EXHIBIT 10.1
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EXECUTION COPY
STOCK PURCHASE AND SALE AGREEMENT
BY AND AMONG
CCS ENTERPRISES, INC.,
THE SHAREHOLDERS LISTED HEREIN
AND
INTERLINE BRANDS, INC.
JULY 7, 2005
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS; PURCHASE AND SALE.......................................1
SECTION 1.1 DEFINITIONS................................................1
SECTION 1.2 STOCK PURCHASE AND SALE....................................9
SECTION 1.3 PURCHASE PRICE DETERMINATION..............................10
SECTION 1.4 DELIVERY OF STOCK; PAYMENT................................11
SECTION 1.5 CLOSING...................................................12
SECTION 1.6 PAYMENT OF PURCHASE PRICE.................................12
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS......................13
SECTION 2.1 OWNERSHIP OF STOCK........................................13
SECTION 2.2 RESTRICTIONS ON STOCK AND OPTIONS.........................13
SECTION 2.3 AUTHORITY OF SELLERS......................................14
SECTION 2.4 NO VIOLATION..............................................14
SECTION 2.5 CONSENTS AND APPROVALS....................................14
SECTION 2.6 BROKERS', FINDERS' FEES, ETC..............................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................15
SECTION 3.1 CORPORATE ORGANIZATION; AUTHORIZATION.....................15
SECTION 3.2 NO VIOLATION..............................................15
SECTION 3.3 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES........16
SECTION 3.4 CAPITALIZATION............................................16
SECTION 3.5 SUBSIDIARIES AND AFFILIATES...............................16
SECTION 3.6 FINANCIAL STATEMENTS......................................17
SECTION 3.7 ABSENCE OF CERTAIN CHANGES................................17
SECTION 3.8 TITLE TO PROPERTIES; ENCUMBRANCES.........................18
SECTION 3.9 PATENTS, TRADEMARKS, TRADE NAMES..........................19
SECTION 3.10 MATERIAL CONTRACTS........................................19
SECTION 3.11 LITIGATION; COMPLIANCE WITH LAWS..........................20
SECTION 3.12 TAXES.....................................................21
SECTION 3.13 BENEFIT PLANS.............................................22
SECTION 3.14 LABOR DISAGREEMENTS.......................................24
SECTION 3.15 ENVIRONMENTAL MATTERS.....................................24
SECTION 3.16 BROKERS', FINDERS' FEES, ETC..............................25
SECTION 3.17 AFFILIATE TRANSACTIONS....................................25
SECTION 3.18 INSURANCE.................................................25
SECTION 3.19 BANK ACCOUNTS.............................................26
SECTION 3.20 ABSENCE OF UNDISCLOSED LIABILITIES........................26
SECTION 3.21 CUSTOMERS.................................................26
SECTION 3.22 SUPPLIERS.................................................26
SECTION 3.23 PRODUCT WARRANTY..........................................26
SECTION 3.24 ACCOUNTS RECEIVABLE.......................................27
SECTION 3.25 INVENTORY.................................................27
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SECTION 3.26 CONDITION OF ASSETS: SUFFICIENCY ASSETS...................27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER........................28
SECTION 4.1 CORPORATE ORGANIZATION....................................28
SECTION 4.2 AUTHORIZATION.............................................28
SECTION 4.3 NO VIOLATION..............................................28
SECTION 4.4 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES........28
SECTION 4.5 SOPHISTICATED INVESTOR....................................29
SECTION 4.6 PURCHASE OF STOCK.........................................29
SECTION 4.7 BROKERS', FINDERS' FEES, ETC..............................29
SECTION 4.8 LITIGATION................................................29
SECTION 4.9 CAPITAL ADEQUACY..........................................29
ARTICLE V ADDITIONAL AGREEMENTS...............................................30
SECTION 5.1 TAX MATTERS...............................................30
SECTION 5.2 PAYMENTS OF INDEBTEDNESS..................................32
SECTION 5.3 BOOKS AND RECORDS.........................................33
SECTION 5.4 FURTHER ASSURANCES........................................33
SECTION 5.5 CERTAIN UNDERSTANDINGS AND DISCLAIMERS....................33
SECTION 5.6 PUBLICITY.................................................34
ARTICLE VI CLOSING DELIVERIES OF SELLERS......................................34
ARTICLE VII CLOSING DELIVERIES OF THE BUYER...................................35
ARTICLE VIII INDEMNIFICATION..................................................36
SECTION 8.1 INDEMNIFICATION OF THE SELLERS............................36
SECTION 8.2 INDEMNIFICATION OF THE BUYER..............................36
SECTION 8.3 ADDITIONAL INDEMNITY PROVISIONS...........................37
SECTION 8.4 DEFENSE OF THIRD PARTY CLAIMS AND EXTENSION OF
STATUTE OF LIMITATIONS....................................40
SECTION 8.5 DISCLOSURE GENERALLY......................................41
ARTICLE IX MISCELLANEOUS PROVISIONS...........................................41
SECTION 9.1 AMENDMENT AND MODIFICATION................................41
SECTION 9.2 WAIVER OF COMPLIANCE......................................41
SECTION 9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES................41
SECTION 9.4 NOTICES...................................................42
SECTION 9.5 BINDING NATURE; ASSIGNMENT................................43
SECTION 9.6 ENTIRE AGREEMENT..........................................43
SECTION 9.7 EXPENSES..................................................43
SECTION 9.8 SELLER REPRESENTATIVE.....................................44
SECTION 9.9 GOVERNING LAW.............................................45
SECTION 9.10 JURISDICTION..............................................45
SECTION 9.11 SEVERABILITY..............................................45
SECTION 9.12 INTERPRETATION............................................45
SECTION 9.13 LEGAL REPRESENTATION......................................46
SECTION 9.14 SPECIFIC PERFORMANCE......................................46
SECTION 9.15 COUNTERPARTS..............................................46
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SECTION 9.16 RELEASE BY SELLERS........................................46
SECTION 9.17 RELEASE BY THE COMPANY....................................47
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SCHEDULES AND EXHIBITS
SCHEDULES DESCRIPTION
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1.1A Capital Leases
1.1B Certain Agreements and Arrangements
1.3 Seller Notes
2.1 Ownership of Stock
2.4 No Violation
3.1 Corporate Organization
3.2 No Violation
3.4 Capitalization
3.5 Subsidiaries and Affiliates
3.6 Financial Statements
3.7 Absence of Certain Changes
3.8A and 3.8B Title to Properties; Encumbrances
3.9 Patents, Trademarks, Trade Names
3.10 Material Contracts
3.11 Litigation; Compliance with Laws
3.12 Taxes
3.13 Benefit Plans
3.15 Environmental Matters
3.17 Affiliate Transactions
3.18 Insurance
3.19 Bank Accounts
3.21 Major Customers
3.22 Major Suppliers
3.23 Product Warranty
3.24 Accounts Receivable
5.2 Payments of Indebtedness
6(l) Agreements to be Terminated
8.2 Certain Indemnification Matters
EXHIBITS DESCRIPTION
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EXHIBIT A SELLERS
EXHIBIT B FORM OF CLOSING CERTIFICATE
EXHIBIT C FORM OF ESCROW AGREEMENT
EXHIBIT D WORKING CAPITAL ACCOUNTS
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STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT (the "Agreement") is made and
entered into as of the 7th day of July, 2005, by and among CCS Enterprises,
Inc., a Delaware corporation (the "Company"), the shareholders of the Company
listed on EXHIBIT A hereto (collectively, the "Sellers"; and each individually,
a "Seller"), and Interline Brands, Inc., a New Jersey corporation (the "Buyer").
RECITALS
A. The Company and the Subsidiaries (as defined herein) are engaged on
the date hereof in the business of the design, manufacturing, marketing and sale
of maintenance, repair and operations supplies and equipment for the chimney and
hearth industry (the "Business").
B. The Sellers are the owners beneficially and of record of all of the
issued and outstanding shares of common stock, par value $0.01 per share, of the
Company (the "Stock") and all of the issued and outstanding options to purchase
shares of common stock, par value $.01 per share, of the Company (the
"Options").
C. On the terms and subject to the conditions contained herein, the
Sellers desire to sell and the Buyer desires to purchase all of the Sellers'
rights, title and interests in and to the Stock and the Options.
NOW THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants which are to be made and performed by
the respective parties, it is agreed as follows:
ARTICLE I
DEFINITIONS; PURCHASE AND SALE
Section 1.1 DEFINITIONS.
The following terms when used in this Agreement have the meanings set
forth below:
(a) "Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on the date of this Agreement.
(b) "Applicable Employer Payroll Tax Amount" means, with respect
to any bonus or similar payments or any proceeds arising from the sale of the
Options, an amount equal to the aggregate payroll Taxes payable with respect to
such bonus or similar payment or sale proceeds imposed upon the Company or any
Subsidiary, including all FICA and FUTA Taxes and any applicable state law
unemployment or other payroll Taxes normally imposed on an employer
making payments of compensation, but excluding all amounts of payroll Tax
required to be withheld from the payment of compensation to an employee.
(c) "Arbitrator" has the meaning set forth in Section 1.3.
(d) "Assumed Historic Acquisition Liabilities" means the amounts
payable by Xxxxxxxxxxx under Sections 2(a) and 2(b) of the Noncompetition and
Earn Out Agreement, dated October 18, 0000, xxxxx Xxxxxxxxxxx, Xxxxxxxxxx
Comfort, Inc. and Xxx Xxxxxxxx.
(e) "Benefit Plans" has the meaning set forth in Section 3.13(a).
(f) "Business" shall have the meaning set forth in the Recitals.
(g) "Buyer Affiliates" has the meaning set forth in Section
8.3(a).
(h) "California Comfort Xxxx of Sale" means the Agreement and Xxxx
of Sale, dated October 18, 2004, between Xxxxxxxxxxx and California Comfort,
Inc.
(i) "Cash Balance" means the sum of the consolidated cash and cash
equivalents of the Company and the Subsidiaries as of the close of business on
the first business day prior to the Closing Date, as determined in accordance
with GAAP (applied in a manner consistent with past practices of the Company and
the Subsidiaries).
(j) "Cash Balance Adjustment" means the Cash Balance, as finally
determined pursuant to Section 1.3(b), reduced by the Estimated Cash Balance. If
the Cash Balance exceeds the Estimated Cash Balance, then the Cash Balance
Adjustment is a positive number equal to such excess. If the Estimated Cash
Balance exceeds the Cash Balance, then the Cash Balance Adjustment is a negative
number equal to such excess.
(k) "CCS-HGI" means CCS-HGI Associates, L.P., a Delaware limited
partnership.
(l) "Claim Notice" has the meaning set forth in Section 8.3(f).
(m) "Closing" has the meaning set forth in Section 1.5.
(n) "Closing Adjustment" means the arithmetic sum (positive or
negative) of the Working Capital Variance, the Indebtedness Adjustment, the
Unpaid Company Transaction Expense Adjustment and the Cash Balance Adjustment.
(o) "Closing Certificate" means the certificate delivered by a
Vice President of Xxxxxxxxxxx pursuant to Section 1.6(c).
(p) "Closing Date" has the meaning set forth in Section 1.5.
(q) "Closing Statements" has the meaning set forth in Section 1.3.
(r) "Code" means the Internal Revenue Code of 1986, as amended.
(s) "Company Accountants" has the meaning set forth in Section
1.3(b).
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(t) "Xxxxxxxxxxx" means Xxxxxxxxxxx Chimney Supply, Inc., an
Oklahoma corporation.
(u) "Environmental Laws" shall mean all federal, state and foreign
laws, rules, regulations or ordinances concerning pollution or protection of
human health and the environment, 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 and
occupational health and safety requirements.
(v) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(w) "ERISA Affiliate" means any employer that is, or at the time
for which any relevant statute of limitations remains open was, together with
the Company, treated as a "single employer" under Section 414(b), 414(c) or
414(m) of the Code.
(x) "Escrow Agent" means LaSalle Bank National Association.
(y) "Escrow Agreement" means the escrow agreement substantially in
the form of EXHIBIT C.
(z) "Escrow Amount" has the meaning set forth in Section 1.6(a).
(aa) "Estimated Cash Balance" means the estimated Cash Balance of
the Company and the Subsidiaries as of the close of business on the first
business day prior to the Closing Date as set forth on the Closing Certificate.
(bb) "Estimated Indebtedness" means the estimated Indebtedness of
the Company and the Subsidiaries as of immediately prior to the Closing as set
forth on the Closing Certificate.
(cc) "Estimated Purchase Price" has the meaning set forth in
Section 1.6(a).
(dd) "Estimated Unpaid Company Transaction Expenses" means the
estimated Unpaid Company Transaction Expenses as of immediately prior to the
Closing as set forth on the Closing Certificate.
(ee) "Estimated Working Capital" means the estimated Working
Capital of the Company and the Subsidiaries as of the close of business on the
first business day prior to the Closing Date as set forth on the Closing
Certificate.
(ff) "Estimated Working Capital Adjustment" means the amount, if
any, of the estimated Working Capital Adjustment as determined from the
Estimated Working Capital.
(gg) "Excess Assumed Historic Acquisition Liability Amount" means
the amount of any Assumed Historic Acquisition Liabilities that exceeds the Net
Accrued Amount.
(hh) "Financial Statements" has the meaning set forth in Section
3.6(a).
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(ii) "GAAP" means generally accepted accounting principles of the
United States.
(jj) "Governmental Authority" shall mean any federal, state,
municipal, county or other governmental department, commission or agency, or any
court, in each case whether of the United States, any of its possessions or
territories, or of any foreign nation.
(kk) "Hazardous Substance" means any material, substance or waste
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste," "toxic
waste" or "toxic substance" under any Environmental Laws, and including
petroleum, petroleum products, asbestos, presumed asbestos-containing material
or asbestos-containing material, urea formaldehyde and polychlorinated
biphenyls.
(ll) "Immediate Family Member" means, with respect to any Person,
the current spouse, any son or daughter, or mother or father of such Person.
(mm) "Indebtedness" means the sum, without duplication, of (1) the
principal amount of any indebtedness of the Company or any Subsidiary for
borrowed money outstanding immediately prior to the Closing, together with all
prepayment premiums or penalties and other amounts becoming due as a result of
the transactions contemplated by this Agreement, (2) any Off-Balance Sheet
Financing of the Company or any Subsidiary in existence immediately prior to the
Closing, (3) any payment obligations of the Company or any Subsidiary in respect
of banker's acceptances or letters of credit in existence immediately prior to
the Closing which are not evidenced by trade payables, (4) any liability of the
Company or any Subsidiary with respect to interest rate swaps, collars, caps and
similar hedging obligations in existence immediately prior to the Closing, (5)
(A) any amounts owed by the Company or any Subsidiary as of the Closing Date
under bonus plans or similar arrangements made payable as a result of the
transactions contemplated hereby, including the bonus payments listed in
SCHEDULE 1.1B, plus the Applicable Employer Payroll Tax Amount relating to such
bonus payments, and (B) any amounts owed by the Company or any Subsidiary with
respect to the consulting and advisory agreements described in the first three
items of SCHEDULE 3.17 and the contingent fee agreement described in item 4 of
SCHEDULE 3.17, in the case of each of (A) and (B) to the extent such amounts are
not paid by the Company or any Subsidiary prior to the Closing, (6) any
indebtedness outstanding immediately prior to the Closing evidenced by notes,
debentures, bonds or similar instruments of the Company or any Subsidiary, (7)
any payment obligations (other than trade payables incurred in the ordinary
course of business) of the Company or any Subsidiary in existence immediately
prior to Closing for the deferred purchase price of assets purchased outside the
ordinary course of business, including any seller notes, non-compete payments,
earn-outs or similar obligations of the Company or any Subsidiary, other than
the Assumed Historic Acquisition Liabilities, (8) any indebtedness of the type
referred to in clauses (1) through (7) above of any Person other than the
Company or any Subsidiary in existence immediately prior to the Closing which is
either guaranteed by, or secured by a security interest upon the interest of the
Company or any Subsidiary in any property owned or leased by, the Company or any
Subsidiary, (9) any unpaid interest, prepayment premiums or penalties or other
breakage costs accrued or owing on any such indebtedness of the Company or any
Subsidiary, including by reason of the transactions contemplated hereby and (10)
amounts owed as of the Closing with respect to the capital leases to which
Xxxxxxxxxxx is a party, to the extent such amounts and such leases are set forth
on SCHEDULE 1.1A. Indebtedness shall not include any amounts of the type
described in items (1) through (10) of the foregoing definition owed solely
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by the Company to any Subsidiary, by any Subsidiary to the Company or by any
Subsidiary to another Subsidiary.
(nn) "Indebtedness Adjustment" means the Estimated Indebtedness
reduced by the Indebtedness, as finally determined pursuant to Section 1.3(b).
If the Estimated Indebtedness exceeds the Indebtedness, then the Indebtedness
Adjustment is a positive number equal to such excess. If the Indebtedness
exceeds the Estimated Indebtedness, then the Indebtedness Adjustment is a
negative number equal to such excess.
(oo) "Indemnified Party" has the meaning set forth in Section
8.3(f).
(pp) "Indemnifying Party" has the meaning set forth in Section
8.3(f).
(qq) "IRS" means the United States Internal Revenue Service.
(rr) "Knowledge" shall mean, (1) in the case of the Company, the
actual knowledge as of the date hereof of any of Xxxxxxx Xxxxx, Xxxxxx X.
Xxxxxxx, Xxxxxxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxx, or Xxxxx
Xxxxxxxx, or actual knowledge as of the date hereof of any Seller as described
in the following clauses (2) and (3), (2) and in the case of each Seller that is
an individual, the actual knowledge as of the date hereof of such Seller, and
(3) in the case of a Seller that is an entity, the actual knowledge as of the
date hereof of any senior executive officer of such Seller or such Seller's
general partner, as the case may be.
(ss) "Latest Balance Sheet" has the meaning set forth in Section
3.6(b).
(tt) "Lease" and "Leases" have the meanings set forth in Section
3.8(b).
(uu) "Liens" shall mean any mortgage, pledge, security interest,
restriction, encumbrance, easement, option, preemptive right, right of first
refusal, defect of title, adverse claim or other claim, charge or encumbrance of
any nature whatsoever.
(vv) "Loss" and "Losses" have the meaning set forth in Section
8.3(e).
(ww) "Major Customers" has the meaning set forth in Section 3.21.
(xx) "Major Suppliers" has the meaning set forth in Section 3.22.
(yy) "Material Adverse Effect" means, with respect to the Sellers
or the Company, (a) any change, event or effect that, individually or together
with other adverse changes, events or effects, is or would reasonably be
expected to be materially adverse to the condition (financial or otherwise),
results of operations, assets, liabilities or business of the Company and its
Subsidiaries, taken as a whole, or (b) that would have a material adverse effect
on the ability of the Sellers to consummate the transactions contemplated by
this Agreement, except, in the case of clause (a), for any change, event or
effect to the extent arising from or relating to (i) the United States or the
global economy or securities markets in general (and which is not specific
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to the Business and which does not affect the Business disproportionately as
compared to other companies which are in the same business as the Company and
the Subsidiaries) or (ii) the industry in which the Company and the Subsidiaries
operate generally (and which is not specific to the Business and which does not
affect the Business disproportionately as compared to other companies which are
in the same business as the Company and the Subsidiaries).
(zz) "Maximum Amount" has the meaning set forth in Section 8.1.
(aaa) "Minimum Claim Amount" has the meaning set forth in Section
8.2.
(bbb) "Net Accrued Amount" means an amount equal to $452,000 plus
the amount of any cash proceeds actually paid to Xxxxxxxxxxx pursuant to the
exercise of its rights under Section 9.2 of the California Comfort Xxxx of Sale.
(ccc) "Off-Balance Sheet Financing" means (i) any liability of the
Company or any Subsidiary under any sale and leaseback transactions which does
not create a liability on the consolidated balance sheet of the Company and the
Subsidiaries and (ii) any liability of the Company or any Subsidiary under any
synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product where the transaction is considered
indebtedness for borrowed money for federal income tax purposes but is
classified as an operating lease in accordance with GAAP (applied in a manner
consistent with past practices of the Company and the Subsidiaries) for
financial reporting purposes.
(ddd) "Option Exercise Amount" has the meaning set forth in Section
1.3(a).
(eee) "Option Tax Withholding Amount" has the meaning set forth in
Section 1.3.
(fff) "Options" has the meaning set forth in the Recitals.
(ggg) "Partnership" means Harbour Group Investments IV, L.P., a
Delaware limited partnership.
(hhh) "Payoff Letters" has the meaning set forth in Section 6(i).
(iii) "Permit" has the meaning set forth in Section 3.11(c).
(jjj) "Permitted Liens" shall mean (i) Liens for Taxes not yet due
or delinquent or being contested in good faith by appropriate proceedings that
are disclosed on SCHEDULE 3.11, (ii) those Liens that are listed on SCHEDULE
3.8B attached hereto, (iii) all exceptions, restrictions, easements, charges,
rights-of-way and monetary and nonmonetary encumbrances which are set forth in
any permits, licenses, governmental authorizations, registrations or approvals,
(iv) mechanics', carriers', workers', repairers' and other similar liens arising
or incurred in the ordinary course of business relating to obligations as to
which there is no material default on the part of the Company or any Subsidiary
or the validity of which are being contested in good faith by appropriate
proceedings that are disclosed on SCHEDULE 3.11, (v) any Liens accounted for as
capitalized leases, (vi) zoning, entitlements, conservation restrictions and
other land use regulations adopted by any Governmental Authority, (vii) any
Liens that are released or otherwise terminated at or prior to Closing, and
(viii) such other Liens or imperfections in or failure of title which do not,
individually or in the aggregate, materially interfere with the present use or
materially impair the value of such properties or assets.
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(kkk) "Person" means an individual, a partnership, a limited
liability company, a corporation, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
(lll) "Pre-Closing Tax Period" means any taxable period that ends on
or before the Closing Date and the portion, ending on the Closing Date, of any
Straddle Period.
(mmm) "Preliminary Purchase Price" has the meaning set forth in
Section 1.3(a).
(nnn) "Proprietary Rights" shall mean all patents, patent
applications, patent disclosures and inventions; all trade secrets, know-how and
confidential business information; all trademarks, service marks, trade dress,
logos, trade names, corporate names and Internet domain names, together with all
goodwill associated therewith; all copyrights and all copyrightable works; all
computer software (including without limitation source code, object code and
accompanying documentation and data); any other intellectual property rights;
and all registrations, applications and renewals for any of the foregoing.
(ooo) "Purchase Price" has the meaning set forth in Section 1.3(a).
(ppp) "PWC" means PricewaterhouseCoopers LLP, as certified public
accountants for the Company and the Subsidiaries.
(qqq) "Riverton" shall mean Riverton Machine & Foundry, Inc., a
Kentucky corporation.
(rrr) "Securities Act" means the Securities Act of 1933, as amended.
(sss) "Seller Notes" has the meaning set forth in Section 1.3(a).
(ttt) "Seller Notes Amount" has the meaning set forth in Section
1.3(a).
(uuu) "Seller Representative" has the meaning set forth in Section
9.8.
(vvv) "Seller's Fraction" means the fraction, the numerator of which
is the number of shares of Stock held by such Seller immediately prior to the
Closing (including the number of shares of the Company's common stock into which
any Options, whether or not then vested, held by such Seller are then
exercisable) and the denominator of which is the total number of shares of Stock
issued and outstanding immediately prior to the Closing (including the number of
shares of the Company's common stock into which all of the issued and
outstanding Options, whether or not then vested, are then exercisable). The
Seller's Fraction of each Seller is set forth on EXHIBIT A.
(www) "Straddle Period" means any taxable period beginning on or
before and ending after the Closing Date.
(xxx) "Subsidiaries" means Xxxxxxxxxxx and Riverton.
(yyy) "Tax Deduction Benefit" has the meaning set forth in Section
5.1.
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(zzz) "Tax Deductions" means the amount of income Tax deductions of
the Company and the Subsidiaries equal to the sum of (i) the unamortized
borrowing and other costs of the Company and Subsidiaries that become deductible
by reason of the transactions contemplated herein, and (ii) the amounts payable
with respect to the agreements and arrangements set forth on SCHEDULE 1.1B.
(aaaa) "Tax Returns" shall mean any report, return, information
statement, payee statement or other information required to be provided to any
taxing authority, with respect to Taxes, including any return of an affiliated,
combined or unitary group.
(bbbb) "Taxes" shall mean any and all taxes (including, without
limitation, income tax, capital gains tax, ad valorem taxes, sales tax, property
tax, use tax, and taxes on fuel), or similar levies, imposts, duties,
assessments, charges and withholdings imposed or required to be collected by or
paid over to any taxing authority, including any interest, penalties, fines,
assessments or additions imposed in respect of the foregoing, or in respect of
any failure to comply with any requirement regarding Tax Returns.
(cccc) "Third Party Claim" has the meaning set forth in Section
8.4(a).
(dddd) "Transaction Documents" means this Agreement, and all other
agreements, instruments, certificates and other Closing documents entered into
or delivered by any party pursuant to the terms of this Agreement (including the
Escrow Agreement).
(eeee) "Transaction Expenses" means all transaction fees and expenses
of legal counsel, accountants, investment bankers, brokers, finders or other
representatives and consultants incurred and any other out-of-pocket expenses in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated hereby.
(ffff) "Treasury Regulations" shall mean the regulations promulgated
under the Code.
(gggg) "Unaudited Financial Statements" has the meaning set forth in
Section 3.6(b).
(hhhh) "Unpaid Company Transaction Expense Adjustment" means the
Unpaid Company Transaction Expenses, as finally determined pursuant to Section
1.3(b), reduced by the Estimated Unpaid Company Transaction Expenses. If the
Estimated Unpaid Company Transaction Expenses exceeds the Unpaid Company
Transaction Expenses, then the Unpaid Company Transaction Expense Adjustment is
a positive number equal to such excess. If the Unpaid Company Transaction
Expenses exceeds the Estimated Unpaid Company Transaction Expenses, then the
Unpaid Company Transaction Expense is a negative number equal to such excess.
(iiii) "Unpaid Company Transaction Expenses" means all Transaction
Expenses of the Company incurred up until immediately prior to the Closing
(whether on its own behalf or on behalf of the Sellers) that have not otherwise
been paid and discharged in full as of such time or are included in Indebtedness
or Working Capital.
(jjjj) "Working Capital" means the excess as of the close of business
on the first business day prior to the Closing Date of (1) the Company's and the
Subsidiaries' consolidated current assets (excluding any cash and cash
equivalents and any deferred or income Tax related
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asset account, the exercise price payable to the Company under any Options, any
amounts payable under the Seller Notes, any amounts owed by the Partnership or
its Affiliates to the Company or its Subsidiaries and any amounts payable to
Xxxxxxxxxxx under Section 9.2 of the California Comfort Xxxx of Sale) over (2)
the Company's and the Subsidiaries' consolidated current liabilities (excluding
any Indebtedness, the Applicable Employer Payroll Tax Amount arising in respect
of the sale of the Options under this Agreement, the Option Tax Withholding
Amount, any amounts owed to the Partnership or its Affiliates and any deferred
or income Tax related liability account), each as determined in accordance with
GAAP (applied in a manner consistent with past practices of the Company and the
Subsidiaries); provided, however, that Working Capital shall not include any
liabilities satisfied as part of the Closing. Attached hereto as EXHIBIT D is a
list of the Company accounts to be included in the calculation of Working
Capital.
(kkkk) "Working Capital Adjustment" means the number (positive or
negative) calculated on the basis of the Working Capital, as determined in
accordance with Section 1.3(b), as follows:
(i) if the Working Capital exceeds the Working Capital
Target by more than $50,000, then the Working Capital Adjustment is a positive
number equal to the amount by which the Working Capital exceeds the Working
Capital Target;
(ii) if the Working Capital exceeds the Working Capital
Target by $50,000 or less, if the Working Capital Target exceeds the Working
Capital by $50,000 or less or if the Working Capital is equal to the Working
Capital Target, then the Working Capital Adjustment is zero (0); and
(iii) if the Working Capital Target exceeds the Working
Capital by more than $50,000, then the Working Capital Adjustment is a negative
number equal to the amount by which the Working Capital Target exceeds the
Working Capital. (llll) "Working Capital Target" means $7,500,000.
(mmmm) "Working Capital Variance" means the Working Capital
Adjustment, as finally determined pursuant to Section 1.3(b), reduced by the
Estimated Working Capital Adjustment. If the Working Capital Adjustment exceeds
(is more positive or less negative than) the Estimated Working Capital
Adjustment, then the Working Capital Variance is a positive number equal to such
excess. If the Estimated Working Capital Adjustment exceeds (is more positive or
less negative than) the Working Capital Adjustment, then the Working Capital
Variance is a negative number equal to such excess.
Section 1.2 STOCK PURCHASE AND SALE.
Subject to the terms and conditions set forth herein, at the Closing,
each Seller shall sell, assign, transfer, convey and deliver to the Buyer the
Stock and the Options set forth opposite such Seller's name on EXHIBIT A, free
and clear of all Liens, and the Buyer shall purchase the shares of Stock and the
Options from the Sellers.
9
Section 1.3 PURCHASE PRICE DETERMINATION.
(a) PURCHASE PRICE. The total purchase price to be paid to the
Sellers shall be equal to (i) Seventy Million Dollars ($70,000,000) minus (ii)
the Indebtedness plus (iii) the Working Capital Adjustment plus (iv) the Cash
Balance minus (v) the Unpaid Company Transaction Expenses plus (vi) all amounts
payable to the Company by certain of the Sellers (the "Seller Notes Amount")
pursuant to the promissory notes referred to in SCHEDULE 1.3 (the "Seller
Notes") plus (vii) the aggregate exercise price payable to the Company by all
Sellers that own Options if all the Options being sold by the Sellers hereunder
had been fully exercised, net of any Applicable Employer Payroll Tax Amount
arising as of the Closing Date in respect of the sale of such Options under this
Agreement (the "Option Exercise Amount") (the sum of the amounts described in
clauses (i) through (vii), the "Preliminary Purchase Price"), reduced by the
amounts described in clauses (x) and (y) of the following sentence and adjusted
pursuant to the other provisions of this Agreement (the "Purchase Price"). The
Purchase Price will be distributed among the Sellers by allocating the
Preliminary Purchase Price (less the Escrow Amount) pro rata in accordance with
each Seller's Fraction, and deducting therefrom the following: (x) with respect
to the portion of the Preliminary Purchase Price to be paid to each Seller that
owns Options, the sum of (1) the aggregate exercise price payable to the Company
by each such Seller as if the Options held by such Seller had been fully
exercised plus (2) all amounts required to be withheld from such portion of the
Preliminary Purchase Price in respect of Tax obligations of such Seller (the
"Option Tax Withholding Amount"), which withheld amounts shall be deemed paid to
such Seller for the purposes of this Agreement and (y) with respect to the
portion of the Preliminary Purchase Price to be paid to each Seller that is an
obligor under any of the Seller Notes, all amounts payable by such Seller under
such Seller Notes, which amounts shall be deemed to have been paid to the
Company in discharge of the Seller Notes.
(b) DETERMINATION OF CASH BALANCE, INDEBTEDNESS, UNPAID COMPANY
TRANSACTION EXPENSES AND WORKING CAPITAL ADJUSTMENT. The amount of the Cash
Balance, the Indebtedness, Unpaid Company Transaction Expenses and Working
Capital Adjustment shall be determined in the following manner:
(i) As promptly as practicable, but not later than ninety (90)
days after the Closing, the Company will prepare and deliver to the Seller
Representative a statement prepared in accordance with GAAP (applied in a manner
consistent with past practices of the Company and the Subsidiaries) and this
Agreement which shall set forth the Closing Adjustment, the Working Capital
Adjustment, the Working Capital, the Cash Balance, the Unpaid Company
Transaction Expenses and the Indebtedness (the "Closing Statements"). After
delivery of the Closing Statements, the Company shall make available to the
Seller Representative and PWC the books, records, work papers, personnel and
other materials and sources used by the Company and its accountants (the
"Company Accountants") to prepare the Closing Statements, but only upon prior
written notice and during normal business hours that are reasonably acceptable
to the Company (and, in the case of any work papers or other materials prepared
by the Company Accountants, provided that the Seller Representative executes any
waivers, releases or similar documentation required by the Company Accountants
for such access provided that the documentation requested by the Company
Accountants is such firm's customary documentation).
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(ii) The Seller Representative may dispute any of the amounts
reflected on the Closing Statements but only on the basis that such amounts were
not reflected in accordance with GAAP (applied in a manner consistent with past
practices of the Company and the Subsidiaries) and this Agreement (or on the
basis of computational errors). The Seller Representative will notify the Buyer
in writing of any disputed items on the Closing Statements within sixty (60)
days of receipt of the Closing Statements, which 60-day period shall be extended
to the extent access to all such books, records, work papers, personnel and
other materials and sources used by the Company and the Company Accountants to
prepare the Closing Statements is delayed. Any such notice of disagreement shall
specify those items or amounts as to which the Seller Representative disagrees
(and shall include the Seller Representative's alternative calculation of the
Closing Adjustment ), and each of the Sellers shall be deemed to have agreed
with all other items and amounts included in the Closing Statements delivered
pursuant to Section 1.3(b) which are not affected or related to the disputed
items or amounts. If a notice of a disagreement shall be given, the Buyer and
the Seller Representative shall, during the thirty (30) days following receipt
of such notice, attempt to reconcile any differences on the disputed items or
amounts.
(iii) ARBITRATION. Failing resolution pursuant to subparagraph
(ii) above, the unresolved disputed items will be referred for final binding
resolution to KPMG LLP or to such other nationally-recognized firm of certified
public accountants as the Buyer and the Seller Representative may hereafter
jointly select (the "Arbitrator"). The Arbitrator's function shall be to review
only those items set forth on the Closing Statements that are in dispute and to
resolve the dispute with respect to such items. The Arbitrator may not award the
parties in the aggregate more than the amount in dispute. The Arbitrator shall
be requested with respect to all references to it to render its decision within
thirty (30) days of a reference or as soon as practicable thereafter, and shall
send copies of such decision to the Buyer and the Seller Representative. The
amount of the Closing Adjustment affected by such unresolved disputed items (if
any) will be as determined by the Arbitrator. The fees and disbursements of the
Arbitrator's review in respect of the resolution of any disagreements over the
items in the Closing Statements shall be allocated between the Buyer and the
Sellers so that the Sellers' share of such fees and disbursements shall be in
the same proportion that the aggregate amount of any disputed amounts so
submitted by the Seller Representative to the Arbitrator that are unsuccessfully
disputed by the Seller Representative (as finally determined by the Arbitrator)
bears to the total amount of such disputed amounts so submitted by the Seller
Representative to the Arbitrator. The Arbitrator's decision shall be final and
binding and shall constitute an arbitral award upon which a judgment may be
entered in any court having jurisdiction thereof. Each of the Buyer and the
Company, on the one hand, and the Seller Representative, on the other, agrees
that it shall pay the fees, costs and expenses due to any accountants or other
agents or representatives retained by it or them in connection with the review,
negotiation or arbitration of the Closing Statement.
Section 1.4 DELIVERY OF STOCK; PAYMENT.
At the Closing (a) each Seller shall deliver to the Buyer (i) one or
more stock certificates representing in the aggregate the number of shares of
Stock set forth opposite the name of such Seller on EXHIBIT A, duly endorsed in
blank for transfer or accompanied by duly executed stock powers in proper form,
all in form and substance reasonably satisfactory to the Buyer and (ii) one or
more certificates or agreements representing all of the Options set forth
opposite the name of such Seller on EXHIBIT A, accompanied by an instrument in
form reasonably acceptable to the Buyer assigning the Options upon the Closing
and (b) the Buyer, unless otherwise directed by
11
the Seller Representative, shall pay to the Sellers the Estimated Purchase Price
(less the Escrow Amount) for the Stock or Options sold by such Sellers by wire
transfer of immediately available funds in accordance with Section 1.6, less the
amounts described in clauses (i) and (ii) of the following sentence. The
Estimated Purchase Price payable to the Sellers pursuant to clause (b) of the
preceding sentence shall be paid to the Sellers as follows: (x) the Estimated
Purchase Price (less the Escrow Amount) shall be paid to the Sellers pro rata in
accordance with each Seller's Fraction, and (y) the amount so paid shall be paid
to each Seller, less, (i) with respect to each Seller that owns Options, the sum
of (A) the aggregate exercise price payable to the Company by each such Seller
as if the Options held by such Seller had been fully exercised and (B) any
Option Tax Withholding Amount of such Seller, which withheld amount shall be
deemed paid to such Seller for the purposes of this Agreement, and (ii) with
respect to each Seller that is an obligor under any of the Seller Notes, all
amounts payable by such Seller under such Seller Notes, which amounts shall be
deemed to have been paid to the Company in discharge of the Seller Notes.
Section 1.5 CLOSING.
The closing of the purchase and sale of the Stock and the Options (the
"Closing") shall take place at the offices of Dechert LLP, Philadelphia,
Pennsylvania on the date hereof (the "Closing Date") or at such other place as
the Buyer and the Seller Representative shall agree.
Section 1.6 PAYMENT OF PURCHASE PRICE.
The Buyer will pay the Purchase Price as follows:
(a) ESTIMATED PAYMENTS. At the Closing, the Buyer shall (i) pay to
the Sellers in accordance with Section 1.4: (A) Sixty Six Million Dollars
($66,000,000) minus (B) the Estimated Indebtedness plus (C) the Estimated
Working Capital Adjustment plus (D) the Estimated Cash Balance minus (E) the
Estimated Unpaid Company Transaction Expenses plus (F) the Option Exercise
Amount plus (G) the Seller Notes Amount and (ii) deliver Four Million Dollars
($4,000,000) (the "Escrow Amount") to the Escrow Agent to be maintained and
distributed pursuant to the provisions of the Escrow Agreement (the sum of (i)
and (ii), collectively, the "Estimated Purchase Price"); provided, however, that
the payment under the foregoing clause (i) shall be reduced by the amounts
described in clauses (i) and (ii) of the last sentence of Section 1.4 as
provided in such Section.
(b) ESCROW AMOUNT. The Escrow Amount shall be divided into two
accounts, a "General Claims Escrow Fund" in the amount of Three Million Five
Hundred Thousand Dollars ($3,500,000.00) and a "Tax Escrow Fund" in the amount
of Five Hundred Thousand Dollars ($500,000.00). The Escrow Amount shall be
allocated among the Sellers pro rata in accordance with their respective
Seller's Fraction.
(c) CLOSING CERTIFICATE. At the Closing, a Vice President of
Xxxxxxxxxxx shall deliver to the Buyer the Closing Certificate in the form
annexed hereto as EXHIBIT B, which certificate shall set forth his best estimate
of the Estimated Cash Balance, the Estimated Indebtedness, the Estimated Working
Capital, the Estimated Working Capital Adjustment and the Estimated Unpaid
Company Transaction Expenses and shall set forth the Seller Notes Amount and the
Option Exercise Amount.
12
(d) CLOSING ADJUSTMENT. The Closing Adjustment shall be computed
in accordance with the terms of this Agreement, by the agreement of the parties
or by the Arbitrator, as the case may be, immediately after the final
determination of the Cash Balance, the Indebtedness, the Unpaid Company
Transaction Expenses, the Working Capital and the Working Capital Adjustment
pursuant to Section 1.3(b) and shall be paid within ten (10) business days
thereafter in immediately available funds. If the Closing Adjustment is a
positive number, the Closing Adjustment shall be paid by the Buyer to the Seller
Representative (for the benefit of the Sellers pro rata in accordance with each
Seller's Fraction). If the Closing Adjustment is a negative number, the Closing
Adjustment shall be paid by the Sellers to the Buyer or, at the Buyer's option,
shall be paid pursuant to the Escrow Agreement. Any amounts payable by the
Sellers to the Buyer pursuant to this Section 1.6(d) shall be paid by the
Sellers, pro rata in accordance with their respective Seller's Fraction.
(e) INTEREST PAYMENTS. Sums payable pursuant to Section 1.6(d)
shall bear interest from the date of Closing to the date of payment at the rate
which is equal to the Prime Rate as published, from time to time in the Wall
Street Journal under "Money Rates," computed on the basis of a 365-day year and
paid for the actual number of days elapsed. Interest calculated in accordance
with this Section 1.6(e) shall be due and payable to the Buyer or the Sellers,
as the case may be, on the date on which the corresponding payment is due.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller, severally and not jointly, hereby represents and warrants,
as to such Seller, to the Buyer as follows:
Section 2.1 OWNERSHIP OF STOCK.
Such Seller is the sole lawful owner, beneficially and of record, of
the shares of Stock and the Options set forth opposite the name of such Seller
on EXHIBIT A hereto, which ownership is free and clear of any Lien, except as
set forth on SCHEDULE 2.1. Such shares of Stock and Options represent all of the
issued and outstanding shares of capital stock of the Company, options to buy
such capital stock or other equity securities of the Company owned by such
Seller. At Closing such Seller shall transfer title to such shares of Stock and
the Options, as applicable, free and clear of any Lien.
Section 2.2 RESTRICTIONS ON STOCK AND OPTIONS.
(a) AGREEMENTS RELATING TO STOCK AND OPTIONS. Except as set forth
on SCHEDULE 2.1, such Seller is not a party to any agreement creating rights in
any Person with respect to such Seller's shares of Stock or Options, and such
Seller has the full power and legal right to sell, assign, transfer and deliver
such Seller's shares of Stock and Options to the Buyer.
(b) NO WARRANTS, OPTIONS, ETC. Except as set forth on SCHEDULE 2.1
and except for this Agreement and the transactions contemplated thereby, there
are no existing warrants, options, stock purchase agreements, redemption
agreements, calls or rights to subscribe of any character to which such Seller
is a party relating to the shares of Stock and Options owned by such Seller.
13
Section 2.3 AUTHORITY OF SELLERS.
(a) Such Seller has the full right, capacity and power to enter
into and deliver to the Buyer this Agreement and the other Transaction Documents
to which such Seller is a party and to consummate the transactions contemplated
herein. With respect to each non-individual Seller, this Agreement and the other
Transaction Documents to which such non-individual Seller is a party, and
consummation of the transactions contemplated herein and therein, have been duly
authorized by all partnership action necessary to authorize the execution,
delivery and performance thereof by such non-individual Seller.
(b) This Agreement and the other Transaction Documents to which
such Seller is a party have been duly and validly executed and delivered by such
Seller and, assuming due authorization, execution and delivery by the Buyer,
constitute valid and binding obligations enforceable against such Seller in
accordance with their terms, except (i) as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
Section 2.4 NO VIOLATION.
Except as set forth on SCHEDULE 2.4 hereto, neither the execution and
delivery of this Agreement and the other Transaction Documents to which such
Seller is a party nor the consummation of the transactions contemplated hereby
or thereby by such Seller will violate, or be in conflict with, or allow the
termination of, or constitute a default under, or cause the acceleration of the
maturity of, or create a Lien under, any debt or obligation pursuant to any
agreement or commitment to which such Seller is a party or by which such Seller
is bound, or violate in any material respect any statute or law or any judgment,
decree, order, regulation or rule of any court or Governmental Authority to
which such Seller is subject.
Section 2.5 CONSENTS AND APPROVALS.
Except for consents, approvals or authorizations which if not received,
or declarations, filings or registrations which if not made, would not impede
the consummation of the transactions contemplated by this Agreement in any
material respect, no consent, approval or authorization of, or declaration,
filing or registration with, any Governmental Authority is required to be made
or obtained by such Seller in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
Section 2.6 BROKERS', FINDERS' FEES, ETC.
Except for Xxxxxx X. Xxxxx & Co. Incorporated, which has been retained
by the Company for the benefit of the Sellers, such Seller has not employed any
broker, finder, investment banker or financial advisor as to whom such Seller
may have any obligation to pay any brokerage or finders' fees, commissions or
similar compensation in connection with the transactions contemplated hereby.
14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Buyer as follows:
Section 3.1 CORPORATE ORGANIZATION; AUTHORIZATION.
(a) The Company and the Subsidiaries are duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation and have all requisite power and authority (corporate or
otherwise) to carry on their respective businesses as now conducted and to own
or lease their respective properties and assets. The Company and the
Subsidiaries are duly qualified or licensed to do business as a foreign company
in good standing in each state of the United States and in each foreign
jurisdiction in which the conduct of their respective businesses or the
ownership or leasing of their respective properties require such qualification,
other than jurisdictions in which the failure to so qualify would not have a
Material Adverse Effect. SCHEDULE 3.1 hereto sets forth a true and complete list
of all jurisdictions in which the Company and the Subsidiaries are qualified or
licensed to do business as a foreign company.
(b) The Company has full corporate power and authority to enter
into this Agreement and to carry out the transactions contemplated on its part
hereby. The Board of Directors of the Company has taken all action required to
authorize the execution and delivery of this Agreement, the performance of the
Company's obligations hereunder and the consummation of the transactions
contemplated hereby. No other corporate proceedings on the part of the Company
are necessary to authorize the execution, delivery and performance by it of this
Agreement.
(c) This Agreement has been duly executed and delivered by the
Company and, assuming due authorization, execution and delivery by the Buyer,
constitutes a valid and binding agreement of the Company, enforceable against it
in accordance with its terms, except (i) as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
Section 3.2 NO VIOLATION.
Except as set forth on SCHEDULE 3.2, neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will (a) violate any provisions of the certificate of incorporation or by-laws
of the Company, (b) with or without the giving of notice or the passage of time,
or both, violate, or be in conflict with, or constitute a default under, or
permit the termination of, or cause the acceleration of the maturity of or
require the consent, authorization, approval or exemption of any party to any
agreement or commitment required to be disclosed on SCHEDULE 3.10, (c) result in
the creation or imposition of any Lien upon any property or assets of the
Company or the Subsidiaries (determined singly or in the aggregate), under any
agreement or commitment to which the Company or any of the Subsidiaries is a
party, or by which the Company or any of the Subsidiaries is bound, or (d)
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or Governmental Authority to which the Company or the Subsidiaries is
subject.
15
Section 3.3 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES.
No consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority is required to be
made or obtained by the Company or the Subsidiaries in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
Section 3.4 CAPITALIZATION.
SCHEDULE 3.4 sets forth the authorized, issued and outstanding shares
of capital stock of the Company and each Subsidiary as of the date hereof. All
issued and outstanding shares of capital stock of the Company and each
Subsidiary have been duly authorized, are validly issued, fully paid and
nonassessable, are owned, in the case of shares of capital stock of the Company,
of record and beneficially by the Sellers, have not been issued in violation of
the preemptive rights, rights of first refusal or similar rights of any Person
arising by operation of law, the articles of incorporation, by-laws or other
organizational documents of the Company or any Subsidiary or any agreement to
which the Company or any Subsidiary is a party or by which it is bound and have
been issued in compliance with applicable federal and state securities laws.
Except as set forth on SCHEDULE 3.4, all outstanding shares of capital stock of
Xxxxxxxxxxx are owned by the Company, free and clear of all Liens. Except as set
forth on SCHEDULE 3.4, all outstanding shares of capital stock of Riverton are
owned by Xxxxxxxxxxx, free and clear of all Liens. Except as set forth on
SCHEDULE 3.4, there are no issued and outstanding shares of capital stock of the
Company or the Subsidiaries, or securities convertible into or exchangeable or
exercisable for shares of capital stock, outstanding, and there are no
outstanding options, warrants, rights, contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is bound to issue,
repurchase or otherwise acquire or retire any shares of capital stock or other
securities of the Company or the Subsidiaries. Except as set forth on SCHEDULE
3.4, there are no calls, puts, rights to subscribe, conversion rights or other
agreements or commitments to which the Company or any Subsidiary is a party or
which are binding upon the Company or a Subsidiary providing for the issuance,
voting, transfer, pledge, registration, disposition or acquisition of any of the
Company's or any Subsidiary's capital stock. Except as set forth on SCHEDULE
3.4, there are no outstanding or authorized stock appreciation, phantom stock or
similar rights with respect to the Company or any Subsidiary. Except as set
forth on SCHEDULE 3.4, neither the Company nor any Subsidiary is under any
obligation to repurchase, redeem or otherwise acquire any capital stock or
equity securities of the Company or any Subsidiary. Except as set forth on
SCHEDULE 3.4, there are no voting trusts, shareholders' agreements, proxies or
any other agreements or understandings with respect to the voting, transfer or
registration under the Securities Act of the capital stock or other equity
securities of the Company or any Subsidiary.
Section 3.5 SUBSIDIARIES AND AFFILIATES.
Except as set forth on SCHEDULE 3.5, neither the Company nor
Xxxxxxxxxxx owns, or since July 1, 1995 has owned, any capital stock or other
equity securities of any other corporation (other than the Company or its
Subsidiaries) and since July 1, 1995 neither the Company nor Xxxxxxxxxxx has
owned any other type of capital or equity interest in any partnership, joint
venture or other business organization or entity (other than the Company or its
Subsidiaries). Except as set forth on SCHEDULE 3.5, Riverton neither owns, nor
since July 14, 2000 has owned, any capital stock or other equity securities of
any other corporation and since July 14, 2000,
16
Riverton has not owned any other type of capital or equity interest in any
partnership, joint venture or other business organization or entity. Neither the
Company nor the Subsidiaries are subject to any obligation or requirement to
make any investment (in the form of a loan or capital contribution) in any
Person.
Section 3.6 FINANCIAL STATEMENTS.
(a) Attached as SCHEDULE 3.6 are accurate and complete copies of
the audited consolidated balance sheet of the Company and the Subsidiaries at
November 30, 2004, November 30, 2003 and November 30, 2002, and the related
audited consolidated statements of operations, changes in stockholders' equity
and cash flows for the fiscal years then ended (collectively, the "Financial
Statements"). Such Financial Statements present fairly, in all material
respects, the consolidated financial position of the Company and the
Subsidiaries at the dates thereof, and the consolidated results of operations,
changes in stockholders' equity and cash flows of the Company and the
Subsidiaries for the fiscal years then ended, in conformity with GAAP applied in
a manner consistent with past practices of the Company and the Subsidiaries.
(b) Set forth on SCHEDULE 3.6 is a true and correct copy of the
unaudited consolidated balance sheet of the Company and the Subsidiaries at May
31, 2005 (the "Latest Balance Sheet"), and the related consolidated statements
of operations for the six (6) months then ended (collectively, the "Unaudited
Financial Statements"). The Unaudited Financial Statements present fairly, in
all material respects, the consolidated financial position of the Company and
the Subsidiaries at the date thereof, and the consolidated results of operations
for the period indicated, and have been prepared in accordance with GAAP applied
in a manner consistent with past practices of the Company and the Subsidiaries,
subject to year-end and other normal or recurring year-end adjustments made in
accordance with GAAP (applied in a manner consistent with past practices of the
Company and the Subsidiaries) and the absence of footnote disclosure and the
absence of statements of changes in stockholders' equity and cash flows.
Section 3.7 ABSENCE OF CERTAIN CHANGES.
Except as set forth in SCHEDULE 3.7, since November 30, 2004 and
through the date hereof, the Company and the Subsidiaries have conducted their
respective businesses only in the ordinary course and there has not been:
(a) any Material Adverse Effect;
(b) any increase in the compensation of any officers of the
Company or any Subsidiary or, except for increases in the ordinary course of
business and in accordance with past practice, any general increase in the
compensation of employees of the Company or the Subsidiaries (including any such
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment);
(c) any sale, transfer or other disposition of any tangible assets
of the Company and the Subsidiaries having a value on the books of the Company
and the Subsidiaries greater than $5,000 individually or $10,000 in the
aggregate, except sales of inventory in the ordinary course of business, or,
except as set forth on SCHEDULE 3.9, any sale, assignment, transfer, expiration
or
17
other disposition of any of the Company's or any Subsidiary's owned patents,
trademarks, trade names, copyrights, licenses or other intangible assets of the
type listed on SCHEDULE 3.9;
(d) any declaration, setting aside, making or paying of any
dividend or other distribution in respect of the capital stock of the Company or
any Subsidiary or any direct or indirect redemption, purchase or other
acquisition of any shares of the capital stock of the Company or any Subsidiary;
(e) any theft, damage, destruction or loss suffered in excess of
$10,000, to the Company's or any Subsidiary's tangible assets, whether or not
covered by insurance, or any substantial destruction of the books and records of
the Company or any of the Subsidiaries;
(f) any layoff or termination of employees that could result in a
material liability under the Worker Adjustment and Retraining Notification Act
of 1988, as amended , by either the Company or any of the Subsidiaries (without
regard to any actions taken by the Buyer, the Company or the Subsidiaries from
and after the Closing);
(g) any change in the accounting methods or policies of the
Company and the Subsidiaries;
(h) any change in the organizational documents of the Company or
any of the Subsidiaries, or any resolution of the shareholders of the Company or
the Subsidiaries approving any such change;
(i) any entry into or termination, amendment or modification of
any agreement that would be required to be disclosed on SCHEDULE 3.10 hereof;
(j) any issuance or sale by the Company or any Subsidiary of their
equity securities or securities convertible into or exercisable for equity
securities of the Company or any Subsidiary, or any recapitalization,
reclassification, stock dividend, stock split or like change in the
capitalization of the Company or any Subsidiary; and
(k) any commitment to do any of the foregoing.
Section 3.8 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) SCHEDULE 3.8A hereto lists all real properties and interests
therein leased by the Company or any Subsidiary as of the date hereof. Neither
the Company nor any of its Subsidiaries owns any real property.
(b) With respect to real property leased or subleased by the
Company or any Subsidiary, except as set forth in SCHEDULE 3.8A, (i) each lease
or sublease (each, a "Lease" and collectively, "Leases") is in full force and
effect as of the date hereof; (ii) neither the Company nor any Subsidiary is
and, to the Knowledge of the Company, no other party to such Leases is in breach
or default or has repudiated any provision thereof; and (iii) the Company or one
of the Subsidiaries holds a valid and existing leasehold or subleasehold
interest under each of the Leases. The Company has delivered to the Buyer
complete and accurate copies of each of the written Leases, including all
amendments thereto (and with respect to any oral Lease, a written summary of the
material terms of such Lease). With respect to each Lease: (i) such Lease has
18
not been modified in any material respect, and (ii) except for Permitted Liens
or as otherwise disclosed on SCHEDULE 3.8A OR SCHEDULE 3.8B, neither the Company
nor any of its Subsidiaries has assigned, transferred, conveyed, mortgaged or
encumbered any interest in such Lease.
(c) Except as set forth in SCHEDULE 3.8B, each of the Company and
the Subsidiaries has good title to all tangible personal property shown as owned
by the Company and the Subsidiaries on their respective books and records
(except for tangible personal property acquired under installment purchase
contracts or held pursuant to the leases disclosed in SCHEDULE 3.10 or not
required to be disclosed in such Schedule), in each case free and clear of all
Liens, except for Permitted Liens.
Section 3.9 PATENTS, TRADEMARKS, TRADE NAMES.
SCHEDULE 3.9 sets forth a true and complete list of all material
patents, patent applications, trademarks, service marks, trade names, domain
names and registered copyrights and all registrations and pending applications
for registration for any of the foregoing owned by or used (pursuant to license
agreements or otherwise, except for off-the-shelf software subject to
"shrink-wrap" licenses) in the conduct of the businesses of the Company and the
Subsidiaries as of the date hereof indicating as to each item as applicable: (i)
the jurisdictions in which the item is issued or registered or in which any
application for issuance or registration has been filed, (ii) the respective
issuance, registration, or application number of the item, and (iii) the dates
of application and issuance or registration of the item. Except as would not
have a Material Adverse Effect or as identified on SCHEDULE 3.9:
(a) the Company and the Subsidiaries own or possess enforceable
rights to use, and immediately following the Closing will own or have such
rights to use on the same terms, all Proprietary Rights used in their respective
businesses as currently conducted;
(b) there are no pending written or, to the Knowledge of the
Company, pending material unwritten claims received by the Company or any
Subsidiary asserting against the Company or any Subsidiary the invalidity,
misuse or unenforceability of any of such Proprietary Rights or asserting that
the conduct by the Company or any Subsidiary of their respective businesses has
infringed, misappropriated, or otherwise violated any Proprietary Rights of any
other Person and there have been no such written claims received by the Company
or any Subsidiary since June 1, 2003;
(c) to the Company's Knowledge, since June 1, 2003, the
Proprietary Rights owned by the Company and the Subsidiaries have not been
infringed, misappropriated, or otherwise violated by any other Person;
(d) the Company or a Subsidiary owns, licenses or otherwise has
rights to use all of the Proprietary Rights included on SCHEDULE 3.9 (in each
case fee and clear of all Liens, other than Permitted Liens); and
(e) to the Company's Knowledge, the operation of the Company's and
Subsidiaries' businesses as currently conducted do not infringe, misappropriate,
or otherwise violate the Propriety Rights of any other Person.
Section 3.10 MATERIAL CONTRACTS.
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SCHEDULE 3.10 lists all agreements, contracts and commitments (or
groups of related agreements, contracts and commitments with the same party) to
which the Company or a Subsidiary is a party as of the date hereof which (i)
have a term of one year or more and involve annual commitments in excess of
$50,000 (other than purchase or sale orders in the ordinary course of business);
(ii) are with (A) any Seller or any officer or director of the Company or any
Subsidiary, (B) any other Affiliate of the Company or any such Seller, officer
or director, (C) any Immediate Family Member of any Seller or any such officer
or director or (D) any entity in which any Seller or any such officer or
director directly or indirectly owns in excess of five percent (5%) of the
outstanding equity interest; (iii) are collective bargaining agreements with any
labor union; (iv) are agreements obligating the Company or its Subsidiaries to
lend or invest more than $50,000 to or in any Person; (v) are leases or
agreements under which it is lessee of, or holds or operates, any personal
property owned by any other party requiring payments in excess of $50,000
annually; (vi) are leases or agreements under which it is lessor of or permits
any third party to hold or operate any property, real or personal, owned or
controlled by it requiring payments in excess of $50,000 annually; (vii) are any
noncompetition agreement under which the Company or any Subsidiary has a
noncompetition obligation; (viii) are partnership or joint venture agreements;
(xi) are agreements under which the Company or any Subsidiary has incurred,
assumed or guaranteed Indebtedness; or (x) are any sales representative, sales
agent or similar agreement involving sales by the Company or any Subsidiary in
excess of $50,000 annually. With respect to each agreement required to be
disclosed on SCHEDULE 3.10, except as set forth in SCHEDULE 3.10, as of the date
hereof: (a) the Company and the Subsidiaries have performed all the material
obligations required to be performed in connection with the agreements,
contracts or commitments required to be disclosed in SCHEDULE 3.10 and are not
in default under any such agreement, contract or commitment (nor has any event
occurred which with notice or lapse of time, or both, would constitute such a
default); (b) to the Knowledge of the Company as of the date hereof, no such
agreement, contract or commitment has been breached in any material respect or
canceled by the other party thereto; (c) neither the Company nor the
Subsidiaries have received any written notice of any default by it thereunder;
(d) such agreement is in full force and effect; (e) such agreement is valid,
binding and enforceable in all material respects, except (x) as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditors' rights generally and (y) that
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought; and (f) no party has
repudiated in writing any material provision of such agreement.
Section 3.11 LITIGATION; COMPLIANCE WITH LAWS.
(a) Except as set forth in SCHEDULE 3.11, there is no action,
suit, arbitration or judicial or administrative proceeding pending or, to the
Knowledge of the Company, threatened, or, to the Knowledge of the Company,
investigation pending or threatened, against the Company or the Subsidiaries
before any court or other Governmental Authority as of the date hereof. Except
as set forth on SCHEDULE 3.11, neither the Company nor any of the Subsidiaries
is subject to any decree, injunction, court order or unsatisfied judgment of any
Governmental Authority that relates specifically to such Company or Subsidiary.
Except as set forth on SCHEDULE 3.11, there are no pending or, to the Company's
Knowledge, threatened claims against the Company and the Subsidiaries with
respect to any products of the Company or its Subsidiaries that are based on a
theory of strict product liability or negligence (as distinct from product
warranty claims) as of the date hereof. SCHEDULE 3.11 also contains a true,
correct and complete list of all claims with
20
respect to any products of the Company or its Subsidiaries based on a theory of
strict product liability or negligence brought against the Company or any
Subsidiary since July 14, 2000. To the Knowledge of the Company, neither the
Company nor any Subsidiary has sold any asbestos-containing products that would
result in the Company or any Subsidiary having any liability to any third party.
Neither the Company nor Xxxxxxxxxxx is currently a party, or has been a party
since July 1, 1995, to any lawsuit or arbitration proceeding alleging that the
Company or Xxxxxxxxxxx has manufactured or sold any asbestos-containing product.
Riverton is not currently a party, and has not been a party since July 14, 2000,
to any lawsuit or arbitration proceeding alleging that Riverton has manufactured
or sold any asbestos-containing product.
(b) Neither the Company nor the Subsidiaries is in violation in
any material respect of any laws, rules, regulations or ordinances applicable to
their respective businesses, properties or operations as presently conducted,
nor since July 14, 2000, has the Company or any Subsidiary been in violation in
any material respect of any such laws, rules, regulations or ordinances, except
as set forth in SCHEDULE 3.11. Except as set forth on SCHEDULE 3.11, since
January 1, 2003, neither the Company nor any Subsidiary has received written
notice from any Governmental Authority regarding an alleged violation of any
law, rule, regulation or ordinance applicable to its respective business,
properties or operations.
(c) Except as set forth on SCHEDULE 3.11, the Company and each
Subsidiary holds all permits, certificates, licenses and authorizations of any
Governmental Authority necessary for the lawful conduct or operation of their
respective businesses as presently conducted (each, a "Permit"), except for such
Permits the failure to hold which individually or in the aggregate would not
have a Material Adverse Effect. All such Permits are in full force and effect.
No proceeding before any Governmental Authority to revoke, withdraw or terminate
any such Permit is pending or, to the Knowledge of the Company, threatened.
Section 3.12 TAXES.
Except as set forth in SCHEDULE 3.12:
(a) The Company and the Subsidiaries have timely filed (taking
into account all extensions) all Tax Returns required to be filed by them with
respect to all Taxes, and all such Tax Returns are true, correct and complete in
all material respects;
(b) The Company and the Subsidiaries have paid all Taxes due and
owing by them (whether or not shown on any Tax Return), except for Taxes that
are being contested in good faith by appropriate proceedings and for which an
adequate reserve is maintained on the Unaudited Financial Statements;
(c) There are no Liens for Taxes upon the assets or properties of
the Company or the Subsidiaries other than Liens for Taxes not yet due and
payable and those that are being contested in good faith by appropriate
proceedings and for which an adequate reserve is maintained on the Unaudited
Financial Statements;
(d) There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to the assessment of any Tax for any
currently open taxable period with respect to any of the Company or the
Subsidiaries;
21
(e) There is no deficiency, examination, claim, litigation or
other proceeding, of which the Company and the Subsidiaries have received
written notice, with respect to Taxes allegedly owed by the Company or the
Subsidiaries pending against the Company or the Subsidiaries before any taxing
authority or threatened in writing against the Company or the Subsidiaries by
any taxing authority;
(f) Each of the Company and the Subsidiaries has properly withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any shareholder, employee, creditor, independent
contractor or other third party;
(g) None of the Company or the Subsidiaries is a party to or bound
by any Tax allocation or Tax sharing agreement with any Person other than the
Company and the Subsidiaries;
(h) None of the Company or the Subsidiaries is a party to any
joint venture, partnership, or other arrangement or contract that is treated as
a partnership for income Tax purposes;
(i) None of the Company or the Subsidiaries (1) has agreed with,
or been requested by any taxing authority to, make any adjustment to its
accounting method or to make any inclusions to its income under Code Section 481
or any comparable provision of state, local or foreign law, or (2) has applied
for or is subject to any Tax ruling; in each case that would have continuing
effect after the Closing Date;
(j) Since February 28, 2000, none of the Company or its
Subsidiaries has participated in or acted as a "material adviser" (as defined in
Treasury Regulation ss. 301.6112-1) to any "reportable transaction" (as that
term is defined in Treasury Regulation ss. 1.6011-4);
(k) SCHEDULE 3.12 lists all income Tax Returns filed by the
Company and the Subsidiaries for the three most recently completed taxable
years, indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of an audit. The Company has
delivered to the Buyer correct and complete copies of all federal income Tax
Returns filed by it and the Subsidiaries for the three most recently completed
taxable years and all examination reports and statements of deficiencies
received by the Company or any Subsidiary with respect to such Tax Returns, and
made available to the Buyer all other material Tax Returns filed by it and its
Subsidiaries for the three most recently completed taxable years.
Section 3.13 BENEFIT PLANS.
(a) SCHEDULE 3.13 contains an accurate and complete list of all
Benefit Plans maintained or sponsored by the Company or any of the Subsidiaries,
contributed to by the Company or any of the Subsidiaries, or covering any
employees of the Company or any of the Subsidiaries and to which the Company or
any of the Subsidiaries are obligated to contribute. For purposes of the
Agreement, the term "Benefit Plans" shall mean: (i) employee benefit plans as
defined in Section 3(3) of ERISA, (ii) employment agreements, (iii) bonus or
incentive plans, (iv) retention bonuses or agreements, (v) stock option or other
equity compensation plan, and (vi) fringe benefit plans, policies, programs and
arrangements, whether or not subject to ERISA, and whether or not funded. Except
as set forth on SCHEDULE 3.13, the Company and the Subsidiaries have no
obligations and have not had any such obligations during any period for which
any
22
relevant statute of limitations remain open, to contribute to any "multiemployer
pension plan," as such term is defined in Section 3(37) of ERISA, or with
respect to any single employer employee benefit plan subject to Title IV of
ERISA, including Sections 4063 and 4064 of ERISA or in Section 413(c) of the
Code (and regulations promulgated thereunder).
(b) The Company does not have, and has not had, for any period for
which any relevant statute of limitations remains open, any ERISA Affiliates
other than the Subsidiaries or the entities listed on SCHEDULE 3.5.
(c) Except as set forth in SCHEDULE 3.13, neither the Company nor
the Subsidiaries contributes to or has any material liability with respect to
any Benefit Plan which provides health, life insurance, accident or other
"welfare-type" benefits to current or future retirees or current or future
former employees, their spouses or dependents, other than in accordance with
Section 4980B of the Code or applicable state continuation coverage law.
(d) The Company and each Subsidiary have complied in all material
respects with the notice and continuation coverage requirements of Section 4980B
of the Code and regulations thereunder, including without limitation, Treasury
Regulation section 54.4980B-9 as it applied to "M&A beneficiaries" as that term
is defined in Reg. ss. 4980B-9, with respect to each Benefit Plan that is, or
was during any taxable year of the Company or any Subsidiary for which the
statute of limitations on the assessment of federal income Taxes remains open, a
group health plan with the meaning of Section 5000(b)(1) of the Code.
(e) Except as set forth in SCHEDULE 3.13, each Benefit Plan
maintained and administered by the Company or any of the Subsidiaries and all
related trusts, insurance contracts and funds have been maintained, funded and
administered in compliance in all material respects with all reporting and
disclosure requirements and applicable laws and regulations, including but not
limited to ERISA and the Code. Except as set forth in SCHEDULE 3.13, as of the
date hereof, no actions, suits, claims (other than routine claims for benefits),
taxes, penalties or Liens with respect or relating to the Benefit Plans
maintained and administered by the Company and the Subsidiaries are pending or
have been assessed or incurred (which assessment or incurrence remains
unsatisfied) or, to the Knowledge of the Company, are threatened.
(f) Except as set forth in SCHEDULE 3.13, each Benefit Plan
maintained and administered by the Company or any of the Subsidiaries that is
intended to be qualified under Section 401(a) of the Code, and each trust (if
any) forming a part thereof, has received a favorable determination letter from
the IRS as to the qualification under the Code of such Benefit Plan and the
tax-exempt status of such related trust, and, to the Knowledge of the Company,
nothing has occurred since the date of such determination through the date
hereof, that could adversely affect the qualification of such Benefit Plan or
the tax-exempt status of such related trust.
(g) With respect to each Benefit Plan maintained and administered
by the Company or any of the Subsidiaries, the Company has provided the Buyer
with true and complete copies, to the extent applicable, of (i) the most recent
annual report (Form 5500 series) filed with the IRS (with attachments), (ii) the
most recent financial statements, and (iii) all governmental rulings and
determinations (and pending requests for governmental rulings or
determinations).
23
(h) As of the Closing, no payment which is or may be made by, from
or with respect to any Benefit Plan to any employee, former employee, director
or agent of the Company or any Subsidiary, either alone or in conjunction with
any other payment, will or could properly be characterized as an "excess
parachute payment" under Code Section 280G, determined without regard to any
payments that may be made pursuant to any Benefit Plan entered into after the
Closing or, in the case of a Benefit Plan entered into at or before the Closing,
entered into by or at the direction of the Buyer.
Section 3.14 LABOR DISAGREEMENTS.
Since July 14, 2000, neither the Company nor the Subsidiaries have
experienced any material labor disputes or any material work stoppages due to
labor disagreements, and, to the Knowledge of the Company, there is no such
dispute or work stoppage threatened against the Company or the Subsidiaries.
Neither the Company nor any Subsidiary is a party to or bound by a collective
bargaining agreement with any labor organization. To the Knowledge of the
Company: (a) during the past two (2) years with respect to the Company or the
Subsidiaries, no labor organization or group of employees has filed any
representation petition or any written demand for recognition as a bargaining
unit, and (b) no union organizing or decertification efforts are currently
underway with respect to the Company or the Subsidiaries.
Section 3.15 ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 3.15, the Company and the
Subsidiaries are, and since July 14, 2000 have been, in compliance in all
material respects with all applicable Environmental Laws.
(b) Except as set forth in SCHEDULE 3.15, the Company and the
Subsidiaries possess and are in compliance in all material respects with all
material permits, licenses, certificates, franchises and other authorizations
relating to the Environmental Laws necessary to conduct their respective
businesses.
(c) Except as set forth in SCHEDULE 3.15, the operations of the
Company and the Subsidiaries or, to the Knowledge of the Company, any
predecessors of the Company or any Subsidiary, have not resulted in any release
of Hazardous Substances on (i) any real property currently or, to the Knowledge
of the Company, formerly, owned or leased by the Company or the Subsidiaries and
(ii) to the Knowledge of the Company, any other property with respect to which
the Company or any Subsidiary has disposed or arranged the disposal of wastes
thereon, in each case to the extent such releases would cause a Governmental
Authority to require a remediation or other response action by the Company or
any Subsidiary or to the extent such remediation or other response action would
be required by Environmental Law.
(d) Except as set forth in SCHEDULE 3.15, neither the Company nor
the Subsidiaries has received since July 14, 2000 any written notice, report or
other information from any Governmental Authority regarding any actual or
alleged violation of or liability under Environmental Laws relating to any of
them, their facilities or any off-site locations.
(e) Except as set forth in SCHEDULE 3.15, neither the Company nor
any of the Subsidiaries own or operate any underground storage tanks regulated
under applicable Environmental Laws.
24
(f) Except as set forth in SCHEDULE 3.15 or in any of the
agreements listed on SCHEDULE 3.10 and except for contracts entered into in the
ordinary course of business, neither the Company nor any of the Subsidiaries,
has assumed any material liability or obligation of any other Person under
Environmental Laws in connection with any contract or agreement where the
Company or the Subsidiaries would not have otherwise had such liability absent
such contract or agreement.
(g) The Company and each of its Subsidiaries have provided or made
available to Buyer complete and correct copies of results of all material
written reports, audits and inspections in the possession of the Company and
such Subsidiaries pertaining to the matters covered by this Section 3.15.
(h) Neither the Sellers, the Company nor any Subsidiary are
required to obtain any approval or authorization from, or make any filing with,
the New Jersey Department of Environmental Protection under the New Jersey
Industrial Site Recovery Act, as amended, in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
(i) The representations and warranties contained in this Section
3.15 are the sole representation and warranties of the Company relating to
Environmental Laws or environmental matters.
Section 3.16 BROKERS', FINDERS' FEES, ETC.
Except for Xxxxxx X. Xxxxx & Co. Incorporated, which has been retained
by the Company for the benefit of the Sellers, neither the Company nor any
Subsidiaries has employed any broker, finder, investment banker or financial
advisor as to whom the Company or the Subsidiaries may have any obligation to
pay any brokerage or finders' fees or commissions or other compensation
(including indemnification obligations) in connection with the transactions
contemplated hereby.
Section 3.17 AFFILIATE TRANSACTIONS.
Except as disclosed in SCHEDULE 3.17, none of the Partnership, CCS-HGI
or any officer or director of either the Company or any Subsidiary or any
Immediate Family Member of any such officer or director, or any entity in which
the Partnership, CCS-HGI or any such officer or director, directly or
indirectly, owns in excess of five percent (5%) of the outstanding equity
interest, is a party to any agreement, contract, commitment or transaction with
either the Company or the Subsidiaries or has any ownership interest in any
property, real or personal or mixed, tangible or intangible, used in or
pertaining to the business of the Company or the Subsidiaries.
Section 3.18 INSURANCE.
SCHEDULE 3.18 sets forth a list of all policies of fire, liability,
product liability and workmen's compensation insurance held by or on behalf of
the Company and the Subsidiaries. All premiums due and payable thereon have been
paid, and, as of the date hereof, neither the Company nor any Subsidiary has
received any notice of cancellation or non-renewal of any such policy. With
respect to the insurance policies required to be disclosed on SCHEDULE 3.18,
25
SCHEDULE 3.18 sets forth a true and complete list of all insurance claims
pending as of June 1, 2005 and the claims history with respect to historical
insurance claims for the Company and the Subsidiaries during the two (2) year
period prior to June 1, 2005. Except as set forth on SCHEDULE 3.18 and except
for the deductible and coverage limitations under the policies listed on
SCHEDULE 3.18, neither the Company nor its Subsidiaries has any self-insurance
programs.
Section 3.19 BANK ACCOUNTS.
SCHEDULE 3.19 sets forth a true and complete list of each bank,
deposit, lock-box or cash collection, management or other account, of the
Company and the Subsidiaries, including the title and number of the account and
the financial or other institution at which such account is located.
Section 3.20 ABSENCE OF UNDISCLOSED LIABILITIES.
To the Knowledge of the Company, neither the Company nor any of its
Subsidiaries has any obligations or liabilities (whether accrued, absolute,
contingent or otherwise), except (a) liabilities or obligations under contracts
or commitments described in SCHEDULE 3.10 or under contracts and commitments
which are not required to be disclosed thereon, (b) liabilities under the
Benefit Plans listed on SCHEDULE 3.13, (c) liabilities reflected on or accrued
or reserved against in the Financial Statements or the Unaudited Financial
Statements, (d) liabilities which have arisen after the date of the Unaudited
Financial Statements balance sheet in the ordinary course of business (none of
which would be expected to have a Material Adverse Effect) and (e) liabilities
otherwise disclosed in this Agreement or the Schedules attached hereto.
Section 3.21 CUSTOMERS.
SCHEDULE 3.21 contains a true and complete list of all customers of the
Company or its Subsidiaries having gross sales during the fiscal year ended
November 30, 2004 in excess of $50,000 (the "Major Customers"). Since December
1, 2004, neither the Company nor any of its Subsidiaries has received written
notice from a Major Customer that any such Major Customer, and the Company
otherwise has no Knowledge that a Major Customer, has or intends to terminate or
otherwise materially adversely modify its relationship with the Company or any
of its Subsidiaries.
Section 3.22 SUPPLIERS.
SCHEDULE 3.22 contains a true and complete list of suppliers of the
Company or its Subsidiaries supplying more than $50,000 in products to the
Company or any Subsidiary (as determined by dollar volume) for the fiscal year
ended November 30, 2004 (the "Major Suppliers"). Since December 1, 2004, neither
the Company nor any of its Subsidiaries has received written notice from a Major
Supplier that any such Major Supplier, and the Company otherwise has no
Knowledge that a Major Customer, has or intends to terminate or otherwise
materially adversely modify its relationship with the Company or any of its
Subsidiaries.
Section 3.23 PRODUCT WARRANTY.
Except as set forth on SCHEDULE 3.23 or as provided for in any
agreement listed on SCHEDULE 3.10, and except for conditions or warranties
implied or imposed by law, as otherwise
26
contained in the Company's or its Subsidiaries' standard terms and conditions of
sale, any product label or product insert or any agreement entered into in the
ordinary course of business, neither the Company nor any of its Subsidiaries
currently provides any warranty in respect of products supplied, manufactured or
sold by it. Except as set forth on SCHEDULE 3.23 and except to the extent
covered by reserves attributable to product warranty claims, since January 1,
2004, there has been no pattern of material defects in the design or manufacture
of any product line sold by the Company and the Subsidiaries prior to the
Closing Date that would adversely affect the performance or quality of such
product.
Section 3.24 ACCOUNTS RECEIVABLE.
Except to the extent of accounts receivable reserves or accruals on the
Unaudited Financial Statements, the accounts receivable of the Company and the
Subsidiaries shown on the Latest Balance Sheet (a) have arisen out of bona fide
sales and deliveries of goods and other business transactions in the ordinary
course of business and (b) are not subject to valid defenses, set-offs or
counterclaims. As of the Closing, except as set forth on SCHEDULE 3.24 or as
provided for in any agreement listed on SCHEDULE 3.10: no Person has any Lien on
such accounts receivable or any part thereof, other than Permitted Liens, and no
agreement for deduction, free goods, discount or other deferred price or
quantity adjustment has been made with respect to any such accounts receivable
other than in the ordinary course of business. No provision of this Section 3.24
will be deemed a guaranty or assurance of the collectability of any accounts
receivable of the Company or its Subsidiaries. To the Company's Knowledge, there
are no receivables of the Company or any Subsidiary reflected on the Latest
Balance Sheet that are not collectible in the ordinary course of business, other
than any such receivables which have been reserved for in the Company's Latest
Balance Sheet.
Section 3.25 INVENTORY.
All inventory of the Company and its Subsidiaries reflected on the
Latest Balance Sheet or acquired by the Company and its Subsidiaries thereafter
and before the Closing was acquired in the ordinary course of business and is
carried on the books and records of the Company and its Subsidiaries at not in
excess of the lower of last-in, first-out cost or market price determined in
accordance with GAAP (applied in a manner consistent with past practices of the
Company and the Subsidiaries). To the Knowledge of the Company, there are no
inventory items reflected on the Latest Balance Sheet which are not saleable in
the ordinary course of business, other than those inventory items included in
the calculation of the inventory reserves set forth in the Latest Balance Sheet.
Section 3.26 CONDITION OF ASSETS: SUFFICIENCY ASSETS.
(a) To the Knowledge of the Company, there are no capital
expenditures necessary to continue to operate in the ordinary course of business
any buildings, fixtures or equipment currently owned or leased by the Company or
any Subsidiary except for normal maintenance capital expenditures in the
ordinary course of business.
(b) The Company and the Subsidiaries own, lease or license or
otherwise have adequate rights to use all the assets, properties and rights that
the Company and the Subsidiaries currently use to operate the Business.
27
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Company and each of the
Sellers as follows:
Section 4.1 CORPORATE ORGANIZATION.
The Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey.
Section 4.2 AUTHORIZATION.
(a) The Buyer has full corporate power and authority to enter into
and deliver this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby. The
Board of Directors of the Buyer has taken all actions required to authorize the
execution and delivery of this Agreement and the other Transaction Documents to
which it is a party, the performance of the Buyer's obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby and
thereby. No other corporate proceedings on the part of the Buyer are necessary
to authorize the execution, delivery and performance by the Buyer of this
Agreement and the other Transaction Documents to which it is a party.
(b) This Agreement and the other Transaction Documents to which it
is a party have been duly and validly executed and delivered by the Buyer and
assuming due authorization, execution and delivery by the Sellers, constitute
valid and binding obligations of the Buyer, enforceable against it in accordance
with their respective terms except (a) as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights generally and (b) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
Section 4.3 NO VIOLATION.
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will violate any provisions
of the charter or by-laws of the Buyer, or violate, or be in conflict with, or
allow the termination of, or constitute a default under, or cause the
acceleration of the maturity of, or create a lien under, any debt or obligation
pursuant to any agreement or commitment to which the Buyer is a party or by
which the Buyer is bound, or violate in any material respect any statute or law
or any judgment, decree, order, regulation or rule of any court or Governmental
Authority to which the Buyer is subject.
Section 4.4 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES.
Except for consents, approvals or authorizations which if not received
or declarations, filings or registrations which if not made, would not impede
the consummation of the transactions contemplated by this Agreement in any
material respect, no consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory
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authority is required to be made or obtained by the Buyer in connection with the
execution, delivery and performance of this Agreement or the transactions
contemplated hereby.
Section 4.5 SOPHISTICATED INVESTOR.
The Buyer is a sophisticated investor, represented by independent legal
and investment counsel with experience in the acquisition and valuation of
ongoing businesses and acknowledges that it has received, or has had access to,
all information which it considers necessary or advisable to enable it to make
an informed investment decision concerning its purchase of the Stock and the
Options. The Buyer is acquiring the Stock and the Options for investment
purposes only, and not with a view to, or for, any public resale or other
distribution thereof. The Buyer acknowledges that the Stock and the Options have
not been registered under the Securities Act or any state or foreign securities
laws and that the Stock and the Options may not be sold, transferred, offered
for sale, pledged, hypothecated or otherwise disposed of unless such transfer,
sale, assignment, pledge, hypothecation or other disposition is pursuant to the
terms of an effective registration statement under the Securities Act and are
registered under any applicable state or foreign securities laws or pursuant to
an exemption from registration under the Securities Act and any applicable state
or foreign securities laws.
Section 4.6 PURCHASE OF STOCK.
The Buyer is acquiring the Stock solely in order to acquire the assets
and business of the Company and the Subsidiaries; the form of transaction is
solely for the convenience of the parties and does not create in the Buyer any
rights or remedies except as and to the extent expressly provided in this
Agreement.
Section 4.7 BROKERS', FINDERS' FEES, ETC.
The Buyer has not employed any broker, finder, investment banker or
financial advisor as to whom the Buyer may have any obligation to pay any
brokerage or finders' fees, commissions or similar compensation in connection
with the transactions contemplated hereby.
Section 4.8 LITIGATION.
There is no action, proceeding or investigation pending or, to the
Buyer's actual knowledge, threatened against the Buyer, which would materially
affect the Buyer's performance under this Agreement or the consummation of the
transactions contemplated hereby.
Section 4.9 CAPITAL ADEQUACY.
The Buyer has either (i) sufficient cash and available credit
facilities, or (ii) sufficient cash and commitments for credit facilities
(written evidence of which, together with all amendments or additions thereto,
has been provided to the Seller Representative) in either case in an aggregate
amount sufficient to pay all of the consideration payable to the Sellers as
required by this Agreement, and to make all other necessary payments in
connection with the purchase of the Stock and the Options and to pay all related
fees and expenses.
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ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 TAX MATTERS.
(a) The Buyer, the Sellers, the Company and the Subsidiaries agree
that, for U.S. federal income Tax purposes, the taxable year of the Company and
the Subsidiaries beginning on December 1, 2004 shall end on and as of the
Closing Date. In the event, as to any state or local jurisdiction, an election
or other action is required to be taken to terminate a taxable year of the
Company or any of the Subsidiaries on the Closing Date, the Buyer shall cause
such election to be made or such other action to be taken. The Buyer, the
Sellers, the Company and the Subsidiaries further agree that, except to the
extent that as a result of a change in law (including regulations, rulings,
decisions, or administrative pronouncements) after the Closing Date, claiming
the Tax Deductions could result in the imposition of penalties on the Buyer, the
Company or the Subsidiaries, the Tax Deductions shall be claimed on the Tax
Returns filed for the Company and the Subsidiaries for the taxable year that
includes the Closing Date, and the Buyer, the Sellers, the Company and the
Subsidiaries shall not take, and shall cause their respective Affiliates not to
take, any action inconsistent with such reporting. The Buyer shall pay to the
Seller Representative (on behalf of the Sellers pro rata in accordance with each
Seller's Fraction) the amount of any refund of, credit against, or reduction in,
Taxes (plus any interest paid thereon) attributable to the Tax Deductions (or
any net operating losses arising therefrom) received by the Buyer or any
Affiliate of the Buyer (including the Company and the Subsidiaries) after the
Closing Date (the "Tax Deduction Benefit") within ten (10) days after
recognizing a Tax Deduction Benefit. For purposes of this Section 5.1, the Buyer
and its Affiliates shall be treated as recognizing a Tax Deduction Benefit with
respect to any taxable period ending on or before the Closing Date when they
actually receive a Tax refund with respect to any such period, and the Buyer and
its Affiliates shall be treated as recognizing a Tax Deduction Benefit with
respect to any other taxable period when it actually receives an increased
refund or pays less Taxes, and only to the extent of: (i) in the case of any
refund, the difference between (x) the amount of any Tax refund actually
received minus (y) the amount of the Tax refund that would have been received if
the Tax Deductions had not been claimed, or (ii) in the case of reductions in
Taxes paid, whether by credits or deductions, the difference between (x) the
amount of Taxes that would have been paid with respect to a taxable period if
the Tax Deductions had not been claimed and (y) the amount of any Taxes actually
paid with respect to such period. The Seller Representative shall cause to be
prepared and filed such Tax Returns (including amendments thereof) and refund
claims (including applications for quick refund of estimated Taxes and for
tentative refund of Taxes from the carryback of net operating losses), and the
Buyer agrees to provide to the Seller Representative such cooperation as may be
necessary to maximize the Tax Deduction Benefit to the Sellers. Any such Tax
Returns and refund claims shall be subject to the Buyer's consent, which consent
shall not be unreasonably withheld or delayed. Neither the Buyer nor the Company
shall be entitled to offset against any amounts owed by it to the Seller
Representative (on behalf of the Sellers) pursuant to this Section 5.1, any
amounts owed by the Sellers to the Buyer pursuant to this Agreement or
otherwise.
(b) To the extent that the Company and the Buyer pay the amount of
any Tax Deduction Benefit to the Sellers with respect to any taxable period or
portion thereof beginning after the Closing Date, and there is a subsequent
increase in the amount of Taxes due for such taxable period resulting from the
disallowance of all or a portion of the Tax Deductions, then the
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allowable Tax Deduction Benefit for all taxable periods or portions thereof
beginning after the Closing Date shall be recomputed using the formula set forth
in Section 5.1(a), and if the allowable Tax Deduction Benefit under that formula
is less than the amount previously paid to the Sellers for all taxable periods
or portions thereof beginning after the Closing Date, the Sellers shall
indemnify Buyer for an amount equal to the difference, and the Buyer shall
thereafter pay the unpaid Tax Deduction Benefit (as recomputed) to the Sellers
when it actually realizes such Tax Deduction Benefit, in accordance with the
formula set forth in Section 5.1(a)
(c) Except as provided in Section 5.1(a), the Buyer shall prepare
or cause to be prepared and file or cause to be filed any Tax Returns for the
Company and the Subsidiaries that are filed after the Closing Date. At least
thirty (30) days prior to filing any such Tax Return for a taxable period
beginning on or before the Closing Date, the Buyer shall submit a copy of such
Tax Return to the Seller Representative for the Seller Representative's consent,
which consent shall not be unreasonably withheld or delayed (provided that this
paragraph (c) shall not apply to state sales and use Tax Returns which are the
subject of Section 5.1(e) below).
(d) No Tax Return of the Company or the Subsidiaries for any
taxable period beginning on or before the Closing Date shall be amended after
the Closing Date without the prior written consent of the Seller Representative,
which consent shall not be unreasonably withheld or delayed, unless such
amendment is required by law, except as provided in Section 5.1(e). The income
Tax Returns of the Company and the Subsidiaries filed after the Closing Date for
a taxable period that begins on or before the Closing Date shall not contain any
election to waive any carryback period otherwise available with respect to the
use of Tax attributes of the Company and the Subsidiaries.
(e) The Buyer, except as otherwise expressly provided in this
Section 5.1(e), shall have the right to control all proceedings and settlements
relating to sales and use Taxes of the Company or any Subsidiary; it being
understood that the Buyer shall promptly notify the Seller Representative of the
commencement by any taxing authority of any audit or other proceeding with
respect thereto, provided, however, that the failure to give, or timely give,
the notice referred to above will not obviate in any way the obligation of the
Sellers to indemnify the Buyer or Buyer Affiliates pursuant to Section 8.2(d)
with respect to sales and use Taxes of the Company or any Subsidiary..
Notwithstanding the foregoing, neither the Buyer nor any of its Affiliates
(including the Company and the Subsidiaries) shall, without the consent of the
Seller Representative (it being understood that the Seller Representative shall
respond to any request for consent within twenty (20) days and shall not
unreasonably withhold consent), make any filing or written submission with any
state taxing authority after the Closing with respect to any state sales or use
Tax relating to a Pre-Closing Tax Period; provided, however, that the Buyer and
the Sellers expressly agree that, no earlier than sixty (60) days after the
Closing Date, the Buyer, the Company or any Subsidiary may seek, through
voluntary disclosure agreements, a resolution of any outstanding sales and use
Tax liability that may be owed by the Company and the Subsidiaries to no more
than four (4) states with respect to taxable periods beginning no earlier than
January 1, 2003 without the consent of the Seller Representative. The Seller
Representative shall be entitled, at its expense, to participate in (but not
control) any proceedings relating to such resolution.
(f) The Buyer, the Sellers, the Company and the Subsidiaries and
their respective agents and representatives shall cooperate fully, as and to the
extent reasonably requested by one another, in connection with the filing of Tax
Returns and any audit, litigation or other proceeding
31
with respect to Taxes. Such cooperation shall include the retention and (upon
one another'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. The Buyer, the
Company and the Subsidiaries on the one hand, and the Sellers on the other,
agree (i) to retain all books and records with respect to Tax matters pertinent
to the Company or any of the Subsidiaries relating to any taxable period
beginning on or before the Closing Date until the expiration of the statute of
limitations of the respective taxable periods, and (ii) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if so requested, shall allow the requesting party to
take possession of such books and records.
(g) Any Tax refunds (whether by payment, credit, offset, reduction
in Tax or otherwise) that are received by the Buyer or any Affiliate of the
Buyer (including the Company or the Subsidiaries) that are attributable to the
Pre-Closing Tax Period (over and above those addressed in Section 5.1(a)) shall
be for the account of the Sellers, and the Buyer shall pay over to the Seller
Representative any such Tax refund within ten (10) days following receipt
thereof. In addition to Tax refund claims pertaining to the Tax Deductions
(which are specifically addressed in Section 5.1(a) and not intended to be
covered by this sentence), the Buyer agrees that it will file any other Tax
refund claims with respect to any Pre-Closing Tax Period that are reasonably
requested by the Seller Representative, provided that all expenses associated
with filing and prosecuting such other refund claim shall be borne exclusively
by the Sellers, and further provided that any such other claim would not
reasonably be expected to result in an increase in Taxes of the Buyer, the
Company or the Subsidiaries for any taxable period not within the Pre-Closing
Tax Period.
(h) In the case of any taxable period ending on the Closing Date
or any Straddle Period, the portion of any Tax that is attributable to a
Pre-Closing Tax Period will be:
(i) in the case of Taxes that are based upon or related
to income or receipts, deemed equal to the amount which would be payable if the
taxable year or period ended on the Closing Date after giving effect to the
transactions contemplated by this Agreement but without giving effect to items
attributable to events or elections after the Closing, including without
limitation any actual or deemed election under Code Section 338 or any similar
provision of state, local or foreign law; and
(ii) in the case of all other Taxes, deemed to be the
amount of such Taxes for the entire period multiplied by a fraction the
numerator of which is the number of calendar days in the taxable period ending
on the Closing Date and the denominator of which is the number of calendar days
in the entire taxable period.
Section 5.2 PAYMENTS OF INDEBTEDNESS.
At the Closing, the Buyer shall cause the Company to pay to the holders
thereof the outstanding principal amount, together with all accrued and unpaid
interest through the Closing Date and prepayment or other penalties or premiums,
if any, owed with respect to the Indebtedness described on SCHEDULE 5.2, such
amounts to be paid as referenced in the Payoff Letters, to the extent such
amounts are reflected on the Closing Certificate, all in accordance with the
Payoff Letters.
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Section 5.3 BOOKS AND RECORDS.
The Buyer will preserve all books and records of the Company and each
of the Subsidiaries received from the Sellers, or held by the Company
immediately after the Closing, and provide the Sellers or their agents
reasonable access (including the right to photocopy at its own expense) to such
books and records in connection with a claim, action, audit, investigation or
proceeding by or before a Governmental Authority (subject to execution of a
confidentiality agreement reasonably acceptable to the Buyer) for a period of
six (6) years following the Closing Date, or until such later date as
preservation of and access to those books and records is no longer required by
any Governmental Authority.
Section 5.4 FURTHER ASSURANCES.
After the Closing, each party hereto shall cooperate with the others,
and execute and deliver, or cause to be executed and delivered, all such other
instruments, including instruments of conveyance, assignment and transfer, and
use commercially reasonable efforts to take all such other actions as may be
reasonably requested by the other parties hereto from time to time, consistent
with the terms of this Agreement, to effectuate the purposes and provisions of
this Agreement, including in the case of the Sellers by cooperating to release
or cause the release of any Liens existing as of the date hereof on any of the
Company's or its Subsidiaries' assets (other than Permitted Liens).
Section 5.5 CERTAIN UNDERSTANDINGS AND DISCLAIMERS.
(a) The Buyer agrees and acknowledges that it is sophisticated and
was advised by experienced counsel and, to the extent it deemed necessary, other
advisors in connection with this Agreement. The Buyer also agrees and
acknowledges that: (i) the Buyer and its employees, agents and representatives
have been afforded complete access to the books, records, key personnel,
facilities and other things reasonably related to the Stock and the Options and
the business and affairs of the Company and the Subsidiaries and have been given
a reasonable opportunity to ask questions relating to the Stock, the Options and
the business and affairs of the Company and the Subsidiaries and to receive
answers thereto; (ii) in respect of this Agreement and transactions contemplated
thereby, the Buyer has not and is not relying on any document or written or oral
information, statement, representation or warranty furnished to or discovered by
it or any of its Affiliates other than the representations and warranties and
other provisions set forth in this Agreement and the Schedules hereto; and (iii)
none of the Sellers, the Company or any Subsidiary or any other Person will have
or be subject to any liability to the Buyer or any other Person resulting from
the distribution to the Buyer, or the Buyer's use of, any information not
contained in this Agreement and the Schedules hereto (including any offering
memorandum, brochure or other publication provided to the Buyer, or any other
document or information provided to the Buyer in connection with the sale of the
Stock and the Options).
(b) IT IS THE EXPLICIT INTENT AND UNDERSTANDING OF EACH PARTY
HERETO THAT NO PARTY HERETO OR ANY OF SUCH PARTY'S AFFILIATES, REPRESENTATIVES
OR AGENTS IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, ORAL OR WRITTEN,
EXPRESS OR IMPLIED, OTHER THAN THOSE SET FORTH IN THIS AGREEMENT OR IN ANY
SCHEDULE HERETO. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SPECIFICALLY SET
FORTH IN THIS AGREEMENT OR IN ANY SCHEDULE HERETO, THE PARTIES
33
EXPRESSLY DISCLAIM ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR
NATURE EXPRESSED OR IMPLIED (INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE
FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE COMPANY
AND THE SUBSIDIARIES). NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE
CONTRARY, NEITHER THE COMPANY, ANY SUBSIDIARY NOR ANY SELLER MAKES ANY
REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND WITH RESPECT TO ANY
PROJECTIONS, ESTIMATES OR BUDGETS HERETOFORE DELIVERED TO OR MADE AVAILABLE TO
THE BUYER OF FUTURE REVENUES, EXPENSES OR EXPENDITURES, FUTURE RESULTS OF
OPERATIONS (OR ANY COMPONENT THEREOF), FUTURE CASH FLOWS OR FUTURE FINANCIAL
CONDITION (OR ANY COMPONENT THEREOF) OF THE COMPANY AND THE SUBSIDIARIES OR THE
FUTURE BUSINESS AND OPERATIONS OF THE COMPANY AND THE SUBSIDIARIES.
Section 5.6 PUBLICITY.
The Buyer, the Company and the Seller Representative shall cooperate
with each other in the development and distribution of all press releases
relating to the transactions contemplated by this Agreement. Neither the Buyer,
on the one hand, nor the Company, the Seller Representative or the Sellers, on
the other hand, shall issue or make, or allow to have issued or made, any press
release concerning the consummation of the transactions contemplated by this
Agreement without the advance approval in writing of the form and substance
thereof by the Seller Representative or the Buyer, as the case may be, unless
otherwise required by applicable legal or stock exchange requirements (such
approval not to be unreasonably withheld or delayed).
ARTICLE VI
CLOSING DELIVERIES OF SELLERS
The Sellers shall have delivered or shall have caused to be delivered
to the Buyer all of the following items at the Closing, all in form and
substance reasonably satisfactory to the Buyer:
(a) certified resolutions of the Board of Directors of the Company
and of the general partner of the Partnership authorizing the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, along with a certificate executed on behalf of
the Company and of the general partner of the Partnership by its Secretary or
Assistant Secretary certifying to the Buyer that such copies are true, correct
and complete copies of such resolutions, and that such resolutions were duly
adopted and have not been amended or rescinded;
(b) certificates representing the Stock as provided in Section
1.4;
(c) the stock books, stock ledgers and minute books of the Company
and the Subsidiaries;
(d) a certificate of the Secretary or Assistant Secretary of each
of the Company and the Subsidiaries, certifying as to the Certificate of
Incorporation, Bylaws or equivalent charter
34
documents and, with respect to the Company, incumbency and signatures of
officers of the Company;
(e) certificates from appropriate authorities, dated as of the
Closing Date, as to the good standing, qualification to do business of the
Company and the Subsidiaries in the jurisdictions in the United States where
they are organized or qualified to conduct business;
(f) the resignation of each director and of each non-employee
officer of the Company and the Subsidiaries;
(g) the Closing Certificate duly executed by a Vice President of
Xxxxxxxxxxx as provided in Section 1.6(c);
(h) an affidavit from each Seller that such Seller is not a
foreign Person within the meaning of Section 1445 of the Code;
(i) payoff letters for any Indebtedness to be paid by the Company
at the Closing (collectively, the "Payoff Letters") in accordance with Section
5.2 herein, and evidence of either the release of all Liens related to such
Indebtedness or of the agreement by the party secured by any such Liens that
such Liens will be terminated upon payment in full of the applicable
Indebtedness;
(j) the Escrow Agreement, executed by each Seller, the Seller
Representative and the Escrow Agent;
(k) noncompetition and confidentiality agreements executed by each
Seller and the Buyer upon terms and conditions agreed to by each such Seller and
the Buyer; and
(l) evidence of termination of the agreements and instruments
listed on SCHEDULE 6(L).
ARTICLE VII
CLOSING DELIVERIES OF THE BUYER
The Buyer shall have delivered to the Sellers or the Seller
Representative, as appropriate, all of the following items at the Closing, all
in form and substance reasonably satisfactory to the Seller Representative:
(a) the Estimated Purchase Price as set forth in Section 1.6(a);
(b) evidence, in the form of federal reference numbers, of the
payment in full of the Indebtedness described in SCHEDULE 5.2; and
(c) the Escrow Agreement, executed by the Buyer and the Escrow
Agent, together with the delivery of the Escrow Amount to the Escrow Agent
thereunder by wire transfer to an account specified by the Escrow Agent.
35
ARTICLE VIII
INDEMNIFICATION
Section 8.1 INDEMNIFICATION OF THE SELLERS.
The Buyer shall indemnify and hold harmless the Sellers (and their
respective partners, employees, agents, Affiliates, successors, heirs, and legal
representatives) from and against any and all Losses arising out of or incurred
with respect to (a) any breach of any or all of the Buyer's representations and
warranties in this Agreement or (b) the breach or nonperformance of any covenant
or obligation to be performed by the Buyer hereunder or under any agreement
executed in connection herewith. Notwithstanding the foregoing, except for any
breach of the representations and warranties in Sections 4.2, 4.5, 4.6, 4.7 or
4.9, the liability of the Buyer for breaches of representations and warranties
under Section 8.1(a) of this Agreement shall be limited as follows: (i) the
Buyer shall have no liability for any such breaches until (A) the aggregate of
all Losses arising out of any Claim exceeds the Minimum Claim Amount and (B) the
aggregate of all such Losses exceeds Seven Hundred Thousand Dollars ($700,000)
and then only for the amount of such Losses in excess of Three Hundred Fifty
Thousand Dollars ($350,000); and (ii) the aggregate liability of the Buyer after
Closing for all such Losses shall not exceed Seven Million Dollars ($7,000,000)
(the "Maximum Amount").
Section 8.2 INDEMNIFICATION OF THE BUYER.
The Sellers, severally and not jointly, shall indemnify and hold
harmless the Buyer (and its Affiliates and their respective directors, officers
and agents) from and against any and all Losses arising out of or incurred with
respect to (a) any breach of such Seller's representations and warranties in
this Agreement or any Schedule, (b) any breach of the Company's representations
and warranties in this Agreement or any Schedule, (c) the breach or
nonperformance of any covenant or obligation to be performed by such Seller
hereunder or under any Schedule or any agreement executed in connection
herewith, (d) except as otherwise provided in Section 9.7, any Tax (including
any income Tax or any sales or use or similar Tax) of the Company or any
Subsidiaries attributable to any Pre-Closing Tax Period, including any failure
to pay or fully pay such Tax, (e) any indemnification obligations of the Company
or its Subsidiaries under their relevant certificates or articles of
incorporation, by laws or other organizational documents or under any contract
or agreement or under any applicable statute or law with respect to officers (to
the extent such officers are employees of Harbour Group Industries, Inc. or its
Affiliates (other than the Company or any Subsidiary)) or directors of the
Company or any Subsidiary prior to the Closing, (f) any Excess Assumed Historic
Acquisition Liability Amount and (g) except to the extent fully covered by
insurance (it being understood that a party's liability for deductibles,
co-payments or amounts in excess of policy limits constitute such party's not
being "fully covered" for this purpose) and subject to such other conditions set
forth thereon, the matters listed on SCHEDULE 8.2. Notwithstanding the
foregoing, except for any breach of the representations and warranties in
Sections 2.1, 2.2, 2.3, 2.6, 3.1(a) (first sentence only), 3.1(b), 3.1(c), 3.3,
3.4, 3.12 and 3.16, the liability of the Sellers for breaches of representations
and warranties under Section 8.2(a) or 8.2(b) of this Agreement shall be limited
as follows: (i) the Sellers shall have no liability for any such breaches until
(A) the aggregate of all Losses arising out of any Claim exceeds the Minimum
Claim Amount and (B) the aggregate of all such Losses exceeds Seven Hundred
Thousand Dollars ($700,000) and then only for the amount of such Losses in
excess of Three Hundred Fifty Thousand Dollars
36
($350,000) and (ii) the aggregate liability of the Sellers after Closing for all
such Losses shall not exceed the Maximum Amount. A "Claim" for purposes of this
Agreement means any single or individual claim for Loss or any aggregated set of
claims for Losses derived from the same or related facts, events or
circumstances. The "Minimum Claim Amount" for the purposes of this Agreement
means (i) in the case of Section 3.26(a), $75,000, and (ii) in the case of any
other representation and warranty, $50,000. Any Claim made under Section 8.2(g)
shall be subject to a Minimum Claim Amount of $20,000. The Sellers' obligations
under Section 8.2(g) shall expire on the date four (4) years from the date
hereof.
Section 8.3 ADDITIONAL INDEMNITY PROVISIONS.
The indemnification obligations of the Buyer and the Sellers hereunder
shall be subject to the following terms and conditions:
(a) The Buyer, on behalf of itself and each of its Affiliates,
successors and assigns and all Persons who may claim any rights through any of
them (collectively, the "Buyer Affiliates"), hereby agrees that notwithstanding
anything to the contrary contained in this Agreement the liability and
obligations of each Seller under or in connection with this Agreement and the
transactions contemplated hereby shall be several and not joint. Accordingly,
each Seller shall be liable to the Buyer only for (a) the aggregate amount of
all Losses arising out of the breach of any representation or warranty or
covenant of such Seller, including the warranty of title for the Stock, or any
breach by such Seller of its obligation under this Agreement to deliver its
Stock free and clear of Liens, and (b) such Seller's Fraction of the aggregate
amount of all Losses or liabilities, other than those described in clause (a),
for which Sellers may be liable hereunder; and no Seller shall have any
liability for the obligations of any other Seller hereunder. The Buyer, for
itself and the Buyer Affiliates, hereby further irrevocably and unconditionally
waives any right it may have to hold any Seller liable for the obligations of
any other Seller. The aggregate liability of any Seller under Section 8.2 shall
not exceed such Seller's pro rata share of the Purchase Price for the Stock and
the Options sold by such Seller to the Buyer hereunder. Notwithstanding the
foregoing and anything to the contrary herein, nothing in this Section 8.3(a) or
elsewhere in this Agreement shall be deemed to limit or restrict the rights of
the Buyer or any Buyer Affiliate under the Escrow Agreement.
(b) No claims for indemnification shall be made by the Buyer to
the extent that the Losses claimed were reflected through their inclusion as
Indebtedness or through their inclusion as liabilities or reserves in Working
Capital and taken into account in determining the Closing Adjustment or result
from a failure to timely pay the Option Tax Withholding Amount or the Applicable
Employer Payroll Tax Amount arising in respect of the sale of the Options under
this Agreement to the appropriate taxing authority.
(c) Except in the case of actual and willful fraud and except as
provided in Section 9.14, the sole recourse and exclusive remedy of the Buyer
and the Sellers against each other arising out of this Agreement or any
certificate delivered in connection with this Agreement, or otherwise arising
from the Buyer's acquisition of the Stock and the Options, shall be to assert a
claim for indemnification under the indemnification provisions of Sections 8.1
and 8.2.
(d) Without limiting the generality or effect of Section 8.3(c),
as a material inducement to the other parties hereto entering into this
Agreement, each party to this Agreement hereby (i) waives, and forever releases
and discharges the other parties and their respective
37
representatives or affiliates from, by reason of or relating to the breach of
this Agreement and the transactions contemplated hereby, any claim or cause of
action which it otherwise might assert (except as otherwise provided in Section
9.14 hereof), including under the common law or federal or state securities,
trade regulation, environmental (including the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. sec. 9601, et seq.)) or
other laws, except for claims or causes of action for which contractual
indemnification may be sought under and subject to the express terms and
conditions of this Article VIII, (ii) agrees not to, and to cause its and
representatives or affiliates controlled by it not to, directly or indirectly,
institute, prosecute or aid in the prosecution of any claim, demand, cause of
action, suit or other proceeding against any other party or representative or
affiliate thereof, which is the subject of clause (i) of this Section 8.3(d),
and (iii) agrees that, regardless of the foregoing provisions, no party will
have any liability or obligation in respect of any claim or cause of action that
is or may be brought for breach of this Agreement except in respect of Losses,
and then only to the extent expressly provided in this Article VIII.
(e) The term "Loss" or "Losses" shall mean any and all
liabilities, judgments, penalties, interest, damages, fines, losses and costs
and expenses, including but not limited to, reasonable attorneys fees and
accounting fees and related disbursements. The amount of any Loss subject to
indemnification hereunder or of any claim therefor shall be calculated net of
any insurance proceeds or indemnification payments (net of direct collection
expenses) actually received by the Buyer, the Company or the Subsidiaries on
account of such Loss. The Buyer, the Company and the Subsidiaries shall seek
full recovery under all insurance policies covering any Loss to the same extent
as they would if such Loss were not subject to indemnification hereunder;
provided, however, that it is expressly understood and agreed that neither the
Buyer, the Company nor any Subsidiary shall be under any obligation to initiate,
defend or pursue any litigation, arbitration or other proceedings against any
third party insurer of the Buyer, the Company or any Subsidiary under such
insurance policies. In the event that an insurance recovery is made or
indemnification payment is received by the Buyer, the Company, the Subsidiaries
or any of their Affiliates with respect to any Loss for which any such Person
has been indemnified hereunder, then a refund equal to the aggregate amount of
the recovery or payment (net of all direct collection expenses) shall be made
promptly to the Seller Representative (on behalf of the Sellers) or if the Loss
has not yet been determined or paid by the Sellers, the Sellers' indemnification
obligation in respect of the Loss shall be reduced by the aggregate amount of
the insurance recovery or indemnification payments (net of all direct collection
expenses). To the extent that an Indemnified Party recognizes any Tax benefit in
connection with a Loss, the amount of any indemnity payments shall be adjusted
when, as, and to the extent any such Tax benefit is actually recognized. For
purposes of this section, an Indemnified Party shall be treated as recognizing a
Tax benefit with respect to any Loss when it actually receives an increased
refund or pays less Taxes, to the extent of: (i) in the case of any refund, the
difference between (x) the amount of any Tax refund actually received minus (y)
the amount of the Tax refund that would have been received if the Tax deductions
or credits relating to the Loss had not been claimed, or (ii) in the case of
reductions in Taxes paid, whether by credits or deductions, the difference
between (x) the amount of Taxes that would have been paid with respect to a
taxable period if the Tax deductions or credits relating to the Loss had not
been claimed and (y) the amount of any Taxes actually paid with respect to such
period.
(f) In the event that any party to this Agreement proposes to make
any claim for indemnification pursuant to this Article VIII as a result of a
Third Party Claim, the party making the claim (or with such right) (the
"Indemnified Party") shall promptly deliver on or prior to the
38
date upon which the applicable representations and warranties expire pursuant to
the terms of this Agreement and within a reasonable time of discovery of such
Third Party Claim a notice signed by the Indemnified Party or an officer of the
Indemnified Party (the "Claim Notice") to the Seller Representative or the
Buyer, whichever is applicable (such party from whom indemnification is sought,
the "Indemnifying Party"), which Claim Notice shall (i) state the occurrence
giving rise to the claim; (ii) specify the Section of this Agreement under which
such claim is made; and (iii) specify in reasonable detail the nature of the
claim, provided, however, that the failure to give, or timely give, the notice
referred to above will not obviate in any way the obligation of the Sellers to
indemnify the Buyer or Buyer Affiliates except to the extent the Sellers have
been prejudiced thereby.
(g) Any payments made as indemnification under Section 8.1 or
Section 8.2 shall be considered adjustments to the Purchase Price.
(h) In the event the Buyer or any Buyer Affiliate seeks
indemnification with respect to a claim for alleged Losses under this Article
VIII against any Seller or Sellers and if and to the extent a court of competent
jurisdiction determines that the Buyer or any such Buyer Affiliates are not
entitled to indemnification hereunder with respect to such alleged Losses, the
Buyer and any such Buyer Affiliates shall pay to such Seller or Sellers all fees
and costs, including reasonable attorney fees, incurred by such Seller or
Sellers in connection with such litigation, including any appeal therefrom. In
the event the Buyer or any Buyer Affiliate seeks indemnification with respect to
a claim for alleged Losses under this Article VIII against the Sellers and if
and to the extent a court of competent jurisdiction determines that the Buyer or
Buyer Affiliates is or are entitled to indemnification hereunder with respect to
such alleged Losses, the applicable Seller or Sellers shall pay to the Buyer or
any such Buyer Affiliate all fees and costs, including reasonable attorney fees,
incurred by the Buyer or any such Buyer Affiliate in connection with such
litigation, including any appeal therefrom.
(i) WITHOUT LIMITING THE FOREGOING, THE BUYER AND THE BUYER
AFFILIATES SHALL NOT BE ENTITLED TO INDEMNIFICATION UNDER THIS ARTICLE VIII WITH
RESPECT TO INCIDENTAL DAMAGES, SPECIAL DAMAGES, EXEMPLARY DAMAGES, CONSEQUENTIAL
DAMAGES OR PUNITIVE DAMAGES (OTHER THAN SUCH DAMAGES RECOVERABLE BY A THIRD
PARTY PURSUANT TO A THIRD PARTY CLAIM).
(j) In the event the Buyer or Buyer Affiliates are entitled to
indemnification for Losses pursuant to Section 8.2, the Buyer or Buyer
Affiliates shall, unless otherwise agreed to in writing by the Seller
Representative, first seek payment for such Losses from the Escrow Amount
pursuant to the terms of this Agreement and the Escrow Agreement.
(k) Except with respect to the representations and warranties set
forth in Sections 3.6, 3.7(a) and 3.20(d), for purposes of determining whether
there has been a breach of representation or warranty and for purposes of
calculating the amount of Losses incurred by the Indemnified Party arising out
of or resulting from, any breach of a representation or warranty, the references
to a "Material Adverse Effect" or materiality in such representation or warranty
shall be disregarded.
(l) The indemnification obligations set forth in this Article VIII
shall not be limited by any investigation made prior to Closing by or on behalf
of any of the parties hereto or the
39
knowledge of the parties or the decision of any such party to proceed with the
Closing. Notwithstanding anything to the contrary herein, the Buyer shall have
the right, irrespective of any knowledge or investigation by the Buyer, to rely
fully on the representations, warranties and covenants of the Sellers and the
Company contained herein.
(m) The Buyer and the Buyer Affiliates, as applicable, shall use
commercially reasonable efforts to mitigate any Losses with respect to any
matters for which the Buyer or the Buyer Affiliates seek or may seek
indemnification under this Article VIII.
Section 8.4 DEFENSE OF THIRD PARTY CLAIMS AND EXTENSION OF
STATUTE OF LIMITATIONS.
(a) Except as otherwise provided in Section 5.1(e), the
Indemnifying Party shall have the right in its discretion and at its expense to
participate in and control (except that the Indemnifying Party may not so elect
to control without the Indemnified Party's consent unless (A) the Indemnifying
Party acknowledges in writing its obligation to indemnify the Indemnified Party
in accordance with the provisions of this Article VIII, (B) the suit, action or
claim does not seek to impose any liability or obligation upon the Indemnified
Party other than for money damages and (C) the amount of Losses for which the
Indemnified Party is entitled to indemnification from the Indemnifying Party
hereunder is greater than 50% of the damages alleged in such Third Party Claim)
(i) the defense or settlement of any claim, suit, action or proceeding
(including appeals) for money damages in respect of such item (or items) by any
Person other than the Indemnified Party (a "Third Party Claim"), subject to the
prior written consent of the Indemnified Party with respect to any settlement
which subjects the Indemnified Party to any liability or obligation, including
monetary damages and (ii) any and all negotiations with respect thereof. The
Indemnified Party shall not settle any such Third Party Claim or agree to extend
any applicable statute of limitations without the prior written approval of the
Indemnifying Party. The Indemnifying Party shall not be liable for any
settlement of any action or proceeding, the defense of which it has elected to
assume, which settlement is effected without the written consent of the
Indemnifying Party. The Indemnified Party will, at the Indemnifying Party's
expense, provide the Indemnifying Party with all reasonably available
information, assistance and authority to enable the Indemnifying Party to effect
such defense or settlement If the Indemnifying Party elects to assume and
control the defense, the Indemnified Party shall have the right to employ
counsel separate from counsel employed by the Indemnifying Party in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel employed by the Indemnified Party shall be at the expense of the
Indemnified Party unless the employment thereof has been specifically authorized
by the Indemnifying Party in writing or unless there exists a conflict of
interest between the Indemnifying Party and the Indemnified Party with respect
to such action. If the Indemnifying Party (y) has failed to assume the defense
and employ counsel, or (z) is prohibited from assuming the defense pursuant to
this Section 8.4, the Indemnified Party shall have the right to participate in
and control the defense of any Third Party Claim, and the fees and expenses of
counsel employed by the Indemnified Party shall be at the expense of the
Indemnifying Party. If the Indemnified Party controls the defense, the
Indemnifying Party shall have the right to employ counsel separate from counsel
employed by the Indemnified Party in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel employed by the
Indemnifying Party shall be at the expense of the Indemnifying Party. The
Indemnifying Party shall not be liable for any settlement of any claim, suit,
action or proceeding controlled by the Indemnified Party, which settlement is
effected without the written consent of the Indemnifying Party. In the event the
Indemnified Party is defending any Third Party Claim, the Indemnifying
40
Party will provide the Indemnified Party with all reasonably available
information, assistance and authority to enable the Indemnified Party to effect
such defense or settlement. The rights of the Sellers under this Section 8.4 to
participate in and control the defense or settlement of any claim, suit, action
or proceeding shall be exercised only by the Seller Representative as agent for
all the Sellers.
(b) Notwithstanding the foregoing Section 8.4(a), the Buyer or the
Company, on the one hand, and the Seller Representative, on the other hand,
shall jointly control at their own expense any matter or proceeding relating
solely to Taxes attributable to a Straddle Period, and neither the Buyer nor the
Seller Representative shall settle any such proceeding without the consent of
the other party, which shall not be unreasonably withheld or delayed.
(c) Notwithstanding anything to the contrary in this Section 8.4,
should any claim hereunder involve a situation where the Indemnified Party
reasonably anticipates that part of the claim will be borne by it and part of
the claim will be borne by the Indemnifying Party due to the existence of the
limitation amounts in Section 8.2, the parties shall jointly consult and proceed
as to any such claim.
Section 8.5 DISCLOSURE GENERALLY.
If and to the extent any information required to be furnished in any
Schedule is contained in this Agreement or in any other Schedule attached
hereto, such information shall be deemed to be included in all Schedules in
which the information is required to be included to the extent the applicability
of such disclosure to such other Schedule is readily apparent on its face. The
inclusion of any information in any Schedule attached hereto shall not be deemed
to be an admission or acknowledgement by the Company, the Subsidiaries or the
Sellers, in and of itself, that such information is material to or outside the
ordinary course of the business of the Company or the Subsidiaries.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified and supplemented only by
written agreement of each of the parties hereto.
Section 9.2 WAIVER OF COMPLIANCE.
Any failure of any party to comply with any obligation, covenant,
agreement or condition contained herein may be expressly waived in writing by
the party to whom such obligation is owed, but such waiver or failure to insist
upon strict compliance shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
Section 9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The respective representations and warranties of the parties contained
herein or in any certificate delivered at Closing pursuant to this Agreement
shall survive the Closing and shall
41
expire and terminate on December 31, 2006, except for (a) claims for the breach
of any representation or warranty herein made pursuant to Article VIII on or
prior to the expiration date of such representation or warranty as set forth in
this Section 9.3, which claims and the provisions of Article VIII shall survive
until the liability is finally determined; (b) the representations and
warranties contained in Sections 3.5 and 3.15, which representations and
warranties shall survive the Closing and shall expire on June 30, 2008; (c) the
representations and warranties contained in Section 3.13, which representations
and warranties shall survive the Closing and shall expire on June 30, 2009; and
(d) the representations and warranties contained in Sections 2.1, 2.2, 2.3, 2.6,
3.1(a) (first sentence only), 3.1(b), 3.1(c), 3.3, 3.4, 3.12, 3.16, 4.2, 4.5,
4.6 and 4.7, which representations and warranties shall survive the Closing and
shall expire upon termination of the applicable statute of limitations.
Thereafter, no party shall be under any liability whatsoever with respect to any
such representation or warranty.
Section 9.4 NOTICES.
All notices, requests, consents and other communications hereunder
shall be deemed given: (i) when delivered if delivered personally (including by
courier); (ii) on the third day after mailing, if mailed, postage prepaid, by
registered or certified mail (return receipt requested); (iii) on the day after
mailing if sent by a nationally recognized overnight delivery service which
maintains records of the time, place, and recipient of delivery; or (iv) upon
receipt of a confirmed transmission, if sent by fax transmission, in each case
to the parties at the following addresses or to other such addresses as may be
furnished in writing by one party to the others:
(a) if to the Sellers to:
c/o Harbour Group Industries, Inc.
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xx. Xxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
Executive Vice President
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxx & Xxxxxxxx LLP
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
Attention: Xxx X. Xxxxx, Esquire
(b) if to the Buyer to:
Interline Brands, Inc.
000 Xxxx Xxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx, General Counsel
42
with a copy to:
Dechert LLP
0000 Xxxx Xxxxxxxx Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Section 9.5 BINDING NATURE; ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without prior written consent of
the other parties. Except for the Buyer Affiliates solely with respect to their
rights to indemnification under Article VIII herein, nothing contained in this
Agreement, express or implied, is intended to confer on any Person other than
the parties hereto or their successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
Except as otherwise expressly provided herein, nothing contained herein shall be
deemed to give rise to any personal obligation of any of the directors, officers
or principals of any of the parties hereto (in their capacities as such), by
reason of any breach or violation of any of the provisions hereof or otherwise,
and no party hereto shall have any rights against, or be entitled to xxx or seek
any recovery from, any such Persons (in their capacities as such).
Section 9.6 ENTIRE AGREEMENT.
This Agreement, together with the Schedules and Exhibits attached
hereto, embodies the entire agreement and understanding of the parties hereto
with respect to the subject matter contained herein. There are no promises,
representations, warranties, covenants or undertakings with respect to this
Agreement and the events giving rise thereto other than those expressly set
forth herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
Section 9.7 EXPENSES.
Except as otherwise expressly provided herein, each party to this
Agreement will pay its own expenses in connection with the negotiation of this
Agreement, the performance of its obligations hereunder, and the consummation of
the transactions contemplated hereby; provided that all sales, documentary,
stamp, excise, transfer and notarial fees and taxes and the like arising from or
relating to the purchase of the Stock and the Options shall be paid by the
Buyer, provided further that, except to the extent taken into account in
determining the Unpaid Company Transaction Expenses, the Sellers shall pay the
Transaction Expenses incurred by the Company prior to Closing. The Sellers shall
pay the fees and expenses of Xxxxxx X. Xxxxx & Co. Incorporated incurred in
connection with the transactions contemplated hereby. Each Seller shall pay such
Seller's Fraction of the aggregate expenses of the Sellers hereunder, and the
Seller Representative shall deduct such Seller's share of such expenses and any
other anticipated obligations of the Sellers with respect to this Agreement from
any amount otherwise payable to any such Seller hereunder.
43
Section 9.8 SELLER REPRESENTATIVE.
By the execution and delivery of this Agreement, each of the Sellers
hereby irrevocably constitutes and appoints Harbour Group IV Management Co.,
L.L.C., a Delaware limited liability company and general partner of the
Partnership, as the true and lawful agent and attorney-in-fact (the "Seller
Representative") of the Sellers with full power of substitution to act in the
name, place and stead of the Sellers with respect to this Agreement, the
Transaction Documents and the transactions contemplated hereby and thereby as
the Seller Representative may deem appropriate, including, without limitation,
the transfer of the Stock and the Options owned by the Sellers to the Buyer in
accordance with the terms and provisions of this Agreement, and to act on behalf
of the Sellers in any litigation or arbitration involving this Agreement or the
Escrow Agreement, do or refrain from doing all such further acts and things, and
execute all such documents as the Seller Representative shall deem necessary or
appropriate in connection with the transactions contemplated by this Agreement
and the Escrow Agreement, including the power:
(i) to act for the Sellers with regard to matters pertaining to
the determination of the Closing Adjustment and pertaining to the
indemnification referred to in this Agreement, including the power to compromise
any indemnity claim on behalf of the Sellers and to transact matters of
litigation;
(ii) to execute and deliver all ancillary agreements, certificates
and documents that the Seller Representative deems necessary or appropriate in
connection with the consummation of the transactions contemplated by this
Agreement and the Escrow Agreement;
(iii) to receive funds and give receipts for funds, including in
respect of any adjustments to the Purchase Price or any amounts distributed
under the Escrow Agreement;
(iv) to do or refrain from doing any further act or deed on behalf
of the Sellers that the Seller Representative deems necessary or appropriate in
its sole discretion relating to the subject matter of this Agreement or the
Escrow Agreement as fully and completely as the Sellers could do if personally
present; and
(v) to receive service of process in connection with any claims
under this Agreement or the Escrow Agreement.
The appointment of the Seller Representative shall be deemed coupled
with an interest and shall be irrevocable, and the Buyer and any other Person
may conclusively and absolutely rely, without inquiry, upon any action of the
Seller Representative in all matters referred to herein. All notices required to
be made or delivered by the Buyer to the Sellers shall be made to the Seller
Representative for the benefit of the Sellers and shall discharge in full all
notice requirements of the Buyer to the Sellers with respect thereto. The
Sellers hereby confirm all that the Seller Representative shall do or cause to
be done by virtue of its appointment as the Seller Representative of the
Sellers. The Seller Representative shall act for the Sellers on all of the
matters set forth in this Agreement and the Escrow Agreement in the manner the
Seller Representative believes to be in the best interest of the Sellers and
consistent with the obligations under this Agreement and the Escrow Agreement,
but the Seller Representative shall not be responsible to the Sellers for any
loss or damages the Sellers may suffer by the performance by the Seller
Representative of its duties under this Agreement or the Escrow Agreement, other
than
44
loss or damage arising from willful violation of the law by the Seller
Representative of its duties under this Agreement or the Escrow Agreement.
If any individual Sellers should die or become incapacitated, if any
trust or estate should terminate or if any other such event should occur, any
action taken by the Seller Representative pursuant to this Section 9.8 shall be
valid as if such death or incapacity, termination or other event had not
occurred, regardless of whether or not the Seller Representative or the Buyer
shall have received notice of such death, incapacity, termination or other
event.
Section 9.9 GOVERNING LAW.
This Agreement and the legal relations between the parties hereto shall
be governed by and construed in accordance with the laws of the State of New
York (as permitted by Section 5-1401 of the New York General Obligations Law or
any similar successor provision) without giving effect to any law or rule that
would cause the laws of any jurisdiction other than the State of New York to be
applied.
Section 9.10 JURISDICTION.
Any judicial proceeding brought against any of the parties to this
Agreement or any dispute arising out of this Agreement or matter related hereto
may be brought in the courts of the State of New York, or in the United States
District Court for the Southern District of New York, and, by execution and
delivery of this Agreement, each of the parties to this Agreement accepts the
exclusive jurisdiction of such courts, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. The foregoing
consents to jurisdiction shall not constitute general consents to service of
process in the State of New York for any purpose except as provided above and
shall not be deemed to confer rights on any Person other than the respective
parties to this Agreement. Each Seller and the Buyer agree that service of any
process, summons, notice or document by U.S. registered mail to such party's
address set forth above shall be effective service of process for any action,
suit or proceeding in New York with respect to any matters for which it has
submitted to jurisdiction pursuant to this Section 9.10.
Section 9.11 SEVERABILITY.
If any provision of this Agreement or the application of any such
provision to any Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof.
Section 9.12 INTERPRETATION.
All references to immediately available funds or dollar amounts
contained in this Agreement shall mean United States dollars. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. The parties
acknowledge and agree that (i) each party and its counsel have reviewed the
terms and provisions of this Agreement and have contributed to its revision,
(ii) the normal rule of construction, to the effect that any ambiguities are
resolved against the drafting party, shall not be employed in the interpretation
of it, and (iii) the terms and provisions of this Agreement shall be constructed
fairly as to all parties hereto and not in favor or against any
45
party, regardless of which party was generally responsible for the preparation
of this Agreement. All references to Schedules and Exhibits refer to the
Schedules and Exhibits of this Agreement, unless otherwise expressly provided.
The term "including" means "including without limitation." Reference in this
Agreement to the Sellers shall mean the Sellers or any one or more of the
Sellers.
Section 9.13 LEGAL REPRESENTATION.
The Buyer, for itself and its successors and assigns, hereby
irrevocably acknowledges and agrees that all communications between the Sellers
and their counsel, including Xxxxxxxxx Xxxxxxx Xxxxx & Xxxxxxxx LLP, made in
connection with the negotiation, preparation, execution, delivery and closing
under, or any dispute or proceeding arising under or in connection with, this
Agreement, or any matter relating to any of the foregoing, are privileged
communications between the Sellers and such counsel.
Section 9.14 SPECIFIC PERFORMANCE.
Each of the parties hereto acknowledges and agrees that the other
parties hereto would be irreparably damaged in the event any of the provisions
of this Agreement were not performed in accordance with their specific terms or
were otherwise breached. Accordingly, each of the parties hereto agrees that, in
addition to any other remedy to which such party may be entitled at law or in
equity, they each shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement, the terms and provisions hereof.
Section 9.15 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument. Any such counterpart may be executed by facsimile signature
with only verbal confirmation, and when so executed and delivered shall be
deemed an original and such counterpart(s) together shall constitute only one
original.
Section 9.16 RELEASE BY SELLERS.
(a) Each Seller, for such Seller and all of such Seller's agents
and assigns, hereby releases effective at the Closing, without the need for any
further action, any and all claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including attorneys' fees and costs
incurred) of whatsoever kind or nature, whether at law or in equity, matured or
unmatured, known or unknown, contingent or liquidated or otherwise, that any of
them can, shall or may have against the Company and the Subsidiaries and their
respective successors and assigns (collectively, "Releasees"), arising from or
relating to any matter, cause or event occurring contemporaneously with or prior
to the Closing other than any claims (i) arising under this Agreement or any
other Transaction Document to which such Seller is a party and (ii) with respect
to any Seller that is or was an employee of the Company or any Subsidiary, such
Seller's employment with the Company or any Subsidiary, including any
compensation (including pursuant to any bonus plans, as may be
46
due such Seller) and any payments or benefits as may be due to such Seller under
any employee benefit plan of the Company or any Subsidiary (the "Released
Claims").
(b) Each Seller hereby irrevocably covenants to refrain from,
directly or indirectly, asserting any claim or demand or commencing, instituting
or causing to be commenced, any proceeding of any kind against any Releasee,
based on or arising from any of the Released Claims.
(c) If any provision of this Section 9.16 is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions in
this Section 9.16 will remain in full force and effect. Any provision of this
Section 9.16 held invalid or unenforceable only in part will remain in full
force and effect to the extent not held invalid or unenforceable.
Section 9.17 RELEASE BY THE COMPANY.
(a) The Company and each Subsidiary, for itself and its agents and
assigns, hereby releases effective at the Closing, without the need for any
further action, any and all claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including attorneys' fees and costs
incurred) of whatsoever kind or nature, whether at law or in equity, matured or
unmatured, known or unknown, contingent or liquidated or otherwise, that any of
them can, shall or may have against the Partnership, CCS-HGI, any present or
former director, officer, employee or agent of any of the Partnership or CCS-HGI
or any of their respective Affiliates and successors and assigns (collectively,
"Seller Releasees"), arising from or relating to any matter, cause or event
occurring contemporaneously with or prior to the Closing relating to the Company
or any Subsidiary (the "Seller Released Claims"). Notwithstanding the foregoing,
the Seller Released Claims shall not include any obligations of the Partnership
or CCS-HGI under this Agreement, any Schedule hereto or any other Transaction
Document to which the Partnership or CCS-HGI is a party.
(b) Each of the Buyer and the Company hereby irrevocably covenants
to refrain from, directly or indirectly, asserting any claim or demand or
commencing, instituting or causing to be commenced, any proceeding of any kind
against any Seller Releasee, based on or arising from any of the Seller Released
Claims.
(c) If any provision of this Section 9.17 is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions in
this Section 9.17 will remain in full force and effect. Any provision of this
Section 9.17 held invalid or unenforceable only in part will remain in full
force and effect to the extent not held invalid or unenforceable.
[The Balance of This Page Intentionally Left Blank]
47
IN WITNESS WHEREOF, the parties have executed this Stock Purchase and
Sale Agreement as of the date first written above.
CCS ENTERPRISES, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
SELLERS:
HARBOUR GROUP INVESTMENTS IV, L.P.
By: HARBOUR GROUP IV MANAGEMENT CO., L.L.C.,
its general partner
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Additional Manager
CCS-HGI ASSOCIATES, L.P.
By: HARBOUR GROUP INDUSTRIES, INC.,
its general partner
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Executive Vice President
/s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxx
--------------------------------------------
Xxxxx X. Xxxxxx
[Signature Page to Stock Purchase and Sale Agreement]
/s/ Xxxxxxx Xxxxxxx
--------------------------------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxx
--------------------------------------------
Xxxxxxx Xxxxxx
BUYER:
INTERLINE BRANDS, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Vice President, General Counsel
and Secretary
[Signature Page to Stock Purchase and Sale Agreement]
EXHIBIT A
SELLERS
SELLER SHARES OWNED OPTIONS OWNED SELLER'S FRACTION
------ ------------ ------------- -----------------
Harbour Group Investments IV, L.P. 813,800 33,322 78.81%
CCS-HGI Associates, L.P. 89,835 --- 8.36%
Xxxxxx X. Xxxxxxx 117,421 4,330 11.33%
Xxxxx X. Xxxxxx 5,375 --- 0.50%
Xxxxxxx Xxxxxxx 5,375 --- 0.50%
Xxxxxxx Xxxxxx 5,375 --- 0.50%
EXHIBIT B
FORM OF
CLOSING CERTIFICATE
The undersigned, Xxxxxxx Xxxxxx, in his capacity as Vice President
of Xxxxxxxxxxx Chimney Supply, Inc., an Oklahoma corporation (the "Company'),
pursuant to Section 1.6(c) of that certain Stock Purchase and Sale Agreement,
dated July ___, 2005 (the "Stock Purchase Agreement"), by and among CCS
Enterprises, Inc., a Delaware corporation ("CCS"), the shareholders of CCS
listed on Exhibit A thereto, and Interline Brands, Inc., a New Jersey
corporation, hereby sets forth his best estimate of the amounts described below
as of the date hereof:
Item Amount
---- ------
Estimated Cash Balance $______________
Estimated Indebtedness $______________
Estimated Working Capital $______________
Estimated Working Capital Adjustment $______________
Estimated Unpaid Company Transaction Expenses $______________
Seller Notes Amount $______________
Option Exercise Amount $______________
Capitalized terms used but not otherwise defined herein shall have
the respective meanings set forth in the Stock Purchase Agreement.
---------------------------------
Xxxxxxx Xxxxxx
Vice President
Dated: July ___, 2005
EXHIBIT C
FORM OF
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated July 7, 2005 (the "Agreement"),
by and among Interline Brands, Inc., a New Jersey corporation (the "Buyer"),
each of the Persons listed on Exhibit A attached hereto (the "Sellers"), Harbour
Group IV Management Co., L.L.C., a Delaware limited liability company, in its
capacity as the Seller Representative (the "Seller Representative"), and LaSalle
Bank National Association, a national banking association, as escrow agent (the
"Escrow Agent").
WHEREAS, the Buyer, CCS Enterprises, Inc., a Delaware
corporation, and the Sellers have entered into that certain Stock Purchase and
Sale Agreement (the "Stock Purchase Agreement"), dated the date hereof,
providing for the sale by the Sellers to the Buyer of all of the Stock and
Options (each as defined in the Stock Purchase Agreement); and
WHEREAS, Section 1.6(a) of the Stock Purchase Agreement
provides for the delivery of a sum equal to Four Million Dollars ($4,000,000)
(the "Escrow Amount") to the Escrow Agent on the Closing Date, such Escrow
Amount to be delivered to and maintained by the Escrow Agent in accordance with
the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants contained herein, the parties hereto agree as follows:
1. Definitions.
Capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to such terms in the Stock Purchase Agreement.
Notwithstanding the foregoing, or any contrary provisions of this Agreement, it
is understood that the Escrow Agent is not a party to, nor does the Escrow Agent
consent to, any provisions of the Stock Purchase Agreement. References in this
Agreement to the Stock Purchase Agreement are for reference by the principals
only, and the parties agree that the Escrow Agent shall not be responsible for
compliance with any provisions of the Stock Purchase Agreement or any agreement
other than this Agreement.
2. Deposit of Escrow Funds.
Upon the execution of this Agreement, the Buyer will deliver
to the Escrow Agent the Escrow Amount by wire transfer, the receipt of which
shall be acknowledged by the Escrow Agent. The Escrow Agent shall deposit the
Escrow Amount in an account identified as being established pursuant to this
Agreement (the "Escrow Account"). The Escrow Agent will hold the Escrow Amount,
together with all investments thereof, additions thereto and all income
accumulated thereon and proceeds therefrom (collectively, the "Escrow Funds"),
in escrow upon the terms and conditions set forth in this Agreement and shall
not withdraw the Escrow Funds
from the Escrow Account except as provided herein.
The Escrow Funds shall be allocated among the Sellers pro rata in accordance
with their respective Seller's Fraction. The Buyer and each Seller acknowledge
and agree that (a) the General Claims Escrow Fund (as defined herein) secures
the obligations, if any, of the Sellers pursuant to Sections 1.6(d) and 8.2 of
the Stock Purchase Agreement and secures no other obligations of any kind of the
Sellers or any Seller and (b) the Tax Escrow Fund (as defined herein) secures
the obligations, if any, of the Sellers under Section 8.2(d) of the Stock
Purchase Agreement to the extent such obligation relates to sales or use Tax of
the Company or any Subsidiary attributable to any Pre-Closing Tax Period and
secures no other obligations of any kind of the Sellers or any Seller.
3. Investments.
(a) The Escrow Agent shall invest and reinvest from time to time
the Escrow Funds (i) in any obligation of, or guaranteed as to principal and
interest by, the United States or any agency or instrumentality thereof
(provided that the full faith and credit of the United States supports the
obligation or guarantee of such agency or instrumentality), (ii) in any money
market fund that invests solely in such obligations or types described in clause
(i), or (iii) in any other investment agreed to in writing by the Buyer and the
Seller Representative. In the absence of written direction from the Buyer and
the Seller Representative, the Escrow Agent shall invest the Escrow Funds in the
Federated Government Obligations Fund (Trust Shares). Investments may be
executed by the Escrow Agent's own Bond Department. To the extent the Escrow
Agent invests any funds in the manner provided for in this Section 3(a), no
party hereto shall be liable for any loss which may be incurred by reason of any
such investment.
(b) The Escrow Agent shall have the power to reduce, sell or
liquidate the foregoing investments whenever the Escrow Agent shall be required
to release all or any portion of the Escrow Funds pursuant to Sections 3 or 4.
The Escrow Agent shall have no liability for any investment losses resulting
from the investment, reinvestment, sale or liquidation of any portion of the
Escrow Funds, except in the case of the gross negligence or willful misconduct
of the Escrow Agent.
(c) On the third business day of each calendar quarter of each
year this Agreement is in effect, beginning with October 5, 2005, the Escrow
Agent shall pay to the Seller Representative (on behalf of the Sellers pro rata
in accordance with their respective Seller's Fraction), by wire transfer or bank
check in accordance with written instructions provided from time to time by the
Seller Representative to the Escrow Agent, forty percent (40%) of all income
earned on the Escrow Amount during the preceding calendar quarter. Such earned
income shall be allocated among the Sellers pro rata in accordance with their
respective Seller's Fraction. Such payments shall be made regardless of the
existence of any claims made against the Escrow Funds or amounts set aside for
such claims by the Escrow Agent in accordance with Section 4 herein.
(d) Notwithstanding any other provision of this Agreement, the
Escrow Agent shall release all or any portion of the Escrow Funds in accordance
with any joint written direction from the Buyer and the Seller Representative.
2
4. Escrow Funds.
(a) The Escrow Amount shall be divided into two (2) separate
funds, which shall be accounted for separately but may be invested jointly. The
first fund shall be known as the "General Claims Escrow Fund" and shall consist
of Three Million Five Hundred Thousand Dollars ($3,500,000.00), plus, subject to
Section 3(c), all income accumulated thereon and proceeds therefrom. The second
fund shall be known as the "Tax Escrow Fund" and shall consist of Five Hundred
Thousand Dollars ($500,000.00), plus, subject to Section 3(c), all income
accumulated thereon and proceeds therefrom.
(b) General Claims Escrow Fund.
(i) At any time, and from time to time, during the period
from the Closing through the General Claims Escrow Expiration Date (as defined
in Section 4(b)(vii) hereof), subject to the limitations set forth in Section
4(c)(vi), the Buyer may give to the Escrow Agent and the Seller Representative
one or more notices (each, a "Notice") that the Buyer determines in good faith
that it or a Buyer Affiliate is entitled to receive payment from the Sellers
pursuant to the indemnification obligations of Sellers under Section 8.2 of the
Stock Purchase Agreement. Subject to the limitations set forth in Section
4(c)(vi), upon receipt of a Notice, the Escrow Agent shall: (A) if such Notice
sets forth the amount of a claim reasonably estimated in the good faith opinion
of the Buyer, hold a portion of the General Claims Escrow Fund equal to the
amount of such claim as set forth in such Notice (or, if the amount set forth
exceeds the entire amount of the General Claims Escrow Fund, the entire General
Claims Escrow Fund) in escrow until receiving notice of a General Claims
Determination (as defined in paragraph 4(b)(iii) below) with respect to such
claim, or (B) if such Notice states, in the good faith opinion of the Buyer,
that the maximum possible Losses which may arise from such claim are not
reasonably ascertainable by the Buyer, the Escrow Agent shall hold the entire
amount of the General Claims Escrow Fund then in its possession until a General
Claims Determination with respect to such claim has occurred, unless the Escrow
Agent is subsequently notified by the Buyer that the maximum possible amount of
such claim is less than the entire amount of the General Claims Escrow Fund, in
which case the Escrow Agent thereafter shall hold a portion of the General
Claims Escrow Fund equal to the maximum possible amount of such claim as set
forth in such subsequent notice in escrow until a General Claims Determination
with respect to such claim has occurred. In the case of any claim, the maximum
possible amount of which is not reasonably ascertainable by the Buyer at the
time the Notice of such claim is given, the Buyer shall notify the Escrow Agent
and the Seller Representative of the amount of such claim promptly after such
amount becomes reasonably ascertainable by the Buyer.
(ii) The Notice given to the Escrow Agent and the Seller
Representative pursuant to paragraph 4(b)(i) above shall set forth a description
of such claim, the clause of Section 8.2 of the Stock Purchase Agreement
pursuant to which the claim is made, the amount thereof if reasonably
ascertainable by the Buyer (or a statement that the amount thereof is not then
reasonably ascertainable by the Buyer and the basis for such statement) and
whether or not such claim arises from the assertion of liability by a third
party.
3
(iii) For the purpose of this Agreement, a "General Claims
Determination" shall mean, with respect to a claim by the Buyer under Section
8.2 of the Stock Purchase Agreement, (A) a written compromise or settlement of
such claim signed by the Buyer and the Seller Representative specifying an
amount owing, if any, to the Buyer, (B) a binding judgment of a court of
competent jurisdiction in the United States of America or elsewhere (the time
for appeal having expired and no appeal having been perfected) in favor of the
Buyer and against the applicable Seller or Sellers with respect to such claim,
or (C) a binding judgment of a court of competent jurisdiction in the United
States of America or elsewhere (the time for appeal having expired and no appeal
having been perfected) in favor of the applicable Seller or Sellers and against
the Buyer with respect to such claim.
(iv) Within two (2) business days following notice of a
General Claims Determination, the Escrow Agent shall either (A) in the case of a
General Claims Determination described in clause (A) or (B) of paragraph
4(b)(iii) above, disburse to the Buyer from the General Claims Escrow Fund the
amount owing to the Buyer as set forth in such General Claims Determination, or
(B) in the case of a General Claims Determination described in clause (C) of
paragraph 4(b)(iii) above, release back into the General Claims Escrow Fund the
portion of the funds held pursuant to Section 4(b)(i) above, as applicable,
which relate to such claim as set forth in the General Claims Determination;
provided, however, that if the General Claims Escrow Expiration Date would have
occurred but for the amounts held aside from the General Claims Escrow Fund
pursuant to Section 4(b)(i) above, as applicable, such amounts will be disbursed
by the Escrow Agent to the Seller Representative (on behalf of the Sellers pro
rata in accordance with their respective Seller's Fraction).
(v) In the event the Closing Adjustment has been finally
determined pursuant to Section 1.3(b) of the Stock Purchase Agreement, and as a
result of such determination the Sellers are required to pay the Closing
Adjustment pursuant to Section 1.6(d) of the Stock Purchase Agreement, then the
Buyer may, at its option, notify the Escrow Agent in writing (a copy of which
the Buyer shall at the same time also provide to the Seller Representative) of
the amount of the Closing Adjustment, which notice (such notice, a "Closing
Adjustment Notice") shall also include (i) either (x) if the Closing Adjustment
was determined by the Arbitrator, a true and correct copy of the Arbitrator's
decision or (y) if the Closing Adjustment was determined by mutual agreement of
the Buyer and the Seller Representative, a jointly executed escrow release
instruction of the Buyer and the Seller Representative, and (ii) a certification
by the Buyer as to the amount of the Closing Adjustment which is owed to the
Buyer but has not yet been paid by the Sellers (the "Closing Adjustment Escrow
Payment Amount"). When the Escrow Agent has received the Closing Adjustment
Notice, the Escrow Agent shall, on the fifth (5th) business day following
receipt of such notice (the "Closing Adjustment Escrow Release Date"), release
to the Buyer from the General Claims Escrow Fund the Closing Adjustment Escrow
Payment Amount.
(vi) In the event that the Sellers are the Indemnifying
Party with respect to a Third Party Claim pursuant to Section 8.2 of the Stock
Purchase Agreement and the Seller Representative has assumed the defense thereof
under Section 8.2(g) or Section 8.4 of the Stock Purchase Agreement, any of
their reasonable out-of-pocket costs and expenses in connection with the defense
of such Third Party Claim shall be advanced from the General
4
Claims Escrow Fund, and the Buyer and the Seller Representative shall execute
any joint written direction to the Escrow Agent and otherwise cooperate with the
other in obtaining such advance or advances of funds.
(vii) The General Claims Escrow Fund created pursuant to
this Agreement shall terminate (the "General Claims Escrow Expiration Date")
upon the earlier to occur of (i) the date of distribution of the entire balance
of the General Claims Escrow Fund to the Buyer (or its designees) pursuant to
this Section 4(b), and (ii) December 31, 2006, except with respect to any
pending claim(s) filed on or prior to such date against the General Claims
Escrow Fund pursuant to a Notice under Section 4(b)(i) hereof (each, a "Pending
Claim"), in which event the General Claims Escrow Fund shall terminate upon
resolution of all such Pending Claims and the payments of all amounts required
to be made from the General Claims Escrow Fund with respect thereto. On the
General Claims Escrow Expiration Date, the balance of the General Claims Escrow
Fund, if any, shall be disbursed to the Seller Representative (on behalf of the
Sellers pro rata in accordance with their respective Seller's Fraction).
(c) Tax Escrow Fund.
(i) At any time, and from time to time, during the period
from the Closing through the Tax Escrow Expiration Date (as defined in Section
4(c)(v) hereof), the Buyer may give to the Escrow Agent and the Seller
Representative one or more notices (each, a "Tax Escrow Notice") that the Buyer
determines in good faith that it or the Company or any Subsidiary is entitled to
receive payment from the Sellers pursuant to the indemnification obligations of
Sellers under Section 8.2(d) of the Stock Purchase Agreement to the extent such
obligation relates to sales or use Tax of the Company or any Subsidiary
attributable to any Pre-Closing Tax Period. Upon receipt of a Tax Escrow Notice,
the Escrow Agent shall: (A) if such Tax Escrow Notice sets forth the amount of a
claim reasonably estimated in the good faith opinion of the Buyer, hold a
portion of the Tax Escrow Fund equal to the amount of such claim as set forth in
such Tax Escrow Notice (or, if the amount set forth exceeds the entire amount of
the Tax Escrow Fund, the entire amount of the Tax Escrow Fund) in escrow until
receiving notice of a Tax Determination (as defined in paragraph 4(c)(iii)
below) with respect to such claim, or (B) if such Tax Escrow Notice states, in
the good faith opinion of the Buyer, that the maximum possible Losses which may
arise from such claim are not reasonably ascertainable by the Buyer, the Escrow
Agent shall hold the entire amount of the Tax Escrow Fund then in its possession
until a Tax Determination with respect to such claim has occurred, unless the
Escrow Agent is subsequently notified by the Buyer that the maximum possible
amount of such claim is less than the entire amount of the Tax Escrow Fund, in
which case the Escrow Agent thereafter shall hold a portion of the Tax Escrow
Fund equal to the maximum possible amount of such claim as set forth in such
subsequent notice in escrow until a Tax Determination with respect to such claim
has occurred. In the case of any claim, the maximum possible amount of which is
not reasonably ascertainable by the Buyer at the time the Tax Escrow Notice of
such claim is given, the Buyer shall notify the Escrow Agent and the Seller
Representative of the amount of such claim promptly after such amount becomes
reasonably ascertainable by the Buyer.
5
(ii) The Tax Escrow Notice given to the Escrow Agent and
the Seller Representative pursuant to paragraph 4(c)(i) above shall set forth a
description of such claim and the amount thereof if reasonably ascertainable by
the Buyer (or a statement that the amount thereof is not then reasonably
ascertainable by the Buyer and the basis for such statement).
(iii) For the purpose of this Agreement, a "Tax
Determination" shall mean, with respect to a claim by the Buyer under Section
8.2(d) of the Stock Purchase Agreement to the extent such claim relates to sales
or use Tax of the Company or any Subsidiary attributable to any Pre-Closing Tax
Period, (A) a written compromise or settlement of such claim signed by the Buyer
and the Seller Representative specifying an amount owing, if any, to the Buyer,
(B) (1) a binding judgment of a court of competent jurisdiction in the United
States of America (the time for appeal having expired and no appeal having been
perfected) in favor of the Buyer and against the applicable Seller or Sellers
with respect to such claim or (2) a binding written settlement with the
applicable state taxing authority or judgment of a court of competent
jurisdiction in the United States of America (the time for appeal having expired
and no appeal having been perfected) to the extent in favor of a state taxing
authority and against the Company or applicable Subsidiary with respect to such
claim, or (C) (1) a binding judgment of a court of competent jurisdiction in the
United States of America (the time for appeal having expired and no appeal
having been perfected) in favor of the applicable Seller or Sellers and against
the Buyer with respect to such claim or (2) a binding written settlement with
the applicable state taxing authority or judgment of a court of competent
jurisdiction in the United States of America (the time for appeal having expired
and no appeal having been perfected) to the extent in favor of the Company or
any Subsidiary and against a state taxing authority with respect to such claim.
(iv) Within ten (10) business days following notice of a
Tax Determination, the Escrow Agent shall either (A) in the case of a Tax
Determination described in clause (A) or (B) of paragraph 4(c)(iii) above,
disburse to the Buyer from the Tax Escrow Fund the amount owing to the Buyer as
set forth in such Tax Determination, or (B) in the case of a Tax Determination
described in clause (C) of paragraph 4(c)(iii) above, release back into the Tax
Escrow Fund the portion of the funds held pursuant to Section 4(c)(i) above
which relate to such claim as set forth in the Tax Determination; provided,
however, that if the Tax Escrow Expiration Date would have occurred but for the
amounts held aside from the Tax Escrow Fund pursuant to Section 4(c)(i) above,
such amounts will be disbursed by the Escrow Agent to the Seller Representative
(on behalf of the Sellers pro rata in accordance with their respective Seller's
Fraction).
(v) The Tax Escrow Fund created pursuant to this
Agreement shall terminate (the "Tax Escrow Expiration Date") upon the earlier to
occur of (A) the date of distribution of the entire balance of the Tax Escrow
Fund to the Buyer (or its designees) pursuant to this Section 4(c), and (B) July
__, 2008, except with respect to any pending claim(s) filed on or prior to such
date against the Tax Escrow Fund pursuant to a Tax Escrow Notice under Section
4(c)(i) hereof (each, a "Pending Claim"), in which event the Tax Escrow Fund
shall terminate upon resolution of all such Pending Claims and the payments of
all amounts required to be made from the Tax Escrow Fund with respect thereto.
On the Tax Escrow Expiration Date, the balance of the Tax Escrow Fund, if any,
shall be disbursed to the Seller Representative (on behalf of the Sellers pro
rata in accordance with their respective Seller's Fraction).
6
(vi) In the event the Buyer is entitled to indemnification
for Losses under Section 8.2(d) of the Stock Purchase Agreement to the extent
such obligation relates to sales or use Tax of the Company or any Subsidiary
attributable to any Pre-Closing Tax Period, the Buyer may seek payment for up to
$250,000 of such Losses from the General Claims Escrow Fund prior to seeking
payment from the Tax Escrow Fund, but otherwise must first seek payment for such
Losses from the funds contained in the Tax Escrow Fund prior to filing any
Notice pursuant to Section 4(b)(i) or otherwise seeking any such payment from
the General Claims Escrow Fund.
(vii) In the event the Buyer, the Company or any Subsidiary
receives an invoice for payment from any state taxing authority for sales or use
Tax of the Company or any Subsidiary attributable to any Pre-Closing Tax Period
for which the Sellers have an indemnification obligation under Section 8.2(d) of
the Purchase Agreement, which invoice under applicable law, regulations or
judicial or administrative decisions, notices or pronouncements cannot be
contested unless such sales or use Tax is first paid in whole or in part, then
the Buyer shall provide the Seller Representative with a copy of such invoice
together with a draft written joint direction to the Escrow Agent requesting
payment from the Tax Escrow Fund for Losses consistent with such invoice
(collectively, a "Tax Escrow Indemnification Request"). Provided such Tax Escrow
Indemnification Request complies with the terms of this Agreement and the
Purchase Agreement, including without limitation setting forth Losses for which
the Sellers have an indemnification obligation under Section 8.2(d) of the
Purchase Agreement, then no later than ten (10) business days following receipt
of such Tax Escrow Indemnification Request, the Seller Representative shall
execute a joint written direction with the Buyer requesting payment for such
Losses. The Buyer shall then submit such joint written direction to the Escrow
Agent for payment in accordance with the terms of this Agreement.
5. Settlement of Disputes.
Any dispute which may arise under this Agreement (which for
the avoidance of doubt does not include any underlying claim that gave rise to
the right to indemnification under the Stock Purchase Agreement) with respect to
the delivery and/or ownership or right of possession of the Escrow Funds or any
part thereof, or the duties of the Escrow Agent hereunder, shall be settled
either by mutual agreement of the Buyer and the Seller Representative (evidenced
by appropriate instructions in writing to the Escrow Agent, signed by such
parties) or by a binding arbitration award or a final order, decree or judgment
of any appropriate court located in the State of New York (the time for appeal
having expired and no appeal having been perfected), each party or parties,
other than the Escrow Agent, bearing its own costs and expenses with respect to
the dispute. The Escrow Agent shall be under no duty whatsoever to institute or
defend any such proceedings. Prior to the settlement of any such dispute, the
Escrow Agent is authorized and directed to retain in its possession, without
liability to anyone, that portion of the amount of the Escrow Funds which is the
subject of such dispute.
6. Termination of Escrow Agreement.
This Agreement shall terminate on the later to occur of the
General Claims Escrow Expiration Date and the Tax Escrow Expiration Date.
7
7. Concerning the Escrow Agent.
(a) The Escrow Agent shall have no duties or responsibilities
except those expressly set forth herein. The Escrow Agent may consult with
counsel and shall have no liability hereunder except for its own gross
negligence or willful misconduct. It may rely on any notice, instruction,
certificate, statement, request, consent, confirmation, agreement or other
instrument which it reasonably believes to be genuine and to have been signed or
presented by a proper person or persons and shall not be responsible for
ascertaining the validity of any such notice, instruction, certificate,
statement, request, consent, confirmation, agreement or other instrument that it
reasonably believes to be genuine and to have been signed or presented by a
proper person or persons.
(b) The Escrow Agent shall have no duties with respect to any
agreement or agreements with respect to any or all of the Escrow Funds other
than as provided in this Agreement. In the event that any of the terms and
provisions of any other agreement between any of the parties hereto conflict or
are inconsistent with any of the terms and provisions of this Agreement, the
terms and provisions of this Agreement shall govern and control in all respects.
Notwithstanding any provision to the contrary contained in any other agreement,
the Escrow Agent shall have no interest in the Escrow Funds except as provided
in this Agreement.
(c) So long as the Escrow Agent shall have any obligation to pay
any amount to the Seller Representative and/or the Buyer from the Escrow Funds
hereunder, the Escrow Agent shall keep proper books of record and account, in
which full and correct entries shall be made of all receipts, disbursements and
investment activity in the Escrow Account.
(d) The Escrow Agent shall not be bound by any modification of
this Agreement affecting the rights, duties and obligations of the Escrow Agent,
unless such modification shall be in writing and signed by the other parties
hereto, and the Escrow Agent shall have given its prior written consent thereto.
The Escrow Agent shall not be bound by any other modification of this Agreement
unless the Escrow Agent shall have received written notice thereof.
(e) The Escrow Agent may resign as escrow agent at any time by
giving forty-five (45) days written notice by registered or certified mail to
the Buyer and the Seller Representative and such resignation shall take effect
at the end of such forty-five (45) days or upon earlier appointment of a
successor. A successor escrow agent hereunder may be appointed by designation in
writing signed by the Buyer and the Seller Representative. The Buyer and the
Seller Representative undertake to utilize their reasonable efforts to arrange
for the appointment of a successor escrow agent. If any instrument of acceptance
by a successor escrow agent shall not have been delivered to the Escrow Agent
within sixty (60) days after the giving of such notice of resignation, the
resigning Escrow Agent may, at the shared expense of the Buyer, on the one hand,
and the Sellers, on the other, petition any court of competent jurisdiction for
the appointment of a successor escrow agent.
(f) If at any time hereafter the Escrow Agent shall resign, be
removed, be dissolved or otherwise become incapable of acting, or the bank or
trust company acting as the
8
Escrow Agent shall be taken over by any government official, agency, department
or board, or the position of the Escrow Agent shall become vacant for any of the
foregoing reasons or for any other reason, the Buyer and the Seller
Representative shall appoint a successor escrow agent to fill such vacancy.
(g) Every successor escrow agent appointed hereunder shall
execute, acknowledge and deliver to its predecessor, and also to the Buyer and
the Seller Representative an instrument in writing accepting such appointment
hereunder, and thereupon such successor escrow agent, without any further act,
shall become fully vested with all the rights, immunities and powers and shall
be subject to all of the duties and obligations, of its predecessor; and every
predecessor escrow agent shall deliver all property and moneys held by it
hereunder to its successor. Each predecessor escrow agent shall be paid any
outstanding fees and expenses prior to transferring all property and moneys held
by it to a successor escrow agent.
(h) The fee charged by the Escrow Agent for performing its
services hereunder shall be paid one-half by the Buyer and one-half by the
Sellers. Except as provided in Section 7(i), the Buyer, on the one hand, and the
Sellers, on the other, shall share equally any reasonable out-of-pocket costs
and expenses incurred by the Escrow Agent in performing its duties hereunder.
This covenant shall survive termination of this Agreement.
(i) The Buyer and the Sellers shall, jointly and severally,
indemnify and hold the Escrow Agent harmless from and against any and all
expenses (including reasonable attorneys' fees), liabilities, claims, damages,
actions, suits or other charges ("Agent Claims") incurred by or assessed against
the Escrow Agent for any act or omission by the Escrow Agent in the performance
of the Escrow Agent's duties hereunder, except such which result from the Escrow
Agent's bad faith, gross negligence or willful misconduct. With respect to any
Agent Claims payable hereunder, the Buyer and the Sellers agree that between
them, such Agent Claims shall be paid one-half by the Buyer and one-half by the
Sellers. This indemnity shall survive the resignation or removal of the Escrow
Agent or the termination of this Agreement.
(j) The Escrow Agent's fees shall be as set forth on Exhibit B
hereto.
(k) The parties to this Agreement hereby authorize the Escrow
Agent to disburse funds from the Escrow Funds in accordance with the provisions
of this Section 7(k). Any disbursement hereunder shall be made by the Escrow
Agent by issuing a check or checks or, in the event of a single disbursement in
excess of $100,000 to a single payee, by fedwire transfer, as designated by such
payee in an original writing, signed and delivered to the Escrow Agent. Such
writing shall indicate the Escrow Funds account name and number and (i) in the
case of check(s), the name of each payee and the amount payable to such payee
and (ii) in the case of a fedwire transfer, the name and account number of the
recipient, the name, address and ABA routing number of the recipient's bank and
the amount to be transferred to such recipient. In the case of fedwire transfers
instructions, the Escrow Agent is expressly authorized to rely on the account
numbers and ABA routing numbers identified in the written instructions.
9
8. Miscellaneous.
(a) This Agreement and the legal relations between the parties
hereto shall be governed by and construed in accordance with the laws of the
State of New York (as permitted by Section 5-1401 of the New York General
Obligations Law or any similar successor provision) without giving effect to any
law or rule that would cause the laws of any jurisdiction other than the State
of New York to be applied. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or matter
related hereto may be brought in the courts of the State of New York, or in the
United States District Court for the Southern District of New York, and, by
execution and delivery of this Agreement, each of the parties to this Agreement
accepts the exclusive jurisdiction of such courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consents to jurisdiction shall not constitute general consents to
service of process in the State of New York for any purpose except as provided
above and shall not be deemed to confer rights on any Person other than the
respective parties to this Agreement. The prevailing party or parties in any
such litigation shall be entitled to receive from the losing party or parties
all costs and expenses, including reasonable counsel fees, incurred by the
prevailing party or parties. Each party hereto agrees that service of any
process, summons, notice or document by U.S. registered mail to such party's
address set forth above shall be effective service of process for any action,
suit or proceeding in New York with respect to any matters for which it has
submitted to jurisdiction pursuant to this Section 8(a).
(b) This Agreement shall inure to the benefit of and be binding
upon the parties hereto, and their successors and permitted assigns. Nothing in
this Agreement, express or implied, shall confer on any person other than the
parties hereto, and their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, including, without limitation, third party beneficiary rights.
(c) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument. Any such counterpart may be executed by facsimile
signature with only verbal confirmation, and when so executed and delivered
shall be deemed an original and such counterpart(s) together shall constitute
only one original.
(d) Section headings contained herein have been inserted for
reference purposes only and shall not be construed as part of this Agreement.
(e) This Agreement may be modified or amended only by a written
instrument duly executed by the Buyer, the Seller Representative and the Escrow
Agent or their respective successors or permitted assigns.
(f) All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given: (i)
when delivered if delivered personally (including by courier); (ii) on the third
day after mailing, if mailed, postage prepaid, by registered or certified mail
(return receipt requested); (iii) on the day after mailing if sent by a
10
nationally recognized overnight delivery service which maintains records of the
time, place, and recipient of delivery; or (iv) upon receipt of a confirmed
transmission, if sent by facsimile transmission during normal business hours, in
each case to the parties at the following addresses:
(i) if to the Buyer:
Interline Brands, Inc.
000 Xxxx Xxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx, Esq., General Counsel
with a copy to:
Dechert LLP
0000 Xxxx Xxxxxxxx Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
(ii) if to the Sellers or the Seller Representative:
c/o Harbour Group Industries, Inc.
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xx. Xxxxx, Xxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Executive Vice
President
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxx & Xxxxxxxx LLP
0000 X Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxx X. Xxxxx, Esq.
(iii) if to the Escrow Agent:
LaSalle Bank National Association
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxx X. Xxxxxx
Corporate Trust Administration
11
or to such other addresses or persons as any party may have furnished to the
other parties in writing, in accordance herewith; provided, however, that
notices to the Escrow Agent shall be deemed effective only upon receipt.
(g) The Escrow Agent shall not be liable to pay any tax on any
income earned on the Escrow Funds, it being the understanding of the parties
that such tax shall be the responsibility of the Sellers. The name, address and
tax identification number of each of the Sellers is set forth on Exhibit A
attached hereto. All necessary tax information forms will be filed by the Escrow
Agent with the appropriate taxing authority. Such forms will allocate all income
earned on the Escrow Funds to the Sellers pro rata in accordance with each
Seller's Fraction, which is set forth on Exhibit A hereto.
(h) If any party hereto refuses to comply with, or at any time
violates or attempts to violate, any term, covenant or agreement contained in
this Agreement, including without limitation any covenant or agreement contained
in Section 4 hereof, any other party hereto may, by injunctive action, compel
the defaulting party to comply with, or refrain from violating, such term,
covenant or agreement, and may, by injunctive action, compel specific
performance of the obligations of the defaulting party.
(i) This Agreement shall not be assignable by any party hereto
without the prior written consent of the other parties.
(j) Pursuant to Section 9.8 of the Stock Purchase Agreement, each
Seller has irrevocably appointed Harbour Group IV Management Co., L.L.C., a
Delaware limited liability company, as the Seller Representative, to act as such
Seller's attorney-in-fact and agent in connection with the execution and
performance of this Agreement and the Stock Purchase Agreement to the extent
provided for in Section 9.8 of the Stock Purchase Agreement.
[Remainder Of Page Intentionally Left Blank]
12
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed and delivered as of the date first above written.
SELLER REPRESENTATIVE:
HARBOUR GROUP IV MANAGEMENT CO., L.L.C.
By:
---------------------------------
Name:
Title:
SELLERS:
HARBOUR GROUP INVESTMENTS IV, L.P.
By: HARBOUR GROUP IV MANAGEMENT
CO., L.L.C., its general partner
By:
-----------------------------
Name:
Title:
CCS-HGI ASSOCIATES, L.P.
By: HARBOUR GROUP INDUSTRIES, INC.,
its general partner
By:
-----------------------------
Name:
Title:
[Signature Page to the Escrow Agreement]
--------------------------------------
Xxxxxx X. Xxxxxxx
--------------------------------------
Xxxxx X. Xxxxxx
--------------------------------------
Xxxxxxx Xxxxxxx
--------------------------------------
Xxxxxxx Xxxxxx
BUYER:
INTERLINE BRANDS, INC.
By:
---------------------------------
Name:
Title:
ESCROW AGENT:
LASALLE BANK NATIONAL ASSOCIATION,
solely as Escrow Agent hereunder and
not in its individual capacity
By:
---------------------------------
Xxxx X. Xxxxxx
First Vice President
EXHIBIT A
List of Sellers
Name and Address Tax Identification No. Seller's Fraction
---------------- ---------------------- -----------------
Harbour Group Investments IV, L.P. 00-0000000 78.81%
c/o Harbour Group Industries, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
CCS-HGI Associates, L.P. 00-0000000 8.36%
c/o Harbour Group Industries, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Xxxxxx X. Xxxxxxx ###-##-#### 11.3%
0000 Xxxxxxx, Xxxxx #0
Xxxxxxxxx, Xxxx 00000
Xxxxx X. Xxxxxx ###-##-#### 0.5%
Xxxxx 0
Xxxxxxxxx, Xxxx 00000
Xxxxxxx Xxxxxxx ###-##-#### 0.5%
000 X. Xxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Xxxxxxx Xxxxxx ###-##-#### 0.5%
000 X. Xxxxxxxxxx
Xxxxxxxxx, Xxxx 00000
EXHIBIT B
SCHEDULE OF FEES
Escrow Agent Administration Fee: $ 3,900.00
THE ESCROW AGENT ADMINISTRATION FEE IS DUE UPON EXECUTION OF THE ESCROW
AGREEMENT.
Any investment transaction not in a money market fund or a LaSalle Enhanced
Liquidity Management account will incur a $150.00 per transaction fee. The
parties to the agreement understand and agree that the Escrow Agent may receive
certain revenue on certain mutual fund investments. These revenues take one of
two forms:
SHAREHOLDER SERVICING PAYMENTS: Escrow Agent may receive Shareholder Servicing
Payments as compensation for providing certain services for the benefit of the
Money Market Fund Company. Shareholder Services typically provided by LaSalle
include the maintenance of shareholder ownership records, distributing
prospectuses and other shareholder information materials to investors and
handling proxy-voting materials. Typically Shareholder Servicing payments are
paid under a Money Market Fund's 12b-1 distribution plan and impact the
investment performance of the Fund by the amount of the fee. The shareholder
servicing fee payable from any money market fund is detailed in the Fund's
prospectus that will be provided to you.
REVENUE SHARING PAYMENTS: Escrow Agent may receive revenue sharing payments from
a Money Market Fund Company. These payments represent a reallocation to Escrow
Agent of a portion of the compensation payable to the fund company in connection
with your account's money market fund investment. Revenue Sharing payments
constitute a form of fee sharing between the fund company and Escrow Agent and
do not, as a general rule, result in any additional charge or expense in
connection with a money market fund investment, are not paid under a 12b-1 plan,
and do not impact the investment performance of the Fund. The amount of any
revenue share, if any, payable to Escrow Agent with respect to your account's
investments is available upon request.
All out-of-pocket expenses will be billed at the Escrow Agent's cost.
Out-of-pocket expenses include, but are not limited to, professional services
(e.g. legal or accounting), travel expenses, telephone and facsimile
transmission costs, postage (including express mail and overnight delivery
charges), and copying charges.
EXHIBIT D
Copperfield Chimney Supply
Working Capital Accounts
APRIL, 30, 2005
BALANCE SHEET CAPTION ACCOUNT # BALANCE
----------------------- ----------------- --------------------
Cash
Cash 1011.900 -
Cash 1016.900 680.80
Cash 1010.600 (0.01)
Cash 1014.000 20,824.19
Cash 1015.000 (0.01)
Cash 1060.000 2,517.88
Cash 1065.000 23.28
Cash 1080.000 53,674.55
Cash 1090.000 4,940.65
Cash 1140.000 94,719.07
Cash 1180.000 1,816.39
--------------------
179,196.79
====================
A/R
A/R - Trade 1210.900 3.77
A/R - Trade 1210.000 3,455,635.19
A/R - Trade 1212.000 (32,775.52)
A/R - Trade 1360.000 (3,302.77)
A/R - Trade 1370.000 163.98
A/R - Trade 1380.000 617.68
A/R - Trade 1390.000 (144,588.97)
A/R - Trade 1395.000 (16,525.89)
A/R - Trade 1400.000 481.60
A/R - Trade 1210.700 624,871.66
--------------------
3,884,580.73
Doubtful accounts 1430.000 (150,849.07)
Doubtful accounts 1430.700 (1,495.46)
--------------------
(152,344.53)
Other allowances 1396.000 (100,000.00)
Other Receivables 1470.900 402.18
Other Receivables 1475.900 2,894.44
Other Receivables 1462.000 7,124.08
Other Receivables 1470.000 121,390.28
Other Receivables 1470.700 (2,641.33)
--------------------
129,169.65
Total A/R, net 3,761,405.85
====================
Inventory
Raw Materials 1501.900 626,606.33
Work in Progress 1502.900 8,312.49
Finished Goods 1503.900 50,866.09
Finished Goods 1510.000 363,285.23
Finished Goods 1515.000 1,204,524.45
Finished Goods 1525.000 875,311.80
Finished Goods 1530.000 1,015,971.78
Finished Goods 1540.000 1,445,188.07
Finished Goods 1550.000 1,381,075.59
Finished Goods 1554.000 12,661.84
Finished Goods 1556.000 23,831.85
Finished Goods 1570.000 2,328.71
--------------------
6,375,045.41
Allowance Quantity and Cost adj. 1555.000 147,432.29
Allowance-Surplus and obsolete 1504.900 (15,000.00)
Allowance-Surplus and obsolete 1504.100 (472,144.05)
--------------------
(487,144.05)
Allowance for LIFO Adjustment 1560.000 (335,368.00)
Other Adjustments 1557.000 32,500.00
Other Adjustments 1562.000 164,983.00
--------------------
197,483.00
Total inventory, net 6,532,367.47
====================
Prepaid expenses 1600.900 35,971.24
Prepaid expenses 1911.900 7,924.74
Prepaid expenses 1912.900 28,046.50
Prepaid expenses 1955.900 (35,971.24)
Prepaid expenses 1600.100 124,299.04
Prepaid expenses 1920.000 22,522.26
Prepaid expenses 1925.000 2,193.94
Prepaid expenses 1926.000 -
Prepaid expenses 1930.000 11,199.08
Prepaid expenses 1940.000 112,689.54
Prepaid expenses 1955.100 (124,299.04)
----------------
184,576.06
-----------------------------------------------------------------------------
Total Current Assets 10,657,546.17
-----------------------------------------------------------------------------
Accounts Payable
Accounts Payable 2020.900 40,456.16
Accounts Payable 2100.000 1,449,249.94 (a)
Accounts Payable 2100.100 114,859.16
Accounts Payable 2642.000 524,631.68
Accounts Payable 2020.700 129.30
----------------
2,129,326.24
================
Taxes Withheld 2360.900 4,311.99
Taxes Withheld 2350.000 342.66
Taxes Withheld 2360.000 10,095.00
Taxes Withheld 2435.000 (120.54)
----------------
14,629.11
================
Accrued Xxx, Wages, Com
Accrued Xxx, Wages, Com 2024.900 18,093.88
Accrued Xxx, Wages, Com 2025.900 48,272.04
Accrued Xxx, Wages, Com 2159.000 189,611.19
Accrued Xxx, Wages, Com 2160.000 59,663.93
Accrued Xxx, Wages, Com 2161.000 (4,275.73)
----------------
----------------
311,365.31
================
Accrued pension expense (401(k))
Accrued pension expense (401(k)) 2177.900 182.19
Accrued pension expense (401(k)) 2177.600 542.47
Accrued pension expense (401(k)) 2175.000 336.42
Accrued pension expense (401(k)) 2177.000 33.29
Accrued pension expense (401(k)) 2180.000 86,000.00
----------------
87,094.37
================
Accrued Taxes Other
Accrued Taxes Other 2186.000 2,088.09
Accrued Taxes Other 2188.000 -
Accrued Taxes Other 2189.000 -
Accrued Taxes Other 2190.000 1.85
Accrued Taxes Other 2194.000 8.30
Accrued Taxes Other 2209.000 (346.55)
Accrued Taxes Other 2215.000 1,956.34
Accrued Taxes Other 2220.000 (67.81)
Accrued Taxes Other 2240.000 3,411.80
Accrued Taxes Other 2250.000 6,686.02
Accrued Taxes Other 2260.000 6,775.99
Accrued Taxes Other 2270.000 (144.88)
Accrued Taxes Other 2280.000 3,789.91
Accrued Taxes Other 2290.000 820.35
Accrued Taxes Other 2450.000 (0.01)
Accrued Taxes Other 2462.000 9.01
Accrued Taxes Other 2485.000 128.86
Accrued Taxes Other 2500.000 (0.11)
Accrued Taxes Other 2200.700 (5.73)
----------------
25,111.43
================
Other liabilities
Other liabilities 2023.900 50,750.00
Other liabilities 2032.900 78.60
Other liabilities 2181.900 4,399.12
Other liabilities 2035.000 26,248.99
Other liabilities 2117.000 457,938.21
Other liabilities 2118.000 (5,324.50)
Other liabilities 2120.000 147,186.65 (b)
Other liabilities 2121.000 (382.62)
Other liabilities 2181.000 607.32
Other liabilities 2023.700 (51.88)
----------------
681,449.89
================
-----------------------------------------------------------------------------
Total current liabilities 3,248,976.35
-----------------------------------------------------------------------------
Net working capital (including cash) 7,408,569.82
-----------------------------------------------------------------------------
Net working capital (excluding cash) 7,229,373.03
-----------------------------------------------------------------------------
(a) - Balance presented excludes $380,030 of Harbour Group management fees.
(b) - Balance presented excludes $109,426 of Harbour Group management fees.
EXCLUDED ACCOUNTS FROM CURRENT ASSETS AND CURRENT LIABILITIES
Other Receivables (Def Tax Asset)
Other Receivables (Def Tax Asset) 1590.100 425,136.00
Liabilities-Fed Inc. Taxes
Liabilities-Fed Inc. Taxes 2810.900 (58,334.00)
Liabilities-Fed Inc. Taxes 2810.000 (258,521.33)
Liabilities-Fed Inc. Taxes 2810.700 638,000.00
Liabilities-Fed Inc. Taxes 2811.700 (6,000.00)
----------------
315,144.67
================
Capital leases-Current
Capital leases-Current 2026.900 145,063.21
Capital leases-Current 2026.100 93,968.47
Capital leases-Current 2026.300 242,946.88
----------------
481,978.56
================
Accrued Interest
Accrued interest 2162.000 35,550.52
Accrued interest 2163.000 1,368.86
Accrued interest 2164.000 14,532.17
Accrued interest 2165.000 182,700.98
Accrued interest 2167.000 103,165.23
Accrued interest 2167.001 86,121.54
Accrued interest 2167.003 29,452.89
----------------
452,892.19
Current portion of LT Debt
Current portion of LT Debt 2638.000 1,625,000.00
Current portion of LT Debt 2639.000 100,000.00
----------------
1,725,000.00
================
