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Exhibit 10.1
SHARE PURCHASE AGREEMENT
BETWEEN
GEO SPECIALTY CHEMICALS, INC.
and
CHARTER OAK PARTNERS
Dated as of March 25, 1997
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SHARE PURCHASE AGREEMENT
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THIS SHARE PURCHASE AGREEMENT (this "Agreement"), dated as of March 25,
1997, is made by and among Charter Oak Partners, a Connecticut partnership
("Charter Oak"), and GEO Specialty Chemicals, Inc., an Ohio corporation (the
"Company").
RECITALS
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A. Charter Oak desires to acquire from the Company, and the Company
desires to issue and sell to Charter Oak, in the manner and on the terms and
conditions hereinafter set forth, Common Shares, $1.00 par value, of the
Company.
B. In connection with Charter Oak's purchase of the Company's Common
Shares, the Company and Charter Oak desire to establish certain rights and
obligations among themselves.
AGREEMENTS
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NOW, THEREFORE, the Company and Charter Oak agree as follows:
SECTION 1. DEFINITIONS
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The following terms when used in this Agreement shall have the
following respective meanings:
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control
with such Person. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of the "controlled" Person, whether
through ownership of voting securities, by contract, or otherwise.
"XXXXXX EMPLOYMENT AGREEMENT" means that certain employment agreement
entered into by the Company and Xxxxxx X. Xxxxxx on even date herewith in the
form attached as EXHIBIT A hereto.
"BUSINESSES" or the "Business" means the business of clay mining and
processing for use in the production of alum and/or the sale to third parties,
the manufacturing and marketing of alum and aluminum based coagulants and
floculants for use in water treatment and the paper industry and the production
of clay for the oil and agchemicals industries, but excluding the United States
and Canadian paper chemicals and construction and process chemicals businesses
to be acquired by the Company pursuant to the Henkel Agreement (defined below).
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"ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Company on file with the Secretary of State of the State of Ohio immediately
prior to the March 25, 1997 approval, by the Company's Shareholders and Board of
Directors of an amendment to the Articles of Incorporation.
"CHARTER OAK WARRANT AGREEMENT" means that certain warrant agreement
entered into by the Company and Charter Oak on even date herewith.
"CLOSING" shall have the meaning set forth in Section 3.1 hereof.
"CLOSING DATE" shall have the meaning set forth in Section 3.1 hereof.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CODE OF REGULATIONS" means the Code of Regulations of the Company.
"COMMON SHARES" means the Company's Class A Voting Common Stock, par
value $1.00 per share.
"COMMON SHAREHOLDERS" means each of Chemical Specialities Enterprises,
L.P. and any Permitted Transferee of Common Shares after the date of this
Agreement.
"COMPANY FINANCIAL STATEMENTS" means the balance sheets of the Company
as of December 31, 1996, and the related statements of operations, shareholders
equity and cash flows for the twelve-month period then ended.
"CONTRACT" means any contract, agreement, undertaking or commitment
(written or oral) to which the Company or any of its Subsidiaries is a party or
by which the Company, any of its Subsidiaries or any of their respective assets
are bound.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of March 25,
1997, among the Company, the financial institutions party thereto and Bankers
Trust Company, as Administrative Agent.
"XXXXX XXXXXX DILIGENCE DOCUMENTS" means any written material prepared
by Xxxxx, Xxxxxx & Company, delivered to Charter Oak and/or Bankers Trust
Company and summarizing in whole or in part, the results of any due diligence
investigation performed by Xxxxx, Xxxxxx & Company for Charter Oak.
"XXXXXX EMPLOYMENT AGREEMENT" means that certain employment agreement
entered into by the Company and Xxxxxxx X. Xxxxxx on even date herewith.
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"EMPLOYEE BENEFIT PLAN(S)" means any employee benefit plan as defined
in Section 3(3) of ERISA and any other plan, policy, program, practice or
arrangement providing compensation or other benefits to any current or former
officer or employee of the Company or its Subsidiaries or any beneficiary or
dependent thereof that is or was maintained by the Company or its Subsidiaries.
"ENCUMBRANCES" means any mortgage, chattel mortgage, conditional sales
contract, pledge, lien, charge, security interest, encumbrance, option, lease,
license or easement.
"ENTERPRISES" means Chemical Specialities Enterprises, L.P., a Delaware
limited partnership.
"ENTERPRISES WARRANT AGREEMENT" means that certain warrant agreement
entered into by the Company and Enterprises on even date herewith.
"ENVIRONMENTAL LAW(S)" means all federal, state, and local laws,
statutes, common law duties, rules, regulations ordinances and codes, together
with all administrative orders, directives, requests, licenses, authorizations,
permits and agreements issued or signed by any federal, state or local
government authority, relating to environmental, health or safety matters,
including but not limited to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980; Clean Water Act of 1977; Clean Air Act;
Resource Conservation and Recovery Act of 1976; Federal Insecticide, Fungicide,
and Rodenticide Act; Toxic Substances Control Act; Emergency Planning and
Community Right-to-Know Act of 1986; Occupational Safety and Health Act of 1970;
and Safe Drinking Water Act, and state and local counterparts to these acts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" shall mean generally accepted accounting principles as in effect
on the date hereof. Whenever any accounting term is used herein which is not
otherwise defined, it shall have the meaning ascribed thereto under GAAP.
"GOVERNMENTAL AUTHORITY" means the United States, any state or
municipality, the government of any foreign country, any subdivision of any of
the foregoing, or any authority, department, commission, board, bureau, agency,
court, or instrumentality of any of the foregoing.
"HAZARDOUS SUBSTANCE(S)" means (a) any substance, the presence of which
requires investigation or remediation under any Environmental Law or under
common law; (b) any dangerous, toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous
substance which is regulated by any Environmental Law; (c) any substance, the
presence of which causes or threatens to cause a nuisance upon property
presently and/or previously owned, leased or otherwise used by the Company or
its Subsidiaries (or poses or threatens to pose a hazard to the health or safety
of persons on or about the property
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or adjacent properties); and (d) radon, ureaformaldehyde, polychlorinated
biphenyls, asbestos or asbestos-containing materials, petroleum and petroleum
products.
"HENKEL" means Xxxxxx Corporation, a Delaware corporation, and Henkel
Canada Limited, a corporation organized under the laws of Ontario, Canada.
"HENKEL AGREEMENT" means that certain asset purchase agreement, dated
February 10, 1977, entered into between the Company and Henkel.
"HENKEL ASSETS" means the assets purchased pursuant to the Henkel
Agreement.
"INDEBTEDNESS" of any Person means (i) indebtedness for borrowed money;
(ii) indebtedness for the deferred purchase price of property or services; (iii)
obligations under a lease which is capitalized on the balance sheet of such
Person; (iv) obligations under direct or indirect guaranties of indebtedness or
obligations of others of the type referred to in clause (i), (ii) or (iii)
above; and (v) nonrecourse indebtedness secured by a lien on the property of
such person.
"INTELLECTUAL PROPERTY" means all of the following which is owned by,
issued to or licensed to Company or any Subsidiary, and any and all
corresponding rights that, now or hereafter, may be secured throughout the
world: patents, patent applications, patent disclosures and inventions (whether
or not patentable and whether or not reduced to practice) and any reissue,
continuation, continuation-in-part, revision, extension or reexamination
thereof; trademarks, service marks, trade dress, logos, trade names and
corporate names together with all goodwill associated therewith and all
translations, adaptations, derivations and combinations of the foregoing;
copyrights and copyrightable works; mask works; and all registrations,
applications and renewals for any of the foregoing; trade secrets as defined
under the Uniform Trade Secrets Act and confidential information (including,
without limitation, ideas, formulae, compositions, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data, financial,
business and marketing plans, sales and promotional literature, and customer and
supplier lists and related information); computer software (including, without
limitation, data and related documentation); other intellectual property rights;
and all copies and tangible embodiments of the foregoing (in whatever form or
medium), in each case including, without limitation, the items set forth on
SCHEDULE 4.13 attached hereto (collectively, the "Intellectual Property").
"KEY EQUITY REDEMPTION AGREEMENT" means that certain redemption
agreement between the Company, Key Equity Capital Corporation and Key Equity
Partners I concerning the redemption of all of the Common Shares and all of the
Class B Non-Voting Common Stock held by Key Equity Capital Corporation and Key
Equity Partners I.
"LICENSES" means all governmental licenses, permits, approvals and
registrations.
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"MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, financial condition, results of operations, assets or prospects of the
Company or any of its Subsidiaries.
"1933 ACT" means the Securities Act of 1933, as amended.
"NOTE PURCHASE AGREEMENT" means that certain note purchase agreement
concerning the purchase of certain notes of Enterprises by Charter Oak from Key
Capital Corporation, entered into on even date herewith.
"PERSON" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization, or Governmental Authority.
"RELATION" shall mean with respect to any Person, such Person's spouse
and the parents, grandparents, brothers and sisters, children, and grandchildren
of such Person or of such Person's spouse.
"SEC" means the Securities and Exchange Commission.
"SHAREHOLDERS" shall have the meaning given to it in Section 4.5(b)
hereof.
"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement, of even date
herewith, among the Company, Charter Oak, Enterprises, Xxxxxx X. Xxxxxx and
Xxxxxxx X. Xxxxxx.
"SUBSIDIARY" means any Person or business in which the Company owns,
directly or indirectly, an equity interest representing at least twenty-five
percent of the voting stock or voting interests or such Person or business.
"TAX RETURN(S)" means all federal, state, foreign, local and other tax
returns, reports and statements heretofore required to be filed by the Company
to which reference is being made or by any consolidated, combined or unitary
group of which the Company is or was a member.
"TAX(ES)" means all taxes, charges, fees, levies or other assessments
of a Governmental Authority of any nature whatsoever, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, estimated, severance, stamp, occupation, property or other
taxes, customs, duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority (domestic or foreign) upon the company
to which reference is being made or any affiliate thereof or upon any
consolidated, combined or unitary group of which any such entity is or was a
member.
"TO THE BEST KNOWLEDGE OF THE COMPANY" means the actual knowledge after
reasonable investigation of any of the Company's officers, directors, general
managers or plant managers.
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SECTION 2. PURCHASE AND SALE OF SHARES
2.1 ISSUANCE AND PURCHASE OF SHARES AT CLOSING. At the Closing, the
Company shall issue and sell to Charter Oak, and Charter Oak shall purchase from
the Company, 82.31 Common Shares. Charter Oak shall pay to the Company a
purchase price of $179,252.24 per share for each Common Share purchased by it
and shall make such payment by wire transfer of immediately available funds to
an account designated in writing by the Company.
SECTION 3. THE CLOSING
3.1 CLOSING. The closing of the issuance and sale of the Common Shares
pursuant to Section 2.1 hereof and the other transactions contemplated hereby
shall take place at the offices of White & Case, 1155 Avenue of the Americas,
Xxx Xxxx, Xxx Xxxx 00000-0000 at 10:00 a.m. on March 25, 1997 (the "Closing
Date"), or at such other time or place as the parties shall mutually agree.
3.2 DELIVERIES BY THE COMPANY. (a) At the Closing, the Company shall
deliver or cause to be delivered to Charter Oak the following items (in addition
to any other items required to be delivered to Charter Oak pursuant to any other
provision of this Agreement):
(i) certificates representing the Common Shares being issued
and sold by the Company to Charter Oak pursuant to Section 2.1 hereof,
duly recorded on the books of the Company in the name of Charter Oak,
together with such other supporting documents as may in the opinion of
Charter Oak's counsel be reasonably necessary to permit Charter Oak to
acquire title to such Common Shares free of any Encumbrance or adverse
claim;
(ii) receipts for the payment delivered to the Company by
Charter Oak pursuant to Section 3.3(a)(i) hereof;
(iii) the Articles of Incorporation, certified by the
Secretary of State of the State of Ohio;
(iv) a certificate of the Secretary of State of the State of
Ohio as to the good standing of the Company, dated within eight days
prior to the Closing Date;
(v) certificates of existence in good standing and
qualification to transact business as a foreign corporation (or similar
documents) of the Company and each of its Subsidiaries from each state
in which the failure to so qualify could have a Material Adverse
Effect;
(vi) a certificate of the Secretary of the Company, in form
and substance satisfactory to counsel for Charter Oak, certifying that
attached thereto are true and correct copies of (A) the Code of
Regulations of the Company and (B) resolutions duly
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and validly adopted by the Board of Directors of the Company authorizing the
execution and delivery of this Agreement, the Shareholders Agreement, the
Enterprises Warrant Agreement, the Charter Oak Warrant Agreement, the Xxxxxx
Employment Agreement, the Xxxxxx Employment Agreement and the Key Equity
Redemption Agreement and the consummation of the transactions contemplated
hereby and thereby.
(vii) a certificate of the President of the Company certifying
that (A) each of the representations and warranties of the Company
contained in Section 4 of this Agreement are true and correct in all
material respects as of the Closing Date and (B) all agreements,
undertakings and obligations to be performed or complied with by the
Company as of or prior to the Closing, unless waived in writing, have
been duly performed or complied with by the Company in accordance with
the terms of this Agreement;
(viii) the legal opinion of Xxxxxxxx, Xxxx & Xxxxx LLP,
counsel to the Company;
(ix) a counterpart of the Shareholders Agreement, duly
executed by the Company, each of the Shareholders, Xxxxxx X. Xxxxxx and
Xxxxxxx X. Xxxxxx;
(x) an executed copy of the Xxxxxx Employment Agreement, duly
executed by the Company and Xxxxxx X. Xxxxxx;
(xi) an executed copy of the Xxxxxx Employment Agreement, duly
executed by the Company and Xxxxxxx X. Xxxxxx;
(xii) a counterpart of the Charter Oak Warrant Agreement, duly
executed by the Company;
(xiii) an executed copy of the Enterprises Warrant Agreement,
duly executed by the Company and Enterprises;
(xiv) an executed copy of the Key Equity Redemption Agreement
and all exhibits thereto;
(xv) an executed copy of the Henkel Agreement; and
(xvi) a copy of the executed Credit Agreement.
3.3 DELIVERIES BY CHARTER OAK. (a) At the Closing, Charter Oak shall
deliver or cause to be delivered to the Company the following items (in addition
to any other items required to be delivered to the Company pursuant to any other
provision of this Agreement):
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(i) payment by wire transfer of immediately available funds
necessary to satisfy Charter Oak's obligations to the Company under
Section 2.1 hereof;
(ii) receipts for each of the Common Shares being purchased by
Charter Oak pursuant to Section 2.1 hereof; and
(iii) a counterpart of the Shareholders Agreement, duly
executed by Charter Oak.
(iv) a copy of the Note Purchase Agreement, duly executed by
Charter Oak;
(v) the legal opinion of Xxxxxx, Halter & Xxxxxxxx LLP,
counsel to Charter Oak.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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In order to induce Charter Oak to purchase the Common Shares that it is
purchasing hereunder, the Company represents and warrants to Charter Oak that:
4.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio and has full
corporate power and authority to own its properties and carry on its business
and to enter into and perform its obligations under this Agreement.
4.2 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has delivered
to Charter Oak true, correct and complete copies of its Articles of
Incorporation and Code of Regulations, together with all amendments to each
through, and including, the date hereof. Such Articles of Incorporation and Code
of Regulations are in full force and effect, and no amendments to the Articles
of Incorporation or Code of Regulations are contemplated, other than the
amendment to the Articles of Incorporation listed on Schedule 4.2.
4.3 CORPORATE MINUTES. The Company has made available to Charter Oak
true, correct and complete copies of its minute books, stock certificate books
and corporate records; such books and records reflect all issuances of equity
and debt securities of the Company or rights to acquire any such securities, and
contain true and complete records of all meetings and consents in lieu of
meetings of the Company's Board of Directors (and any committees thereof) and
shareholders.
4.4 QUALIFICATION. The Company is qualified to do business and is in
good standing in each jurisdiction (listed on SCHEDULE 4.4 to this Agreement)
where the character or location of property owned and leased, the employment of
personnel or the nature of the business and activities conducted by the Company
requires such qualification, licensing or domestication, except in such
jurisdictions where the failure to be so qualified, licensed or domesticated and
to
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be in good standing, individually or in the aggregate, would not have a Material
Adverse Effect. Except as set forth on SCHEDULE 4.4, the Company does not file
franchise, income or other tax returns in any jurisdiction based upon the
ownership or use of property therein or the derivation of income therefrom.
4.5 CAPITALIZATION OF THE COMPANY; SHAREHOLDERS. (a) Immediately prior
to the issuance of the Common Shares as contemplated by this Agreement, but
giving effect to the transactions contemplated by the Key Equity Redemption
Agreement, the authorized capital stock of the Company consists of: (i) 1025
Common Shares, 21.88 of which are issued and outstanding, and 215 Class B
Non-Voting Common Stock, par value $1.00, none of which are issued and
outstanding. All issued and outstanding Common Shares have been duly authorized
and are validly issued, fully paid and nonassessable and are not subject to, nor
were any issued in violation of, any previously existing preemptive rights.
Except as described above in this Section 4.5(a) or as set forth on SCHEDULE
4.5(a), there are not any outstanding shares of capital stock or other equity
securities of the Company or options, warrants, subscriptions, convertible
debentures or other rights, commitments or any other similar agreements for the
purchase of any shares of capital stock or other equity securities of the
Company. Each of the Common Shares outstanding were issued in full compliance
with all federal and state securities or "blue sky" laws. Except as provided to
the Shareholders under the terms of the Shareholders Agreement, there are no
preemptive or similar rights with respect to the Company's capital stock. Except
as provided in the Shareholders Agreement and as set forth on SCHEDULE 4.5(a),
the Company is not a party to any voting trust agreements or other contracts,
agreements or arrangements restricting voting rights or transferability with
respect to any shares of the capital stock of the Company.
(b) The persons set forth on SCHEDULE 4.5(b) own of record on
the date hereof the number of Common Shares set forth opposite their names, and
collectively constitute all the shareholders of record of the capital stock of
the Company.
4.6 OWNERSHIP OF HENKEL ASSETS. The Company has agreed to acquire the
United States and Canadian paper chemicals and construction and process
chemicals businesses of Henkel, pursuant to the terms of the Henkel Agreement,
which acquisition shall, subject to the satisfaction of the conditions to
closing contained therein, close as of the date of this Agreement.
4.7 SUBSIDIARIES AND OTHER AFFILIATES. Except as set forth on SCHEDULE
4.7, the Company does not own, either directly or indirectly, any interest or
investment, whether debt or equity (other than an interest as a creditor holding
a trade account receivable), or any obligation, option or right to acquire any
interest, direct or indirect, in any other corporation or other entity.
4.8 AUTHORITY. (a) The Company has the necessary corporate power and
authority to enter into and deliver this Agreement, the Shareholders Agreement,
the Enterprises Warrant Agreement, the Charter Oak Warrant Agreement, the Xxxxxx
Employment Agreement, the Xxxxxx Employment Agreement and the Key Equity
Redemption Agreement to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby
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and thereby. The execution and delivery of this Agreement, the Shareholders
Agreement, the Enterprises Warrant Agreement, the Charter Oak Warrant Agreement,
the Xxxxxx Employment Agreement, the Xxxxxx Employment Agreement and the Key
Equity Redemption Agreement and the consummation of the transactions
contemplated hereby and thereby by the Company have been duly authorized by the
Board of Directors and the Shareholders of the Company in accordance with the
Company's governing corporate documents and applicable laws. This Agreement, the
Shareholders Agreement, the Enterprises Warrant Agreement, the Charter Oak
Warrant Agreement, the Xxxxxx Employment Agreement, the Xxxxxx Employment
Agreement and the Key Equity Redemption Agreement have each been duly and
validly authorized, executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable in accordance
with their respective terms (except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
rights of creditors generally or by the general principles of equity). Except as
set forth on SCHEDULE 4.8, neither the execution, delivery or performance of
this Agreement, the Shareholders Agreement, the Enterprises Warrant Agreement,
the Charter Oak Warrant Agreement, the Xxxxxx Employment Agreement, the Xxxxxx
Employment Agreement or the Key Equity Redemption Agreement by the Company, nor
the consummation of the transactions contemplated hereby or thereby, nor
compliance by the Company with the terms and provisions of this Agreement, the
Shareholders Agreement, the Enterprises Warrant Agreement, the Charter Oak
Warrant Agreement, the Xxxxxx Employment Agreement, the Xxxxxx Employment
Agreement or the Key Equity Redemption Agreement will result in a violation or
breach of any term or provision of the Company's Articles of Incorporation or
Code of Regulations, or of any statute, rule or regulation applicable to the
Company or its businesses, properties, assets or personnel, nor conflict with or
constitute a violation or breach of, or a default under (or an event which, with
the passage of time or the giving of notice, or both, would constitute a default
under), or give any party a right to accelerate the due date of any indebtedness
or obligation under, any indenture, mortgage, deed of trust, or Contract to
which the Company is a party or to which its properties or assets are subject,
or any instrument, judgment, decree, writ, or other restriction to which the
Company is a party or by which the Company or its businesses, properties, assets
or personnel are bound, nor require any consent or approval of any Person.
(b) The Company is not required to submit any notice, report
or other filing with any federal, state or local Governmental Authority in
connection with the execution or delivery or performance by the Company of this
Agreement or the consummation of the transactions contemplated thereby.
4.9 COMPANY FINANCIAL STATEMENTS. The Company has delivered to Charter
Oak true, complete and correct copies of the Company Financial Statements.
Except as set forth on SCHEDULE 4.9 and any Xxxxx Xxxxxx Diligence Documents,
the Company Financial Statements (a) present fairly the financial condition of
the Company at said dates and the results of operations, changes in
shareholders' equity and cash flows for the periods therein specified and (b)
have been prepared from the books and records of the Company in accordance with
GAAP,
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consistently applied and maintained throughout the periods indicated, except as
otherwise stated or referred to in such Company Financial Statements.
4.10 NO UNDISCLOSED LIABILITIES. Except for (a) liabilities disclosed
or provided for on the Company Financial Statements or on SCHEDULE 4.10 hereto
and any Xxxxx Xxxxxx Diligence Documents and (b) liabilities incurred in the
ordinary course of business consistent with past practice since December 31,
1996 not exceeding in the aggregate $25,000, the Company has no direct or
indirect indebtedness, liability, loss or obligation, accrued, absolute or
contingent (whether or not of a kind required by GAAP to be set forth on a
balance sheet).
4.11 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 4.11,
since December 31, 1996, the Company has conducted its business only in the
ordinary course and consistent with prior practice, and the Company has not:
(a) discharged or satisfied any lien, charge or encumbrance
other than those then required to be discharged or satisfied, or paid
any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, other than current liabilities
shown on the Company Financial Statements and current liabilities
incurred since December 31, 1996, in the ordinary course of business
and consistent with prior practice;
(b) declared or made any payment of any dividend, or made any
other distribution upon or in respect of any of its shares of capital
stock or any other securities, or purchased, retired or redeemed any of
the shares of its capital stock or any other securities, including any
warrants or options to purchase any capital stock, or obligated itself
to do any of the foregoing, other than pursuant to the Key Equity
Redemption Agreement;
(c) mortgaged, pledged or subjected (or permitted to be
subjected) to lien, charge, security interest or any other encumbrance
or restriction any of its property, business or assets, tangible or
intangible;
(d) sold, transferred, leased to others or otherwise disposed
of any of its property or assets, tangible or intangible (other than
inventory and other products sold and/or licensed in the ordinary
course of business and consistent with prior practice), or canceled or
compromised any debt or claim, or waived or released any claim or right
of substantial value;
(e) terminated or received any notice of termination of any
contract, lease or other agreement or suffered any damage, destruction
or loss (whether or not covered by insurance) which, individually or in
the aggregate, has had or might have a Material Adverse Effect;
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(f) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slowdowns or
lockouts, or had any material change in its relations with its
employees, consultants, agents, distributors, formulators, customers or
suppliers;
(g) transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, or entered into
any agreement or commitment relating to, any license, patent,
copyright, trademark, trade name, or any application for any of the
foregoing, or any permit, consent, approval, invention, product
registration or similar rights, domestic or foreign, or modified any
existing rights with respect thereto;
(h) adopted, entered into or amended any employee benefit plan
or made any change in the actuarial methods or assumptions used in
funding or determining benefit equivalencies thereunder, made any
material change in the rate of compensation, commission, bonus,
deferred compensation arrangement or other direct or indirect
remuneration payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus (cash or non-cash), extra
compensation, deferred compensation arrangement or severance or
vacation pay, to any stockholder, director, officer, or senior employee
of the Company or hired or entered into any written or verbal
employment agreement or arrangement (other than at-will employment
agreements or arrangements in the ordinary course of business which do
not provide for severance and/or termination benefits) with any person
other than as set forth in the Xxxxxx Employment Agreement and the
Xxxxxx Employment Agreement;
(i) issued or sold any shares of its capital stock or other
securities, or issued, granted or sold any options, rights or warrants
with respect thereto, or acquired any capital stock or other securities
of any corporation, business or entity, or any interest in any business
enterprise or otherwise made any loan or advance to or investment in
any person, entity, firm or corporation, except for short-term
investments in cash and cash equivalents made in the ordinary course of
business and consistent with prior practice;
(j) made any capital expenditures or capital additions or
betterments or commitments therefor in excess of $10,000 individually
or $50,000 in the aggregate;
(k) instituted, settled or agreed to settle, or suffered any
adverse determination in, any litigation, action or proceeding before
any court or governmental body (domestic or foreign) relating to the
Company or its businesses, assets or properties;
(l) revalued any of its assets or written off as uncollectible
any notes or accounts receivable, except writedowns and write-offs in
the ordinary course of business, none of which, individually or in the
aggregate, is material to the Company or its businesses;
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(m) entered into any agreement or made any commitment to take
any of the actions described in paragraphs (a) through (l) above; or
(n) experienced any Material Adverse Effect, or any events or
circumstances that are likely to result in a Material Adverse Effect.
4.12 ASSETS. Except as set forth on SCHEDULE 4.12, the Company has good
and marketable title to, or a valid leasehold interest in, all of the properties
and assets it owns or uses in its business or purports to own. Except as set
forth on SCHEDULE 4.12, none of such assets or properties are subject to any
Encumbrances, except (i) Encumbrances incurred or made in the ordinary course of
business which are not substantial in character, amount or extent and do not
materially impair the usefulness of such properties and assets in the conduct of
the business of the Company or its Subsidiaries; (ii) liens for taxes,
assessments or other governmental charges or levies which are either not yet
delinquent or are being contested in good faith and by appropriate proceedings,
can be paid without penalty and which do not materially impair the usefulness of
such properties and assets in the conduct of the business of the Company or its
Subsidiaries; and (iii) as reflected on the Company Financial Statements.
4.13 INTELLECTUAL PROPERTY. SCHEDULE 4.13 sets forth all patents,
trademarks, service marks, trade names, copyrights and franchises, all
applications for any of the foregoing and all permits, grants and licenses or
other rights running to or from the Company relating to any of the foregoing
that are necessary to the Business of the Company as currently conducted or as
contemplated to be conducted. Except as set forth on SCHEDULE 4.13, to the best
knowledge of the Company, the Company is not in violation of, or infringing upon
or misappropriating, any patent, trademark, service xxxx, trade name, copyright,
franchise or other proprietary right of any third party, and no claims have been
asserted, nor is there any litigation pending or threatened claiming such
infringement or misappropriation. Except as set forth on SCHEDULE 4.13, the
Company has not licensed or encumbered any of its Intellectual Property to any
third party, nor have any other distribution rights been granted by the Company
to a third party. Except as set forth on SCHEDULE 4.13, the Company has not
entered into any other agreements whereby the Company has been appointed as a
distributor or licensee of any products, patents, trademarks or other
intellectual property owned by a third party. Except as set forth on SCHEDULE
4.13, the Company has not entered into any agreement which restricts or affects
the use of any Intellectual Property. The Company is not a breach of any
agreement set forth in SCHEDULE 4.13, nor have any claims with respect to any
agreement been asserted nor is there any litigation pending or threatened
claiming any such breach, nor have any claims been asserted that any of the
terms and conditions of such agreements violate the laws of any jurisdiction or
treaty. Except as provided in SCHEDULE 4.13, the Company owns all right, title
and interest in and to the Intellectual Property, or has a valid and enforceable
license from third parties, and has the unfettered right to use, all
Intellectual Property in order to conduct its business in all material respects
as currently conducted and has used reasonable efforts to protect its rights in
the Intellectual Property and to protect and maintain the secrecy of its trade
secrets and other proprietary rights and confidential information. Except as set
forth in SCHEDULE 4.13, the transactions contemplated by this
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Agreement will have no material adverse effect on the right, title and interest
in and to the Intellectual Property. To the best knowledge of the Company, the
owners of any Intellectual Property licensed to the Company have taken all
necessary action to maintain and protect such Intellectual Property subject to
such licenses.
4.14 TAX MATTERS. The Company and each other corporation (or
predecessor) that has at any time been a member of a consolidated, combined or
unitary group of which the Company is or was a member (the "Tax Affiliates")
have timely and correctly filed or caused to be filed all Tax Returns. Except as
set forth on SCHEDULE 4.14 and any Xxxxx Xxxxxx Diligence Documents, all Taxes
due and payable in respect of such Tax Returns have been or will be by Closing
paid in full. Except as set forth on SCHEDULE 4.14 and any Xxxxx Xxxxxx
Diligence Documents, the Company and the Tax Affiliates have no current
extensions for the filing of any Tax Returns. Except as set forth on SCHEDULE
4.14 and any Xxxxx Xxxxxx Diligence Documents, adequate provisions have been
made for the payment of all accrued and unpaid Taxes as of the date thereof,
whether or not then due and payable and whether or not disputed, except as may
be set forth in explanatory notes thereto. Except as set forth on SCHEDULE 4.14
and any Xxxxx Xxxxxx Diligence Documents, the Tax Returns of or relating to the
Company, and the Affiliates have not been examined (nor are they currently in
the process of being examined) by the Internal Revenue Service or any other tax
authority for any of the past six (6) years, and such Tax Returns constitute a
complete and accurate representation of the Tax liabilities of the Company, the
Tax Affiliates and any combined, consolidated or unitary group of which the
company is or was a member.
4.15 LEGAL AND REGULATORY MATTERS. Except as set forth on SCHEDULE
4.15: (a) there is no claim, suit, action, arbitration, governmental
investigation or other proceeding, nor any order, decree or judgment pending or
in effect, or threatened by, against or relating to the Company or any of its
assets or properties, or the transactions contemplated hereby; (b) there are no
judgments, decrees or orders enjoining the Company in respect of, or the effect
of which is to prohibit any business practice or the acquisition of any property
or the conduct of any aspect of the business of the Company; (c) the Company has
complied and is complying with all laws, ordinances, treaties and governmental
rules, orders and regulations applicable to it or its properties, assets,
personnel or business, non-compliance with which could have a Material Adverse
Effect; and (d) the Company has obtained all Licenses necessary for the
ownership of its properties and the conduct of its business as currently
conducted, and all such Licenses are currently in full force and effect.
4.16 EMPLOYEES. Except as set forth on SCHEDULE 4.16, the Company has
not been and is not a party to any collective bargaining agreements with respect
to any of its employees or with respect to any contract or agreement with a
labor union or any local or subdivision thereof, nor has it been charged with
any unresolved unfair labor practices, nor is there any present union organizing
activity among any of its employees. There are no material controversies,
claims, suits, actions or proceedings pending or threatened between the Company
and any of its employees. The Company has complied in all material respects with
all laws and regulations
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relating to the employment of labor, including, without limitation, any
provisions thereof relating to wages, hours, employment practices, terms and
conditions of employment, collective bargaining, equal opportunity or similar
laws and the payment of social security and similar taxes, and is not liable for
any arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing.
4.17 INSURANCE COVERAGE. SCHEDULE 4.17 to this Agreement lists all
insurance policies of the Company indicating the risks insured against, carrier,
policy number, amount of coverage (including deductible), premiums and
expiration dates. Except as set forth on SCHEDULE 4.17, such policies are in
full force and effect and all premiums now due and owing with respect to such
policies have been paid in full, and the Company has not made any borrowings or
incurred any indebtedness, the collateral for which was any of such policies.
4.18 PERSONNEL. (a) SCHEDULE 4.18 to this Agreement lists the names and
addresses of all directors, officers and employees of the Company, indicating
(i) the positions within the Company held by each such person and (ii) the
current annual salary rates for each such person and the amounts payable as
bonus or other compensation for each such person.
(b) SCHEDULE 4.18 to this Agreement provides a description of
all severance plans or agreements that would cause payments of a material nature
to be made to any employee of the Company if his or her employment were
terminated.
4.19 EMPLOYEE BENEFIT PLAN(S). (a) SCHEDULE 4.19 lists each Employee
Benefit Plan. The Company has no affiliates for purposes of ERISA.
(b) Each Employee Benefit Plan is in substantial compliance
with applicable law and has been administered and operated in all material
respects in accordance with its terms. Each Employee Benefit Plan which is
intended to be "qualified" within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service and
no event has occurred and no condition exists which could reasonably be expected
to result in the revocation of any such determination. No event which
constitutes a "reportable event" (as defined in Section 4043(b) of ERISA) for
which the 30-day notice requirement has not been waived by the Pension Benefit
Guaranty Corporation (the "PBGC") has occurred with respect to any Employee
Benefit Plan. Except as set forth on SCHEDULE 4.19, no Employee Benefit Plan
subject to Title IV of ERISA has been terminated or is or has been the subject
of termination proceedings pursuant to Title IV of ERISA. Full payment has been
made of all amounts which the Company was required under the terms of the
Employee Benefit Plan(s) to have paid as contributions to such Employee Benefit
Plan(s) on or prior to the date hereof (excluding any amounts not yet due) and
no Employee Benefit Plan which is subject to Part 3 of Subtitle B of Title 1 of
ERISA has incurred any "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived. Neither
the Company nor any Subsidiary nor any other "disqualified person" or "party in
interest" (as defined in Section 4975(e)(2) of the Code and Section 3(14) of
ERISA, respectively) has
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engaged in any transactions in connection with any Employee Benefit Plan(s) that
could reasonably be expected to result in the imposition of a material penalty
pursuant to Section 502(i) of ERISA, damages pursuant to Section 409 of ERISA or
a tax pursuant to Section 4975(a) of the Code. No material liability, claim,
action or litigation, has been made, commenced or, to the best of Company's
knowledge, threatened with respect to any Employee Benefit Plan(s) (other than
for benefits payable in the ordinary course and PBGC insurance premiums). No
Employee Benefit Plan or related trust owns any securities in violation of
Section 407 of ERISA. With respect to all Employee Benefit Plan(s) which are
subject to Title IV of ERISA, as of the most recent actuarial valuation prepared
for each such Employee Benefit Plan, the aggregate present value of the accrued
liabilities thereof did not exceed the aggregate fair market value of the assets
allocable thereto. The Company does not presently maintain or has not at any
time in the past maintained a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA). There are no actions, suits, or claims (other than routine
claims for benefits) pending or threatened against any Employee Benefit Plan of
the Company or its assets, or arising out of such Employee Benefit Plan(s) and
no facts exist which could give rise to any such actions, suits or claims or
that might have a material adverse effect on such Employee Benefit Plan(s).
There has been no act or omission by the Company that has given rise or may give
rise to any fines, penalties, taxes or late charges under Section 502(c), (i) or
(1), Section 407(1) of ERISA or Chapter 43 of the Code.
4.20 NOTES AND ACCOUNTS RECEIVABLE: INVENTORIES. Except as set forth on
SCHEDULE 4.20, all notes and accounts receivable of the Company are reflected on
the Company Financial Statements as of December 31, 1996, net of any reserves
therefor reflected thereon and all such accounts receivable shall have arisen
only from bona fide transactions in the ordinary course of business. The notes
and accounts receivable of the Company which have arisen since December 31,
1996, have arisen only from bona fide transactions in the ordinary course of
business.
4.21 COMPLIANCE WITH ENVIRONMENTAL LAW. (a) Except as set forth in
SCHEDULE 4.21 or except where the failure to be in compliance would not have a
Material Adverse Effect, (i) the Company is and has been in compliance with all
Environmental Laws as currently in effect; (ii) neither the Company nor any of
its predecessors used, released or disposed of any Hazardous Substance in any
manner that could reasonably be expected to result in material liability; (iii)
none of the property owned, leased or operated by the Company is contaminated by
any Hazardous Substance; and (iv) none of the property owned, leased or operated
by the Company is affected by any condition that could reasonably be expected to
result in liability under any Environmental Law as currently in effect; and (v)
there is and has been no condition, activity or event respecting the Company or
any of the properties owned, leased or operated by it that could reasonably be
expected to subject the Company to any material liability under any
Environmental Law as currently in effect.
4.22 BANK AND BROKERAGE ACCOUNTS. SCHEDULE 4.22 lists (i) the names and
addresses of all banks and brokerage firms in which the Company has accounts or
safe deposit boxes, lock boxes, vaults and the account numbers relating thereto,
(ii) the name of each person authorized to
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draw on any such account or have access to any such boxes or vaults and (iii)
the names of all persons, if any, holding tax or other powers of attorney from
the Company and a summary of the terms thereof.
4.23 CONTRACTS. (a) Except as set forth on SCHEDULE 4.23, the Company
is not a party to any:
(i) Contract for the employment or retention of, or collective
bargaining, severance or termination agreement with, any of its
directors, officers, employees, consultants or agents or groups of
employees;
(ii) Profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension,
retirement, hospitalization, insurance or other employee benefit plan,
agreement or arrangement;
(iii) Contract for the sale of any of its assets, property or
rights outside the ordinary course of business consistent with prior
practice (other than the Xxxxxx Agreement);
(iv) Contract that contains any provisions requiring the
Company to indemnify or act as a indemnitor, guarantor, surety,
co-signer, co-maker or endorser for any other person or entity;
(v) Contract restricting the Company from conducting business
anywhere in the world (other than the Xxxxxx Agreement);
(vi) Contract or other obligation for or relating to borrowed
money or commitments for obtaining borrowed money involving in excess
of $10,000;
(vii) Contract which involves the future payment by or to it
of more than $10,000 in any one installment or $25,000 in the
aggregate;
(viii) Letter of credit or power of attorney;
(ix) Joint venture Contract or similar arrangement or
agreement which is likely to involve future payments by it in excess of
$10,000 in the aggregate;
(x) Personal service, licensing, distributor, supplier,
dealer, franchise, advertising, sales or manufacturer's representative,
agency or other similar Contract;
(xi) Contract to which any shareholder, officer or director of
the Company or any "affiliate" or "associate" of such persons (as such
terms are defined in the rules and regulations promulgated under the
Securities Act), is presently a party, including, without
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limitation, any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity; or
(xii) Any Contract that might have a Material Adverse Effect.
(b) Except as specified on SCHEDULE 4.23, all Contracts,
plans, instruments, arrangements required to be listed on SCHEDULE 4.23 are
valid and binding, enforceable in accordance with their respective terms and in
full force and effect, and the continuation, validity and effectiveness of such
items will in no way be affected by the consummation of the transactions
contemplated by this Agreement. Neither the Company, nor, to the best knowledge
of the Company, any other party thereto, is in breach of any provision of or in
default under any term of any such agreement, and, to the best knowledge of the
Company, there exists no condition or event which after lapse of time or notice
(or both) would constitute any such breach or default or result in any right to
accelerate or loss of rights. True and complete copies of all such agreements,
contracts, plans, instruments, arrangements and commitments have been delivered
or made available to Charter Oak.
4.24 MATERIAL MISSTATEMENTS OR OMISSIONS. The statements,
representations and warranties of the Company contained in this Agreement
(including the schedules hereto but excluding the contents of the documents
referred to therein) and in each document, statement, certificate or exhibit
furnished or to be furnished by or on behalf of the Company pursuant hereto, or
in connection with the transactions contemplated hereby, taken together, do not
contain and will not contain any untrue statements of a material fact and do not
or will not omit to state a material fact necessary to make the statements or
facts contained herein or therein, in light of the circumstances made, not
misleading. There is no fact known to the Company which has not been disclosed
to Charter Oak which materially and adversely affects, or is likely to
materially and adversely affect, the business, financial condition, results of
operations or assets of the Company.
4.25 BROKER'S FEES. Except as set forth on SCHEDULE 4.25, there are no
broker's or finder's fees or obligations due to persons engaged by the Company,
or any of its employees, officers, or directors in connection with the
transactions contemplated by this Agreement, except for the fees and expenses of
counsel and accountants.
4.26 EMPLOYMENT: NO CONFLICTING AGREEMENTS. None of the officers of the
Company is obligated under any contract (including licenses, covenants or
commitments of any nature) or other oral or written agreement, or subject to any
judgment, decree or order of any court, administrative or governmental agency,
that would conflict with his or her obligation to use his or her best efforts to
promote the Company's business as currently conducted and proposed to be
conducted. Neither the execution and delivery of this Agreement, the
Shareholders Agreement, the Enterprises Warrant Agreement, the Charter Oak
Warrant Agreement, the Xxxxxx Employment Agreement, the Xxxxxx Employment
Agreement nor the Key Equity Redemption Agreement nor the carrying on of the
Company's business as employees by such persons as such
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business is currently conducted and proposed to be conducted, will conflict with
or result in the breach of the terms, conditions or provisions of, or constitute
a default under, any contract, covenant, agreement or instrument under which any
of the officers or directors of the Company will, immediately following the
closing of the Xxxxxx Agreement, be obligated.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF CHARTER OAK
---------------------------------------------
Charter Oak hereby represents and warrants to the company that:
5.1 INVESTMENT INTENT. The Common Shares to be purchased by Charter Oak
hereunder are being purchased for its own account and not with the view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the 1933 Act. It understands that the Common Shares have
not been registered under the 1933 Act by reason of their issuance in
transactions exempt from the registration and prospectus delivery requirements
of the 1933 Act pursuant to Section 4(2) thereof and agrees to deliver to the
Company, if requested by the Company, an investment letter in customary form.
Charter Oak understands that the Shares, may not be sold, transferred or
otherwise disposed of without registration under the 1933 Act or an exemption
therefrom, and that in the absence of an effective registration statement
covering the Common Shares or an available exemption from registration under the
1933 Act, the Common Shares must be held indefinitely. In particular, Charter
Oak is aware that the Common Shares may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that Rule
are met. Among the conditions for use of Rule 144 is the availability of current
information to the public about the Company. Such information is not now
available and the Company has no present plans to make such information
available. It further understands that the certificates representing the Common
Shares will bear the following legend and agrees that it will hold such shares
subject thereto:
THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES THAT MAY BE
ISSUED UPON THE CONVERSION OF SUCH SHARES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR
INTEREST HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE
EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY
SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).
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5.2 CAPACITY OF CHARTER OAK: EXECUTION OF AGREEMENT. Charter Oak has
all requisite power, authority, and capacity to enter into this Agreement, the
Shareholders Agreement, the Charter Oak Warrant Agreement and the Note Purchase
Agreement and to perform the transactions and obligations to be performed by it
hereunder. This Agreement, the Shareholders Agreement, the Charter Oak Warrant
Agreement and the Note Purchase Agreement have each been duly authorized,
executed and delivered by it and constitutes its valid and legally binding
obligation, enforceable in accordance with their respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws, both state and federal, affecting the
enforcement of creditors' rights or remedies in general from time to time in
effect and the exercise by courts of equity powers or their application of
principles of public policy.
5.3 ACCREDITED INVESTOR. Charter Oak is an "accredited investor" as
defined in Rule 501(a) of Regulation D promulgated under the 1933 Act.
5.4 SUITABILITY AND SOPHISTICATION. (i) Charter Oak has such knowledge
and experience in financial and business matters that it is capable of
independently evaluating the risks and merits of purchasing the Common Shares;
(ii) it has independently evaluated the risks and merits of purchasing the
Common Shares and has independently determined that the Common Shares are a
suitable investment for it; and (iii) it has sufficient financial resources to
bear the loss of its entire investment in the Common Shares.
5.5 RECEIPT OF INFORMATION. Charter Oak further represents that it
and/or its Affiliates has had an opportunity to ask questions and receive
answers from the Company regarding the business, properties, prospects and
financial condition of the Company and to obtain additional information (to the
extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to it and/or its Affiliates or to which it and/or its
Affiliates had access. The foregoing, does not however limit or modify the
representations and warranties of the Company in Section 4 of this Agreement or
the right of Charter Oak to rely thereon.
SECTION 6. INDEMNIFICATION
---------------
6.1 INDEMNIFICATION BY THE COMPANY. Notwithstanding anything in this
Agreement to the contrary, but subject to the other provisions of this Section
6, the Company shall indemnify, defend, and hold Charter Oak, each of Charter
Oak's directors, officers, and Affiliates (other than the Company), and each of
such Affiliates' officers, directors, partners, employees, representatives and
Affiliates, (collectively, the "Investor Indemnitees") harmless from and
against, and shall reimburse them for, any and all demands, claims, losses,
liabilities, damages, costs, and expenses whatsoever (including, without
limitation, any fines, penalties, reasonable fees and disbursements of counsel
incurred by the Investor Indemnitees in investigating or defending any of the
foregoing, and other reasonable expenses incurred investigating or defending any
of the foregoing or enforcing this Agreement) (individually a "Loss" and
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collectively "Losses") sustained or incurred by an Investor Indemnitee resulting
from or arising in connection with any inaccuracy in or breach of any
representation or warranty of the Company set forth in this Agreement, but only
if the business, financial condition, capitalization, results of operations,
assets or prospects of the Company, as the case may be, are materially and
adversely different than the business, financial condition, capitalization,
results of operations, assets or prospects of the Company as represented and
warranted in such representation and warranty. Charter Oak acknowledges and
agrees that no individual director, shareholder or officer of the Company shall
have personal liability for any indemnity obligation of the Company under this
Section 6.1.
6.2 INDEMNIFICATION BY CHARTER OAK. Notwithstanding anything in this
Agreement to the contrary, but subject to the other provisions of this Section
6, Charter Oak shall indemnify, defend, and hold the Company and its officers,
directors, employees, representatives and Affiliates, and each of the Company's
Affiliates' officers, directors, employees, partners, representatives and
Affiliates (collectively, the "Company Indemnitees") harmless from and against,
and shall reimburse them for, any and all Losses sustained or incurred by a
Company Indemnitee resulting or arising from (a) any material inaccuracy in or
breach of any of Charter Oak's representations or warranties set forth in this
Agreement or (b) any breach of any covenant, obligation or agreement of Charter
Oak contained in this Agreement and the Shareholders Agreement, in each case
whether or not such Loss results from a third party claim.
6.3 INDEMNIFICATION NOTICE. In the event that any third party claim is
asserted against a Person with respect to which such Person is entitled to
indemnification hereunder, such Person (the "Indemnified Party") shall, within
60 days of the later of the occurrence of the event giving rise to the claim or
the date that the Indemnified Party learned of such claim (provided, however,
that if a claim arises by virtue of litigation, then in no event less than 10
days prior to the date in which an appearance or answer is due, whichever is
earlier), notify the Person obligated to indemnify it (the "Indemnifying Party")
of such claim by delivery of a written notice describing the claim and
indicating the basis for indemnification hereunder; provided that the failure to
so notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligations hereunder except to the extent such failure shall have harmed the
Indemnifying Party. The Indemnifying Party shall have the right, upon written
notice to the Indemnified Party within 10 days after receipt from the
Indemnified Party of notice of such claim, to conduct at its expense the defense
against such claim in its own name, or if necessary in the name of the
Indemnified Party. In the event that the Indemnifying Party fails to give such
notice, it shall be deemed to have elected not to conduct the defense of the
subject claim, and in such event the Indemnified Party shall have the right to
conduct such defense and, only with the prior consent of the Indemnifying Party
which shall not be unreasonably withheld, to compromise and settle the claim. In
the event that the Indemnifying Party does elect to conduct the defense of the
subject claim, the indemnified party shall cooperate with and make available to
the Indemnifying Party such assistance and materials as may be reasonably
requested by it, all at the expense of the Indemnifying Party and the
Indemnified Party shall have the right at its expense to participate in the
defense, provided that the Indemnified Party will have the right to compromise
and settle the
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claim only with the prior written consent of the Indemnifying Party. Any
settlement to which the Indemnifying Party shall have consented in writing shall
conclusively be deemed to be an obligation with respect to which the Indemnified
Party is entitled to indemnification hereunder.
6.4 LIMITATIONS ON INDEMNIFICATION. The representations and warranties
contained in this Agreement shall survive the Closing Date and continue to be
binding, regardless of any investigation made at any time by any party.
Indemnification pursuant to this Article 6 shall be limited as follows:
(a) Claims for indemnification relating to the representations
and warranties contained in Sections 4.14 and 4.21 may be made until
the date determined by statutes of limitations with respect to
liability regarding such representations and warranties;
(b) Claims for indemnification relating to the representations
and warranties contained in Sections 4.12, 4.13 and 4.20 may be made
until the first anniversary of the Closing Date;
(c) Claims for indemnification relating to all other
representations and warranties contained in this Agreement may be made
until the first anniversary of the Closing Date;
(d) Notwithstanding the limitations set forth in this Section
6.4, claims for indemnification relating to the representations and
warranties contained in Section 4.3 and 4.5 may be made any time after
the Closing Date;
(e) The Company shall not be liable to the Investor
Indemnitees for any indemnification pursuant to this Article 6 to the
extent such indemnification, when aggregated with all other
indemnification payments made by the Company pursuant to the provisions
of this Article 6 shall exceed $7,500,000; and
(f) The Company shall not be liable to the Investor
Indemnitees for indemnification claims pursuant to this Article 6 until
the aggregate amount of the net liability of such indemnification
claims exceeds $100,000, but upon reaching such amount the Company
shall be liable to Charter Oak from the first dollar of net liability
for such indemnification claims up to a maximum amount of $7,500,000.
6.5 NET LIABILITY. For the purpose of this Article 6, in computing any
individual or aggregate amounts of liabilities for indemnification, the amount
of each liability shall be deemed to be an amount (i) net of any reasonably
anticipated tax benefit to the Indemnified Party; (ii) net of any insurance
proceeds which the Indemnified Party, or in the case of a liability of the
Company to Charter Oak, the Indemnifying Party, has received and any indemnity,
contribution or other similar payment payable by any third party to the
Indemnified Party, or in the case of a liability of the Company to Charter Oak,
the Indemnifying Party, with respect thereto; and
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(iii) net of any adjustments to the aggregate price paid by Charter Oak for the
Common Shares pursuant to Section 2.1 of this Agreement; provided, however, that
the tax benefit shall be determined in good faith by the independent public
accounts of the Indemnified Party and shall apply to the earliest year
reasonable permitted; and provided, further, that in all cases, the timing,
receipt or realization of tax benefits, insurance proceeds or recoveries from
third parties, the amount of increased costs of insurance arising from the
receipt of collection of such insurance proceeds, and the costs of collection
shall be taken into account in determining any reduction in the indemnification
claim.
SECTION 7. COVENANTS
---------
The Company covenants and agrees with Charter Oak that for so long as
Charter Oak remains a shareholder in the Company:
7.1 FURNISHING OF FINANCIAL STATEMENTS AND INFORMATION. The Company
shall deliver to Charter Oak:
(a) according to the time schedule set forth in the Credit
Agreement, unaudited consolidated balance sheets of the Company as of
the end of such month, together with the related unaudited consolidated
statements of income and retained earnings for such month and for the
period from the beginning of the fiscal year to the end of such month
(which shall also set forth any budgeted figures) and cash flows, all
in reasonable detail and the statements as of the end of each fiscal
quarter shall be certified by the President or chief financial officer
of the Company to be accurate to the best of his knowledge and placing
due reliance on the Company's accounting staff, subject to year-end
adjustments;
(b) according to the time schedule set forth in the Credit
Agreement, the audited consolidated balance sheets of the Company, as
of the end of such fiscal year, together with the related consolidated
statements of income and retained earnings and cash flows for such
fiscal year, setting forth in comparative form figures for the previous
fiscal year, all in reasonable detail and duly certified by Xxxxx,
Xxxxxx & Company, or another firm of independent public accountants of
national or regional standing reasonably acceptable to Charter Oak,
which accountants shall have given the Company an opinion, unqualified
as to the scope of the audit, regarding such statements;
(c) within ten days after the Company learns of the
commencement or threatened commencement of any material claim or suit,
legal or equitable, or of any material administrative, arbitration, or
other similar proceeding against the Company, or its business, assets,
or properties, written notice of the nature and extent of such suit or
proceeding;
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(d) within ten days after the Company learns of any
circumstance or event which reasonably can be expected to have a
Material Adverse Effect on the assets, properties, financial condition,
results of operations, business, or prospects of the Company, written
notice of the nature and extent of such circumstance or event;
(e) not less than 30 days prior to the end of each fiscal
year, commencing with the fiscal year beginning January 1, 1998, an
annual budget for the Company for the next succeeding fiscal year,
prepared in good faith and submitted to the Board of Directors of the
Company (an "Annual Budget"), which Annual Budget shall include monthly
capital and operating expense budgets, cash flow statements, capital
expenditure budgets, profit and loss projections, and employee hiring
projections;
(f) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general
written communications which the Company sends to its shareholders and
copies of all registration statements and all regular, special or
periodic reports which it files with the SEC or with any securities
exchange on which any of its securities are then listed, and copies of
all press releases and other statements made available generally by the
Company to the public concerning material developments in the Company's
business;
(g) within 10 business days after Charter Oak makes a
reasonable request therefor, such other data relating to the business,
affairs and financial condition of the Company; and
(h) Notwithstanding any provision to the contrary herein, in
the Shareholder Agreement and/or in the Amended Articles, the Company
and Charter Oak acknowledge and agree that all financial reporting
deliverable and notices required by this Section 7.1 shall concurrently
be sent to each of the Company's shareholders.
7.2 INSPECTION. The Company shall, upon receipt of reasonable notice,
permit Charter Oak and any of its representatives to visit and inspect any of
the properties of the Company during normal business hours, including, without
limitation, their respective books and records (and to make extracts therefrom
and copies thereof).
7.3 DIVIDENDS ON OR REDEMPTION OF SHARES. Except with respect to the
Key Equity Redemption Agreement and as otherwise provided in the Shareholders
Agreement, the Company shall not, directly or indirectly, declare or pay any
dividend or make any other distribution with respect to any of its capital stock
or any securities, or directly or indirectly purchase, redeem, or otherwise
acquire for any consideration any shares of its capital stock or other equity
securities (including without limitation any warrants or options) without the
prior written consent of Charter Oak.
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7.4 INDEBTEDNESS. Except as set forth in the Annual Budget approved by
the Company's Board, and as otherwise provided in the Shareholders Agreement,
the Company shall not, without the prior written consent of Charter Oak, incur,
assume or suffer to exist any Indebtedness except (i) the Credit Agreement, (ii)
Indebtedness to banks or other financial institutions of up to $500,000 in the
aggregate, (iii) purchase money Indebtedness representing or evidencing the
principal amount of the deferred purchase price of equipment or other personal
property used in the Company's business and (iv) Indebtedness arising from
capitalized lease obligations of up to $250,000 in the aggregate.
7.5 USE OF PROCEEDS. The Company shall use all proceeds received from
Charter Oak in connection with the issuance and sale of the Common Shares
hereunder towards consummation of the transactions contemplated by the Key
Equity Redemption Agreement and the Xxxxxx Agreement.
7.6 MANAGEMENT COMPENSATION. The Company shall not amend the terms or
provisions of the Xxxxxx Employment Agreement and/or the Xxxxxx Employment
Agreement or create, implement or otherwise put into effect any stock option
plan, stock rights plan, stock appreciation rights plan or similar benefit plan,
without the prior written consent of Charter Oak.
7.7 FURTHER ASSURANCES. The Company shall cure promptly any defects in
the creation and issuance of the Common Shares, and in the execution and
delivery of this Agreement and the Shareholder Agreement. The Company, at its
expense, shall promptly execute and deliver to Charter Oak upon reasonable
request all such other and further documents, agreements and instruments in
compliance with or pursuant to its covenants and agreements herein, and shall
make any recordings, file any notices, and obtain any consents as may be
reasonably necessary or appropriate in connection therewith.
7.8 TAXES AND ASSESSMENTS. The Company shall pay and discharge, before
the same become delinquent and before penalties accrue thereon, all taxes,
assessments and governmental charges upon or against the Company or any of its
properties, and all other material liabilities at any time existing, except to
the extent and so long as (a) the same are being contested in good faith and by
appropriate proceedings in such manner as not to cause any material adverse
effect upon the Company, or the loss of any right of redemption from any sale
thereunder, and (b) the Company shall have set aside on its books adequate
reserves with respect thereto.
7.9 BUSINESS LINES. Except as set forth in the Shareholders Agreement,
the Company shall not, enter into the ownership, management or operation of any
business other than the Businesses without the prior written consent of Charter
Oak.
7.10 CONFLICTING AGREEMENTS. The Company shall not enter into or become
subject to any Contract or instrument which by its terms would (under any
circumstances) restrict the Company's right to perform any of the provisions of
this Agreement, the Shareholders Agreement, the Enterprises Warrant Agreement,
the Charter Oak Warrant Agreement, the
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Xxxxxx Employment Agreement, the Xxxxxx Employment Agreement, the Key Equity
Redemption Agreement or the Articles of Incorporation.
7.11 INSURANCE. The Company shall:
(a) keep or cause all of its insurable property or properties
to be kept insured against loss or damage against fire and other
material risks;
(b) maintain public liability insurance against claims for
personal injury, death, or property damage suffered by others upon or
in or about any premises occupied by it or occurring as a result of its
maintenance or operation of any automobiles, trucks, or other vehicles
or other facilities; and
(c) maintain all such workers' compensation or similar
insurance as may be required under the laws of any state or
jurisdiction in which it may be engaged in business.
All insurance for which provision has been made in this Section 7.13 shall be
maintained with such insurers, in such amounts and to such extent as is
reasonable for businesses such as or similar to the Businesses.
SECTION 8. CONDITIONS TO CLOSING
---------------------
8.1 CONDITIONS TO CLOSING BY CHARTER OAK. The obligations of Charter
Oak to consummate the purchase of the Common Shares pursuant to Section 2.1
hereof and certain of the transactions contemplated by this Agreement are
subject to the satisfaction on or prior to the Closing Date of the following
conditions, any of which may be waived in whole or in part in writing by Charter
Oak:
(a) The conditions for the closing of the Xxxxxx Agreement
have been either satisfied or waived;
(b) The Company shall have consummated simultaneously with the
Closing of this Agreement, the Key Equity Redemption Agreement and the
transactions contemplated thereunder;
(c) All representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as
though made anew as of such date;
(d) The Company shall have delivered to Charter Oak the items
required by Section 3.2 of this Agreement;
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(e) The Company shall have performed and complied with all
agreements and conditions required by this Agreement to be performed
and complied with by it prior to or as of the Closing Date;
(f) All pre-issuance registrations, qualifications, permits,
and approvals required, if any, under applicable state securities laws
for the lawful execution and delivery of this Agreement and the offer,
sale, issuance, and delivery of the Common Shares shall have been
obtained;
(g) The Company and each of the named parties thereto (other
than any exceptions approved by Charter Oak) shall have executed and
delivered to Charter Oak the Shareholders Agreement;
(h) Xxxxxx X. Xxxxxx shall have entered into the Xxxxxx
Employment Agreement with the Company;
(i) Xxxxxxx X. Xxxxxx shall have entered into the Xxxxxx
Employment Agreement with the Company; and
(j) The Company shall have issued the Enterprises Warrant
Agreement and Charter Oak Warrant Agreement.
8.2 CONDITIONS TO CLOSING BY THE COMPANY. The obligations of the
Company to consummate the issuance and sale of the Common Shares pursuant to
Section 2.1 hereof and certain of the transactions contemplated by this
Agreement are subject to the satisfaction on or prior to the Closing Date of the
following conditions, any of which may be waived in whole or in part in writing
by the Company:
(a) All representations and warranties of Charter Oak
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as
though made anew as of such date;
(b) Charter Oak shall have delivered to the Company the items
required by Section 3.3 of this Agreement;
(c) All pre-issuance registrations, qualifications, permits,
and approvals required, if any, under applicable state securities laws
for the lawful execution and delivery of this Agreement and the offer,
sale, issuance, and delivery of the Preferred Shares shall have been
obtained;
(d) Charter Oak shall have executed and delivered the
Shareholders Agreement; and
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(e) Charter Oak shall have executed and delivered the Note
Purchase Agreement to Key Capital Corporation.
SECTION 9. MISCELLANEOUS
-------------
9.1 WAIVERS AND AMENDMENTS. This Agreement may be amended or modified
in whole or in part only by a writing which makes reference to this Agreement
executed by Charter Oak and the Company. The obligations of any party hereunder
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the party
claimed to have given the waiver; PROVIDED, HOWEVER, that any waiver by any
party of any violation of, breach of, or default under any provision of this
Agreement or any other agreement provided for herein shall not be construed as,
or constitute, a continuing waiver of such provision, or waiver of any other
violation of, breach of or default under any other provision of this Agreement
or any other agreement provided for herein. Any amendment, modification or
waiver of this Agreement that would have a material adverse impact on the rights
of the Company must be approved by the Company's Board of Directors with the
directors nominated by Charter Oak abstaining from the vote thereon.
9.2 EXPENSES. Each party hereto shall pay its own costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement, the Shareholders Agreement, the Enterprises
Warrant Agreement, the Charter Oak Warrant Agreement, the Xxxxxx Employment
Agreement, the Xxxxxx Employment Agreement, the Key Equity Redemption Agreement
and the Note Purchase Agreement.
9.3 ENTIRE AGREEMENT. This Agreement and the other agreements and
instruments expressly provided for herein, together set forth the entire
understanding of the parties hereto and supersede in their entirety all prior
contracts, agreements, arrangements, communications, discussions,
representations, and warranties, whether oral or written, among the parties.
9.4 GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the internal substantive laws of the State of
Ohio without giving effect to the principles of conflicts of law thereof.
9.5 NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and be deemed to have been duly given
(a) when personally delivered or sent by facsimile transmission (the receipt of
which is confirming in writing), (b) one business day after being sent by a
nationally recognized overnight courier service or (c) five business days after
being sent by registered or certified mail, return receipt requested, postage
prepaid, to the parties at their respective addresses set forth below.
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If to the Company: Xxxxxx X. Xxxxxx
President
GEO Specialty Chemicals, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxx 00000
with a copy to: Xxxxxxxx Xxxx & Xxxxx LLP
0000 Xxx Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
If to Charter Oak: Xx. Xxxxxxx X. Xxxx
Charter Oak Partners
00 Xxxxxx Xxxxxx
Xxxxxxxx X
X.X. Xxx 0000
Xxxxxxxx, XX 00000
with a copy to: Xxxxxx, Xxxxxx & Xxxxxxxx XXX
0000 XxXxxxxx Xxxxxxxxxx Center
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Any party may change the address of the persons to whom notices or copies
thereof shall be directed by written notice to the other party.
9.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together will constitute one and the same instrument.
9.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns, except that the Company may not assign or transfer its rights
hereunder without the prior written consent of Charter Oak. Charter Oak shall be
entitled to assign all of its rights, benefits, and obligations hereunder
without the prior consent of any party only to any Person that acquires Common
Shares from Charter Oak and such Person shall become entitled to all rights and
benefits, and be bound by the obligations, of Charter Oak hereunder.
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9.8 THIRD PARTIES. Nothing expressed or implied in this Agreement is
intended, or shall be construed, to confer upon or give any person or entity
other than the parties hereto any rights or remedies under or by reason of this
Agreement.
9.9 SCHEDULES AND EXHIBITS. The schedules and exhibits attached to this
Agreement are incorporated herein and shall be part of this Agreement for all
purposes. Charter Oak acknowledges and agrees that disclosures set forth in one
schedule shall automatically be deemed to have been made with respect to any
other schedule, representation and/or warranty to which they may be applicable,
provided that the reason for such disclosure is readily apparent.
9.10 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have duly executed, or have caused
their duly authorized officer or representative to executive, this Share
Purchase Agreement as of the date first above written.
GEO SPECIALTY CHEMICALS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
CHARTER OAK PARTNERS
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Director of Private Investments
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