Exhibit 2.1
STOCK PURCHASE AGREEMENT
AMONG
XXX XXXXXXXX CORPORATION,
THE LEHIGH PRESS, INC.
AND THE SHAREHOLDERS OF
THE LEHIGH PRESS, INC.
DATED AS OF SEPTEMBER 5, 2003
TABLE OF CONTENTS
PAGE
1. Definitions..........................................................................................................1
2. Purchase and Sale of Company Shares.................................................................................10
(a) Basic Transaction.........................................................................................10
(b) Purchase Price............................................................................................11
(c) Purchase Price Definitions................................................................................11
(d) Estimated Purchase Price..................................................................................13
(e) Payment from Buyer to Sellers and Option Payees...........................................................13
(f) Determination of Purchase Price...........................................................................13
(g) Closing...................................................................................................15
(h) Deliveries at Closing.....................................................................................15
3. Representations and Warranties Concerning Transaction...............................................................15
(a) Sellers' Representations and Warranties...................................................................15
(b) Buyer's Representations and Warranties....................................................................16
4. Representations and Warranties Concerning the Company...............................................................17
(a) Organization, Qualification and Corporate Power; Corporate Records........................................18
(b) Capitalization............................................................................................18
(c) Noncontravention; Authorization of Transaction............................................................18
(d) Brokers' Fees.............................................................................................19
(e) Title to Assets...........................................................................................19
(f) Subsidiaries..............................................................................................19
(g) Financial Statements......................................................................................20
(h) Events Subsequent to Most Recent Fiscal Year End..........................................................20
(i) Undisclosed Liabilities...................................................................................22
(j) Legal Compliance; Permits.................................................................................22
(k) Tax Matters...............................................................................................22
(l) Real Property.............................................................................................24
(m) Intellectual Property.....................................................................................26
(n) Tangible Assets...........................................................................................28
(o) Inventory.................................................................................................28
(p) Contracts.................................................................................................28
(q) Notes and Accounts Receivable; Accounts Payable...........................................................29
(r) Powers of Attorney........................................................................................29
(s) Insurance.................................................................................................29
(t) Litigation................................................................................................30
(u) Employees.................................................................................................30
(v) Employee Benefits.........................................................................................31
(w) Guaranties................................................................................................32
(x) Environmental Matters.....................................................................................33
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(y) Certain Business Relationships with Company...............................................................34
(z) Customers and Suppliers...................................................................................34
(aa) Bank Accounts.............................................................................................34
(bb) Product Quality and Warranty Claims.......................................................................34
(cc) Books and Records.........................................................................................35
5. Pre-Closing Covenants...............................................................................................35
(a) General...................................................................................................35
(b) Notices and Consents......................................................................................35
(c) Operation of Business.....................................................................................36
(d) Preservation of Business..................................................................................37
(e) Access....................................................................................................37
(f) Notice of Developments....................................................................................38
(g) Exclusivity...............................................................................................38
(h) Updates to Environmental Assessments......................................................................39
(i) Repayment of Loans and Affiliate Transactions.............................................................39
(j) Indebtedness..............................................................................................39
(k) Transaction Expenses......................................................................................39
(l) Assistance with Financing.................................................................................39
(m) Company Stock Options.....................................................................................40
(n) Restricted Stock Agreement; Corporate Governance Agreement................................................40
(o) Lehigh Puerto Rico; Puerto Rico Asset Purchase Agreement..................................................40
(p) Split Dollar Life Insurance Assignment....................................................................40
(q) Buyer's Financing.........................................................................................40
(r) Release of Liens..........................................................................................41
(t) SERP Payments.............................................................................................41
6. Post-Closing Covenants..............................................................................................41
(a) General...................................................................................................41
(b) Litigation Support........................................................................................41
(c) D & O Insurance...........................................................................................42
(d) Severance Pay Plan........................................................................................42
(e) Transition................................................................................................42
(f) Confidentiality...........................................................................................42
(g) Covenant Not to Compete; Non-Solicitation.................................................................43
7. Conditions to Obligation to Close...................................................................................44
(a) Conditions to Buyer's Obligation..........................................................................44
(b) Conditions to Sellers' Obligation.........................................................................45
8. Remedies for Breaches of this Agreement.............................................................................46
(a) Survival of Representations and Warranties................................................................46
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(b) Indemnification Provisions for Buyer's Benefit............................................................46
(c) Indemnification Provisions for Sellers' Benefit...........................................................48
(d) Matters Involving Third Parties...........................................................................48
(e) Direct Claims.............................................................................................50
(f) Exclusive Remedy..........................................................................................50
(g) Escrow Agreement..........................................................................................50
(h) Adjustment to Purchase Price..............................................................................50
9. Termination.........................................................................................................51
(a) Termination of Agreement..................................................................................51
(b) Effect of Termination.....................................................................................51
10. Miscellaneous.......................................................................................................51
(a) Nature of Sellers' Obligations............................................................................51
(b) Press Releases and Public Announcements...................................................................52
(c) No Third-Party Beneficiaries..............................................................................52
(d) Entire Agreement..........................................................................................52
(e) Succession and Assignment.................................................................................52
(f) Counterparts..............................................................................................53
(g) Headings..................................................................................................53
(h) Notices...................................................................................................53
(i) Governing Law; Jurisdiction; Waiver of Jury Trial.........................................................54
(j) Amendments and Waivers....................................................................................54
(k) Severability..............................................................................................54
(l) Expenses..................................................................................................54
(m) Construction..............................................................................................55
(n) Incorporation of Exhibits, Annexes and Schedules..........................................................55
(o) Governing Language........................................................................................55
(p) Cooperation on Tax Matters................................................................................55
(q) Appointment of Sellers' Representative....................................................................58
EXHIBIT A - Estimate of the Estimated Purchase Price
EXHIBIT B - Escrow Agreement
EXHIBIT C - Commitment Letters
EXHIBIT D - Financial Statements
EXHIBIT E - Option Termination Agreement
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") dated as of
September 5, 2003 by and among Xxx Xxxxxxxx Corporation, a Delaware corporation
("Buyer"), The Lehigh Press, Inc., a Pennsylvania corporation (the "Company"),
and each of Xxxx X. XxXxxx, Xxxxxxx X. Xxxxx, Xx., individually and as Sellers'
Representative, Xxxxxxx X. XxXxxx, as trustee, and Xxxx X. XxXxxx (each a Seller
and collectively, "Sellers"). Buyer, the Company and Sellers are referred to
collectively herein as the "Parties."
Sellers in the aggregate own all of the outstanding capital stock of
the Company.
This Agreement contemplates a transaction in which Buyer will
purchase from Sellers and Sellers will sell to Buyer, all of the outstanding
capital stock of the Company on the terms and for the consideration set forth
below.
Concurrently with the execution and delivery of this Agreement, Buyer
Xxxx X. XxXxxx has executed an executive agreement (the "Executive Agreement").
Concurrently with the execution and delivery of this Agreement, each
Option Payee has executed and delivered to the Company an Option Termination
Agreement.
Now, therefore, in consideration of the premises and the mutual
promises herein made and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
1. Definitions.
"Accountants" has the meaning set forth in Section 2(f)(i) below.
"Accrued Other Taxes" has the meaning set forth in Section 2(c)(xii)
below.
"Accrued Other Taxes Adjustment" has the meaning set forth in Section
2(c)(xiii) below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a) or any similar group defined under a similar provision of
state, local or foreign Law.
"Agreement" has the meaning set forth in the preface above.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction that forms or could form the basis for any
specified consequence.
"Basket Amount" has the meaning set forth in Section 8(b)(i)(A)
below.
"Business Day" means any day other than (a) Saturday or Sunday or (b)
any other day on which banks in New York, New York are permitted or required to
be closed.
"Buyer" has the meaning set forth in the preface above.
"Buyer Indemnified Parties" has the meaning set forth in Section
8(b)(i) below.
"Cash" means cash and cash equivalents of the Company (including
deposits in transit) less escrowed amounts or other restricted cash balances of
the Company and less the amounts of any unpaid checks, drafts and wire transfers
issued by the Company on or prior to the date and time of determination,
calculated in accordance with GAAP applied on a basis consistent with the
preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 2(g) below.
"Closing Date" has the meaning set forth in Section 2(g) below.
"Closing EBITDA" has the meaning set forth in Section 2(c)(ix) below.
"Closing Financial Statements" has the meaning set forth in Section
2(f)(i) below.
"Closing Indebtedness" has the meaning set forth in Section 2(c)(vi)
below.
"Closing Net Working Capital" has the meaning set forth in Section
2(c)(i) below.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B and of any similar state Law.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment Letters" has the meaning set forth in Section 3(b)(vi)
below.
"Company" has the meaning set forth in the preface above.
"Company Share" means any share of the common stock, no par value, of
the Company.
"Company Stock Options" has the meaning set forth in Section 4(b)
below.
"Confidential Information" means any information concerning the
businesses and affairs of the Company that is not already generally available to
the public.
"Confidentiality Agreement" means that certain letter agreement,
dated May 2, 2003, between Buyer and the Company, as amended, restated or
supplemented from time to time.
"Contracts" has the meaning set forth in Section 4(p) below.
"Corporate Governance Agreement" has the meaning set forth in Section
5(n) below.
"Current Assets" has the meaning set forth in Section 2(c)(ii) below.
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"Current Liabilities" has the meaning set forth in Section 2(c)(iii)
below.
"Damages" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, deficiencies, assessments, damages, dues, penalties,
fines, costs, liabilities, obligations, taxes, liens, losses, expenses and fees,
including court costs and reasonable attorneys' and other professionals' fees
and expenses, including such of the foregoing that relate to Direct Claims.
"Direct Claim" has the meaning set forth in Section 8(e) below.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Disputed Items" has the meaning set forth in Section2(f)(i) below.
"DLJMB Buyers" means, collectively, DLJ Merchant Banking Partners II,
L.P., DLJ Merchant Banking Partners XX-X, X.X., XXX Xxxxxxxx Xxxxxxxx XX, X.X.,
XXX Diversified Partners, L.P., DLJ Diversified Partners-A, L.P., DLJ Millennium
Partners, L.P., DLJ Millennium Partners-A, L.P., DLJ EAB Partners, L.P., and MBP
II Plan Investors, L.P.
"EBITDA" has the meaning set forth in Section 2(c)(x) below.
"EBITDA Deduction" has the meaning set forth in Section 2(c)(vii)
below.
"EBITDA Shortfall" has the meaning set forth in Section 2(c)(viii)
below.
"Employee Benefit Plan" means any "employee benefit plan" (as such
term is defined in ERISA Section 3(3)) and any other material employee benefit
plan, program or arrangement of any kind, including, but not limited to, any
bonus or other incentive compensation, stock option, stock purchase, stock award
or other equity-based compensation, severance, salary continuation, employee
income tax indemnity (e.g. tax gross up) plan, program or arrangement.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental Claim" means any claim, demand, action, suit, or
proceeding by any Person and/or by any federal, state or regulatory entity,
incident to (i) the Release or threatened Release of any Hazardous Substance at
or from the Real Property on or prior to the Closing Date; (ii) the ownership,
operation or use of any site or facility by the Company on or prior to the
Closing Date for the storage, treatment, generation, transportation, processing,
handling, production or disposal of any Hazardous Substance, or as a landfill or
other waste disposal site; (iii) human exposure to any Hazardous Substance; (iv)
a violation of any applicable Environmental Requirement or non-compliance with
any environmental permit relating to the ownership, operation or use of any site
or facility by the Company on or prior to the Closing Date; (v) any requests for
information, notices of claim, demand letters or other notification received by
the Buyer after the Closing Date from any Governmental Entity in connection with
any investigation or clean-up of hazardous or polluting substances sent directly
by the Company prior to the Closing Date to any site listed or formally proposed
3
for listing on the National Priority List ("NPL") promulgated pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") or the Comprehensive Environmental Response, Compensation and
Liability Information System ("CERCLIS") or to any site listed on any state list
of hazardous substances sites requiring investigation or clean-up.
"Environmental Requirements" shall mean all federal, state, local and
foreign Laws, all judicial and administrative orders and determinations and all
common law concerning pollution or protection of the environment, natural
resources or human health and safety as it relates to environmental protection,
including all those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or cleanup
of any Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity that is treated as a single
employer with Company for purposes of Code Section 414.
"Escrow Agent" has the meaning set forth in Section 2(h) below.
"Escrow Agreement" has the meaning set forth in Section 2(h) below.
"Escrow Amount" has the meaning set forth in Section 2(e) below.
"Estimated Purchase Price" has the meaning set forth in Section 2(d)
below.
"Executive Agreement" has the meaning set forth in the preface above.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" has the meaning set forth in Section 4(g)
below.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"GIN" has the meaning set forth in Section 5(b) below.
"Governmental Entity" means any government or governmental or
regulatory body thereof, 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).
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Hazardous Substances" means, collectively, (i) any petroleum or
petroleum products, flammable explosives, radioactive materials, radon gas, lead
based paint, friable asbestos, in any form, urea formaldehyde foam insulation,
and transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCBs), (ii) any chemicals or other materials or
4
substances which are defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "toxic substances",
"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Requirements and (iii) any other chemical or other
material or substance, exposure to which is prohibited, limited or regulated by
any Environmental Requirements.
"Improvements" has the meaning set forth in Section 4(l)(iv) below.
"Income Tax" means any federal, state, local or foreign tax, charge,
fee, impost, levy or other assessment which is based upon, measured by, or
calculated with respect to (i) net income or profits or (ii) multiple bases, if
one or more of the bases upon which the tax is based, by which it is measured,
or with respect to which it is calculated is described in clause (i), together
with any interest, penalty or addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto and including any amendment thereof.
"Indebtedness" of any Person means, without duplication, (i) the
principal of (A) indebtedness of such Person for money borrowed, (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable and (C) any
liability or obligation that should be reflected as debt in accordance with
GAAP; (ii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable and other accrued current liabilities arising
in the Ordinary Course of Business); (iii) all obligations of such Person under
leases required to be capitalized in accordance with GAAP; provided, however,
that for the purposes hereof, the leases set forth on Section 1(a) of the
Disclosure Schedule shall not be treated as Indebtedness; (iv) all obligations
of such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction; (v) all remaining cash
contributions due on or before October 15, 2003, to satisfy the minimum required
contributions for plan years 2002 and 2003 for any Employee Pension Benefit Plan
sponsored by such Person; provided, however, that for the purposes hereof the
Parties agree that as of the date of this Agreement, with respect to the
Company, such remaining cash contributions are equal to $610,000; (vi) all
negative Cash balances, (vii) all obligations of the type referred to in clauses
(i) through (vi) of any Persons for the payment of which such Person is
responsible or liable, directly or indirectly, as obligor, guarantor, surety or
otherwise, including guarantees of such obligations; (viii) all obligations of
the type referred to in clauses (i) through (vii) of other Persons secured by
any Lien on any property or asset of such Person (whether or not such obligation
is assumed by such Person); and (ix) any accrued but unpaid interest, fees,
penalties, premiums and the like in respect of any of the foregoing; provided,
however, except as set forth in clause (v) above, no deferred compensation or
pension liability shall be treated as Indebtedness; and provided further, the
items set forth on Section 1(b) of the Disclosure Schedule shall not be treated
as Indebtedness.
"Indemnified Party" has the meaning set forth in Section 8(d)(i)
below.
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"Indemnifying Party" has the meaning set forth in Section 8(d)(i)
below.
"Indemnity Escrow Amount" has the meaning set forth in Section 2(e)
below.
"Industrial Site Recovery Act" means the New Jersey Industrial Site
Recovery Act, N.J. Stat. Xxx.ss.13:1K et seq, and the rules and regulations
promulgated thereunder.
"Intellectual Property" means intellectual property rights arising
from or in respect of the following, whether protected, created or arising under
the laws of the United States or any other jurisdiction: (i) all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (ii) all trademarks, service marks, trade dress, logos, slogans, trade
names, fictional business names (whether registered or unregistered, including
any applications for registration of the foregoing), Internet domain names and
rights in telephone numbers, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, (iii) all copyrights and all applications, registrations and renewals
in connection therewith, (iv) all mask works and all applications, registrations
and renewals in connection therewith, (v) all trade secrets and confidential
business information (including inventions (whether or not reduced to practice),
discoveries, concepts, ideas, methods, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(vi) all computer programs, including any and all computer software
implementations of algorithms, models and methodologies (including source code,
executable code, data, databases and related documentation), (vii) all databases
and compilations including all data and collections of data, whether machine
readable or otherwise, (viii) all material advertising and promotional
materials, (ix) all other proprietary rights, and (x) all copies and tangible
embodiments thereof (in whatever form or medium).
"Knowledge" means, with respect to an individual, the actual
knowledge of such individual after reasonable inquiry of the Company's directors
and officers and, with respect to a Person (other than an individual), the
actual knowledge of any director, officer or key employee of such Person after
reasonable inquiry of such Person's directors and officers.
"Laws" shall have the meaning ascribed to such term in Section
3(a)(ii) below.
"Leased Real Property" means all leasehold or subleasehold estates
and other rights to use or occupy any land, buildings, structures, improvements,
fixtures or other interest in real property held by the Company.
"Leases" has the meaning set forth in Section 4(e)(i) below.
"Legal Proceeding" has the meaning set forth in Section 4(t) below.
"Lehigh Puerto Rico" means Lehigh Press Puerto Rico LLC together with
Lehigh Press Puerto Rico, Inc.
"Liabilities" has the meaning set forth in Section 4(i) below.
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"Lien" means any mortgage, pledge, lien, security interest, claim,
lease, option, right of first refusal, easement, servitude, transfer restriction
under any shareholder or similar agreement, encumbrance, charge, or any other
restriction or limitation, other than (i) statutory liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, provided an appropriate reserve therefor is reflected
on the Most Recent Balance Sheet in accordance with GAAP, (ii) purchase money
liens and (iii) mechanics', carriers', workers', repairers' and similar liens
arising in the Ordinary Course of Business that are not material to the
businesses, operations and financial condition of the property so encumbered or
the Company and that are not incurred in connection with the borrowing of money.
"Material Adverse Effect" or "Material Adverse Change" means any
effect or change that would be materially adverse to the business, assets,
condition (financial or otherwise), operating results or operations of the
Company, taken as a whole, or on the ability of any Party to consummate timely
the transactions contemplated hereby.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
Section 4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section
4(g) below.
"Multiemployer Plan" has the meaning set forth in Section 4(v) below.
"Net Working Capital" has the meaning set forth in Section 2(c)(iv)
below.
"Net Working Capital Deduction" has the meaning set forth in Section
2(c)(xi) below.
"NJDEP" has the meaning set forth in Section 5(b) below.
"Option Cash Consideration" has the meaning set forth in Section 5(m)
below.
"Option Termination Agreement" has the meaning set forth in Section
5(m) below.
"Option Payee" means any Person that holds a Company Stock Option who
has not exercised such Company Stock Option prior to the Closing Date and who is
entitled to receive a payment in connection with the cancellation of such
Person's option rights.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Property" means all land, together with all buildings,
structures, improvements and fixtures located thereon and all easements and
other rights and interests appurtenant thereto, owned in fee by the Company.
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"Parties" has the meaning set forth in the preface above.
"Permitted Encumbrances" means with respect to each parcel of Real
Property: (i) real estate taxes, assessments and other governmental levies,
fees, or charges imposed with respect to such Real Property that are (A) not due
and payable as of the Closing Date or (B) being contested in good faith and for
which adequate reserves therefor are reflected on the Most Recent Balance Sheet
in accordance with GAAP; (ii) mechanics' liens and similar liens for labor,
materials, or supplies provided with respect to such Real Property incurred in
the Ordinary Course of Business for amounts that (A) are not due and payable as
of the Closing Date or (B) are being contested in good faith which would not,
individually or in the aggregate, materially impair the use or occupancy of the
Real Property or the operation of the business of the Company as currently
conducted on such Real Property; (iii) zoning, building codes and other land use
Laws regulating the use or occupancy of such Real Property or the activities
conducted thereon that are imposed by any Governmental Entity having
jurisdiction over such Real Property and are not violated by the current use or
occupancy of such Real Property or the operation of the business of the Company
as currently conducted thereon; and (iv) easements, covenants, conditions,
restrictions and other similar matters of record affecting title to such Real
Property which do not or would not materially detract from the value of or
materially impair the use or occupancy of such Real Property in the operation of
the business of the Company as currently conducted thereon.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, any other business entity, or any
Governmental Entity.
"Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
"Puerto Rico Asset Purchase Agreement" has the meaning set forth in
Section 5(o) below.
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Purchase Price Escrow Amount" has the meaning set forth in Section
2(e) below.
"Real Property" has the meaning set forth in Section 4(l)(iii) below.
"Real Property Laws" has the meaning set forth in Section 4(l)(vi)
below.
"Real Property Leases" means all leases, subleases, licenses,
concessions and other Contracts (written or oral), including all amendments,
extensions, renewals, guaranties and other agreements with respect thereto,
pursuant to which the Company holds any Leased Real Property.
"Restricted Period" has the meaning set forth in Section 6(h)(i)
below.
"Restricted Stock Agreement" has the meaning set forth in Section
5(m) below.
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"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Seller Indemnified Parties" has the meaning set forth in Section
8(c) below.
"Sellers" has the meaning set forth in the preface above.
"Sellers' Representative" has the meaning set forth in Section 10(q)
below.
"SERP Payments" has the meaning set forth in Section 5(t) below.
"Special Bonus Payment" has the meaning set forth in Section 5(s)
below.
"Specially Designated Employee" means the individual listed on
Section 1(d) of the Disclosure Schedule.
"Specified Liens" has the meaning set forth in Section 5(r) below.
"Split Dollar Life Insurance Assignment" has the meaning set forth in
Section 5(p) below.
"Straddle Period" has the meaning set forth in Section 10(p)(viii)
below.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association, or other business entity of
which (i) if a corporation, 50% or more of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), 50% or more of partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons owns a 50% or more ownership interest
in such a business entity (other than a corporation) if such Person or Persons
shall be allocated 50% or more of such business entity's gains or losses or
shall be or control any managing director or general partner of such business
entity (other than a corporation). The term "Subsidiary" shall include all
Subsidiaries of such Subsidiary.
"SWDA" has the meaning set forth in Section 4(x)(iv) below.
"Target Net Working Capital" has the meaning set forth in Section
2(c)(v) below.
"Tax" or "Taxes" means (i) any federal, state, local, or foreign
taxes, charges, fees, imports, levies or other assessments, including, without
limitation, all net income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, property, sales, use, transfer, registration, ad valorem, inventory,
9
value added, alternative or add-on minimum and estimated taxes, customs duties,
fees, assessments and charges of any kind whatsoever, (ii) all interest,
penalties, fines, additions to tax or additional amounts imposed by any taxing
authority in connection with any item described in clause (i) and (iii) any
liability in respect of any items described in clauses (i) and/or (ii) payable
by reason of contract, assumption, transferee or successor liability, operation
of Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor
thereof or any analogous or similar provision under Law) or otherwise.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement required to be filed in respect of any Taxes,
including any schedule or attachment thereto, and including any amendment
thereto.
"Third-Party Claim" has the meaning set forth in Section 8(d) below.
"Transaction Expenses" means the aggregate amount of fees and
expenses and other payment obligations incurred by or on behalf of, or paid or
to be paid by, the Company in connection with this Agreement or any of the
transactions contemplated hereby, including, but not limited to, (i) all fees
and expenses of counsel, advisors, brokers, finders, consultants (including
environmental consultants), investment bankers, experts, actuaries, auditors and
accountants, (ii) all transaction, success or similar bonuses, or other amounts
payable to any Person in connection with or upon the consummation of the
transactions contemplated hereby whether payable on the Closing Date or
thereafter, and whether or not contingent upon continued employment with the
Company for a period following the Closing, (iii) all severance or other costs
payable to any Person in connection with the consummation of the transactions
contemplated herein unless such severance or other costs become payable only
upon the termination by the Company of such Person's employment with the Company
on or after the Closing Date, (iv) all severance and other amounts, including,
but not limited to, the SERP Payments contempated by Section 5(t) below, payable
to Xxxxxxx Xxxx, Xxxxxxx X. Xxxxx, Xx. and Xxxx X. XxXxxx pursuant to any
Contract, employee plan or other arrangement, whether payable prior to, on or
after the Closing Date (other than as set forth on Section 1.1(c) of the
Disclosure Schedule), (v) all costs, fees, penalties, premiums, payments or
expenses incurred or paid (A) in obtaining any approvals or consents
contemplated by Section 4(c) hereof, (B) in connection with the repayment of
Indebtedness under Section 5(j) and (C) in connection with the release and
termination of Liens under Section 5(r), and (vi) all fees and governmental
charges described in Section 10(p)(iv) hereof; provided, however, no amount
shall be included as Transaction Expenses to the extent that such amount is
included as Indebtedness; further, provided, however, that the fees, costs and
expenses of Buyer's financing (including with respect to the financing
contemplated under the Commitment Letters), shall not be included as Transaction
Expenses.
2. Purchase and Sale of Company Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, Buyer agrees to purchase from each Seller, and each Seller
agrees to sell to Buyer, all of his, her, or its Company Shares free and clear
of all Liens for the consideration specified below in this Section 2. The
10
obligation of Buyer to purchase and pay for the Company Shares at Closing is
subject, inter alia, to the condition that all of the Company Shares be
delivered and available for purchase by Buyer on the terms set forth herein.
(b) Purchase Price. The aggregate purchase price (the "Purchase
Price") to be paid by Buyer for all of the Company Shares (including payments
made to all Option Payees with respect to the cancellation of all options to
purchase Company Shares) shall be an amount equal to One Hundred and Ten Million
Dollars ($110,000,000.00): (i) minus an amount equal to the Closing
Indebtedness; (ii) minus an amount equal to the Net Working Capital Deduction;
(iii) minus the EBITDA Deduction, if any; (iv) minus the amount of all
Transaction Expenses which remain unpaid as of the Closing; and (v) minus an
amount equal to the Accrued Other Taxes Adjustment.
(c) Purchase Price Definitions. For purposes of calculating the
Purchase Price, the following terms shall have the following meanings:
(i) "Closing Net Working Capital" means the Net Working Capital
of the Company measured as of 11:59 p.m. (Eastern Time) on the day
immediately preceding the Closing Date.
(ii) "Current Assets" means accounts receivable, other
receivables, inventory, deposits and prepaid expenses and other
current assets, but excluding (A) Cash (including negative Cash
balances), (B) any Income Tax assets or deferred Taxes, and (C)
receivables from any of the Company's Affiliates, directors,
employees, officers or Sellers and any of their Affiliates, in each
case, as is determined in accordance with GAAP applied on a consistent
basis with the preparation of the Company's Financial Statements for
the Most Recent Fiscal Year End.
(iii) "Current Liabilities" means accounts payable, accrued
compensation, accrued other expenses, Accrued Other Taxes and other
current liabilities, but excluding (A) payables to any of the
Company's Affiliates, directors, employees, officers or Sellers and
any of their Affiliates (but only to the extent that the Company is
released from such obligations on or prior to the Closing), (B)
accrued Transaction Expenses, (C) the impact of any reclassification
of any negative cash balances to a Liability, and (D) the current
portion of Indebtedness, in each case, as is determined in accordance
with GAAP applied on a consistent basis with the preparation of the
Company's Financial Statements for the Most Recent Fiscal Year End.
Current Liabilities shall also exclude deferred compensation recorded
in the amount of $94,106 representing general ledger account number
280020 and pension liabilities related to the company's qualified and
supplemental retirement plans recorded under SFAS Statement number 87.
As of the Closing Date, the Liability for accrued bonuses shall be
calculated as the pro rata portion of the annual 2003 bonus that is
included in the Company's most recent 2003 forecast, assuming the
Company achieves such 2003 forecast less that portion of the annual
2003 bonus that would have been allocated to Xxxxxxx X. Xxxxx, Xx.
(iv) "Net Working Capital" means Current Assets of the Company
less Current Liabilities of the Company.
11
(v) "Target Net Working Capital" means Eight Million Three
Hundred Ninety Three Thousand Dollars ($8,393,000.00).
(vi) "Closing Indebtedness" means the amount of Indebtedness of
the Company, net of positive Cash balances, as of 11:59 p.m. (Eastern
Time) on the day immediately preceding the Closing Date (not taking
into account the debt incurred by the Buyer or the Company in
connection with the financing of the transactions contemplated by this
Agreement).
(vii) "EBITDA Deduction" shall be an amount, if any, equal to the
EBITDA Shortfall times seven and one-half (7.5); provided, however, in
no event shall such amount be in excess of Four Million One Hundred
Twenty-Five Thousand Dollars ($4,125,000).
(viii) "EBITDA Shortfall" shall be the amount, if any, by which
Closing EBITDA is less than Fifteen Million Eight Hundred Thousand
Dollars ($15,800,000); provided, however, in no event shall such
amount be in excess of Five Hundred Fifty Thousand Dollars ($550,000).
(ix) "Closing EBITDA" shall be an amount equal to the Company's
EBITDA for the twelve month period ending on the last day of the
fiscal month ended immediately prior to the Closing Date.
(x) "EBITDA", as used in calculating the Closing EBITDA and
EBITDA Shortfall, means operating profit (it being understood that
bonus and profit sharing expense shall be deducted in determining
operating profit, and gains and losses on asset sales and insurance
recoveries shall be excluded from determining operating profit): (A)
plus depreciation and amortization, (B) plus non-recurring expense
items (limited to shareholder expenses, pro forma operating leases,
and normalized bonus and profit sharing expenses as discussed between
the Buyer and identified by management of the Company which shall not
exceed $3.2 million in the aggregate for any twelve -month period, net
of $277,000 SERP expense reversal recorded in December 2002), and (C)
plus any Transaction Expenses taken into account in the determination
of operating income, in each case, as is determined in accordance with
GAAP applied on a consistent basis with preparation of the Company's
Financial Statements for the Most Recent Fiscal Year End.
(xi) "Net Working Capital Deduction" means the amount, if any, by
which Target Net Working Capital exceeds Closing Net Working Capital.
(xii) "Accrued Other Taxes" means accrued Taxes of the Company as
of 11:59 p.m. (Eastern Time) on the day immediately preceding the
Closing Date (excluding Liabilities relating to Income Taxes and
deferred Taxes), which have an original due date that is on or after
the Closing Date, determined in accordance with GAAP applied on a
consistent basis with the preparation of the Company's Financial
Statements for the Most Recent Fiscal Year End.
12
(xiii) "Accrued Other Taxes Adjustment" means an amount equal to
fifty percent (50%) of Accrued Other Taxes.
(d) Estimated Purchase Price. On or before the third (3rd) Business
Day preceding the Closing Date, Sellers' Representative shall furnish to Buyer a
pro forma calculation of the Purchase Price (the "Estimated Purchase Price")
with reasonable detail and support substantially in the form attached hereto as
Exhibit A (which Exhibit A reflects a good faith estimate by the Sellers of the
Estimated Purchase Price on the date hereof), determined in accordance with
Sections 2(b) and (c) above based upon Sellers' good faith estimate of the
Closing Indebtedness, Transaction Expenses, Closing Net Working Capital, Accrued
Other Taxes Adjustment and the EBITDA Deduction.
(e) Payment from Buyer to Sellers and Option Payees. At the Closing,
Buyer shall deliver and pay (A) an amount in cash, by wire transfer to an
account designated in writing by the Sellers' Representative for further
distribution by the Sellers' Representative to Sellers and Option Payees, equal
to the Estimated Purchase Price, less Three Million Dollars ($3,000,000) (the
"Purchase Price Escrow Amount") to be held in an interest-bearing escrow to
satisfy any amounts payable to Buyer upon the final determination of the
Purchase Price pursuant to Section 2(f)(ii) hereof, and less Six Million Dollars
($6,000,000) (the "Indemnity Escrow Amount", and, together with the Purchase
Price Escrow Amount, the "Escrow Amount") to be held in an interest-bearing
escrow to satisfy any amounts payable to Buyer pursuant to Section 8 hereof, and
(B) an amount in cash, by wire transfer to a Company account equal to the amount
of the Transaction Expenses as estimated in determining the Estimated Purchase
Price pursuant to Section 2(d) above for further distribution to the Transaction
Expenses payees at the Closing.
(f) Determination of Purchase Price.
(i) Buyer will prepare (A) a balance sheet of the Company as of
the Closing Date in accordance with GAAP applied on a consistent basis
with the preparation of the Company's balance sheet for the Most
Recent Fiscal Year End and (B) a detailed statement setting forth the
Closing Indebtedness, Closing Net Working Capital, Transaction
Expenses, Accrued Other Taxes Adjustment and EBITDA Deduction and the
resulting Purchase Price (the "Closing Financial Statements") of the
Company as 11:59 p.m. (Eastern Time) on the day immediately prior to
the Closing Date, determined in accordance with Sections 2(b) and 2(c)
above. The Closing Financial Statements will also include a detailed
statement prepared by Buyer setting forth Buyer's determination of the
EBITDA Deduction. The Closing Financial Statements shall be fully
supported by appropriate schedules and work papers. Buyer will deliver
the Closing Financial Statements to the Sellers' Representative within
sixty (60) days after the Closing Date. The Sellers' Representative
shall have thirty (30) days following receipt of the Closing Financial
Statements to give written notice to Buyer of any objection to the
Closing Financial Statements. Any such written notice shall specify in
reasonable detail those items or amounts as to which the Sellers'
Representative disagrees (the "Disputed Items") and Sellers'
Representative shall be deemed to have agreed with all other items and
amounts contained in the Closing Financial Statements except for such
other items or amounts which are impacted by any Disputed Item or the
13
resolution of any Disputed Item. If, within such thirty (30) day
period the Sellers' Representative has not given Buyer written notice
of its objection to the Closing Financial Statements, then the
Purchase Price reflected in the Closing Financial Statements shall be
final and binding on the Parties. If the Sellers' Representative gives
such notice of objection, then the Parties shall attempt in good faith
to resolve the Disputed Items for a period not less than ten (10)
days. If the parties are unable to resolve the Disputed Items after
such ten (10) day period, then the Disputed Items will be submitted
for resolution in accordance with the terms hereof, including Sections
2(b) and (c), to the Chicago office of Deloitte & Touche, LLP,
certified public accountants, or, if Deloitte & Touche, LLP is
unwilling or unable to accept such appointment, then to a nationally
recognized independent accounting firm which is mutually agreeable to
Buyer and the Sellers' Representative (the "Accountants"). If Buyer
and the Sellers' Representative cannot agree on a nationally
recognized independent accounting firm to serve as the Accountants,
then Buyer and Sellers' Representative shall request the American
Arbitration Association appoint such firm, and such appointment shall
be conclusive and binding on the Parties. If the Disputed Items are
submitted to the Accountants for resolution, (A) the Accountants shall
function as an expert and not as an arbitrator; (B) each Party will
furnish to the Accountants such workpapers and other documents and
information relating to the Disputed Items as the Accountants may
request and are available to that Party (or its independent public
accountants), and will be afforded the opportunity to present to the
Accountants any material relating to the Disputed Items and to discuss
the Disputed Items with the Accountants; (C) the Accountants shall be
bound by the provisions of this Section 2; (D) the Accountants shall
make a determination only with respect to the Disputed Items and may
not assign a value to any Disputed Item greater than the highest value
for such Disputed Item claimed by either Party or less than the
smallest value for such Disputed Item claimed by either Party; (E) the
determination by the Accountants, as set forth in a notice delivered
to both Parties by the Accountants, will be binding and conclusive on
the Parties; and (F) Buyer and Sellers will each bear fifty percent
(50%) of the fees of the Accountants for such determination.
(ii) Not later than the fifth (5th) Business Day following the
final determination of the Purchase Price in accordance with Section
2(f)(i), (A) if the Purchase Price is greater than the Estimated
Purchase Price, Buyer will pay the difference thereof and the Escrow
Agent will distribute the Purchase Price Escrow Amount in accordance
with the terms of the Escrow Agreement, to an account designated by
the Sellers' Representative for further distribution by the Sellers'
Representative to Sellers and Option Payees, and (B) if the Estimated
Purchase Price is greater than the Purchase Price, then such
difference shall be deducted from the Purchase Price Escrow Amount and
distributed by the Escrow Agent to Buyer in accordance with the terms
of the Escrow Agreement; provided that (x) if the excess of the
Estimated Purchase Price over the Purchase Price is greater than the
Purchase Price Escrow Amount, then Sellers shall pay the difference
thereof to Buyer in cash by wire transfer to an account designated by
Buyer, and (y) all such amounts payable by Sellers to Buyer pursuant
to clause (x) above shall be the joint and several obligation of
Sellers; provided further, that if the excess of the Estimated
Purchase Price over the Purchase Price is less than the Purchase Price
Escrow Amount, then the remainder of the Purchase Price Escrow Amount
not distributable to Buyer shall be distributed by the Escrow Agent to
14
the Sellers' Representative for further distribution by the Sellers'
Representative to Sellers and Option Payees. Buyer and Sellers will
cause the Escrow Agent to disburse the Purchase Price Escrow Amount in
accordance with the resolution or determination of the Purchase Price
as set forth herein.
(g) Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Weil, Gotshal &
Xxxxxx LLP in New York, New York commencing at 9:00 a.m. local time on the third
(3rd) Business Day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself) or such other date as Buyer and Sellers may mutually
determine (the "Closing Date").
(h) Deliveries at Closing. At the Closing, (i) Sellers will deliver
to Buyer the various certificates, instruments and documents referred to in
Section 7(a) below, (ii) Buyer will deliver to Sellers the various certificates,
instruments and documents referred to in Section 7(b) below, (iii) each Seller
will deliver to Buyer stock certificates representing all of his, her, or its
Company Shares, endorsed in blank or accompanied by duly executed assignment
documents, (iv) Buyer will deliver and pay the Estimated Purchase Price, less
the Escrow Amount, as specified in Section 2(e) above, (v) Sellers will deliver
the Option Termination Agreements duly executed by the Option Payees, and (vi)
Buyer, the Sellers' Representative and an escrow agent to be mutually agreed to
by Sellers and Buyer (the "Escrow Agent") will execute and deliver the Escrow
Agreement substantially in the form attached hereto as Exhibit B (with such
changes as may be required by the Escrow Agent and reasonably acceptable to
Buyer and Sellers) (the "Escrow Agreement"), and Buyer will deliver and pay to
the Escrow Agent, the Escrow Amount to be held and distributed in accordance
with the terms of the Escrow Agreement.
3. Representations and Warranties Concerning Transaction.
(a) Sellers' Representations and Warranties. Each Seller, for
himself, herself or itself and not jointly and severally, represents and
warrants to Buyer that the statements contained in this Section 3(a) are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3(a)) with
respect to himself, herself, or itself, except as set forth in Annex I attached
hereto.
(i) Authorization of Transaction. Such Seller has full power,
legal capacity and authority to execute and deliver this Agreement and
each other agreement, document, instrument or certificate contemplated
herein or to be delivered in connection herewith and to perform his,
her, or its obligations hereunder and thereunder. This Agreement
constitutes the valid and legally binding obligation of such Seller,
enforceable in accordance with its terms and conditions, except that
such enforcement may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights or remedies of creditors, or (B) by general
equitable principles (whether enforcement is sought in law or equity).
The execution, delivery and performance of this Agreement and all
other agreements contemplated hereby have been duly authorized by such
Seller.
15
(ii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) conflict with, violate or result in a default under
any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any Governmental
Entity (collectively, "Laws") to which such Seller is subject or, if
such Seller is an entity, any provision of its governing documents,
(B) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any Contract or other arrangement to which such Seller is a party or
by which he, she, or it is bound or to which any of his or its assets
is subject, or (C) result in the imposition or creation of a Lien upon
or with respect to Company Shares. No consent, waiver, approval,
order, permit or authorization of, or declaration or filing with, or
notification to, any Person or Governmental Entity is required on the
part of such Seller in connection with the execution and delivery of
this Agreement, or any other Contract, document, instrument or
certificate contemplated herein or to be delivered in connection
herewith, or the compliance by such Seller with any of the provisions
hereof or thereof, the consummation of the transactions contemplated
hereby or the taking of any other action contemplated hereby.
(iii) Brokers' Fees. Such Seller has no liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(iv) Company Shares. Such Seller holds of record and owns
beneficially the number of Company Shares set forth next to his, her,
or its name in Section 3(a) of the Disclosure Schedule, free and clear
of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Liens, options,
warrants, purchase rights, Contracts, commitments, equities, claims
and demands. Except as set forth in Section 3(a) of the Disclosure
Schedule, such Seller is not a party to any option, warrant, purchase
right, or other Contract or commitment that could require such Seller
to sell, transfer, or otherwise dispose of any capital stock of the
Company (other than this Agreement).
(b) Buyer's Representations and Warranties. Buyer represents and
warrants to Sellers that the statements contained in this Section 3(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3(b)), except as set forth in Annex II attached hereto.
(i) Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation (or other formation).
(ii) Authorization of Transaction. Buyer has full power and
authority (including full corporate or other entity power and
authority, including, without limitation, the approval of the board of
directors of Buyer) to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the
16
valid and legally binding obligation of Buyer, enforceable in
accordance with its terms and conditions, except that such enforcement
may be limited by (A) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights
or remedies of creditors, or (B) by general equitable principles
(whether enforcement is sought in law or equity). Except with respect
to the Xxxx-Xxxxx-Xxxxxx Act, the Industrial Site Recovery Act or any
state securities Laws, Buyer is not required to give any notice to,
make any filing with, or obtain any authorization, consent or approval
of any Governmental Entity in order for it to consummate the
transactions contemplated by this Agreement. The execution, delivery
and performance of this Agreement and all other agreements
contemplated hereby have been duly authorized by Buyer.
(iii) Noncontravention. Except as set forth on Section 3(b) of
Annex II, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (A)
violate any Law to which Buyer is subject or any provision of its
charter or bylaws or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, Contract or other arrangement
to which Buyer is a party or by which it is bound or to which any of
its assets is subject.
(iv) Brokers' Fees. Buyer does not have any liability or
obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
(v) Investment. Buyer is not acquiring Company Shares with a view
to or for sale in connection with any distribution thereof within the
meaning of the Securities Act.
(vi) Financial Resources. To the extent Buyer will not be funding
the Purchase Price from Buyer's cash on hand, Buyer has received
commitment letters executed or entered into by and between Buyer and
Credit Suisse First Boston, acting through its Cayman Islands branch,
and by and between Buyer and the DLJMB Buyers (together, the
"Commitment Letters") which are in full force and effect and, in
accordance with the terms thereof, are in an amount necessary to fund
the Purchase Price in connection with the transactions contemplated
hereby. True and correct copies of the executed Commitment Letters are
attached hereto as Exhibit C. As of the date hereof, Buyer is not
aware of any facts or circumstances with respect to the Company, Buyer
or its lenders under the Commitment Letters that create a reasonable
basis for Buyer to believe that Buyer would not be able to obtain the
financing contemplated by the Commitment Letters.
4. Representations and Warranties Concerning the Company. The Company
and Sellers, jointly and severally, represent and warrant to Buyer that the
statements contained in this Section 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 4), except, with respect to any
17
particular subsection of this Section 4, as set forth in the corresponding
subsection of the disclosure schedule delivered by the Company and Sellers to
Buyer on the date hereof (the "Disclosure Schedule"). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 4. For purposes of this Section 4 (other
than with respect to Section 4(b)--Capitalization) and any other provision in
this Agreement that refers to the representations and warranties in this Section
4 all references to the "Company" shall be deemed to include the Company and any
and all of its Subsidiaries.
(a) Organization, Qualification and Corporate Power; Corporate
Records. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania. The Company is
duly authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required, except where the lack of
such qualification would not, individually or in the aggregate, have a Material
Adverse Effect. The Company has full corporate power and authority to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. Section 4(a) of the Disclosure Schedule lists the directors and
officers of the Company. The stock certificate books and stock transfer records
of the Company previously made available to Buyer are true, correct and
complete.
(b) Capitalization. The entire authorized capital stock of Company
consists of 1,000,000 Company Shares, of which 195,466 Company Shares are issued
and outstanding and no Company Shares are held in treasury. All of the issued
and outstanding Company Shares have been duly authorized, are validly issued,
fully paid and nonassessable and are held of record by the respective Sellers as
set forth in Section 4(b) of the Disclosure Schedule. As of the date hereof,
there are 19,917 outstanding options to purchase Company Shares, which have an
aggregate option exercise price of $356,734 (the "Company Stock Options").
Section 4(b) of the Disclosure Schedule sets forth, with respect to each Company
Stock Option, the holder thereof, the number of Company Shares exercisable under
such Company Stock Option and the applicable exercise price per Company Share.
Except as set forth in this Section 4(b) or in Section 4(b) of the Disclosure
Schedule, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights exchange rights or other
Contracts that could require the Company to issue, sell or otherwise cause to
become outstanding any of its capital stock, and there are no securities of the
Company outstanding which upon conversion or exchange would require the
issuance, sale or transfer of any additional shares of capital stock or other
equity securities of the Company or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase shares of
capital stock or other equity securities of the Company.
(c) Noncontravention; Authorization of Transaction.
(i) Neither the execution and the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (A)
violate any Law to which Company is subject or any provision of the
charter or bylaws of the Company or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any material Contract or other
material arrangement to which the Company is a party or by which it is
18
bound or to which any of its assets is subject (or result in the
imposition of any Lien upon any of its assets). Except with respect to
the transfer of the Owned Real Property, the Xxxx-Xxxxx-Xxxxxx Act and
the Industrial Site Recovery Act, the Company is not required to give
any notice to, make any filing with, or obtain any material
authorization, consent, or approval of any Governmental Entity in
order for the Parties to consummate the transactions contemplated by
this Agreement.
(ii) The Company has full corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Company, enforceable in accordance with its terms
and conditions, except that such enforcement may be limited by (A)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights or remedies of creditors or
(B) by general equitable principles (whether enforcement is sought in
law or equity).
(d) Brokers' Fees. Other than fees payable to Xxxxxxx Xxxxx &
Company, L.L.C. (which will constitute Transaction Expenses to the extent unpaid
as of the Closing), the Company has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
(e) Title to Assets.
(i) Section 4(e) of the Disclosure Schedule sets forth all
material leases of properties and assets (other than with respect to
Leased Real Property) used by the Company or to which the Company is
bound or by which any of its properties or assets are bound (the
"Leases"). The Company has delivered or otherwise made available to
Buyer true, correct and complete copies of all Leases, together with
all amendments, modifications or supplements thereto. The Company has
a valid leasehold interest under each of the Leases under which it is
a lessee, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to
general principles of equity, and there is no default under any Lease
by the Company or, to the Knowledge of the Company or Sellers by any
other party thereto, and no event has occurred that with the lapse of
time or the giving of notice or both would constitute a default
thereunder.
(ii) The Company has good title to, or a valid leasehold interest
in, the properties and assets, whether tangible or intangible, used by
it, located on its premises, or shown on the Most Recent Balance Sheet
or acquired after the date thereof, free and clear of all Liens,
except for properties and assets disposed of in the Ordinary Course of
Business since the date of the Most Recent Balance Sheet. Such
properties and assets comprise all of the assets necessary to operate
the businesses of the Company as presently conducted in all material
respects.
(f) Subsidiaries. Except as set forth in Section 4(f) of the
Disclosure Schedule, the Company (i) is not a general partner or limited partner
of, or party to any joint venture with any Person, and does not, directly or
indirectly, own any interest, including, without limitation any direct or
indirect equity or other investment or ownership interest in any corporation,
partnership, company, joint venture, association or other Person or (ii) does
19
not own or have any right to acquire, directly or indirectly, any outstanding
capital stock or other equity interest of, or other investment or ownership
interests in, any Person. Section 4(f) of the Disclosure Schedule sets forth,
with respect to each Subsidiary, the jurisdiction in which it is incorporated or
organized, the jurisdictions, if any, in which it is qualified to do business,
the number of shares of its authorized capital stock, the number and class of
shares thereof duly issued and outstanding, the names of all stockholders or
other equity owners and the number of shares of stock owned by each stockholder
or the amount of equity owned by each equity owner. The outstanding shares of
capital stock or equity interests of each Subsidiary are validly issued, fully
paid and non-assessable, and all such shares or other equity interests
represented as being owned by the Company are owned by it free and clear of any
and all Liens. There is no existing option, warrant, call, right or Contract to
which any Subsidiary is a party requiring, and there are no convertible
securities of any Subsidiary outstanding which upon conversion would require,
the issuance of any shares of capital stock or other equity interests of any
Subsidiary or other securities convertible into shares of capital stock or other
equity interests of any Subsidiary.
(g) Financial Statements. Attached hereto as Exhibit D are the
following financial statements of the Company (collectively, the "Financial
Statements"): (i) audited balance sheets and statements of operations, retained
earnings and cash flow as of and for the fiscal years ended December 31, 2000,
December 31, 2001 and December 31, 2002 (the "Most Recent Fiscal Year End"); and
(ii) unaudited balance sheet and statements of income and cash flow (the "Most
Recent Financial Statements") as of and for the six months ended July 5, 2003
(the "Most Recent Fiscal Month End"). Except as set forth in Section 4(g) of the
Disclosure Schedule, the Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP (other than with respect to the Most
Recent Financial Statements, the lack of footnotes and year-end adjustments)
applied on a consistent basis throughout the periods covered thereby and present
fairly the financial condition of the Company as of such dates and the results
of operations of the Company for such periods.
(h) Events Subsequent to Most Recent Fiscal Year End. Since December
31, 2002, there has not been any Material Adverse Change. Without limiting the
generality of the foregoing, since that date through the date hereof:
(i) the Company has not sold, leased, transferred, or assigned
any assets, tangible or intangible, other than the sale of inventory
in the Ordinary Course of Business;
(ii) the Company has not entered into any Contract outside the
Ordinary Course of Business;
(iii) no party (including the Company) has outside of the
Ordinary Course of Business accelerated, cancelled or terminated, nor
have there been any amendments or modifications to, any material
Contract, lease or license to which the Company is a party or by which
it is bound;
(iv) the Company has not imposed any Lien upon any of its assets,
tangible or intangible;
20
(v) the Company has not made, or failed to make, any capital
expenditures outside the Ordinary Course of Business;
(vi) the Company has not made any capital investment in any other
Person;
(vii) the Company has not created, incurred, assumed or
guaranteed more than $100,000 in aggregate Indebtedness except as set
forth on the face of the Most Recent Balance Sheet;
(viii) the Company has not transferred, assigned or granted any
license or sublicense of any rights under or with respect to any
Intellectual Property;
(ix) there has been no change made or authorized in the charter
or bylaws of the Company;
(x) the Company has not issued, sold or otherwise disposed of any
of its capital stock, or granted any options, warrants or other rights
to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(xi) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xii) the Company has not experienced any damage, destruction or
loss (whether or not covered by insurance) to any of its properties or
assets in excess of $25,000 for any single loss or $100,000 for all
such losses;
(xiii) the Company has not entered into any other transaction
with any of its directors, officers and employees outside the Ordinary
Course of Business;
(xiv) the Company has not entered into any employment Contract or
collective bargaining agreement, written or oral, or modified the
terms of any existing Contract;
(xv) the Company has not increased the compensation or benefits
of any of its directors, officers and employees, except for changes in
the Ordinary Course of Business, which, for this purpose shall not
include any increase in annual salary or similar rate of pay greater
than two and one-half percent (2 1/2%) per year or material increases
in benefits not applicable to eligible employees generally;
(xvi) the Company has not entered into, adopted, amended,
modified or terminated any bonus, profit sharing, incentive,
severance, or other plan, Contract, or commitment for the benefit of
any of its directors, officers and employees (or taken any such action
with respect to any other Employee Benefit Plan);
21
(xvii) the Company has not made any material change in any method
of accounting or accounting principles or practice, except for any
such change required by reason of a change in GAAP;
(xviii) the Company has not changed its Tax accounting or Tax
reporting principles, methods or policies;
(xix) the Company has not made or revoked any election relating
to Taxes, settled or compromised any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating
to Taxes;
(xx) the Company has not instituted or settled any Legal
Proceedings;
(xxi) the Company has not loaned or advanced any money to any
Person (other than advances to employees related to travel and
expenses made in the Ordinary Course of Business); and
(xxii) the Company has not committed or otherwise agreed to do
any of the foregoing.
(i) Undisclosed Liabilities. The Company has no material liabilities,
whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated and
whether due or to become due, including any liability for Taxes and any
off-balance sheet liability (collectively, "Liabilities"), except for (A)
Liabilities set forth in the Most Recent Balance Sheet, (B) Liabilities
disclosed in Section 4(i) of the Disclosure Schedule, and (C) Liabilities which
have arisen after the Most Recent Fiscal Month End in the Ordinary Course of
Business, which are not expected to be individually, or in the aggregate,
material.
(j) Legal Compliance; Permits. The Company has complied and is in
compliance in all material respects with all Laws applicable to its business or
operations, and no Legal Proceeding has been filed or commenced against it
alleging any failure to so comply, and, to the Knowledge of the Company and
Sellers, there are no facts or circumstances that could form the Basis for any
such violation. Section 4(j) of the Disclosure Schedule contains a list of all
material permits, approvals, authorizations, consents, licenses or certificates
from any Governmental Entity that are required for the operation of the
businesses of the Company as presently conducted.
(k) Tax Matters.
(i) The Company has duly and timely filed all Income Tax Returns
and all other Tax Returns which, if properly prepared and filed, would
involve more than an immaterial amount of Tax due, that it was
required to file with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns are required to be filed. All
such Tax Returns were true, correct and complete, in each case, in all
material respects. All Taxes due and owing by the Company (whether or
not shown on any Tax Return) have been fully paid and all Taxes
incurred as of the date of the Most Recent Balance Sheet but not yet
due have been adequately reserved for on the Most Recent Balance Sheet
22
(which reserves or accounts are set forth on the Company's detailed
balance sheet). There are no Liens for Taxes (other than Taxes not yet
due and payable) upon any of the assets of the Company. All required
estimated Tax payments sufficient to avoid any underpayment penalties
have been made by or on behalf of the Company. The Company has
complied in all material respects with all applicable Laws relating to
the payment and withholding of Taxes and has duly and timely withheld
and paid over to the appropriate taxing authorities all amounts to be
so withheld and paid over for all periods under all applicable Laws.
(ii) All deficiencies asserted or assessments made as a result of
any examinations by any taxing authority of the Tax Returns of the
Company have been fully paid or are being validly contested (which
contested Taxes, if any, are listed in Section 4(k)(ii) of the
Disclosure Schedule), and there are no other audits or to the
Knowledge of any Seller or the Company, other investigations by any
taxing authority in progress other than those listed in Section
4(k)(ii) of the Disclosure Schedule, nor has any Seller or the Company
received any notice from any taxing authority that it intends to
conduct such an audit or investigation or that any claim for unpaid
Taxes has become a Lien of any kind against the property of the
Company or is being asserted against the Company. No issue has been
raised by any taxing authority in any current or prior examination
which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any
subsequent taxable period.
(iii) Section 4(k)(iii) of the Disclosure Schedule lists all
federal, state, local and foreign franchise, sales or Income Tax
Returns filed with respect to the Company for taxable periods ended on
or after December 31, 2000, indicates those franchise, sales and
Income Tax Returns that have been audited and indicates those
franchise, sales and Income Tax Returns that currently are the subject
of audit. In addition, Section 4(k)(iii) of the Disclosure Schedule
lists all franchise, sales and Income Taxes paid for taxable periods
ended on or after December 31, 2000. No claim has been made by a
taxing authority in a jurisdiction where the Company does not file Tax
Returns such that it is or may be subject to taxation by that
jurisdiction. Buyer has received complete copies of all franchise and
Income Tax Returns and all audit reports issued within the last three
(3) years with respect to such Tax Returns. The Company has not waived
any statute of limitations in respect of Taxes or requested or agreed
to any extension of time with respect to a Tax assessment or
deficiency.
(iv) Neither the Company nor any other Person (including any
Seller) on behalf of the Company has on or prior to the Closing Date
(A) filed a consent under Code Section 341(f) concerning collapsible
corporations, (B) agreed to or is required to make any adjustments
pursuant to Code Section 481(a) or any similar provision of law or has
any Knowledge that any taxing authority has proposed any such
adjustment, or has any application pending with any taxing authority
requesting permission for any change in accounting methods that relate
to the Company or (C) executed or entered into a closing agreement
pursuant to Code Section 7121 or any similar provision of law with
respect to the Company. Company has not been a United States real
property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). The Company is not a party to or bound by any Tax
23
allocation, indemnity, sharing or similar arrangement or agreement.
The Company (x) is not and has not been a member of an Affiliated
Group filing a consolidated federal Income Tax Return (other than a
group the common parent of which was the Company) and (y) has no
liability for the Taxes of any Person (other than the Company) under
Treasury Regulation Section 1.1502-6 (or any similar provision of
Law), as a transferee or successor, by Contract, or otherwise. No
Seller is a foreign person within the meaning of Code Section 1445.
(v) Except as provided in Section 4(k)(v) of the Disclosure
Schedule, no property owned by the Company is (i) property required to
be treated as being owned by another Person pursuant to the provisions
of 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, (ii) "tax-exempt use property" within the meaning of Code
Section 168(h)(1), (iii) "tax-exempt bond financed property" within
the meaning of Code Section 168(g), (iv) subject to Code Section
168(g)(1)(A) or (v) "limited use property" within the meaning of Rev.
Proc. 2001-28.
(vi) The Company is not a party to or bound by (A) any Contract,
plan or arrangement covering any Person that, individually or
collectively, could give rise to the payment of any amount that would
not be deductible by Buyer or its Affiliates by reason of Code Section
280G, (B) any private letter ruling of the Internal Revenue Service or
comparable rulings of other taxing authorities or (C) any power of
attorney with respect to any Tax matter that is currently in force.
(vii) The Company has not constituted a "controlled corporation"
(within the meaning of Code Section 355(a)(1)(A)) in a distribution of
stock qualifying for tax-free treatment under Code Section 355 (A) in
the two (2) years prior to the date hereof or (B) in a distribution
which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Code Section 355(e)) in
conjunction with the transactions contemplated by this Agreement.
(viii) There is no taxable income of the Company that will be
required under applicable Tax Law to be recognized by Buyer or its
Affiliates, including the Company, for a taxable period beginning
after the Closing Date which taxable income was realized and resulted
in economic income (i.e., the receipt of cash or other property
arising from such realization) prior to the Closing Date.
(ix) Section 4(k)(ix) of the Disclosure Schedule sets forth the
tax basis of the fixed assets of the Company, for each of the
Company's operating divisions, as of the Most Recent Fiscal Year End
as such tax bases are reflected on the books and records of the
Company.
(l) Real Property.
(i) Section 4(l)(i) of the Disclosure Schedule sets forth the
address and legal description of each parcel of Owned Real Property.
With respect to each parcel of Owned Real Property:
24
(A) Except as set forth in Section 4(l)(i)(A) of the
Disclosure Schedule, the Company has good and marketable fee
simple title, free and clear of all Liens, except Permitted
Encumbrances;
(B) except as set forth in Section 4(l)(i)(B) of the
Disclosure Schedule, the Company has not leased or otherwise
granted to any Person the right to use or occupy such Owned Real
Property or any portion thereof; and
(C) there are no outstanding options, rights of first offer
or rights of first refusal to purchase such Owned Real Property
or any portion thereof or interest therein.
(ii) Section 4(l)(ii) of the Disclosure Schedule sets forth the
address of each parcel of Leased Real Property and a true and complete
list of all Real Property Leases for each such Leased Real Property
(including the date and name of the parties to such Real Property
Lease document). Sellers have delivered or made available to Buyer a
true and complete copy of each such Real Property Lease document and
in the case of any oral Lease, a written summary of the material terms
of such Real Property Lease. Except as set forth in Section 4(l)(ii)
of the Disclosure Schedule, with respect to each of the Real Property
Leases:
(A) such Real Property Lease is legal, valid, binding,
enforceable and in full force and effect;
(B) the transaction contemplated by this Agreement does not
require the consent of any other party to such Lease, will not
result in a breach of or default under such Real Property Lease
and will not otherwise cause such Real Property Lease to cease to
be legal, valid, binding, enforceable and in full force and
effect on identical terms following the Closing;
(C) neither the Company nor, to the Knowledge of Sellers and
the Company, any other party to the Real Property Lease is in
material breach or default under such Lease; and
(D) the Company has not subleased, licensed or otherwise
granted any Person the right to use or occupy such Leased Real
Property or any portion thereof.
(iii) The Owned Real Property identified in Section 4(l)(i) of
the Disclosure Schedule and the Leased Real Property identified in
Section 4(l)(ii) of the Disclosure Schedule (collectively, the "Real
Property") comprise all of the real property used in the business of
the Company; and the Company is not a party to any agreement or option
to purchase any real property or interest therein.
(iv) All buildings, structures, fixtures, building systems and
equipment and all components thereof, included in the Real Property
(the "Improvements") are, in all material respects, sufficient for the
operation of the business of the Company.
25
(v) The Company has not received written notice of any
condemnation, expropriation or other proceeding in eminent domain
affecting any parcel of Real Property or any portion thereof or
interest therein.
(vi) To the Knowledge of the Company and Sellers, the Owned Real
Property is in material compliance with all applicable building,
zoning, subdivision, health and safety and other land use Laws, and
all insurance requirements affecting the Real Property (collectively,
the "Real Property Laws"). The Company has not received any notice of
violation of any Real Property Law and, to the Knowledge of the
Company and Sellers, there is no reasonable Basis for the issuance of
any such notice or the taking of any action for such violation.
(vii) To the Knowledge of the Company and Sellers, the current
use and occupancy of the Real Property and the operation of the
business of Company as currently conducted thereon does not violate in
any material respect any easement, covenant, condition, restriction or
similar provision in any instrument of record or other unrecorded
agreement affecting such Real Property.
(viii) To the Knowledge of the Company and Sellers, none of the
Real Property or any portion thereof is located in a flood hazard area
(as defined by the Federal Emergency Management Agency).
(m) Intellectual Property.
(i) Since December 31, 1997, the Company has not interfered with,
infringed upon, misappropriated, or violated any Intellectual Property
rights of any third Person in any material respect and, since December
31, 1997, neither the Company nor Sellers have received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that
the Company must license or refrain from using any Intellectual
Property rights of any Person). To the Knowledge of the Company and
Sellers, no Person has interfered with, infringed upon,
misappropriated, or violated any material Intellectual Property rights
of the Company in any material respect.
(ii) Section 4(m)(ii) of the Disclosure Schedule identifies each
patent or other registration which has been issued to the Company with
respect to any of its Intellectual Property, identifies each pending
patent application or other application for registration which the
Company has made with respect to any of its Intellectual Property and
identifies each material license, sublicense, agreement, or other
permission which the Company has granted to any Person with respect to
any of its Intellectual Property (together with any exceptions).
Section 4(m)(ii) of the Disclosure Schedule also identifies each
material trade name or unregistered trademark, service xxxx, corporate
name, fictional business name, Internet domain name and copyright used
by the Company in connection with any of its businesses. With respect
to each material item of Intellectual Property used by the Company in
connection with any of its businesses:
26
(A) the Company possesses all right, title and interest in
and to the item, free and clear of any Lien, license or other
restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(C) no Legal Proceeding is pending or, to the Knowledge of
the Company and Sellers, threatened, and no opposition,
cancellation proceeding or notice of such has been received,
which challenges the legality, validity, enforceability, use or
ownership of the item;
(D) the Company has taken reasonable steps to protect the
Company's rights in and to each item and to prevent the
unauthorized use thereof by any other person;
(E) all registrations have been effectively registered in
accordance with all applicable legal requirements and are
currently in compliance with all applicable legal requirements in
all material respects (including as to payment of maintenance
fees and the like);
(F) to the Knowledge of the Company and Sellers, there has
been no prior use of any Intellectual Property by any Person
which would confer upon such Person superior rights in the
Intellectual Property.
(iii) Section 4(m)(iii) of the Disclosure Schedule identifies
each material item of Intellectual Property that any other Person owns
and that the Company uses pursuant to license, sublicense, agreement
or permission. With respect to each item of Intellectual Property
required to be identified in Section 4(m)(iii) of the Disclosure
Schedule:
(A) the license, sublicense, agreement or permission
covering the item is legal, valid, binding, enforceable and in
full force and effect in all material respects;
(B) no party to the license, sublicense, agreement or
permission is in material breach or default and no event has
occurred which with notice or lapse of time would constitute a
material breach or default or permit termination, modification or
acceleration thereunder;
(C) no party to the license, sublicense, agreement or
permission has repudiated any material provision thereof;
(D) the Company has not granted any sublicense or similar
right with respect to the license, sublicense, agreement or
permission; and
(E) no loss or expiration of the item is threatened, pending
or reasonably foreseeable, except for patents expiring at the end
of their statutory terms (and not as a result of any act or
omission by Sellers or the Company, including without limitation,
a failure by Sellers or the Company to pay any required
maintenance fees).
27
(n) Tangible Assets. The buildings, machinery, equipment and other
tangible assets that the Company owns or leases, taken as a whole, are free from
material defects (patent and latent), have been maintained in accordance with
normal industry practice and are, in all material respects, in good operating
condition and repair (subject to normal wear and tear).
(o) Inventory. The inventory of the Company consists of raw materials
and supplies, manufactured and processed materials, work in process and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured. Adequate reserves have been reflected in the Most
Recent Balance Sheet for obsolete or otherwise unusable inventory and were
calculated in a manner consistent with past practice and in accordance with
GAAP.
(p) Contracts. Section 4(p) of the Disclosure Schedule lists the
following oral or written contracts, agreements, instruments, notes, bonds,
indentures, leases, licenses, or binding commitments (collectively, "Contracts")
to which the Company is a party as of the date hereof:
(i) any Leases the payments of which exceed $20,000 annually;
(ii) any Contract (or group of related Contracts), including
purchase orders for the purchase or sale of raw materials,
commodities, supplies, products or other personal property, or for the
furnishing or receipt of services, that involves consideration in
excess of $250,000 in the aggregate;
(iii) any Contract concerning a partnership or similar joint
venture;
(iv) any Contract (or group of related Contracts) under which it
has created, incurred, assumed, or guaranteed any Indebtedness in
excess of $100,000 or under which it has imposed a Lien on any of its
assets, tangible or intangible;
(v) any Contract containing covenants not to compete by the
Company in any line of business or with any Person in any geographical
area or any material Contracts with any Person not to compete with the
Company (other than as contained in employment agreements);
(vi) any Contract with any of Sellers or their Affiliates (other
than the Company);
(vii) any collective bargaining agreement or other Contract with
any labor union or association representing any employee of the
Company;
(viii) any Contract for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $150,000 or providing material severance
benefits;
28
(ix) any Contract under which it has advanced or loaned any
amount to any of its directors, officers and employees (other than
advances relating to travel and expenses made in the Ordinary Course
of Business);
(x) any Contract that relates to rebates, allowances or discounts
outside the Ordinary Course of Business;
(xi) any Contract providing for guarantee or surety by the
Company;
(xii) any Contract which provides for annual payments in excess
of $250,000 pursuant to which, to the Knowledge of the Company or
Sellers, the Company has agreed to indemnify another Person other than
in connection with the sale of the Company's products; and
(xiii) any Contract under which the Company has made advances or
loans to any other Person amounts in the aggregate exceeding $25,000.
With respect to each such Contract set forth on Section 4(p) of the
Disclosure Schedule: (A) the agreement is legal, valid, binding, enforceable and
in full force and effect in all material respects; (B) the Company is not, nor,
to the Knowledge of the Company or Sellers, is any other party, in material
breach or default and no event has occurred which with notice or lapse of time
would constitute a material breach or default, or permit termination,
modification or acceleration, under the Contract; and (C) no party has
repudiated any material provision of any such Contract.
(q) Notes and Accounts Receivable; Accounts Payable.
(i) All notes and accounts receivable of the Company are
reflected properly on its books and records in accordance with GAAP,
and are valid receivables subject to no setoffs or counterclaims. All
accounts receivable of the Company have arisen from bona fide
transactions in the Ordinary Course of Business.
(ii) All accounts payable of the Company reflected in the Most
Recent Balance Sheet or arising after the date thereof are the result
of bona fide transactions in accordance with GAAP applied on a
consistent basis.
(r) Powers of Attorney. To the Knowledge of the Company and Sellers,
there are no outstanding material powers of attorney executed on behalf of the
Company.
(s) Insurance. Section 4(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability and workers' compensation coverage and
bond and surety arrangements) with respect to which the Company is a party, a
named insured or otherwise the beneficiary of coverage:
(i) the type of insurance coverage;
(ii) the name, address and telephone number of the agent;
29
(iii) the name of the insurer, the name of the policyholder and
the name of each covered insured;
(iv) the policy number and the period of coverage; and
(v) the premium, scope (including an indication of whether the
coverage is on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable and in full force and effect in all material
respects; (B) neither the Company nor any other party to the policy is in
material breach or default (including with respect to the payment of premiums or
the giving of notices) and no event has occurred which, with notice or the lapse
of time, would constitute such a material breach or default, or permit
termination, modification, or acceleration, under the policy; (C) no party to
the policy has repudiated any material provision thereof; (D) each are in such
amounts and provide coverage that are reasonable and customary in light of the
businesses, operations and properties of the Company; and (E) the insurer of
such policy has not threatened to cancel such policy nor has any insurer
cancelled a policy during the previous five years. Section 4(s) of the
Disclosure Schedule describes any material self-insurance arrangements affecting
the Company.
(t) Litigation. Section 4(t) of the Disclosure Schedule sets forth
each instance in which the Company or any of its officers, directors or
employees of the Company with respect to their business activities on behalf of
the Company (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge, (ii) is a defendant or, to the Knowledge of the
Company and Sellers, is threatened to be made a defendant to any action, suit,
proceeding, hearing or investigation or (iii) is a plaintiff to any material
action, suit, proceeding, hearing or investigation ("Legal Proceeding") of, in
or before any Governmental Entity.
(u) Employees.
(i) To the Knowledge of the Company, there is no dispute between
the Company and any of its current and former employees or consultants
related to compensation, severance pay, vacation benefits, pension
benefits, or discrimination.
(ii) Except as set forth in Section 4(u)(ii) of the Disclosure
Schedule, (A) the Company is not a party to or bound by any collective
bargaining agreement, (B) none of the Company's employees is
represented by any labor organization, (C) the Company has not
experienced any strike or material grievance, claim of unfair labor
practices or other collective bargaining dispute within the past three
(3) years, and (D) to the Knowledge of the Company and Sellers, there
is no material grievance currently pending or threatened by any
employee against the Company. The Company has not committed any
material unfair labor practice. The Company and Sellers have no
Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to
employees of Company. The Company is in compliance in all material
respects with all currently applicable Laws respecting employment,
equal employment opportunity, nondiscrimination, wages, hours and
30
occupational health and safety. The Company is and, during the term of
its current collective bargaining agreements, has been in compliance
with all of its obligations under such collective bargaining
agreements, except where any noncompliance could not reasonably result
in material liability.
(iii) Each individual who renders services to the Company who is
or has been classified by the Company as having the status of an
independent contractor or other non-employee status for any purpose
(including for purposes of Taxes and under Employee Benefit Plans) is
and has been properly so characterized.
(v) Employee Benefits.
Section 4(v) of the Disclosure Schedule lists each Employee Benefit
Plan that the Company has any Liability, contingent or otherwise, and separately
identifies each such plan which is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA ("Multiemployer Plan"). Except as set forth in Section
4(v) of the Disclosure Schedule:
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract or fund) has been maintained, funded and
administered in accordance with the terms of such Employee Benefit
Plan and complies in form and in operation in all material respects
with the applicable requirements of ERISA, the Code and other
applicable Laws;
(ii) All required reports and descriptions (including Form 5500
annual reports, summary annual reports and summary plan descriptions)
have been timely filed and/or distributed in accordance with the
applicable requirements of ERISA and the Code with respect to each
such Employee Benefit Plan. The requirements of COBRA have been met in
all material respects with respect to each such Employee Benefit Plan
and each Employee Benefit Plan maintained by an ERISA Affiliate which
is an Employee Welfare Benefit Plan subject to COBRA;
(iii) All contributions (including all employer contributions and
employee salary reduction contributions) that are due have been made
within the time periods prescribed by ERISA and the Code to each such
Employee Benefit Plan that is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date
which are not yet due have been made to each such Employee Pension
Benefit Plan or accrued in accordance with the past custom and
practice of the Company. All premiums or other payments for all
periods ending on or before the Closing Date have been paid with
respect to each such Employee Benefit Plan that is an Employee Welfare
Benefit Plan;
(iv) Each such Employee Benefit Plan that is intended to meet the
requirements of a "qualified plan" under Code Section 401(a) is so
qualified, and, to the Knowledge of the Company and Sellers, there are
no facts or circumstances that could adversely affect the qualified
status of any such Employee Benefit Plan;
(v) There have been no non-exempt Prohibited Transactions with
respect to any such Employee Benefit Plan or any Employee Benefit Plan
31
maintained by an ERISA Affiliate. To the Knowledge of the Company and
the Sellers, no Fiduciary has any Liability for material breach of
fiduciary duty or any other material failure to act or comply in
connection with the investment of the assets or administration of any
such Employee Benefit Plan. No Legal Proceeding with respect to the
administration or the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits) is pending or,
to the Knowledge of the Company or any Seller, threatened;
(vi) Sellers have delivered to Buyer correct and complete copies
of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the
most recent annual report (Form 5500, with all applicable attachments)
and all related trust agreements, insurance contracts and other
funding arrangements that implement each such Employee Benefit Plan;
(vii) Section 4(v)(vii) of the Disclosure Schedule sets forth for
each Employee Benefit Plan subject to Title IV of ERISA (other than
any Multiemployer Plan) the amount, if any, by which the present value
of the projected benefit obligations of such plan as shown on the
January 1, 2003 Actuarial Valuation (calculated in accordance with the
actuarial assumptions and methodologies used for GAAP financial
disclosure purposes as set forth in the Financial Statements for the
Most Recent Fiscal Year End, but adjusted for discount rates
applicable as of the date hereof) exceed the fair market value of the
assets (excluding any accrued and unpaid contributions) of such plan
as of June 30, 2003;
(viii) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (A)
result in any payment becoming due to or increase any amount payable
to any current or former employee, director or consultant of the
Company, (B) require to be established or any amount to be contributed
to any trust, insurance policy or other funding vehicle for the
benefit of any current or former employee, director or consultant of
the Company, or (C) result in the acceleration of the time of payment
of, vesting of or other rights with respect to any compensation or
benefits under any such Employee Benefit Plan or any employment,
consulting, severance or similar agreement;
(ix) If the Company and all of its ERISA Affiliates made a
complete withdrawal from each Multiemployer Plan, the Company and its
ERISA Affiliates would not have any liability to such Multiemployer
Plan under Title IV of ERISA or the terms of such Multiemployer Plan;
and
(x) All representations set forth in subsections (i) through (ix)
of this Section 4(v) with respect to any Multiemployer Plan are made
only to the extent of the Knowledge of the Company and Sellers.
(w) Guaranties. The Company is not a guarantor or otherwise
responsible for any Liability (including Indebtedness) of any other Person.
32
(x) Environmental Matters.
The representations and warranties contained in this Section 4(x) are
the sole and exclusive representations and warranties of the Company and
Sellers, pertaining or relating to Environmental Requirements, Environmental
Claims or Hazardous Substances.
Except as disclosed in Section 4(x) of the Disclosure Schedule:
(i) The Company and its predecessors have complied and are in
compliance, in each case in all material respects, with all
Environmental Requirements and, to the Knowledge of the Company and
Sellers, there are no facts, circumstances or conditions that could
reasonably be expected to prevent continued compliance with
Environmental Requirements. There has been no release of Hazardous
Substances at, on, under or from any property now or formerly owned,
operated, or leased by or for the Company at concentrations exceeding
those allowed by Environmental Requirements or requiring remedial
activity under Environmental Requirements.
(ii) Without limiting the generality of the foregoing, the
Company has obtained, has complied with and is in compliance with, in
each case in all material respects, all material permits, licenses and
other authorizations that are required pursuant to Environmental
Requirements for the occupation and use of its facilities and the
operation of its business; a list of all such material permits,
licenses and other authorizations is set forth on Section 4(x)(ii) of
the Disclosure Schedule.
(iii) Since December 31, 1997, the Company has not received any
written notice, report or other information regarding any actual or
alleged material violation of Environmental Requirements, or any
material Liabilities or potential material Liabilities, including any
material investigatory, remedial or corrective obligations, relating
to any of them or its facilities arising under Environmental
Requirements, and, to the Knowledge of the Company and Sellers, no
facts, circumstances or conditions exist prior to December 31, 1997,
regarding actual or alleged violations by or Liability or potential
liability of the Company or the Subsidiaries under Environmental
Requirements that individually or in the aggregate would reasonably be
expected to result in the Company incurring material environmental
Liabilities under Environmental Requirements.
(iv) Neither the Company nor any of its predecessors has treated,
stored, disposed of, arranged for or permitted the disposal of,
transported, handled or released any substance, including without
limitation any hazardous substance, or owned or operated any property
or facility (and no such property or facility is contaminated by any
such substance) in a manner that has given or would give rise to
material liabilities, including any material Liability for response
costs, corrective action costs, personal injury, property damage,
natural resources damages or attorney fees, pursuant to CERCLA, or the
Solid Waste Disposal Act, as amended ("SWDA"), or any other
Environmental Requirements.
33
(v) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any
material obligations for site investigation or cleanup, or
notification to or consent of Government Entities or third parties,
pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental Requirements, including,
but not limited to the Industrial Site Recovery Act.
(y) Certain Business Relationships with Company. None of Sellers,
their Affiliates and the Company's directors, officers, employees and
shareholders have been involved in any material business arrangement or
relationship with Company within the past twelve (12) months and none of the
Sellers, their Affiliates and Company's directors, officers, employees and
shareholders owns any material asset, tangible or intangible, that is used in
the business of the Company. Except as set forth in Section 4(y) of the
Disclosure Schedule, none of the Company's Affiliates, officers, directors,
employees, stockholders or any of their Affiliates owns any direct or indirect
interest of any kind in, or controls or is a director, officer, employee or
partner of, or consultant to, or lender to or borrower from or has the right to
participate in the profits of, any Person which is a competitor, supplier,
customer, landlord, tenant, creditor or debtor of the Company.
(z) Customers and Suppliers. Section 4(z) of the Disclosure Schedule
lists the ten (10) largest customers of the Company's Lehigh Direct division,
the ten (10) largest customers of the Company's Lehigh Lithographers division
and the ten (10) largest suppliers of the Company for the Most Recent Fiscal
Year End and sets forth opposite the name of each such customer the dollar sales
and approximate percentage of consolidated net sales attributable to such
customer during such fiscal year and opposite the name of each such supplier the
dollar purchases attributable to such supplier. Since the date of the Most
Recent Fiscal Year End the customers listed on Section 4(z) of the Disclosure
Schedule have not indicated in writing that they shall stop, or materially
decrease the rate of, buying materials, products or services from the Company.
In addition, the Company has not received any written notice from any such
supplier of any material adverse change in the price (excluding normal price
fluctuations), quality and delivery terms and conditions on which such supplier
will continue to make delivery of such item or in the financial condition of
such supplier, and, to the Knowledge of the Company and Sellers, the
consummation of the transactions contemplated by this Agreement will not cause
any of such events to happen.
(aa) Bank Accounts. Section 4(aa) of the Disclosure Schedule contains
a complete and correct list of the names and locations of all banks in which the
Company has accounts or safe deposit boxes and the names of all persons
authorized to draw thereon or to have access thereto, and with respect to such
accounts, the purpose for and the account number for each such account.
(bb) Product Quality and Warranty Claims. All products and services
sold, rented, leased, provided or delivered by the Company to customers on or
prior to the Closing Date conform or will conform in all material respects to
applicable Contractual commitments, express and implied warranties, product and
service specifications and quality standards, and, to the Knowledge of the
Company and Sellers, the Company does not have any Liability for replacement or
repair thereof or other damages in connection therewith, except for adjustments
34
made in the Ordinary Course of Business consistent with past practice. To the
Knowledge of the Company and Sellers, no product or service sold, leased,
rented, provided or delivered by the Company to customers on or prior to the
Closing Date pursuant to a Contract which provides for annual payments in excess
of $250,000 is subject to any guaranty, warranty or other indemnity for
consequential damages or other damages other than for the repair or replacement
thereof.
(cc) Books and Records. The books, records and accounts of the
Company accurately and fairly reflect, in reasonable detail, the transactions
and the assets and liabilities of the Company. The Company has not engaged in
any transaction, maintained any bank account or used any funds except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of the Company. The Company has
established and maintains disclosure controls and procedures that are
commercially reasonable and, to the Knowledge of the Company and Sellers, such
disclosure controls and procedures are effective in timely alerting the
Company's principal executive officer or its principal financial officer to
material information which such principal officers and independent auditors deem
necessary to be provided to them.
5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his, her or its
commercially reasonable efforts to take all action and to do all things
necessary, proper or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the closing conditions set forth in Section 7 below).
(b) Notices and Consents. The Company shall, and Sellers will cause
the Company to, give any notices to third parties and will cause the Company to
use its commercially reasonable efforts to obtain the third-party consents set
forth in or contemplated by Sections 3(a) and 4(c) (unless otherwise indicated
on Section 4(c) of the Disclosure Schedule). Buyer will give any notices to the
third-parties and will use commercially reasonable efforts to obtain the
third-party consents set forth on Annex II or contemplated by Section 3(b). Each
of the Parties will give any notices to, make any filings with and use their
respective commercially reasonable efforts to obtain any authorizations,
consents and approvals of Governmental Entities in connection with the matters
referred to in Sections 3(a)(ii), 3(b)(iii) and 4(c)(i) above. Without limiting
the generality of the foregoing, within ten (10) Business Days after the date
hereof, each of the Parties will file any Notification and Report Forms and
related material that he, she or it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the Xxxx-Xxxxx-Xxxxxx Act, or any similar reports required to be
filed with any foreign jurisdiction, will use his, her or its commercially
reasonable efforts to obtain a waiver from the applicable waiting period and
will make any further filings pursuant thereto that may be necessary, proper or
advisable in connection therewith. Notwithstanding anything to the contrary
contained in this Agreement, neither Buyer nor any of its Affiliates shall be
required to hold separate (including by trust or otherwise) or divest any of
their respective businesses or assets or agree to any limitation on the
operation or conduct of their respective businesses with respect to obtaining
such authorization, consents, approvals and waivers referred to in this Section
5(b). Sellers shall submit to the New Jersey Department of Environmental
Protection ("NJDEP"): (a) within five (5) Business Days of execution of this
35
Agreement, an Initial Notice under ISRA (the "GIN"); and (b) no later than ten
(10) Business Days after the execution of this Agreement, a request for
Expedited Review with supporting documentation, which shall include, but not be
limited to (i) the previously submitted December 23, 2002 Preliminary
Assessment, (ii) a Negative Declaration Affidavit, and (iii) the NJDEP Entire
Site Unrestricted Use No Further Action Letter and Covenant Not to Xxx dated
January 6, 2003.
(c) Operation of Business. Between the date of this Agreement and the
Closing Date , the Company shall not, and Sellers will cause the Company and its
Subsidiaries not to, engage in any practice, take any action or enter into any
transaction outside the Ordinary Course of Business except for such actions and
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, except as otherwise consented to in writing by Buyer or as set
forth in Section 5(c) of the Disclosure Schedule or otherwise contemplated
hereby, the Company shall not, and the Sellers will cause the Company and its
Subsidiaries not to,
(i) declare, set aside or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase or
otherwise acquire any of its capital stock,
(ii) take any action out of the Ordinary Course of Business to
generate Cash or increase Net Working Capital;
(iii) change or modify its credit, collection or payment
policies, procedures or practices, including acceleration of
collections of receivables (whether or not past due) or failure to pay
or delay payment of payables or other liabilities outside the Ordinary
Course of Business;
(iv) reduce the volume of production or purchases of inventory,
other than as a result of then current reasonable business demands in
the Ordinary Course of Business;
(v) transfer, issue, sell or dispose of any shares of capital
stock or other securities of the Company, or grant options, warrants,
calls or other rights to purchase or otherwise acquire capital stock
or other securities of the Company or amend any outstanding options,
warrants, calls or other such rights;
(vi) effect any recapitalization, reclassification, stock split
or like change in the capitalization of the Company;
(vii) incur, create, assume or guarantee any Indebtedness except
as set forth on Section 5(c)(vii) of the Disclosure Schedule;
(viii) cancel or compromise any debt or claim or waive or release
any material right of the Company except in the Ordinary Course of
Business;
(ix) permit the Company to enter into or agree to enter into any
merger or consolidation with, any Person, and not engage in any new
36
business or invest in, make a loan, advance (other than advances to
employees related to travel and expenses made in the Ordinary Course
of Business) or capital contribution to, or otherwise acquire the
securities of any other Person or to form any new Subsidiary;
(x) make or revoke any election relating to Taxes, settle or
compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or
except as may be required by applicable Law or GAAP, make any change
to any of its methods of accounting or methods of reporting income or
deductions for Tax or accounting practice or policy from those
employed in the preparation of its Tax Return most recently filed
prior to the date of this Agreement;
(xi) agree to make any capital expenditures except for such
capital expenditures which are set forth on Section 5(c)(xi) of the
Disclosure Schedule;
(xii) amend or modify the Company's articles of incorporation or
by-laws;
(xiii) terminate the employment or services of any officer or key
employee of the Company;
(xiv) except as set forth on Section 5(c)(xiv) of the Disclosure
Schedule, adopt, enter into or amend any Employee Benefit Plan, or
enter into any employment, consulting or severance agreement, except
to the extent required to comply with applicable Law or the terms of
any contract in effect prior to the date hereof; or
(xv) otherwise engage in any practice, take any action or enter
into any transaction of the sort described in Section 4(h) above.
(d) Preservation of Business. The Company shall, and Sellers shall
cause the Company, to use commercially reasonable efforts to keep its business
and properties substantially intact, including its present operations, physical
facilities, working conditions, insurance policies and relationships with
lessors, licensors, suppliers, customers, employees and others having a business
relationship with the Company. Without limiting the generality of the foregoing,
except as otherwise consented to in writing by Buyer, the Company shall, and
Sellers will cause the Company to: (i) (A) maintain the books, accounts and
records of the Company in the Ordinary Course of Business and in accordance with
GAAP, (B) continue to collect accounts or trade receivables and pay accounts
payable in the Ordinary Course of Business, and (C) comply with all contractual
and other obligations applicable to the operations of the Company in the
Ordinary Course of Business; and (ii) continue to make capital expenditures in
the Ordinary Course of Business consistent with the disclosure set forth on
Section 5(c)(xi) of the Disclosure Schedule.
(e) Access.
(i) Between the date of this Agreement and the Closing Date, the
Company shall permit, and Sellers will permit and will cause the
Company to permit, upon prior notification and approval,
representatives of Buyer (including legal counsel, accountants and
other advisors) to have access at all reasonable times, during normal
37
business hours, and in a manner so as not to interfere with the normal
business operations of the Company, to all premises, properties,
personnel, books, records (including Tax records), Contracts and
documents of or pertaining to Company. Additionally, as reasonably
requested by Buyer and subject to the approval of the Company's chief
executive officer in each instance, the Company and Sellers will
coordinate or will cause to be coordinated meetings (whether in person
or by telephone) between representatives of customers of, or suppliers
to, the Company and representatives of Buyer. All requests by Buyer
for any access, for Confidential Information, meetings with Company
personnel or the Company's customers or suppliers or inspection of the
Company's properties shall be made to the Company's CEO. Buyer hereby
confirms and agrees that it will observe the terms and conditions of
the Confidentiality Agreement, and shall be deemed the signatory to
the Confidentiality Agreement as if it had been an original signatory
thereto. Between the date of this Agreement and Closing, the Company
will provide Buyer with copies of unaudited balance sheets of the
Company and the related unaudited statements of income and cash flows
for each month end and quarter end after the date of the Most Recent
Balance Sheet as promptly as practicable, but in any event within
thirty (30) calendar days, after each such month end and quarter end,
prepared in the Ordinary Course of Business in accordance with GAAP
applied on a basis consistent with past practice.
(ii) Notwithstanding anything to the contrary set forth herein or
in any other agreement (including the Confidentiality Agreement) to
which the Parties are parties or by which they are bound, the
obligations of confidentiality contained herein and therein, as they
relate to the transactions contemplated by this Agreement, shall not
apply to the tax structure or tax treatment of such transactions, and
each Party (and any employee, representative or agent of any Party)
may disclose to any and all Persons, without limitation of any kind,
the tax structure and tax treatment of such transactions; provided,
however, that such disclosure shall not include the name (or other
identifying information not relevant to the tax structure or tax
treatment) of any Person and shall not include information for which
nondisclosure is reasonably necessary in order to comply with
applicable securities laws.
(f) Notice of Developments. The Company and Sellers will give prompt
written notice to Buyer of any breach of any of the representations and
warranties in Section 4 above. Each Party will give prompt written notice to the
others of any breach of any of his, her or its own representations and
warranties in Section 3 above. No disclosure by any Party pursuant to this
Section 5(f), however, shall be deemed to amend or supplement Annex I, Annex II
or the Disclosure Schedule or to prevent or cure any misrepresentation, breach
of warranty or breach of covenant.
(g) Exclusivity. Neither the Company nor any Seller shall (and
Sellers will cause the Company not to) (i) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of the Company (including any acquisition structured as a merger,
consolidation or share exchange), (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing, or (iii) sell, transfer, assign,
hypothecate, mortgage or pledge and of the Company Shares or sell, transfer or
assign all or substantially all of the assets of the Company, or agree to do any
of the foregoing.
38
(h) Updates to Environmental Assessments. Within thirty (30) days
after the date hereof, the Company shall, and Sellers shall cause the Company
to, use its commercially reasonable efforts to obtain and have delivered to
Buyer at Buyer's expense updates of the Phase I Environmental Site Assessments
previously prepared for the Company in December 2002, copies of which have
previously been provided to Buyer.
(i) Repayment of Loans and Affiliate Transactions. On or prior to the
Closing Date, the Company and Sellers shall cause (i) all loans or other
advances made by the Company to any of Sellers or any Affiliate of the Company
or any of Sellers, including any accrued and unpaid interest thereon, to be
repaid in full in cash or by offset to the Company, and (ii) any and all
Contracts or other arrangements between the Company and any Affiliate of the
Company or any Affiliate of any Seller, other than those listed on Section 5(i)
of the Disclosure Schedule, to be terminated.
(j) Indebtedness. No later than three (3) Business Days prior to the
Closing Date, the Company and Sellers shall use their commercially reasonable
efforts to deliver to Buyer (i) forms of pay-off letters (if customarily
available) in respect of all outstanding Indebtedness identified by Buyer
reasonably in advance of the Closing that is anticipated to be repaid with
financing supplied by the Buyer as part of the transactions contemplated by this
Agreement and (ii) the notice setting forth the Estimated Purchase Price.
(k) Transaction Expenses. No later than three (3) Business Days prior
to the Closing Date, the Company and Sellers shall use their commercially
reasonable efforts to deliver to Buyer pay-off letters in respect of the
Transaction Expenses which will remain unpaid as of the Closing from any and all
third-party service providers to whom payments are required to be made by the
Company in connection with the transactions contemplated by this Agreement and
which third-party service providers customarily provide pay-off letters. The
pay-off letters shall provide that the amounts set forth therein represent
payment in full for all fees and expenses payable by the Company in connection
with the transactions contemplated by this Agreement through the Closing Date.
At or prior to the Closing either the Company or Sellers shall pay and discharge
all Transaction Expenses or such Transaction Expenses shall be deducted from the
Purchase Price in accordance with Section 2(b).
(l) Assistance with Financing. In order to assist with the financing
of the transactions contemplated hereby, the Company shall, to the extent
requested in writing by Buyer and at Buyer's expense, reasonably cooperate with
Buyer and use its commercially reasonable efforts to assist Buyer in obtaining
the financing contemplated under the Commitment Letters.
39
(m) Company Stock Options. To the extent such Option Termination
Agreements (as defined below) were not entered into in connection with the
execution hereof, the Company shall, and Sellers will cause the Company to,
notify all holders of Company Stock Options as soon as practicable after the
date of this Agreement that this Agreement has been approved by the board of
directors of the Company and executed by the Company and will, consistent with
the Company Stock Options between the Company and the holders of such Company
Stock Options, cause each holder of the Company Stock Options, in connection
with and contingent upon Closing hereunder, to execute and deliver an agreement
in the form attached hereto as Exhibit E (each an "Option Termination
Agreement") pursuant to which such holder will agree not to exercise such
Company Stock Option and to surrender and agree to the cancellation of such
Company Stock Option in exchange for the right to receive the payment specified
in the Option Termination Agreement (the "Option Cash Consideration").
(n) Restricted Stock Agreement; Corporate Governance Agreement. At or
prior to the Closing, the Company shall, and the Sellers shall cause the Company
to, cause (i) the Restricted Stock Agreement (the "Restricted Stock Agreement")
by and among the Company, Xxxx X. XxXxxx and Xxxxxxx X. Xxxxx, Xx., dated as of
May 19, 1998, and (ii) the Agreement Regarding Corporate Governance (the
"Corporate Governance Agreement") by and among the Company, Xxxx X. XxXxxx and
Xxxxxxx X. Xxxxx, Xx., dated as of May 19, 1998, to be terminated and be of no
further force and effect and the Company to be released from all Liability
thereunder.
(o) Lehigh Puerto Rico; Puerto Rico Asset Purchase Agreement. At or
prior to the Closing, the Company shall, and the Sellers shall cause the Company
to, cause Lehigh Puerto Rico to obtain releases, in form and substance
reasonably satisfactory to Buyer, pursuant to which Lehigh Puerto Rico and the
Company shall be fully and unconditionally released from all outstanding
Liabilities, including, but not limited to, all Liabilities created by or
arising from that certain Asset Purchase Agreement, dated as of May 15, 2000,
between Lehigh Puerto Rico and L.P.P.R., Inc. (the "Puerto Rico Asset Purchase
Agreement").
(p) Split Dollar Life Insurance Assignment. Prior to the Closing,
Xxxx X. XxXxxx shall cause the split dollar life insurance agreement, described
more fully on Section 5(p) of the Disclosure Schedule, to be terminated, and, in
connection therewith, pay to the Company in cash an amount equal to the excess
of the cash surrender value of such policy over any policy loans taken
thereunder, and, the Company shall transfer ownership of the policy to Xxxx X.
XxXxxx (subject to such policy loan) and release any collateral assignments and
other security, and the Company shall be fully and unconditionally released from
any Liabilities the Company may have had with respect to the split dollar life
insurance policies on the life of Xxxx X. XxXxxx with respect to which such
split dollar life insurance agreements relate, including, but not limited to,
with respect to the payment of premiums for such policy (collectively, the
"Split Dollar Life Insurance Assignment"). At or prior to Closing, Xxxx X.
XxXxxx shall provide evidence, in form and substance reasonably satisfactory to
Buyer, that the Split Dollar Life Insurance Assignment has been effected.
(q) Buyer's Financing. Buyer will use commercially reasonable efforts
to obtain the financing contemplated by the Commitment Letters.
40
(r) Release of Liens. At or prior to the Closing, the Company shall,
and the Sellers shall cause the Company to, use its commercially reasonable
efforts to cause the Liens identified by Buyer reasonably in advance of the
Closing (but not including the Liens set forth on Section 5(r) of the Disclosure
Schedule unless Buyer's Lenders require any of such Liens to be released at the
Closing) to be released and terminated; provided that to the extent any of such
Liens secure any Indebtedness which constitutes Closing Indebtedness (the
"Specified Liens"), Sellers shall only be obligated to use commercially
reasonable efforts to have such Liens released and terminated to the extent that
Buyer at Closing provides the funds to repay such Indebtedness. The Company
shall, and the Sellers shall cause, the Company to use its commercially
reasonable efforts to file, or cause to be filed, Form UCC-3 termination
statements and obtain, or use its commercially reasonable efforts to cause to be
obtained, any other releases, consents, waivers, or similar documents necessary
to effect the release of such Liens as and to the extent contemplated in the
previous sentence.
(s) Payment of Accrued Bonuses. On the day following the Closing, the
Buyer will cause the Company to pay the Specially Designated Employee an amount
equal to the Specially Designated Employee's pro-rata portion (through the date
of termination of employment) of the Company's accrued 2003 bonus (provided such
annualized bonus does not exceed $50,000) as of the Closing Date (the "Special
Bonus Payment"). The Special Bonus Payment shall not constitute a Transaction
Expense and shall not result in any reduction to the Purchase Price. Other than
the Special Bonus Payment that will be made pursuant to the previous sentence,
the Company is not required to pay any employee any portion of the Company's
accrued 2003 bonus at or prior to the Closing; however, Buyer agrees that it
shall cause the Company to pay such accrued 2003 bonuses (to the extent accrued
as of the Closing) to the Company's current employees following the end of the
2003 fiscal year in the Ordinary Course of Business but not later than 70 days
following the Closing Date. Buyer shall consult with Sellers' Representative
with respect to the allocation of such payments to such employees.
(t) SERP Payments. On the Closing Date, the Company shall pay a lump
sum payment ("SERP Payment") to Xxxxxxx Xxxx and to Xxxxxxx X. Xxxxx, Xx., in
full satisfaction of the benefits accrued as of such date by Xxxxxxx Xxxx under
the Company's Supplemental Executive Retirement Plan and by Xxxxxxx X. Xxxxx,
Xx. under the supplemental retirement benefit provisions of his employment
agreement.
6. Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification thereof under Section 8 below or to the
extent that such costs and expenses would constitute Transaction Expenses).
(b) Litigation Support. In the event that and for so long as any
Party actively is contesting or defending against any Legal Proceeding in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
41
occurrence, event, incident, action, failure to act or transaction on or prior
to the Closing Date involving Company, each of the other Parties (if and only to
the extent that neither (A) such other Party or Parties are not adverse to the
contesting or defending party in such Legal Proceeding nor (B) the contesting or
defending Party is entitled to indemnification therefor under Section 8 below),
will cooperate with him, her or it and his, her or its counsel in the contest or
defense, make available their personnel and provide such testimony and access to
their books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party.
(c) D & O Insurance. Buyer will cause the Company to purchase a three
(3) year extension of the Company's existing directors' and officers' insurance
policy; provided, that, the cost of such extension shall not exceed 150% of the
current annual premium of such policy; provided, however, in the event the cost
exceeds such amount, Buyer shall cause the Company to purchase as favorable a
policy as possible at such price, or, at the election of Sellers, Sellers may
pay such additional cost so that a three (3) year extension of the current
policy is purchased.
(d) Severance Pay Plan. Buyer will cause the Company for a period of
one (1) year following the Closing to maintain a severance pay plan
substantially in the form of Section 6(d) of the Disclosure Schedule.
(e) Transition. For a period of two (2) years following the Closing,
no Seller will, directly or indirectly, take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Company from maintaining the same
business relationships with the Company after the Closing as it maintained with
the Company prior to the Closing.
(f) Confidentiality. Sellers will treat and hold as confidential all
Confidential Information, refrain from using any Confidential Information except
in connection with this Agreement and any other commercially reasonable
non-competition purpose (including preparation of Tax Returns) and, at the
request of Buyer, deliver promptly to Buyer or destroy all tangible embodiments
(and all copies) of Confidential Information in their possession, other than
with respect to Confidential Information being used solely for commercially
reasonable non-competition purposes (including the preparation of Tax Returns),
which may be retained for so long as such Confidential Information is being used
solely for such purposes. In the event that any Seller is requested or required
pursuant to oral or written question or request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process to disclose any Confidential Information, such Seller will
notify Buyer promptly of the request or requirement so that Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 6(f). If, in the absence of a protective order or the receipt of a
waiver hereunder, any Seller is, on the advice of counsel, compelled to disclose
any Confidential Information to any tribunal or else stand liable for contempt,
such Seller may disclose the Confidential Information to the tribunal; provided,
however, such Seller will use her, his or its commercially reasonable efforts to
obtain, at the reasonable request and expense of Buyer, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as Buyer will designate.
42
(g) Covenant Not to Compete; Non-Solicitation.
(i) For a period of five (5) years from and after the Closing
Date (the "Restricted Period"), each Seller will not without the
written consent of the Company and except on behalf of the Company,
directly or indirectly, engage in, own (in whole or in part), manage,
control, participate in, work for, permit his name to be used by,
consult with, render services for, do business with or otherwise
assist in any manner or maintain any interest (whether proprietary,
financial or otherwise) in, or provide or arrange any financing for,
any Person or entity (whether as director, officer, employee, agent,
representative, security holder, equity owner, partner, member,
consultant or otherwise) engaged in any way in any businesses
currently conducted by the Company; provided, however, that ownership
of less than three percent (3%) of the outstanding stock of any
publicly-traded corporation will not be deemed engagement in any of
its businesses; and, provided further, that nothing herein shall
prohibit Xxxx X. XxXxxx from maintaining his ownership interest and
other relationship with L.P.P.R., Inc., so long as L.P.P.R., Inc. (or
any of its subsidiaries or Affiliates) does not, directly or
indirectly, compete with the Company. If the final judgment of a court
of competent jurisdiction declares that any term or provision of this
Section 6(g) is invalid or unenforceable, the Parties agree that the
court making the determination of invalidity or unenforceability will
have the power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this
Agreement will be enforceable as so modified after the expiration of
the time within which the judgment may be appealed.
(ii) Without limiting the generality of Section 6(g)(i) above,
each Seller further agrees that during the Restricted Period, such
Seller will not, directly or indirectly, cause, solicit, induce or in
any manner encourage (A) any independent contractor, producer,
customer, licensor, supplier, agent or business partner of the
Company, to terminate or adversely change her, his or its relationship
with the Company or (B) any present employee of the Company or an
employee during the Restricted Period, to leave the employ of the
Company or hire, employ or otherwise engage any such individual;
provided that the restrictions set forth in this paragraph (ii) shall
not apply to Xxxxxxx Xxxx.
(iii) The covenants and undertakings contained in this Section
6(g) relate to matters which are of a special, unique and
extraordinary character and a violation of any of the terms of this
Section 6(g) will cause irreparable injury to the parties, the amount
of which will be impossible to estimate or determine and which cannot
be adequately compensated. Therefore, Buyer will be entitled to an
injunction, restraining order or other equitable relief from any court
of competent jurisdiction in the event of any breach of this Section
6(g). The rights and remedies provided by this Section 6(g) are
cumulative and in addition to any other rights and remedies which
Buyer may have hereunder or at law or in equity. Buyer and Sellers
acknowledge that the Purchase Price represents fair and adequate
consideration for all the Company Shares and accordingly, no portion
of the Purchase Price is allocable to the foregoing covenant.
43
7. Conditions to Obligation to Close.
(a) Conditions to Buyer's Obligation. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4
(other than the representations and warranties set forth in Sections
4(a), (b) and (c)) above shall be true and correct in all material
respects at and as of the Closing Date, except to the extent that such
representations and warranties are qualified by terms such as
"material", "Material Adverse Effect," and "Material Adverse Change"
in which case such representations and warranties shall be true and
correct in all respects at and as of the Closing Date, and the
representations and warranties set forth in Section 3(a) and Sections
4(a), (b) and (c) above shall be true and correct in all respects at
and as of the Closing Date;
(ii) the Company and Sellers shall have performed and complied
with all of their covenants hereunder in all material respects through
the Closing, except (A) to the extent that such covenants are
qualified by terms such as "material", "Material Adverse Effect," and
"Material Adverse Change" and (B) with respect to the covenants
contained in Sections 5(i), (j), (k), (m), (n), (o), (p), (r) and (s)
in which case Sellers shall have performed and complied with all of
such covenants in all respects through the Closing;
(iii) the Company shall have procured all of the third-party
consents specified in Section 5(b) above, each of which shall be
reasonably satisfactory to Buyer in form and substance;
(iv) no action, suit or proceeding shall be pending before any
Governmental Entity wherein an unfavorable injunction, judgment,
order, decree, ruling or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement, (B) cause any of
the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of Buyer to own
Company Shares and to control Company or (D) affect materially and
adversely the right of Company to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling or
charge shall be in effect);
(v) Sellers shall have delivered to Buyer a certificate to the
effect that each of the conditions specified above in Sections 7(a)(i)
through (iii) is satisfied in all respects;
(vi) all applicable waiting periods (and any extensions thereof)
under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or otherwise been
terminated;
(vii) Buyer shall have received from the Company a Certificate of
Secretary and incumbency certificate, including the following
attachments (A) Articles of Incorporation, certified as of a recent
date by the Secretary of State of the Commonwealth of Pennsylvania,
(B) bylaws of the Company, and (C) resolutions of directors and
shareholders, if necessary, approving this Agreement and the
transaction contemplated hereby;
44
(viii) Sellers shall have delivered to Buyer copies of the
certificate of good standing of Company issued on or soon before the
Closing Date by the Secretary of State (or comparable officer) of the
Commonwealth of Pennsylvania;
(ix) each Seller shall have provided Buyer with an affidavit of
non-foreign status that complies with Section 1445 of the Code;
(x) Buyer shall have received financing under and in accordance
with the terms of the Commitment Letters;
(xi) the Executive Agreement shall not have been terminated by
Xxxx X. XxXxxx and shall be in full force and effect;
(xii) the Closing EBITDA shall not be less than Fifteen Million
Two Hundred Fifty Thousand Dollars ($15,250,000); and
(xiii) Provided that Buyer shall have provided the funds to do
so, Buyer shall have received evidence satisfactory to Buyer that all
Indebtedness of the Company identified by Buyer reasonably in advance
of the Closing shall have been repaid and extinguished or will be
repaid and extinguished at the Closing;
(xiv) Provided that Buyer shall have provided the funds to do so,
Buyer shall have received evidence satisfactory to Buyer that all
Specified Liens on the assets and properties of the Company identified
by Buyer reasonably in advance of the Closing have been
unconditionally released and terminated;
(xv) the updates to the Phase I Environmental Site Assessments
referred to in Section 5(h) hereof shall have been obtained; and
(xvi) all actions to be taken by Sellers in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Buyer.
Buyer may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Sellers' Obligation. Sellers' obligation to
consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of
the Closing Date, except to the extent that such representations and
warranties are qualified by terms such as "material" and "Material
Adverse Effect," in which case such representations and warranties
shall be true and correct in all respects at and as of the Closing
Date;
45
(ii) Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing,
except to the extent that such covenants are qualified by terms such
as "material" and "Material Adverse Effect," in which case Buyer shall
have performed and complied with all of such covenants in all respects
through the Closing;
(iii) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) Buyer shall have delivered to Sellers a certificate to the
effect that each of the conditions specified above in Sections 7(b)(i)
through (ii) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof)
under the Xxxx-Xxxxx-Xxxxxx Act and other similar provisions required
by any foreign jurisdiction shall have expired or otherwise been
terminated.
Sellers may waive any condition specified in this Section 7(b) if
they execute a writing so stating at or prior to the Closing.
8. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties contained in Xxxxxxx 0 xxxxx (xxxxx xxxx Xxxxxxxx
0(x), (x), (x), (x) and (x) and subsection (i)(A) of Section 4(l) above) shall
survive the Closing hereunder and continue in full force and effect for a period
of eighteen (18) months thereafter. The representations and warranties contained
in subsection (i)(A) of Section 4(l) above shall survive the Closing and
continue in full force and effect for a period of five (5) years. All of the
other representations and warranties contained in this Agreement (including the
representations and warranties contained in Section 3 above and the
representations and warranties contained in Sections 4(b), (d), (f), (k) and (x)
above) shall survive the Closing and continue in full force and effect until
thirty (30) days following the expiration of the applicable statutes of
limitations (including any extension thereto, whether automatic or permissive).
(b) Indemnification Provisions for Buyer's Benefit.
(i) Each Seller shall, jointly and severally, indemnify, defend
and hold harmless Buyer, the Company and their respective directors,
officers, employees, stockholders, Affiliates, successors and assigns
(collectively the "Buyer Indemnified Parties") from and against:
46
(A) any and all Damages resulting from, arising out of or
caused by the failure of any representation or warranty contained
herein or in the Closing Certificate referred to in Section
7(a)(v) or the Disclosure Schedule (other than the
representations and warranties contained in Section 3(a)), to be
true and correct in all respects as of the date made; provided
that Buyer makes a written claim for indemnification against the
Sellers pursuant to Section 10(h) below within the applicable
survival period, if any, set forth in Section 8(a); provided
further, that (x) that all references to materiality, Material
Adverse Effect and Material Adverse Change in the representations
and warranties contained in Section 4 hereof shall be omitted and
disregarded from this Agreement for the purpose of determining
the amount of Damages hereunder; (y) Sellers shall not have any
obligation to indemnify any Buyer Indemnified Party from and
against any Damages resulting from or caused by the failure of
any representation or warranty contained in Section 4 to be true
and correct in all respects as of the date made (other than the
representations and warranties contained in Sections 4(b), (d),
(f), (k) and (x) and subsection (i)(A) of Section 4(l) above)
until the Buyer Indemnified Parties have suffered Damages by
reason of such breach in excess of an amount equal to Five
Hundred Thousand Dollars ($500,000) (the "Basket Amount") (after
which, Sellers will only be obligated to indemnify the Buyer
Indemnified Parties from and against all such Damages to the
extent such Damages exceed, in the aggregate, the Basket Amount)
and (z) the aggregate amount of all Damages for which Sellers
shall be obligated to indemnify the Buyer Indemnified Parties
with respect the failure of the representations and warranties of
Sellers contained in Section 4 to be true and correct in all
respects as of the date made (other than the representations and
warranties contained in Sections 4(b), (d), (f), (k) and (x) and
subsection (i) (A) of Section 4(l) above) shall be limited to Ten
Million Dollars ($10,000,000) and, with respect to the
representations and warranties contained in Section 4(x), shall
be limited to fifty percent (50%) of the Purchase Price and,
further, with respect to the representations and warranties
contained in Sections 4(b), (d), (f) and (k) shall be limited to
one hundred percent (100%) of the Purchase Price.
(B) any and all Damages resulting from, arising out of or
caused by the breach of any covenant or other agreement contained
in this Agreement (other than the covenants contained in Sections
2(a) and Section 6 above);
(C) any and all Transaction Expenses (except to the extent
that such are deducted from the Purchase Price in accordance with
Section 2(b) or have been paid prior to the Closing); and
(D) any and all Taxes of the Company and its Subsidiaries
with respect to any Tax period ending on or prior to the Closing
Date and the pre-Closing portion of any Tax period beginning
before and ending after the Closing Date (determined as provided
in Section 10(p)(viii)), and any and all Damages with respect
thereof; provided, however, that in the case of Taxes which would
have constituted Accrued Other Taxes had such Taxes been finally
determined to be due and payable as of the day before the Closing
Date, such indemnity shall not exceed the excess, if any, of (x)
fifty percent (50%) of such Taxes over (y) the Accrued Other
Taxes Adjustment, and any and all Damages with respect thereof.
47
(ii) Each Seller shall severally (and not jointly and severally)
indemnify, defend and hold harmless the Buyer Indemnified Parties from
and against any and all Damages resulting from, arising out of or
caused by (A) the breach of such Seller's individual covenants
contained in Section 2(a) or Section 6 above or (B) the failure of
such Seller's representations and warranties contained in Section 3(a)
above to be true and correct in all respects as of the date made;
provided that Buyer makes a written claim for indemnification against
such Seller pursuant to Section 10(h) below within the applicable
survival period, if any, set forth in Section 8(a).
(iii) Any Damages payable hereunder shall be (A) reduced for
Income Tax benefits actually recognized by the Buyer Indemnified
Parties as a result of the event giving rise to payments hereunder for
such Damages and increased for any Taxes actually incurred by the
Buyer Indemnified Parties as a result of the receipt of payments
hereunder for such Damages, and (B) calculated net of any insurance
proceeds actually received by Buyer or the Company in respect thereof.
(iv) Sellers shall have no recourse against the Company or its
directors, officers, employees, Affiliates, agents, attorneys,
representatives, assigns or successors for any indemnification claims
asserted by the Buyer Indemnified Parties.
(c) Indemnification Provisions for Sellers' Benefit. In the event
Buyer breaches any of its representations, warranties and covenants contained
herein and provided that any Seller makes a written claim for indemnification
against Buyer pursuant to Section 10(h) below within the survival period (if
there is an applicable survival period pursuant to Section 8(a) above), then
Buyer agrees to indemnify, defend and hold harmless each Seller, its trustees,
heirs and agents, and any successors to Seller's interests and their trustees,
heirs and agents (the "Seller Indemnified Parties") from and against the
entirety of any Damages suffered resulting from or caused by the breach.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third-Party Claim") which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is actually and materially
prejudiced.
(ii) (A) Except as provided in clause (B) below, any Indemnifying
Party will have the right to assume the defense of the Third-Party
Claim with counsel of his or its choice reasonably satisfactory to the
Indemnified Party at any time within thirty (30) days after the
48
Indemnified Party has given notice of the Third-Party Claim; provided,
however, that the Indemnifying Party must conduct the defense of the
Third-Party Claim actively and diligently thereafter in order to
preserve its rights in this regard.
(B) Buyer shall have the exclusive right to control the
conduct of any Third Party Claim with respect to Taxes; provided,
however, that, in the case of a Third Party Claim with respect to
Taxes that Sellers are liable or responsible for under Section 8
or otherwise, (i) Buyer shall keep the Sellers' Representative
reasonably informed and consult seriously and in good faith with
the Sellers' Representative and its tax advisors with respect to
any issue relating to such Third Party Claim; (ii) Buyer shall
promptly provide the Sellers' Representative with copies of all
correspondence, notices and other written materials received from
any taxing authorities and shall on a current basis otherwise
keep the Sellers' Representative and its tax advisors advised of
significant developments in the Third Party Claim and of
significant communications involving representatives of the
taxing authorities with respect to the Third Party Claim; (iii)
the Sellers' Representative may request that Buyer take a
position in respect of such Third Party Claim, and Buyer shall do
so provided that (A) there exists substantial authority for such
position within the meaning of the accuracy-related penalty
provisions of Section 6662 of the Code and (B) the adoption of
such position would not adversely affect the Tax liability of
Buyer or any of its Affiliates for any post-Closing period or
portion thereof (unless the Sellers' Representative agrees on
behalf of Sellers to indemnify and hold harmless Buyer and its
Affiliates from and against such adverse effect); (iv) Buyer
shall provide the Sellers' Representative with a copy of any
written submission to be sent to a taxing authority prior to the
submission thereof (with reasonable time for review by the
Sellers' Representative and its tax advisors) and shall give
serious and good faith consideration to any comments or suggested
revisions that the Sellers' representative or its tax advisors
may have with respect thereto; and (v) there shall be no
settlement, resolution, or closing or other agreement with
respect thereto without the consent of the Sellers'
Representative, which consent will not be unreasonably withheld
or delayed. Notwithstanding the foregoing, the withholding of
consent will not be regarded as unreasonable if the Sellers'
Representative receives, and provides Buyer a copy of, written
advice from a tax advisor reasonably satisfactory to Buyer that
there is a significant probability that, by pursuing the dispute
further, Buyer could obtain a more favorable outcome (taking into
account both pre-Closing and post-Closing Tax periods of the
Company and its Affiliates) than that reflected in the proposed
settlement, resolution, or closing or other agreement.
(iii) So long as the Indemnifying Party has assumed and is
conducting the defense of the Third-Party Claim in accordance with
Section 8(d)(ii) above, (A) the Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement with respect to
the Third-Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the payment in full of
money damages by one or more of the Indemnifying Parties and does not
impose an injunction or other equitable relief upon the Indemnified
49
Party and (B) the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the
Third-Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably). The Parties
hereto agree to cooperate fully with each other in connection with the
defense, negotiation or settlement of any Third Party Claim.
(iv) In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third-Party Claim in accordance with
Section 8(d)(ii) above, however, (A) the Indemnified Party may defend
against and consent to the entry of any judgment or enter into any
settlement with respect to, the Third-Party Claim in any manner he or
it reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith) and (B) the Indemnifying Parties will remain
responsible for any Damages the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of or caused by the
Third-Party Claim to the fullest extent provided in this Section 8.
(e) Direct Claims. With respect to any claim by an Indemnified Party
for Damages not involving a Third-Party Claim (a "Direct Claim") the Indemnified
Party and Indemnifying Party shall attempt in good faith to resolve any issues
in dispute with respect to such Direct Claim following the delivery of a notice
relating to a Direct Claim. In the event the parties are unable to resolve the
issues in dispute, the Indemnified Party will be free to pursue such remedies as
may be available to the Indemnified Party on the terms and subject to the
provisions of this Section 8.
(f) Exclusive Remedy. Buyer and Sellers acknowledge and agree that,
following the Closing, the foregoing indemnification provisions in this Section
8 shall be the exclusive remedy of the Buyer Indemnified Parties and Seller
Indemnified Parties with respect to the Company, this Agreement or the
transactions contemplated by this Agreement, except with respect to any claims
or causes of actions for fraud and/or intentional misrepresentation by a Party
and to any adjustment to the Purchase Price in accordance with Section 2 hereof.
Without limiting the generality of the foregoing, the Buyer Indemnified Parties
waive any statutory, equitable, or common law rights or remedies relating to any
Environmental Requirements or any Environmental Claim. Notwithstanding the
foregoing, no Party shall be precluded from bringing an action for specific
performance or other equitable remedy to require a Party to perform its
obligations under this Agreement.
(g) Escrow Agreement. Any amount in respect of Damages to which any
Buyer Indemnified Party is entitled to receive under this Section 8 shall
initially be disbursed from the Indemnity Escrow Amount in accordance with the
terms of the Escrow Agreement until the entire Indemnity Escrow Amount has been
disbursed.
(h) Adjustment to Purchase Price. The Parties agree to treat all
payments made under Section 8 as adjustments to the Purchase Price for Tax
purposes, unless a contrary treatment is required by applicable Law.
50
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) Buyer and the Sellers' Representative may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written notice
to Sellers' Representative at any time prior to the Closing (A) in the
event either the Company or any Seller has breached any
representation, warranty or covenant contained in this Agreement in
any material respect, Buyer has notified Sellers' Representative of
the breach and the breach is incapable of being cured or, if capable
of being cured, has continued without cure for a period of twenty (20)
days after the notice of breach or (B) if the Closing shall not have
occurred on or before November 6, 2003 by reason of the failure of any
condition precedent under Section 7(a) hereof (unless the failure
results primarily from Buyer itself breaching any representation,
warranty or covenant contained in this Agreement); and
(iii) Sellers' Representative may terminate this Agreement by
giving written notice to Buyer at any time prior to the Closing (A) in
the event Buyer has breached any representation, warranty or covenant
contained in this Agreement in any material respect, the Sellers'
Representative has notified Buyer of the breach and the breach is
incapable of being cured or, if capable of being cured, has continued
without cure for a period of twenty (20) days after the notice of
breach or (B) if the Closing shall not have occurred on or before
November 6, 2003, by reason of the failure of any condition precedent
under Section 7(b) hereof (unless the failure results primarily from
any Seller breaching any representation, warranty or covenant
contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in Section 5(e) above and Section 10
shall survive termination.
10. Miscellaneous.
(a) Nature of Sellers' Obligations.
(i) The covenants of each Seller in Section 2(a) above concerning
the sale of his, her or its Company Shares to Buyer (but not with
respect to the payment of any adjustment to the Purchase Price to the
extent such adjustment exceeds the Purchase Price Escrow Amount), the
representations and warranties of each Seller in Section 3(a) above
concerning the transaction and the covenants of each Seller contained
in Section 6 above are individual obligations. This means that the
particular individual Seller making the representation, warranty or
covenant shall be solely responsible to the extent provided in Section
8(b)(ii) above for any Damages Buyer may suffer as a result of any
breach thereof.
51
(ii) The remainder of the representations, warranties and
covenants in this Agreement are joint and several obligations. This
means that each Seller shall be responsible to the extent provided in
Section 8(b)(i) above for the entirety of any Damages any of the Buyer
Indemnified Parties may suffer as a result of any breach thereof.
(b) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of Buyer
and Sellers' Representative; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable Law or any
listing or trading agreement concerning its publicly traded securities (in which
case the disclosing Party will use its best efforts to advise the other Parties
of such belief and provide the other Parties with an opportunity to review and
comment upon prior to making the disclosure); provided, however, that Buyer
acknowledges and agrees that (i) (A) Buyer will issue a press release
announcing, and will subsequently file with the Securities and Exchange
Commission a current report on Form 8-K and a quarterly report on Form 10-Q that
will discuss the transactions contemplated herein, and (B) the transactions
contemplated herein may be disclosed in any offering or information memorandum
or other similar document and in any "roadshow" or syndication presentations or
other marketing materials prepared in connection with Buyer's financing of the
transactions contemplated herein; and (ii) Buyer shall afford Sellers'
Representative ample time to review and comment upon, and provide written
approval of such discussions and disclosures as contemplated by the first clause
of this Section 10(b) (other than Buyer's Form 8-K and Form 10-Q).
(c) No Third-Party Beneficiaries. Except as set forth in Section 8
hereof, this Agreement shall not confer any rights or remedies upon any Person
other than the Parties and their respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) and the Confidentiality Agreement constitute the entire
agreement among the Parties and supersedes any prior understandings, agreements
or representations by or among the Parties, written or oral, to the extent they
relate in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Buyer and the Sellers' Representative; provided, however,
that Buyer may (i) assign any or all of its rights and interests hereunder to
one or more Affiliates or to any Person providing Buyer with financing relating
to the transactions contemplated hereby, and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of which cases
Buyer nonetheless will remain responsible for the performance of all of its
obligations hereunder) and (iii) assign its rights, whether in whole or in part,
under Section 6(g) or Section (8) hereunder to any Person that is a successor
(whether through stock purchase, merger, transfer of assets or otherwise) to the
Company's Lehigh Direct division or Lehigh Lithographers division.
52
(f) Counterparts. This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given (i) when delivered
personally to the recipient, (ii) one business day after being sent to the
recipient by reputable overnight courier service (charges prepaid), (iii) one
business day after being sent to the recipient by facsimile transmission or
electronic mail, or (iv) four business days after being mailed to the recipient
by certified or registered mail, return receipt requested and postage prepaid
and addressed to the intended recipient as set forth below:
If to Sellers: Copy to:
Sellers' Representative Vedder, Price, Xxxxxxx & Kammholz, P.C.
c/o Xxxxxxx X. Xxxxx, Xx. 000 X. XxXxxxx Xxxxxx
000 Xxxx Xxxxxxxx Xxxxxx, #0000 Xxxxxxx, Xxxxxxxx 00000
Xxxxxxx, Xxxxxxxx 00000 Fax: 000-000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx X. Xxxxxxx, Esq.
If to Buyer: Copy to:
Xxx Xxxxxxxx Corporation DLJ Merchant Banking Partners II, L.P.
0000 Xxxxxx Xxxxxx 00 Xxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000 Fax: 000-000-0000
Attn: Xxxx Xxxxxx Attn: Xxxxx Xxxxxxxxxxx
Copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: 000-000-0000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Xxxxxxx X. Xxxxxx, Esq.
Any Party may change the address to which notices, requests, demands,
claims and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
53
(i) Governing Law; Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the
domestic laws of the State of New York without giving effect to any
choice or conflicts of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of New York. EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT SUCH PARTY MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER, OR IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT. EACH PARTY CERTIFIES
AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF SUCH LEGAL PROCEEDING, SEEK TO
ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES
THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10(I).
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Sellers. No waiver by any Party of any provision of this Agreement or any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of Buyer and the Sellers will bear his, her or its
own costs and expenses (including investment banking and legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby (it being understood that any costs and expenses of Sellers
which are not paid by the Company prior to the Closing but remain as obligations
of the Company will be deducted from the Purchase Price as Transaction Expenses
as provided in Section 2 above). Buyer and the Company shall each pay one-half
of the filing fees in connection with the notification filing under the
Xxxx-Xxxxx-Xxxxxx Act. Buyer agrees to use its commercially reasonable efforts
to assist Sellers in minimizing any costs, fees, penalties, premiums, payments
or expenses referred to in clause (v) in the definition of "Transaction
Expenses" in Section 1 hereof. Buyer or its affiliates (or the Company following
the Closing) shall pay all costs, fees and expenses incurred in connection with
Buyer's financing and the Commitment Letters and Sellers shall not be liable for
any such costs, fees or expenses and such amounts shall not be treated as
Transaction Expenses or as a deduction to the Purchase Price.
54
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(n) Incorporation of Exhibits, Annexes and Schedules. The Exhibits,
Annexes and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Governing Language. This Agreement has been negotiated and
executed by the Parties in English. In the event any translation of this
Agreement is prepared for convenience or any other purpose, the provisions of
the English version shall prevail.
(p) Cooperation on Tax Matters.
(i) Sellers shall timely prepare or cause to be prepared and
timely file or cause to be filed all Tax Returns for the Company and
any Subsidiary which are required to be filed on or prior to the
Closing Date, and shall timely pay or cause to be paid all Taxes shown
due thereon. All such Tax Returns shall be prepared in a manner
consistent with prior practice (unless otherwise inconsistent with
applicable Law). With respect to Tax Returns required to be filed
during the period between the execution of this Agreement and the
Closing, the Sellers' Representative shall cause the Company and its
Subsidiaries to provide Buyer with copies of such completed Tax
Returns at least twenty (20) days prior to the due date for filing
thereof, along with supporting workpapers, for Buyer's review and
approval (unless such twenty (20) day period is not feasible given the
date of execution of this Agreement and the due date of the Tax
Return, in which case, Sellers' Representative shall provide copies of
such Tax Returns to Buyer as soon as practicable after execution of
this Agreement), which approval shall not be unreasonably withheld (it
being understood that so long as such Tax Returns are prepared on a
basis consistent with past practice and substantial authority exists
for the taking of a position on such Tax Returns, any withholding of
Buyer's approval with respect to such Tax Returns shall be considered
unreasonable). Sellers and Buyer shall attempt in good faith to
resolve any disagreements regarding such Tax Returns prior to the due
date for filing. In the event that Sellers and Buyer are unable to
resolve any dispute with respect to such Tax Returns at least ten (10)
days prior to the due date for filing (or such shorter period as
contemplated above), such dispute shall be resolved pursuant to
Section 10(p)(vii), which resolution shall be binding on the Parties.
(ii) Sellers shall timely prepare or cause to be prepared and
Buyer shall cooperate in good faith in timely filing or causing to be
filed all Income Tax Returns for the Company and any Subsidiary which
relate to Tax periods ending on or prior to the Closing Date and which
are filed after the Closing Date, and, to the extent Sellers are
obligated to indemnify for such Taxes under Section 8; Sellers shall
timely pay or cause to be paid all Taxes shown due thereon. All such
55
Tax Returns shall be prepared in a manner consistent with prior
practice (unless otherwise inconsistent with applicable Law). Buyer
will be provided with copies of such completed Tax Returns at least
twenty (20) days prior to the due date for filing thereof, along with
supporting workpapers for Buyer's review and approval, which approval
shall not be unreasonably withheld (it being understood that so long
as such Tax Return is prepared on a basis consistent with past
practice and substantial authority exists for the taking of a position
on such Tax Return, any withholding of Buyer's approval with respect
to such Tax Return shall be considered unreasonable). Sellers and
Buyer shall attempt in good faith to resolve any disagreements
regarding such Tax Returns prior to the due date for filing. In the
event that Sellers and Buyer are unable to resolve any dispute with
respect to such Tax Returns at least ten (10) days prior to the due
date for filing, such dispute shall be resolved pursuant to Section
10(p)(vii), which resolution shall be binding on the Parties.
(iii) (A) Except as provided above, following the Closing, Buyer
shall timely prepare or cause to be prepared and timely file or caused
to be filed all Tax Returns for the Company and any Subsidiary which
are required to be filed after the Closing Date. With respect to any
such Income Tax Return for a Straddle Period (as defined below), Buyer
shall prepare such Income Tax Return in a manner consistent with prior
practice (unless otherwise required by applicable Law) and permit
Sellers to review and comment on each such Income Tax Return prior to
filing. Sellers and Buyer shall attempt in good faith to resolve any
disagreements regarding such Income Tax Returns prior to the due date
for filing. In the event Sellers and Buyer are unable to resolve any
dispute with respect to such Income Tax Returns at least ten (10) days
prior to the due date for filing, such dispute shall be resolved
pursuant to Section 10(p)(vii), which resolution shall be binding on
the Parties.
(B) In the event Buyer has the responsibility to cause to be
filed any Tax Return pursuant to Section 10(p)(ii) or this
Section 10(p)(iii) and to the extent, but only to the extent,
Sellers are obligated to indemnify under Section 8 for any Taxes
reflected on such Tax Return, Sellers' Representative, on behalf
of the Sellers, shall no later than five (5) days prior to the
due date for the payment of Taxes shown due on such Tax Return
pay to Buyer the amount of any such Taxes for which Sellers are
obligated to indemnify under Section 8, with respect to any Tax
period ending on or prior to the Closing Date and the pre-Closing
portion of any Tax period beginning before and ending after the
Closing Date. No payment pursuant to this clause (B) shall excuse
Sellers from their indemnification obligations pursuant to
Section 8 if the amount of Taxes as ultimately determined (on
audit or otherwise) for the periods covered by such Tax Returns
exceeds the amount of Sellers' payment under this clause (B).
(iv) Nothing contained in Section 10(p)(i), (ii) or (iii) shall
excuse the Sellers from their indemnification obligations pursuant to
Section 8 with respect to Taxes. Sellers shall be liable for and shall
pay (and shall indemnify and hold harmless Buyer Indemnified Parties
against) any and all sales, use, stamp, documentary, filing,
recording, transfer or similar fees or Taxes or governmental charges
as levied by any Governmental Entity (including any interest and
penalties) in connection with the transactions contemplated by this
Agreement (other than with respect to, or in connection with, any
financing arrangement entered into by Buyer).
56
(v) Any Income Tax refunds that are received by Buyer or the
Company or any Subsidiary that relate to Income Tax periods or
portions thereof ending on or before the Closing Date shall be for the
account of Sellers, and Buyer shall pay, or cause to be paid, to the
Sellers' Representative for the benefit of Sellers, as an additional
amount of the Purchase Price, any such refund net of any Taxes, costs
or expenses actually payable by Buyer or the Company with respect
thereto within ten (10) days after receipt thereof; provided, however,
that Buyer shall be entitled to retain any such refund to the extent
such refund arises by reason of the carryback of any losses, credits
or other Tax attributes generated in any Income Tax periods or
portions thereof beginning after the Closing Date.
(vi) Buyer, the Company and Sellers shall cooperate fully, as and
to the extent reasonably requested by the other Party, in connection
with the filing of Tax Returns pursuant to this Section 10(p) and any
audit, litigation or other proceeding with respect to Taxes for such
pre-Closing tax periods. Such cooperation shall include the retention
and (upon the other Party's request) the provision of records and
information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Company and Sellers
agree (A) to retain all books and records with respect to Tax matters
pertinent to the Company and its Subsidiaries relating to any taxable
period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Buyer or
Sellers, any extensions thereof) of the respective taxable periods and
to abide by all record retention agreements entered into with any
taxing authority and (B) to give the other Party reasonable written
notice prior to transferring, destroying or discarding any such books
and records and, if the other Party so requests, Company or Sellers,
as the case may be, shall allow the other Party to take possession of
such books and records.
(vii) Any dispute as to any matter covered in this Section 10(p)
shall be resolved by an independent accounting firm mutually
acceptable to the Sellers' Representative and Buyer. The fees and
expenses of such accounting firm shall be borne equally by Sellers, on
the one hand, and Buyer on the other. If any dispute with respect to a
Tax Return is not resolved prior to the due date of such Tax Return,
such Tax Return shall be filed in the manner which the party
responsible for preparing such Tax Return deems correct.
(viii) In the case of any Tax period that includes (but does not
end on) the Closing Date (a "Straddle Period"), Sellers and Buyer
shall, unless prohibited by applicable Law, close the Tax period of
the Company and its Subsidiaries as of the close of business on the
Closing Date. If applicable Law does not permit the Company or any of
its Subsidiaries to close its Tax year on the Closing Date or in any
case in which a Tax is assessed with respect to a Tax period which
includes the Closing Date (but does not begin or end on that day), the
Taxes, if any, attributable to such period shall be allocated (except
as provided in the proviso to Section 8(b)(i)(D)) (A) to Sellers for
57
the portion of such period up to and including the close of business
on the Closing Date, and (B) to Buyer for the portion of such period
subsequent to the Closing Date. Any allocation of income or deductions
required to determine any Taxes attributable to any such period shall
be made by means of a closing of the books and records of the Company
and its Subsidiaries as of the close of business on the Closing Date,
provided that exemptions, allowances or deductions that are calculated
on an annual basis (other than depreciation and amortization
deductions) shall be allocated between the portion of such period
ending on the Closing Date and the portion of such period after the
Closing in proportion to the number of days in each such portion of
such period.
(ix) It is agreed that any Income Tax deductions, credits or
other Tax benefits arising from the payment or accrual of Transaction
Expenses and the Option Cash Consideration shall, to the extent
permitted under applicable Law, be reflected on the Company's Income
Tax Return for the Tax period ending on the Closing Date. For purposes
of clarity, Section 10(p)(ix) of the Disclosure Schedule sets forth a
list of such Transaction Expenses and Option Cash Consideration to
which this Section 10(p)(ix) relates.
(x) Following the Closing Buyer will not permit the Company to
dispose or sell the Company's Lehigh Direct division until at least
one business day following the Closing Date. In the event such a
disposition is consummated, the Parties hereto agree that any Tax
consequences arising from such disposition shall be properly allocated
to any Tax period beginning after the Closing Date (as contemplated in
Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) or otherwise) or
the Post-Closing portion of any Tax period beginning before and ending
after the Closing Date.
(q) Appointment of Sellers' Representative. Each Seller hereby
appoints Xxxxxxx X. Xxxxx, Xx. or, in the event Xxxxxxx X. Xxxxx, Xx. dies,
becomes disabled or is no longer able or willing to serve in such capacity, then
Xxxx X. XxXxxx (the "Sellers' Representative") to act as his, her or its agent
for the purposes of: (i) delivering to Buyer his, her or its respective Company
Shares; (ii) accepting from Buyer the payment of the immediately available funds
portion of the Purchase Price and distributing to each Seller his respective
portion of such funds; (iii) receiving any notice required or desired to be
given to Sellers by Buyer pursuant to this Agreement; (iv) changing the time,
date or place of the Closing; (v) granting any consent or waiver required or
desired of Sellers by Buyer pursuant to this Agreement; (vi) amending this
Agreement; (vii) terminating or agreeing to terminate this Agreement; (viii)
authorizing the distribution to Buyer of all or any portion of the Escrow Fund;
(ix) agreeing to, negotiating, entering into settlements and compromises of, and
agreeing to the payment to Buyer of any amounts in respect of Damages for which
Buyer is entitled to be indemnified pursuant to Section 8 hereof; (x) agreeing,
negotiating, entering into settlements and compromises with respect to the
calculation of the Estimated Purchase Price at Closing and to any post-Closing
adjustment to the Purchase Price, all in accordance with Section 2 hereof; and
(xi) executing all documents and delivering all documents contemplated by this
Agreement. Each Seller shall execute and have notarized a Power of Attorney to
the Sellers' Representative, which Power shall be irrevocable and coupled with
an interest for his appointment. A decision, act, consent or instruction of the
Sellers' Representative authorized hereunder shall constitute a decision for all
Sellers and shall be final, binding and conclusive upon each Seller, and Buyer
may rely upon any such decision, act, consent or instruction of the Sellers'
Representative as being the decision, act, consent or instruction of every such
Seller. Buyer is hereby relieved from any liability to any person for any acts
undertaken by Buyer in accordance with such decision, act, consent or
instruction from the Sellers' Representative.
58
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
XXX XXXXXXXX CORPORATION
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Name: Xxxx Xxxxxx
Title: Senior Vice President & CFO
THE LEHIGH PRESS, INC.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
-----------------------------------
Name : Xxxxxxx X. Xxxxx, Xx.
Title: President & CEO
/s/ Xxxx X. XxXxxx
------------------------------------
Name: Xxxx X. XxXxxx
/s/ Xxxxxxx X. XxXxxx
----------------------------------------
Xxxxxxx X. XxXxxx, as trustee, under the
Irrevocable Agreement of Trust between
Xxxx X. XxXxxx (Settlor) and Xxxxxxx X.
XxXxxx (Trustee) dated December 22, 1998
/s/ Xxxx X. XxXxxx
---------------------------------------
Name: Xxxx X. XxXxxx
/s/ Xxxxxxx X. Xxxxx, Xx.
---------------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
