the Shares
pursuant to this Agreement;
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(f) Each of the consents identified on Schedule 7.1(f) must have
been obtained and must be in full force and effect and each of the notices
identified on Schedule 7.1(f) must have been delivered; and
(g) from the date of this Agreement through the Closing Date, there
shall not have occurred any Material Adverse Effect.
7.2 Conditions Precedent to Obligations of Sellers. The obligation of
Sellers to consummate the sale under this Agreement is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by Sellers):
(a) all representations and warranties of Buyers contained in this
Agreement that are expressly qualified by a reference to materiality or material
adverse effect shall be true and correct in all respects as so qualified and all
of the representations and warranties of Buyers that are not so qualified shall
be true and correct in all material respects at and as of the date of this
Agreement and at and as of the time of the Closing with the same effect as
though made again at, and as of, that time (except that representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date);
(b) Buyers shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by Buyers prior to or at the Closing;
(c) Sellers shall have been furnished with the documents referred
to in Section 8.2;
(d) the waiting period under the HSR Act with respect to the
filings (including any extension thereof) made as contemplated under Section 6.6
shall have expired or been terminated;
(e) no provision of any applicable law or regulation shall prohibit
Buyers, and there shall not be in effect any injunction or restraining order
issued by a court of competent jurisdiction in any action or proceeding against
Buyers regarding the consummation of the sale and purchase of the Shares
pursuant to this Agreement; and
(f) The shares of Parent Common Stock issuable to Sellers pursuant
to this Agreement shall have been duly approved for listing on
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the NASDAQ (subject to notice of issuance) and such approval shall be in full
force and effect at the time of Closing.
SECTION 8. DOCUMENTS TO BE DELIVERED AT THE CLOSING.
8.1 Documents to Be Delivered by Sellers. At the Closing, Sellers shall
deliver, or cause to be delivered, to Buyers the following:
(a) (i) the stock certificates evidencing the Shares and (ii) one
or more executed stock powers duly endorsed in blank or other instruments of
transfer, dated the Closing Date, transferring to Buyers all of each Seller's
right, title and interest in and to the respective Shares, provided, however,
that the Shares specified on Schedule 8.1(a) may be delivered in accordance with
the procedures described on Schedule 8.1(a);
(b) the Xxxx of Sale, substantially in the form of Exhibit A,
executed by the Canadian Seller, transferring to the North American Buyer all
the Canadian Seller's right, title and interest in and to the assets of Ertl
Canada together with possession of such assets;
(c) the Assumption Agreement, substantially in the form of Exhibit
B hereto (the "Assumption Agreement"), executed by Canadian Seller;
(d) a copy of resolutions of the board of directors of each Seller
authorizing the execution, delivery and performance of this Agreement by each
Seller and a certificate of the secretary or assistant secretary of each Seller,
dated the Closing Date, that such resolutions were duly adopted and are in full
force and effect;
(e) a certificate, dated the Closing Date, executed by an officer
of Sellers certifying to the fulfillment of the conditions specified in Sections
7.1(a), 7.1(b) and 7.1(g);
(f) the tax sharing and indemnification agreement in the form of
Exhibit D (the "Tax Sharing Agreement") executed by the Sellers;
(g) a registration rights agreement in the form of Exhibit E (the
"Registration Rights Agreement") executed by the Sellers;
(h) opinion of the general counsel of USI, dated as of the Closing
Date, in substantially the form of Exhibit F;
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(i) a cross-receipt acknowledging payment and receipt of the
Initial Price;
(j) a tax affidavit, substantially in the form of Exhibit C
attached hereto;
(k) An opinion, in form and substance reasonably acceptable to
Buyers, from legal counsel reasonably satisfactory to Buyers as to the good and
valid title of the Subsidiaries to the Owned Property, subject only to the
Permitted Liens; and
(l) such other documents as Buyers may reasonably request for the
purpose of (i) evidencing the satisfaction of any condition referred to in
Section 7.1, or (ii) otherwise facilitating the consummation or performance of
any of the transactions contemplated by this Agreement.
8.2 Documents to Be Delivered by Buyers. At the Closing, Buyers shall
deliver, or cause to be delivered, to Sellers the following:
(a) payment and evidence of the wire transfer referred to in
Section 2.3(a);
(b) a certificate or certificates representing the shares of Parent
Common Stock to be issued hereunder, registered in the name of a holder
designated by USI, such certificates to bear a restrictive legend in
substantially the form set forth on Exhibit G;
(c) the Assumption Agreement, substantially in the form of Exhibit
B hereto, executed by the North American Buyer, evidencing the assumption of the
liabilities of Ertl Canada by the North American Buyer;
(d) a copy of the resolutions of the board of directors of each
Buyer authorizing the execution, delivery and performance of this Agreement by
each Buyer, and a certificate of its secretary or assistant secretary, dated the
Closing Date, that such resolutions were duly adopted and are in full force and
effect;
(e) a certificate, dated the Closing Date executed by an officer of
Buyers certifying to the fulfillment of the conditions specified in Sections
7.2(a) and 7.2(b);
(f) the Tax Sharing Agreement, executed by the Buyers;
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(g) the Registration Rights Agreement, executed by Parent; and
(h) such other documents as Sellers may reasonably request for the
purpose of (i) evidencing the satisfaction of any condition referred to in
Section 7.2, or (ii) otherwise facilitating the consummation or performance of
any of the transactions contemplated by this Agreement.
SECTION 9. INDEMNIFICATION AND RELATED MATTERS.
9.1 Indemnification.
(a) Subject to the provisions of this Article 9, and excluding
liability for Taxes which has been resolved by agreement of the parties or by
the final determination of a court of competent jurisdiction, with all
opportunities for appeal having been exhausted, pursuant to the Tax Sharing
Agreement which specifically relates to the facts giving rise to a claim for
indemnification under this Section 9.1(a), the Seller Parties will jointly and
severally indemnify, defend and hold the Buyer Parties and their affiliates,
predecessors, successors and assigns and their respective officers, directors,
partners, consultants, employees and agents (collectively, the "Buyer
Indemnified Parties") harmless from and against all actions, suits, proceedings,
claims, obligations, deficiencies, demands, assessments, judgments, damages,
costs and expenses (including, without limitation, any diminution in value),
whether known or unknown, fixed or unfixed, xxxxxx or inchoate, liquidated or
unliquidated, secured or unsecured, subordinated or unsubordinated, matured or
unmatured, accrued, absolute, contingent or otherwise, including, without
limitation, reasonable attorneys' fees, interest, penalties and all reasonable
amounts paid in investigation, defense or settlement of any of the foregoing
arising or resulting from the following:
(i) a breach or inaccuracy of any representation or warranty on
the part of any of the Seller Parties under the terms of this Agreement or any
other document executed or delivered by any of the Seller Parties pursuant
hereto (excluding the representations and warranties in Section 4.15 which are
covered by Section 9.5);
(ii) non-fulfillment of or failure to perform or comply with
any agreement or covenant on the part of any of the Seller Parties under the
terms of this Agreement or any other document executed or delivered by any of
the Seller Parties pursuant hereto, including, without limitation, the Tax
Sharing Agreement;
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(iii) the Excluded Liabilities (as defined in the Assumption
Agreement);
(iv) any terminations of Employees or other events, conditions,
circumstances, facts, activities, practices, actions or omissions relating to
Employees which occur prior to the Closing to the extent not accrued on the
Final Balance Sheet, including, without limitation, any liability related to or
arising out of WARN (except to the extent that such liability relates to any
termination prior to the Closing which results in liability because it is
aggregated with terminations after the Closing) and any liability or obligation
pursuant to any Employee Benefit Plan or Benefit Arrangements, excluding,
however, any liabilities for COBRA coverage for which the Subsidiaries are
responsible pursuant to Section 6.3(a) and further excluding any liabilities for
which the Seller Parties shall indemnify the Buyer Indemnified Parties pursuant
to Section 9.1(a)(vii);
(v) any claim by any Person asserted under the bulk sales or
similar law applicable with respect to the transfer of the assets of Ertl Canada
to the Foreign Buyer pursuant hereto;
(vi) any claim by any Person for brokers' commissions or
finders' fees or similar payments based upon any agreement alleged to have been
made by, through or under any of the Seller Parties or the Subsidiaries (or any
Person acting on their behalf) in connection with this Agreement and the
transactions contemplated hereunder;
(vii) any claim made within four years following the Closing
Date relating to any general liability, liability associated with the ownership
or use of any vehicle, product liability for products shipped or manufactured
by, or any services provided by, any Subsidiary prior to the Closing Date, or
any self-insurance programs for vision or dental care for employees of any of
the Subsidiaries, if such claim relates to facts or circumstances which occurred
prior to the Closing;
(viii) any claim made within two years following the Closing
Date based upon any warranty or guaranty, express or implied, written or oral,
relating to any product shipped or manufactured by, or any services provided by,
any Subsidiary prior to the Closing Date;
(ix) any claim raised by or relating to Alpha International
Inc. ("Alpha") with respect to any of the Subsidiaries or the Business for
matters which occurred prior to the Closing Date, including, without limitation,
claims by
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Alpha for breach of contract, misappropriation of trade secrets or
other torts, and any failure by the Subsidiaries to collect pre-closing accounts
receivable from Alpha in an aggregate amount not less than the amount reflected
on the Final Balance Sheet with respect to such accounts receivable, provided,
however, that the Seller Parties shall only be required to pay the first $3
million of the losses, damages, costs and expenses of the Buyer Indemnified
Parties pursuant to this clause, subject to the Basket (as defined in Section
9.2(c)), plus 50% of the losses, damages, costs and expenses of the Buyer
Indemnified Parties pursuant to this clause in excess of $3 million up to $4
million;
(x) any and all liabilities or obligations relating to customs
or import taxes or duties relating to any events, conditions, circumstances,
facts, activities, practices, actions or omissions which occur on or prior to
the Closing Date (excluding any liability for Taxes which has been resolved by
agreement of the parties or by the final determination of a court of competent
jurisdiction, with all opportunities for appeal having been exhausted, pursuant
to the Tax Sharing Agreement which specifically relates to the facts giving rise
to a claim for indemnification under this Section 9.1(a)(x));
(xi) any and all liabilities or obligations relating to Taxes
of any of the Subsidiaries attributable to any periods on or before the Closing
Date, excluding such liabilities solely to the extent they are reflected on the
Final Balance Sheet and excluding any liability for Taxes which has been
resolved by agreement of the parties or by the final determination of a court of
competent jurisdiction, with all opportunities for appeal having been exhausted,
pursuant to the Tax Sharing Agreement, or Section 9.1(xii) and Schedule 9.6,
which specifically relates to the facts giving rise to a claim for
indemnification under this Section 9.1(a)(xi)); and
(xii) any and all Foreign Subsidiary Tax Liabilities
attributable to any periods commencing on or before the Closing Date, except
that this indemnity shall not cover any Foreign Subsidiary Tax Liability (as
defined below):
(A) to the extent that, in relation only to a period
which has not ended on or before the Closing Date, it is reduced by the Closing
Apportionment (as defined below);
(B) to the extent that it arises or is increased as a
result only of any increase in rates of Tax or any change in law or practice or
any withdrawal of any extra-statutory concession by a tax authority or any
change in
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accountancy practice or principles, being an increase, withdrawal or change
made, in any such case, after the Closing Date with retrospective effect;
(C) to the extent that it would not have arisen but for a
voluntary transaction, action or omission carried out or effected by any of the
Foreign Subsidiaries at any time after the Closing Date, other than any such
transaction, action or omission: (x) carried out or effected under a legally
binding commitment created on or before the Closing Date; (y) carried out or
effected in the ordinary course of the trade carried on by the relevant Foreign
Subsidiary as at the Closing Date; or (z) consisting of any of the Foreign
Subsidiaries ceasing, or being deemed to cease, to be a member of any group of
companies or associated with any other company for the purposes of any Tax;
(D) to the extent that it arises by reason of any
voluntary disclaimer by any of the Foreign Subsidiaries after the Closing Date
of the whole or part of any allowance to which any of them is entitled or by
reason of the revocation by any of the Foreign Subsidiaries after the Closing
Date of any claim for relief made by any of them prior to the Closing Date;
(E) to the extent that it arises as a result of any
changes after the Closing Date in the bases, methods or policies of accounting
of the Foreign Buyer and/or any of the Foreign Subsidiaries provided that the
bases, methods or policies of accounting previously adopted by the Foreign
Subsidiaries are in accordance with generally accepted accounting practice; or
(F) to the extent that it is attributable to any of the
Foreign Subsidiaries ceasing to be entitled after the Closing Date to any rate
of tax which applies to different companies dependent on their size or the level
of their profits; or
(G) to the extent that it would not have arisen but for a
cessation of, or any change in the nature or conduct of, any trade carried on by
any of the Foreign Subsidiaries, being a cessation or change occurring on or
after the Closing Date.
For the purposes of this Section 9.1(a)(xii):
"Closing Apportionment" shall mean (y) in the case of any
Foreign Subsidiary Tax Liability relating to real, personal and intangible
property, such amount of that Foreign Subsidiary Tax Liability multiplied by a
fraction, the numerator of which is the number of days in the period in question
after the Closing Date and the denominator is the number of days in that period;
and (z) in
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the case of any Foreign Subsidiary Tax Liability (other than a Foreign
Subsidiary Tax Liability relating to real, personal or intangible property),
such amount of that Foreign Subsidiary Tax Liability as is attributable to the
portion of the period in question which falls after the Closing Date, computed
as if, for these purposes only, the period in question had ended on the Closing
Date (such amount to be determined by reference to any internal records of the
relevant Foreign Subsidiary and to the extent that such determination is not
possible by multiplying the Foreign Subsidiary Tax Liability by the same
fraction as in sub-paragraph (y) above.); and
"Foreign Subsidiary Tax Liability" shall mean both a
liability of a Foreign Subsidiary to make actual payments of Tax (or amounts in
respect of Tax), regardless of whether any such liability shall have been
discharged in whole or in part on or before the Closing Date save to the extent
such discharge is taken into account in the Final Balance Sheet or, if no such
discharge is there taken into account, in the last audited accounts of the
relevant Foreign Subsidiary and also (y) the loss of a right to repayment of Tax
which has been treated as an asset of the relevant Foreign Subsidiary in
preparing the Final Balance Sheet (or, if not so treated in the Final Balance
Sheet, in the last audited accounts of the relevant Foreign Subsidiary) or the
setting off of any such right to repayment of Tax against any actual Foreign
Subsidiary Tax Liability in respect of which the Buyer Parties would, but for
that setting off, have been able to make a claim against the Seller Parties; and
(z) the setting off against income, profits or gains which were earned, accrued
or received on or before the Closing Date or in respect of a period ended on or
before the Closing Date or against any Tax otherwise chargeable in respect of an
event occurring (or deemed to occur) on or before the Closing Date or in respect
of a period ended on or before the Closing Date of any relief which arises as a
consequence of or by reference to an event occurring (or deemed to occur) after
the Closing Date or in respect of a period commencing after the Closing Date and
not as a consequence of or by reference to any event occurring (or deemed to
occur) on or before the Closing Date or in respect of a period ended on or
before the Closing Date in circumstances where, but for such setting off, the
relevant Foreign Subsidiary would have had an actual Tax Liability in respect of
which the Buyer Parties would have been able to make a claim against the Seller
Parties. In any case falling within either of sub-paragraphs (y) or (z) of this
paragraph, the amount that is to be treated for the purposes of this Agreement
as a Foreign Subsidiary Tax Liability (the "Deemed Tax Liability") shall be
determined as follows:
(1) in a case which falls within sub-paragraph
(y) of this paragraph, the Deemed Tax Liability shall be the amount of the
repayment that would have been obtained but for the loss or setting off
mentioned in that sub-paragraph;
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(2) in a case which falls within sub-paragraph
(z) of this paragraph and where the relief that was the subject of the setting
off mentioned in that sub-paragraph was a deduction from or offset against Tax,
the Deemed Tax Liability shall be the amount of that relief; and
(3) in a case which falls within subparagraph
(z) of this paragraph and where the relief that was the subject of the setting
off mentioned in that sub-paragraph was a deduction from or offset against
income, profits or gains, the Deemed Tax Liability shall be the amount of Tax
which has been saved in consequence of the setting off.
(b) Subject to the provisions of this Article 9, excluding any
liability for Taxes which has been resolved by agreement of the parties or by
the final determination of a court of competent jurisdiction, with all
opportunities for appeal having been exhausted, pursuant to the Tax Sharing
Agreement which specifically relates to the facts giving rise to a claim for
indemnification under this Section 9.1(b), the Buyer Parties will jointly and
severally indemnify, defend and hold the Seller Parties and their affiliates,
predecessors, successors and assigns and their respective officers, directors,
partners, consultants, employees and agents (collectively, the "Seller
Indemnified Parties") harmless from and against all actions, suits, proceedings,
claims, obligations, deficiencies, demands, assessments, judgments, damages,
costs and expenses, whether known or unknown, fixed or unfixed, xxxxxx or
inchoate, liquidated or unliquidated, secured or unsecured, subordinated or
unsubordinated, matured or unmatured, accrued, absolute, contingent or
otherwise, including reasonable attorneys' fees arising or resulting from the
following:
(i) a breach or inaccuracy of any representation or warranty on
the part of Buyers under the terms of this Agreement or any other document
executed or delivered by Buyers pursuant hereto;
(ii) non-fulfillment of or failure to perform or comply with
any agreement or covenant on the part of Buyers under the terms of this
Agreement or any other document executed by Buyers pursuant hereto, including,
without limitation, the Tax Sharing Agreement;
(iii) the Assumed Liabilities (as defined in the Assumption
Agreement);
(iv) any claim by any Person for brokers' commissions or
finders' fees or similar payments based upon any agreement alleged to have been
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made by, through or under any of the Buyers (or any Person acting on their
behalf) in connection with this Agreement and the transactions contemplated
hereunder;
(v) WARN or similar state or foreign Laws as a result of the
termination of employment, including a constructive termination, by Buyer or the
Subsidiaries of any Employee which occurs after the Closing, including with
respect to any termination prior to the Closing which results in liability under
such Laws because it is aggregated with terminations after the Closing;
(vi) any liability resulting from post-Closing changes in the
Subsidiary Severance Plans or the Ertl Company Medical Plans;
(vii) any liability or increased liability to Tax of the Seller
Parties or any of their subsidiaries which arises as a result of or by reference
to any reduction or disallowance of group relief that would otherwise have been
available to the Seller Parties or the relevant subsidiary or subsidiaries where
and to the extent that such reduction or disallowance occurs as a result of or
by reference to:
(A) any total or partial withdrawal effected by any of
the Foreign Subsidiaries after the Closing Date of any surrender of group relief
that was submitted by any of the Foreign Subsidiaries to the appropriate tax
authority on or before the Closing Date in respect of any accounting period
ended on or before the Closing Date;
(B) any total or partial disclaimer made by any of the
Foreign Subsidiaries after the Closing Date of any capital allowances available
to any of the Foreign Subsidiaries in respect of any accounting period ended on
or before the Closing Date except where any such withdrawal or disclaimer is
made at the express written request of the Seller Parties;
(viii) any liability or increased liability to Tax of the
Seller Parties or any of their subsidiaries which arises as a consequence of or
by reference to any of the following occurring or being deemed to occur at any
time after the Closing Date:
(A) the disposal by any Relevant Company of any asset or
of any interest in or right over any asset;
(B) the making by any Relevant Company of any such
payment or deemed payment as constitutes a payment made otherwise than for bona
fide commercial reasons or forming part of a scheme or arrangement the
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main purpose of which or one of the main purposes of which is the avoidance of
Tax;
(C) any Relevant Company ceasing to be resident in the
territory in which it is resident on the Closing Date for the purposes of any
Tax; or
(D) the effecting by any Relevant Company of any such
payment or transfer of assets as constitutes the receipt by another person of an
abnormal amount by way of dividend; or
(E) any Relevant Company failing to pay the whole of the
Tax charged by any tax assessment made in respect of that Relevant Company
within six months of the date of that tax assessment where (and to the extent
that) the liability for that Tax arises in circumstances such that the Buyer
Parties would not have been entitled to make a claim against the Seller Parties
under Section 9.1 (a) (xii) of this Agreement in respect of that Tax had it been
paid by the Relevant Company.
For the purposes of this sub-clause, the term "Relevant
Company" shall mean any of the Foreign Subsidiaries; and
(ix) any reasonable out-of-pocket legal and accounting costs
and expenses reasonably and properly incurred by the Seller Parties or any of
their subsidiaries in connection with any such liability or increased liability
to Tax (or claim therefor) or in taking any action under Section 9.1(b)(vii) or
(viii).
9.2 Determination of Damages and Related Matters.
(a) In calculating any amounts payable to the Buyer Indemnified
Parties by the Seller Parties pursuant to Sections 9.1(a) or 9.5, the Seller
Parties shall receive credit for (i) any reduction in actual tax liability of
the Buyer Indemnified Parties as a result of the facts giving rise to the claim
for indemnification (provided that no such credit shall be made prior to filing
of the tax return with respect to the taxable period in which the Buyer
Indemnified Parties actually receive the benefit of such reduced tax liability
and, if such tax benefit will accrue in periods after the indemnity payment is
due, the Seller Parties shall be required to pay the full amount due subject to
Buyers' obligation to repay to amount of the credit when the tax benefit is
actually realized pursuant to the last sentence of this Section 9.2(a)), (ii)
any insurance, litigation or other monetary recoveries actually received by the
Buyer Indemnified Parties as a result of the facts giving rise to the claim for
indemnification, (iii) the amount of any reserves
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or accruals on the Final Balance Sheet which specifically relate to the facts
giving rise to the claim for indemnification and (iv) any amounts paid to Buyers
pursuant to the Tax Sharing Agreement which specifically relate to the facts
giving rise to the claim for indemnification. To the extent a credit pursuant to
this Section 9.2(a) arises after the receipt by the Buyer Indemnified Parties of
the related indemnification amounts paid by the Seller Parties, Buyers shall
promptly pay to Sellers, or offset against any other outstanding claims of any
of the Buyer Indemnified Parties, the amount of such credit upon receipt by the
Buyers of such amount.
(b) In calculating any amounts payable to the Seller Indemnified
Parties by the Buyer Parties pursuant to Section 9.1(b), the Buyer Parties shall
receive credit for (i) any reduction in actual tax liability of the Seller
Indemnified Parties as a result of the facts giving rise to the claim for
indemnification (provided that no such credit shall be made prior to the taxable
period in which the Seller Indemnified Parties actually receive the benefit of
such reduced tax liability and, if such tax benefit will accrue in periods after
the indemnity payment is due, the Buyer Parties shall be required to pay the
full amount due subject to Sellers' obligation to repay to amount of the credit
when the tax benefit is actually realized pursuant to the last sentence of this
Section 9.2(b)), and (ii) any insurance, litigation or other monetary recoveries
actually received by the Seller Indemnified Parties as a result of the facts
giving rise to the claim for indemnification and (iii) any amounts paid to
Sellers pursuant to the Tax Sharing Agreement which specifically relate to the
facts giving rise to the claim for indemnification. To the extent a credit
pursuant to this Section 9.2(b) arises after the receipt by the Seller
Indemnified Parties of the related indemnification amounts paid by the Buyer
Parties, Sellers shall promptly pay to Buyers, or offset against any other
outstanding claims of any of the Seller Indemnified Parties, the amount of such
credit upon receipt by the Sellers of such amount.
(c) The Seller Parties or the Buyer Parties, as the case may be,
shall have no liability under Sections 9.1(a)(i) and 9.1(b)(i) for breaches of
representations and warranties under Articles 4 and 5 of this Agreement,
respectively, and the Seller Parties shall have no liability under Section
9.1(a)(ix) or for the payment of defense costs of the Buyer Parties pursuant to
Section 9.4(f) unless the aggregate amount of the damages and losses to the
Seller Parties or the Buyer Parties, as the case may be, from all claims finally
determined to arise under all such provisions with respect to such party exceed
an amount equal to one percent (1%) of the Purchase Price (the "Basket") and, in
such event, the Seller Parties and the Buyer Parties, as the case may be, shall
be required to pay only the amount by which such aggregate amount of claims
exceeds the amount of the Basket in the aggregate; provided, further, that in no
event shall the amount of the
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Seller Parties' or the Buyer Parties' aggregate liability under Sections
9.1(a)(i) and 9.1(b)(i), respectively, exceed the Purchase Price (the "Cap"). No
claim under Section 9.1(a)(i) or 9.1(b)(i) based upon fraud or the knowing
breach of a representation or warranty or the breach of any representation or
warranty contained in Sections 4.1, 4.2, 4.5, 4.8, 4.18, 5.1, 5.2, 5.6 or 5.8
will be subject to the Basket or the Cap, provided, however, that any damages or
losses with respect to such a claim will not be counted toward the Basket and
the Cap.
(d) The parties agree that the provisions set forth in this Article
9 can be specifically enforced in a court of competent jurisdiction. Apart from
such rights to specific enforcement, the indemnification provided for in this
Article 9 shall, from and after the Closing, be the sole remedy for any claim
for a breach of any representation or warranty contained in Article 4 or Article
5.
(e) Any qualifications in the representations, warranties and
covenants with respect to Material Adverse Effect, materiality or similar terms
will not have any effect with respect to the calculation of the amount of any
damages or losses or the application of the Cap or the Basket pursuant to this
Article 9. However, such qualifications will have an effect in determining
whether a breach has occurred.
(f) The right to indemnification and the other remedies of the
parties pursuant to this Article 9 will not be affected by any investigation
conducted, or any knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy or performance of or
compliance with any representation, warranty, covenant or obligation pursuant to
this Agreement. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification or other
remedies pursuant to this Article 9 based on such representations, warranties,
covenants or obligations.
(g) The Seller Parties or the Buyer Parties, as the case may be,
shall have no liability for consequential damages, including, without
limitation, damages relating to business interruption, pursuant to Section 9.1
or 9.5, provided, however, any losses, costs, expenses or damages arising out of
or relating to a claim which is asserted by a third party against the Seller
Indemnified Parties or the Buyer Indemnified Parties, as the case may be, shall
not be deemed to be consequential damages for purposes of this Section 9.2(g).
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9.3 Time and Manner of Certain Claims. Except as otherwise expressly
provided herein, the Seller Parties and the Buyer Parties shall be liable for
damages asserted under Section 9.1(a)(i) or Section 9.1(b)(i), respectively,
only to the extent that notice of a claim therefor complying with the
requirements of this Section 9.3 is asserted by the other in writing and
delivered prior to the expiration of a period ending 18 months from the Closing
Date. Notwithstanding the foregoing, (i) the representations and warranties set
forth in Sections 4.1, 4.2, 4.5, 4.18, 5.1, 5.2, 5.6 and 5.8 and claims based
upon fraud or the knowing breach of a representation or warranty shall survive
indefinitely, and (ii) claims for indemnification for the representations and
warranties contained in Section 4.8 or Section 4.11 may be brought at any time
until the underlying Tax, ERISA or employee benefit obligation is barred by the
applicable period of limitation under federal, state, local or foreign laws
relating thereto (as such may be extended by waiver). Any notice of a claim (a
"Claim Notice") shall be in writing and shall state, to the extent reasonably
practicable at the time the notice of claim is delivered, the facts giving rise
to the alleged basis for the claim and the amount of liability asserted against
the other party by reason of the claim.
9.4 Procedure for Indemnification. All claims for indemnification
pursuant to Section 9.1 shall be asserted and resolved as follows:
(a) In the event that any claim or demand, or other circumstance or
state of facts which could give rise to any claim or demand, for which the Buyer
Parties or the Seller Parties, as applicable (an "Indemnifying Party") may be
liable to any of the Seller Indemnified Parties or the Buyer Indemnified
Parties, as applicable (an "Indemnified Party") is asserted against or sought to
be collected by a third party (an "Asserted Liability"), the Indemnified Party
shall as soon as reasonably possible deliver a Claim Notice to the Indemnifying
Party, which Claim Notice shall specify the nature of such Asserted Liability,
except that no delay on the part of the Indemnified Party in giving any such
Claim Notice shall relieve the Indemnifying Party of any indemnification
obligation hereunder, except to the extent that the Indemnifying Party
demonstrates that it is materially prejudiced in its ability to defend the suit,
action, claim, proceeding or investigation (a "Proceeding") for which such
indemnification is sought by reason of such delay.
(b) Upon receipt of a Claim Notice the Indemnifying Party shall be
entitled at its option to assume the defense of such Proceeding with respect to
which it is called upon to indemnify an Indemnified Party pursuant to this
Article 9 if the Indemnifying Party (i) notifies the Indemnified Party within 30
days (or less if the nature of the Asserted Liability requires) of its receipt
of the Claim Notice (the "Notice Period") that the Indemnifying Party desires,
at the
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Indemnifying Party's sole cost and expense and by counsel of its own choosing,
to defend against such Asserted Liability, and (ii) the Indemnifying Party
provides reasonable assurance to the Indemnified Party of its financial capacity
to defend such Proceeding and provide Indemnification with respect to such
Proceeding. If, (i) under applicable standards of professional conduct a
conflict on any significant issue between the Indemnifying Party and any
Indemnified Party exists in respect of such Asserted Liability which requires
the employment of separate counsel for the Indemnified Party, or (ii) the
Indemnifying Party shall not have promptly retained counsel reasonably
satisfactory to the Indemnified Party to take charge of the defense of such
Proceeding and the Indemnified Party has employed counsel to take charge of such
defense, then the Indemnifying Party shall reimburse the Indemnified Party for
the reasonable fees and expenses of such counsel (who shall be reasonably
acceptable to the Indemnifying Party) and the Indemnifying Party shall not have
the right to direct the defense of any Proceeding on behalf of the Indemnified
Party. The Indemnifying Party shall not consent to any compromise or settlement
without the prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld or delayed) unless such settlement (i) includes a
complete release of the Indemnified Party and (ii) does not require the
Indemnified Party to make any payment or forego or take any action and does not
include any finding or admission of any violation by any Indemnified Person of
Law or other legal requirements. If the Indemnifying Party undertakes to defend
against such Asserted Liability, the Indemnified Party shall cooperate to the
extent reasonably requested with the Indemnifying Party and its counsel in the
investigation, defense and settlement thereof, but the Indemnifying Party shall
control the investigation, defense and settlement thereof. If the Indemnified
Party desires to participate in any such defense it may do so at its sole cost
and expense, except as set forth herein.
(c) If the Indemnifying Party elects not to defend against such
Asserted Liability, then the Indemnifying Party has the right to participate in
any such defense at its sole cost and expense, but the Indemnified Party shall
control the investigation, defense and settlement thereof at the reasonable cost
and expense of the Indemnifying Party. The Indemnifying Party shall not be
liable for any settlement of any Asserted Liability effected without its prior
written consent (which consent shall not be unreasonably withheld or delayed).
(d) Notwithstanding the foregoing, if any Indemnified Party
determines in good faith that there is a reasonable probability that an action
for which it seeks indemnity may materially and adversely affect it or its
subsidiaries or affiliates, such Indemnified Party may, by written notice to the
Indemnifying Party, assume the exclusive right to defend and, with the consent
of the Indemnifying Party, may compromise or settle such action. If an
Indemnified
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Party has a claim against the Indemnifying Party by reason of the provisions of
this Article 9, other than as provided in Section 9.4(b), such payment shall be
made within fifteen (15) days after such claim is finally determined by mutual
agreement of the parties hereto or pursuant to the final judgment of a court of
competent jurisdiction.
(e) In the event that an Indemnified Party has a claim against an
Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall send a Claim Notice with respect to such claim to the
Indemnifying Party. The Indemnifying Party must within 45 days from the date
such Claim Notice is delivered notify the Indemnified Party in writing of any
good faith objections it has to the Indemnified Party's Claim Notice or claims
for indemnification, setting forth in reasonable detail each of the Indemnifying
Party's objections thereto. If the Indemnifying Party does not deliver such
written notice of objection within such 45-day period, the Indemnifying Party
shall pay such amounts to the Indemnified Party upon the date such 45-day period
expires. If the Indemnifying Party does deliver such written notice of objection
within such 45-day period, the Indemnifying Party and the Indemnified Party
shall attempt in good faith to resolve any such dispute within 60 days of the
delivery by the Indemnifying Party of such written notice of objection.
(f) Notwithstanding the foregoing, Buyers shall control the defense
of any Proceeding for any Asserted Liability relating to Section 9.1(a)(ix), and
the Seller Parties shall pay the reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees) of Buyers' defense of such
Proceeding, subject to the Basket as provided in Section 9.2(c). The Buyers will
consult with the Seller Parties in the defense of any such Proceeding.
9.5 Environmental Indemnification.
(a) Subject to the requirements of Section(s) 9.5 (b) through (f)
herein, the Seller Parties shall be responsible for and shall jointly and
severally indemnify, reimburse, defend and hold the Buyer Indemnified Parties
harmless from and against any and all notices, demands, information requests,
claims, orders, consent orders, injunctions, judgments, decrees, rulings, writs,
assessments, awards, and any and all other legal or administrative proceedings,
asserted, filed, brought or alleged by any person or entity, and any and all
losses, fees, expenses, costs (including, without limitation, legal, accounting,
consulting, contracting, engineering and similar expenses, cleanup costs,
remediation, removal or other response costs at any location, whether on-site or
off-site, and costs to cause any Subsidiary or the Business, or any of their
assets or properties, to come
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into compliance with Environmental Laws or incurred by reason or in the course
of any remodeling, renovation, expansion, repair or rehabilitation of the
Business or the Real Property), investigation costs, amounts paid in settlement,
damages, fines, interest, penalties, judgments or liabilities (including,
without limitation, any actual or punitive damages, any damages of third parties
for personal injury or property damage or to natural resources, and any
diminution in value of any property), arising out of or relating in any way to:
(i) any breach of any representations or warranties of the
Seller Parties set forth in Section 4.15;
(ii) any actual violation, or any violation alleged by a third
party, by any of the Subsidiaries, any of their respective predecessors or the
Business, of, or failure by any of the Subsidiaries, any of their respective
predecessors or the Business, to comply with, any Environmental Law or
Environmental Permits, as of or prior to the Closing Date and any continuation
of such matter from and after the Closing Date other than fines or penalties
imposed by an Environmental Authority and incurred by the Buyer Indemnified
Parties as a result of actions taken by the Buyer Indemnified Parties in the
operation of the Business after Closing;
(iii) any actual transportation, treatment, deposit, Release,
threatened release, handling, storage, recycling, or use, or any transportation,
treatment, deposit, Release, threatened release, handling, storage, recycling,
or use alleged by any third party, by any of the Subsidiaries, any of their
respective predecessors or the Business, of any Hazardous Materials off the
Owned Property or Leased Property or any other property currently or formerly
owned or leased by any of the Subsidiaries or any of their predecessors as of or
prior to the Closing Date and any continuation of such matter from and after the
Closing Date other than fines or penalties imposed by an Environmental Authority
and incurred by the Buyer Indemnified Parties as a result of actions taken by
the Buyer Indemnified Parties in the operation of the Business after Closing;
(iv) the presence, handling, storage, treatment, or Release of
any Hazardous Materials on, at, upon, in, beneath, or migrating to or from the
Owned Property or Leased Property or any other property currently or formerly
owned or leased by any of the Subsidiaries or any of their predecessors as of or
prior to the Closing Date and any continuation of such matter from and after the
Closing Date other than fines or penalties imposed by an Environmental Authority
and incurred by the Buyer Indemnified Parties as a result of actions taken by
the Buyer Indemnified Parties in the operation of the Business after Closing;
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(v) the exposure or alleged exposure of any person or property
at any time to any Hazardous Materials existing at, in, upon, or beneath or
transported, Released or emanating to or from the Owned Property or Leased
Property or any other property currently or formerly owned or leased by any of
the Subsidiaries or any of their predecessors as of or prior to the Closing Date
and any continuation of such matter from and after the Closing Date other than
fines or penalties imposed by an Environmental Authority and incurred by the
Buyer Indemnified Parties as a result of actions taken by the Buyer Indemnified
Parties in the operation of the Business after Closing;
(vi) those matters listed in Schedule 9.5(a)(vi) hereto,
however the Environmental Claim Notice requirement set forth in Section 9.5(b)
hereto shall not apply, and the Seller Parties hereby agree to fully indemnify
and undertake the defense of these matters; or
(vii) the implementation of the Phase II investigation of the
Domestic Subsidiary's Dyersville Plants 1 & 2 ("Phase II Study"), a true copy of
the scope of work for which is attached hereto in Schedule 9.5(a)(vii), and any
and all Environmental Claims, Environmental Costs or Liabilities, or Remedial
Action, arising out of or relating to any Hazardous Materials identified through
implementation of the Phase II Study, and the Seller Parties shall in a
commercially reasonable and diligent manner complete the Phase II Study in
accordance with such scope of work and perform any and all the Remedial Actions
resulting therefrom.
(b) To the extent the Buyer Indemnified Parties (including those
described in Section 9.5(e) hereof) seek indemnification under Section 9.5(a),
the Buyer Indemnified Parties shall first be obligated to provide the Seller
Parties with prompt written notice ("Environmental Claim Notice") of each such
claim for which an indemnification is claimed hereunder and shall provide the
Seller Parties with copies of any documents transmitted to or from any
Environmental Authorities regarding each such Claim, except that no delay on the
part of the Buyer Indemnified Parties in giving any such Environmental Claim
Notice shall relieve the Seller Parties of any indemnification obligation
hereunder, except to the extent that the Seller Parties demonstrate that they
are materially prejudiced in their ability to defend the proceeding for which
such indemnification is sought by reason of such delay. The foregoing shall not
be construed as authorizing the Buyer Indemnified Parties to proceed with the
response to or management of any matter, including, but not limited to, any
Environmental Claim, for which indemnification will or may be sought under
Section 9.5(a) hereof, it being the intent of the parties hereto that the Seller
Parties, pursuant to the following procedure, shall be given the first
opportunity to manage each such Environmental
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Claim. If, within 30 days of any Environmental Claim Notice, the Seller Parties
fail to respond, deny the Claim or advise of their choice not to undertake
management of the Claim, the Buyer Indemnified Parties may do so, as long as the
Remedial Actions and settlements undertaken by the Buyer are acceptable to
applicable Environmental Authorities and are in conformance with applicable
Environmental Law. The Sellers shall be provided with true copies of invoices or
other charges associated with each such Claim to the extent the Seller Parties
refuse or decline management of the subject Claim. If the Seller Parties choose
to manage the response to any such Claim, the Seller Parties shall notify the
Buyer Indemnified Parties of same within 30 days of its receipt of the
Environmental Claim Notice. Regardless of the Sellers' decision to undertake the
management or supervision of any Claim, and unless the parties are in litigation
regarding their respective rights under this Agreement, the parties shall
cooperate with one another and shall provide access to the Real Property, share
data and exchange non-privileged documents received or transmitted from third
parties. Any proposed or final Remedial Action or response undertaken by the
Seller Parties shall not result in the imposition of any deed or well notice or
restriction, or any other notice or restriction affecting the Real Property due
to the presence of Hazardous Materials in, on, at, upon, beneath or from the
Real Property.
(c) Except as required by applicable Environmental Law or
Environmental Authorities, Buyers shall not purposefully engage in the
investigation of the environmental condition of the Real Property in an effort
to accelerate the timing of any obligations of the Seller Parties under Section
9.5(a). The foregoing shall not be construed to limit the Seller Parties'
indemnification obligations under Section 9.5(a) in the event Hazardous
Materials or other indemnifiable circumstances under this Section 9.5 are
identified by Buyers, the Subsidiaries, their respective tenants, transferees or
assigns, or any of their contractors, advisors, agents or representatives, or
and Environmental Authority or governmental agent in the course of the operation
of the Business or the Real Property, including, by way of example and not
limitation, activities such as the repair, modification or expansion of facility
structures and the conduct by Buyers, the Subsidiaries or any of their
respective transferees, tenants, agents or assigns or other third parties of due
diligence investigations in connection with any financing, refinancing,
transfer, assignment, lease, merger, sale or other similar transaction. To the
extent the Buyer Indemnified Parties believe that applicable Environmental Law
requires that investigations of the Real Property be conducted or that reporting
to any Environmental Authority of any matter be undertaken which may trigger the
Seller Parties' obligations under Section 9.5(a) hereof, the Buyers Indemnified
Parties shall first provide the Seller Parties with reasonable, advance written
notice of their intent to pursue such investigations or reporting.
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(d) For so long as the Seller Parties' indemnification of the Buyer
Indemnified Parties set forth in Section 9.5(a) shall be in effect, Buyers shall
provide to Sellers a copy of all information or reports that are provided by
Buyers or their agents to the National Response Center or other federal, state,
local or foreign agency, with regard to all Releases of Hazardous Materials on
or from the Real Property where such Releases are or may relate to Hazardous
Materials which exists or may have existed as of Closing and for which the
Seller Parties may have liability to Buyers.
(e) In the event that title to all or any part of the Real Property
is transferred after the Closing Date, the successor in title to such Real
Property or lessee of such Real Property will be a Buyer Indemnified Party for
purposes of this Section 9.5 and may bring a claim for indemnification pursuant
to this Section 9.5.
(f) The provisions of this Section 9.5 shall remain in full force
and effect and shall survive for a period of seven (7) years following the
Closing Date, provided, however, that the Seller Parties' obligations pursuant
to this Section 9.5 shall continue with respect to any matter for which an
Environmental Claim Notice is delivered in accordance with Section 9.5(b) prior
to the end of such 20-year period.
9.6 Additional Provisions regarding Foreign Taxes. The Seller Parties
and the Buyer Parties also agree that the procedures and matters set forth on
Schedule 9.6 shall be applicable to Tax matters with respect to the Foreign
Subsidiaries.
SECTION 10. MISCELLANEOUS.
10.1 Entire Agreement. This Agreement (with its Schedules and Exhibits)
together with the existing Confidentiality Agreement between the parties
contains, and is intended as, a complete statement of all of the terms of the
arrangements between the parties with respect to the matters provided for,
supersedes any previous agreements and understandings between the parties with
respect to those matters (except as otherwise provided in Section 6.1), and
cannot be changed or terminated orally.
10.2 Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of Illinois without giving effect to
conflicts of law principles thereof.
10.3 Tables of Contents and Headings. The table of contents and Section
headings of this Agreement and titles given to Schedules to this Agreement
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are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement.
10.4 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed duly given (i) when delivered personally
or by prepaid overnight courier, with a record of receipt, (ii) the second day
after mailing, if mailed by certified mail, return receipt requested, or (iii)
the day after transmission, if sent by facsimile or telecopy (with a copy
promptly sent by certified mail, return receipt requested), to the parties at
the following addresses or telecopy numbers (or to such address or telecopy
number as a party may have specified by notice given to the other party pursuant
to this provision):
If to the Seller Parties, to:
U.S. Industries, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Telecopy: 000-000-0000
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy: 000-000-0000
If to the Buyer Parties, to:
Racing Champions Corporation
000 Xxxxxxxxx Xxxx
Xxxxxxxx X, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attention: Chief Executive Officer
Telecopy: 000-000-0000
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with copies to:
Reinhart, Boerner, Van Deuren,
Xxxxxx & Xxxxxxxxxx, s.c.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
X.X. Xxx 000000
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq. &
Xxxxx X. Xxxxxx, Esq.
Telecopy: 000-000-0000
10.5 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
10.6 Amendment; Waiver. The parties may by mutual agreement amend this
Agreement in any respect, and any party, as to such party, may (i) extend the
time for the performance of any of the obligations of any other party, (ii)
waive any inaccuracies in representations by any other party, (iii) waive
compliance by any other party with any of the agreements contained herein and
performance of any obligations by such other party, or (iv) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party against whom
enforcement of the same is sought.
Neither the failure of any party hereto to exercise any right,
power or remedy provided under this Agreement where otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party with its obligations hereunder, nor any custom or practice of the parties
at variance with the terms hereof, shall constitute a waiver by such party of
its right to exercise any such right, power or remedy or to demand such
compliance. The rights and remedies of the parties hereto are cumulative and not
exclusive of the rights and
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remedies that they otherwise might have now or hereafter, at law, in equity, by
statute or otherwise.
10.7 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not a party to this
Agreement other than the Buyer Indemnified Parties and the Seller Indemnified
Parties. No assignment of this Agreement or of any rights or obligation
hereunder may be made by either party (by operation of law or otherwise) without
the prior written consent of the other and any attempted assignment without the
required consent shall be void; provided, however, that no such consent shall be
required of any party hereto to assign part or all of its rights under this
Agreement to one or more of their wholly-owed subsidiaries or affiliates, but no
such assignment by such party of its rights or obligations hereunder shall
relieve such party of any of its obligations under the Agreement to the other
parties hereto.
10.8 Best Knowledge. As used in this Agreement "to the best of Sellers'
knowledge" or words of similar import shall mean actual knowledge possessed by a
director or officer of any Seller Party or Subsidiary together with Xx. Xxxx
Xxxxxxxx and Xxxxx X'Xxxxx, and "to the best of Buyers' knowledge" or words of
similar import shall mean actual knowledge possessed by a director or officer of
any of the Buyer Parties.
10.9 Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original, but which together shall constitute one and the
same Agreement.
10.10 Bulk Sales Laws. The parties hereby waive compliance with the
Bulk Sales Laws of any state or territory in which the assets of Ertl Canada are
located or in which operations relating to the assets of Ertl Canada are
conducted.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the date first set forth above.
U.S. INDUSTRIES, INC.
BY /s/ Xxxxxx X. XxxXxxx
----------------------------------------
Its Senior Vice President
-------------------------------------
JUSI HOLDINGS, INC.
BY /s/ Xxxxxx X. XxxXxxx
----------------------------------------
Its Senior Vice President
-------------------------------------
USI OVERSEAS HOLDINGS LIMITED
BY /s/ Xxxxxx X. XxxXxxx
----------------------------------------
Its Director
-------------------------------------
USI CANADA, INC.
BY /s/ Xxxxxx X. XxxXxxx
----------------------------------------
Its Vice President
-------------------------------------
RACING CHAMPIONS CORPORATION
BY /s/ Xxxxxx X. Xxxx
----------------------------------------
Its Chief Executive Officer
-------------------------------------
RACING CHAMPIONS, INC.
BY /s/ Xxxxxx X. Xxxx
----------------------------------------
Its Chief Executive Officer
-------------------------------------
RCNA HOLDINGS, INC.
BY /s/ Xxxxxx X. Xxxx
----------------------------------------
Its Chief Executive Officer
-------------------------------------
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RACING CHAMPIONS WORLDWIDE LIMITED
BY /s/ Xxxxxx X. Xxxx
----------------------------------------
Its Director
-------------------------------------
RACING CHAMPIONS LIMITED
BY /s/ Avy Xxxxx
----------------------------------------
Its Director
-------------------------------------
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