EXHIBIT 2.6
STOCK PURCHASE AGREEMENT
AMONG
XXXXXXX BROS., INC.,
THE PEERLESS PAPER XXXXX
AND
THE SHAREHOLDERS OF
THE PEERLESS PAPER XXXXX
------------------------
Dated as of December 19, 2000
TABLE OF CONTENTS
SECTION PAGE
Article I SALE AND PURCHASE OF SHARES...........................................................1
1.1 Sale and Purchase of Shares...........................................................1
Article II SALE AND PURCHASE OF SHARES...........................................................2
2.1 Purchase Price........................................................................2
2.2 Payment of Base Purchase Price........................................................2
2.3 Adjustment of Purchase Price..........................................................2
2.4 Escrow................................................................................5
Article III CLOSING AND TERMINATION...............................................................5
3.1 Closing Date..........................................................................5
3.2 Termination of Agreement..............................................................5
3.3 Procedure for Termination.............................................................6
3.4 Effect of Termination.................................................................6
Article IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS.........................................6
4.1 Organization and Good Standing........................................................6
4.2 Authorization of Agreement............................................................6
4.3 Capitalization........................................................................7
4.4 No Subsidiaries.......................................................................8
4.5 Corporate Records.....................................................................8
4.6 Conflicts; Consents of Third Parties..................................................8
4.7 Ownership and Transfer of Shares......................................................9
4.8 Financial Statements..................................................................9
4.9 No Undisclosed Liabilities............................................................9
4.10 Absence of Certain Developments......................................................10
4.11 Taxes................................................................................11
4.12 Real Property........................................................................13
4.13 Tangible Personal Property...........................................................14
4.14 Intangible Property..................................................................15
4.15 Material Contracts...................................................................16
4.16 Employee Benefits....................................................................17
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SECTION PAGE
4.17 Labor; Personnel.....................................................................20
4.18 Litigation...........................................................................21
4.19 Compliance with Laws; Permits........................................................21
4.20 Environmental Matters................................................................22
4.21 Insurance............................................................................23
4.22 Inventories; Receivables; Payables...................................................23
4.23 Related Party Transactions...........................................................23
4.24 Contracts with Vendors; Customers and Suppliers......................................23
4.25 Banks................................................................................24
4.26 No Misrepresentation.................................................................24
4.27 Brokers; Finders.....................................................................24
4.28 Advantage Marketing..................................................................24
4.29 Affiliation with Deloitte & Touche LLP...............................................24
Article V REPRESENTATIONS AND WARRANTIES OF PURCHASER..........................................24
5.1 Organization and Good Standing.......................................................24
5.2 Authorization of Agreement...........................................................24
5.3 Conflicts; Consents of Third Parties.................................................25
5.4 Litigation...........................................................................25
5.5 Investment Intention.................................................................26
5.6 Brokers; Finders.....................................................................26
5.7 Affiliation with Deloitte & Touche LLP...............................................26
Article VI COVENANTS............................................................................26
6.1 Access to Information................................................................26
6.2 Conduct of the Business Pending the Closing..........................................27
6.3 Consents.............................................................................29
6.4 Filings with Governmental Bodies.....................................................30
6.5 Other Actions........................................................................30
6.6 No Solicitation......................................................................30
6.7 Preservation of Records..............................................................31
6.8 Publicity............................................................................31
6.9 Repayment of Loans...................................................................31
6.10 Pre-Payment of Debt and Other Obligations............................................31
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SECTION PAGE
6.11 Severance Payments...................................................................31
6.12 Release of Liens.....................................................................32
6.13 Use of Name..........................................................................32
6.14 Environmental Matters................................................................32
6.15 Leases...............................................................................32
6.16 Personal Property....................................................................33
6.17 Advantage Marketing Arrangement......................................................33
6.18 Termination of Certain Plans.........................................................33
6.19 Termination of Key-Man Life Insurance................................................33
6.20 Tax Matters..........................................................................33
6.21 Inventory............................................................................34
6.22 Environmental Insurance..............................................................34
Article VII CONDITIONS TO CLOSING................................................................34
7.1 Conditions Precedent to Obligations of Purchaser.....................................34
7.2 Conditions Precedent to Obligations of the Sellers...................................36
Article VIII DOCUMENTS TO BE DELIVERED............................................................37
8.1 Documents to Be Delivered by the Sellers.............................................37
8.2 Documents to be Delivered by the Purchaser...........................................38
Article IX INDEMNIFICATION......................................................................39
9.1 Survival of Representations, Warranties and Covenants................................39
9.2 Limitations on Liability.............................................................39
9.3 General Indemnification..............................................................40
9.4 Vendor Rebate Receivable Indemnification.............................................41
9.5 Defense of Claims....................................................................41
9.6 Adjustment to Purchase Price.........................................................43
9.7 Right of Set Off.....................................................................44
Article X MISCELLANEOUS........................................................................44
10.1 Definitions..........................................................................44
10.2 Payment of Sales, Use or Similar Taxes...............................................51
10.3 Expenses.............................................................................51
10.4 Specific Performance.................................................................51
10.5 Further Assurances...................................................................51
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SECTION PAGE
10.6 Entire Agreement; Amendments and Waivers.............................................51
10.7 Submission to Jurisdiction; Consent to Service of Process............................52
10.8 Governing Law........................................................................52
10.9 Table of Contents and Headings.......................................................52
10.10 Notices..............................................................................52
10.11 Severability.........................................................................54
10.12 Binding Effect; Assignment...........................................................54
10.13 Sellers' Representative..............................................................54
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of December 19, 2000 (the
"AGREEMENT"), among Xxxxxxx Bros., Inc., a Louisiana corporation (the
"PURCHASER"), The Peerless Paper Xxxxx, a Pennsylvania corporation (the
"COMPANY"), and the shareholders of the Company listed on the signature pages
hereof (collectively the "SELLERS").
W I T N E S S E T H:
WHEREAS, the Sellers own an aggregate of 3,693 shares of common
stock, par value $12.50 per share (the "SHARES"), of the Company, which
Shares constitute all of the issued and outstanding shares of capital stock
of the Company;
WHEREAS, the Sellers desire to sell to the Purchaser, and the
Purchaser desires to purchase from the Sellers, the Shares for the purchase
price and upon the terms and conditions hereinafter set forth;
WHEREAS, as an inducement to the Purchaser to enter into this
Agreement, (i) each of Xxxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx shall enter
into non-competition agreements with the Purchaser in the forms attached
hereto as EXHIBITS A-1 and A-2 and (ii) Xxxxxxx X. Xxxxxxxx shall enter into
an employment agreement with the Purchaser in the form attached hereto as
EXHIBIT B; and
WHEREAS, capitalized terms used in this Agreement are defined in
SECTION 10.1 hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties hereby hereto
agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
1.1 SALE AND PURCHASE OF SHARES. At the Closing, upon the terms and
subject to the conditions contained herein, each Seller shall sell, assign,
transfer, convey and deliver to the Purchaser, and the Purchaser shall
purchase from each Seller, the Shares owned by such Seller set forth opposite
such Seller's name on EXHIBIT C hereto.
ARTICLE II
SALE AND PURCHASE OF SHARES
2.1 PURCHASE PRICE. The aggregate consideration to be paid by the
Purchaser to the Sellers for the Shares shall be $29,500,000 in cash less any
Debt set forth on the Debt Notice less any adjustment required by SECTIONS
6.15(b) and 6.22 (the "BASE PURCHASE PRICE"), subject to adjustment, if any,
in accordance with SECTION 2.3 (as adjusted, the "PURCHASE PRICE").
2.2 PAYMENT OF BASE PURCHASE PRICE. On the Closing Date, the
Purchaser shall pay to the Sellers the Base Purchase Price less the Escrow
Amount by wire transfer of immediately available funds into accounts
designated by the Sellers in writing to the Purchaser not later than two (2)
Business Days prior to the Closing Date, which amount shall be allocated
between the Sellers as set forth on EXHIBIT C.
2.3 ADJUSTMENT OF PURCHASE PRICE.
(a) As soon as practicable following the Closing Date (but in no
event later than sixty (60) days after Closing), the Purchaser shall cause
the Company to prepare and deliver to the Purchaser and the Sellers a balance
sheet of Company as at the close of business on the Closing Date (the
"CLOSING DATE BALANCE SHEET"). The Closing Date Balance Sheet shall be
audited and certified by Xxxxxx, Xxxxx and Associates LLP, the Company's
regular independent certified public accountants (the "COMPANY'S
ACCOUNTANTS"), shall be based upon the books and records of Company, shall be
prepared in accordance with GAAP applied on a basis consistent with that of
the preceding fiscal year (except for those adjustments set forth on SCHEDULE
2.3(a)), shall present fairly the financial position of Company as at the
Closing Date and shall reflect the adjustments set forth in SCHEDULE 2.3(a)
notwithstanding the Company's prior practice with respect to those items. All
accruals as at the Closing Date which, in accordance with GAAP applied on a
basis consistent with that of the preceding fiscal year should be reflected
on a balance sheet shall be reflected on the Closing Date Balance Sheet,
including, without limitation, with respect to such items as employee
bonuses, profit-sharing plan contributions, promotional expenses and Taxes.
Inventory shall be reflected on the Closing Date Balance Sheet in accordance
with GAAP on a LIFO basis, consistent with prior practice, which prior
practice excluded vendor rebates and purchase discounts (except for those
adjustments set forth on SCHEDULE 2.3(a)). The Purchaser's regular
independent public accountants, Ernst & Young LLP (the "PURCHASER'S
ACCOUNTANTS"), shall have the opportunity to observe the taking of
inventories in connection with the preparation of the Closing Date Balance
Sheet, to consult with and to examine the work papers, schedules and other
documents prepared or reviewed by the Company's Accountants in connection
with the preparation of their report and of the Purchase Price Certificate
referred to in SUBPARAGRAPH (b) hereof.
(b) For purposes of this SECTION 2.3, "ADJUSTED TANGIBLE NET BOOK
VALUE" shall be the sum of inventory (as adjusted in accordance with SCHEDULE
2.3(a)),
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accounts receivable (trade and vendor rebate) and net property, plant and
equipment, xxxxx cash, deposits, prepaid corporate taxes, prepaid lease
payments (including, but not limited to certain truck leases), prepaid rent,
other prepaid items (including, without limitation, prepaid real estate
taxes, prepaid vehicle and truck licenses and permits, prepaid software
licenses and prepaid health insurance premiums) and an escrow account with
Vanguard, LESS accounts payable, accrued expenses, taxes payable, other
current liabilities and other long-term liabilities, including, without
limitation, a note payable to Twincorp Master Distributors, Inc., a Minnesota
corporation, dated as of September 16, 1999, in each case as reflected on the
Closing Date Balance Sheet. For purposes of example only, the parties agree
that the Adjusted Tangible Net Book Value, if calculated as of September 30,
2000, would be calculated as set forth on SCHEDULE 2.3(b). The methods
applied in calculating SCHEDULE 2.3(b) (including, without limitation, the
adjustments set forth on SCHEDULE 2.3(a)) shall be consistently applied in
the calculation of the Closing Date Balance Sheet.
The calculation of Adjusted Tangible Net Book Value shall be made by
the Company's Accountants, who shall render a certificate (the "PURCHASE
PRICE CERTIFICATE") showing such calculation and stating that such
calculation has been made in accordance with the provisions of this SECTION
2.3. The Purchase Price Certificate shall be delivered to the Purchaser and
the Sellers as soon as practicable following the Closing Date but in no event
later than sixty (60) days thereafter.
(c) The Purchaser shall have a period of thirty (30) days after
delivery of the Closing Date Balance Sheet and the Purchase Price Certificate
to present in writing to the Company's Accountants (with a copy to the
Sellers) any objections the Purchaser may have to any of the matters set
forth therein, which objections shall be set forth in reasonable detail. If
no objections are raised within such 30-day period, the Closing Date Balance
Sheet and the determination of Adjusted Tangible Net Book Value shall be
deemed accepted and approved by the Purchaser and by the Sellers and the
supplemental closing (herein called the "SUPPLEMENTAL CLOSING") shall be held
at the same place and time as is provided in SECTION 3.1 on the fifth (5th)
Business Day following the expiration of such 30-day period, or at such other
place and at such other time and date as may be mutually agreed upon in
writing by the Purchaser and the Sellers.
If the Purchaser shall raise any objections within the aforesaid
30-day period, Company's Accountants and Purchaser's Accountants shall
attempt to resolve the matter or matters in dispute and, if resolved, such
firms shall send a joint notice to the Purchaser and the Sellers stating the
manner in which the dispute was resolved, the Company's Accountants shall
send to the Purchaser and the Sellers a confirmation of the original Purchase
Price Certificate or, if necessary, a revised Purchase Price Certificate
prepared in accordance with such resolution, and the Purchaser's Accountants
shall send a letter to the Purchaser and the Sellers confirming that such
confirmed or revised Purchase Price Certificate is in accordance with such
resolution, whereupon the confirmed or revised Purchase Price Certificate
shall be final and binding on the parties hereto. The Supplemental Closing
shall then take place on the fifth (5th) Business Day following the receipt
of such documents by the Purchaser and the Sellers.
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Notwithstanding the foregoing, the Purchaser or the Sellers, as the case may
be, shall pay the amount, if any, determined to be due and owing to the
Sellers or the Purchaser, as the case may be, in accordance with SECTION
2.3(d) which is not disputed by the Purchaser pursuant to this SECTION 2.3(c)
on the fifth (5th) Business Day following the 30-day period after delivery of
the Closing Date Balance Sheet.
If such dispute cannot be resolved by the Purchaser and the Sellers
nor by such accounting firms within sixty (60) days after the delivery of the
Closing Date Balance Sheet and the Purchase Price Certificate, then the
specific matters in dispute shall be promptly submitted to Deloitte & Touche
LLP, Chicago office or, if such firm declines to act in such capacity, such
other firm of independent public accountants mutually acceptable to the
Purchaser and the Sellers, which firm shall make a final and binding
determination as to such matter or matters. Deloitte & Touche LLP or such
other accounting firm shall send its written determination to the Purchaser,
the Sellers, the Company's Accountants and the Purchaser's Accountants within
sixty (60) days of the submission of such matters. The Company's Accountants
shall then send to the Purchaser and the Sellers a confirmation of the
original Purchase Price Certificate or, if necessary, a revised Purchase
Price Certificate prepared in accordance with such determination, and the
Purchaser's Accountants shall send a letter to the Purchaser and the Sellers
confirming that such confirmed or revised Purchase Price Certificate is in
accordance with such determination, whereupon the confirmed or revised
Purchase Price Certificate shall be binding on the parties hereto. The
Supplemental Closing shall then take place on the fifth (5th) Business Day
following the receipt of such documents by the Purchaser and the Sellers.
The parties agree to cooperate with each other and each other's
authorized representatives and with Deloitte & Touche LLP or any other
accounting firm selected by the Purchaser and the Sellers in order that any
and all matters in dispute shall be resolved as soon as practicable and that
a final determination of the Adjusted Tangible Net Book Value shall be made.
(d) At the Supplemental Closing, (i) the Purchaser shall pay to the
Sellers, by delivery to the Sellers by wire transfer of immediately available
funds to accounts designated by the Sellers, the amount, if any, by which the
Adjusted Tangible Net Book Value shall exceed $15,200,000 (the "ESTIMATED
TANGIBLE NET BOOK VALUE"), which amount shall be allocated between the
Sellers as set forth on EXHIBIT C, or (ii) the Sellers shall pay to the
Purchaser, by wire transfer of immediately available funds to an account
designated by the Purchaser, the amount, if any, by which the Estimated
Tangible Net Book Value shall exceed the Adjusted Tangible Net Book Value.
(e) The fees and expenses incurred in connection with this Section
of the Company's Accountants shall be paid by the Sellers, those of the
Purchaser's Accountants shall be paid by the Purchaser, and those of Deloitte
& Touche LLP or any other accounting firm selected by the Purchaser and the
Sellers pursuant to SUBPARAGRAPH (c) above shall be paid one-half by the
Purchaser and one-half by the Sellers.
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2.4 ESCROW. At the Closing, the Purchaser shall deposit $3 million
of the Base Purchase Price (the "ESCROW AMOUNT") with The Chase Manhattan
Bank or another commercial bank mutually agreeable to the Purchaser and the
Sellers (the "ESCROW AGENT") which shall invest the Escrow Amount in
accordance with the escrow agreement, substantially in the form of EXHIBIT D
hereto (the "ESCROW AGREEMENT"), which shall be used to partially satisfy any
amounts payable by the Sellers to the Purchaser pursuant to SECTIONS 9.3 and
9.4 hereof; PROVIDED that on the date that is the eighteen (18) month
anniversary of the Closing Date, the balance of the Escrow Amount on such
date shall be paid to the Sellers in accordance with the allocation set forth
on EXHIBIT C hereto, less an amount equal to any unresolved claim or claims
for indemnification against the Sellers under ARTICLE IX hereof, which shall
be disbursed within three (3) Business Days of the date of final resolution
thereof, as more fully described in the Escrow Agreement.
ARTICLE III
CLOSING AND TERMINATION
3.1 CLOSING DATE. The closing of the sale and purchase of the Shares
(the "CLOSING") shall take place at the offices of the Company at 10:00 a.m.
(local time) on the second Business Day after the conditions set forth in
ARTICLE VII hereof have been satisfied or waived by the party entitled to do
so, or at such other time and/or place as may mutually be agreed upon by the
Purchaser and the Sellers. The date on which the Closing shall be held is
referred to in this Agreement as the "CLOSING DATE."
3.2 TERMINATION OF AGREEMENT. This Agreement may be terminated prior
to the Closing as follows:
(a) by the written agreement of the Purchaser and the Sellers; or
(b) by either the Purchaser or the Sellers' Representative if the
Closing shall not have occurred on or prior to January 31, 2001; PROVIDED
that the terminating party is not in material breach of its obligations under
this Agreement; or
(c) by either the Purchaser or the Sellers' Representative if there
shall be in effect a final nonappealable Order restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated
hereby; it being agreed that the parties hereto shall promptly appeal, and
shall diligently pursue, any adverse determination which is appealable; or
(d) by either the Purchaser or the Sellers' Representative if, prior
to the Closing Date, the other party is in material breach of any
representation, warranty, covenant or agreement herein contained and such
breach shall not be cured within ten (10) days of the delivery date of the
notice of default served by the party claiming such material default;
PROVIDED, that the right to terminate this Agreement pursuant to this
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SECTION 3.2(d) shall not be available to any party who is in material breach
of this Agreement at the time notice of termination is delivered.
3.3 PROCEDURE FOR TERMINATION. The termination of this Agreement
pursuant to SECTION 3.2(b), (c) or (d) shall be effectuated by the delivery
of a written notice, in accordance with SECTION 10.10, of such termination
from the party terminating this Agreement to the other parties.
3.4 EFFECT OF TERMINATION. If this Agreement is terminated in
accordance with SECTION 3.2, this Agreement shall become null and void and of
no further force and effect, except (a) for this SECTION 3.4, (b) the last
sentence of each of SECTIONS 4.27 and 6.1 hereof, and SECTIONS 10.3, 10.8 and
10.10 and (c) that the termination of this Agreement for any cause shall not
relieve any party hereto from liability for a breach of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers severally but not jointly represents and
warrants to the Purchaser with respect to the matters set forth in SECTIONS
4.2, 4.3(b), 4.6, 4.7 and 4.27, and Xxxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx
(each a "SHAREHOLDER" and, collectively, the "SHAREHOLDERS") hereby jointly
and severally represent and warrant to the Purchaser with respect to all
matters contained in this ARTICLE IV that:
4.1 ORGANIZATION AND GOOD STANDING.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the commonwealth of Pennsylvania and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now conducted. Except as set forth
on SCHEDULE 4.1, the Company is duly qualified or authorized to do business
as a foreign corporation and is in good standing under the laws of each
jurisdiction in which it owns or leases real property and each other
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization.
4.2 AUTHORIZATION OF AGREEMENT.
(a) Each Seller has all requisite power, authority and legal
capacity to execute and deliver this Agreement, the Escrow Agreement and each
other agreement, document, or instrument or certificate contemplated by this
Agreement or to be executed by such Seller in connection with the
consummation of the transactions contemplated by this Agreement (together
with this Agreement and the Escrow Agreement, the "SELLER DOCUMENTS"), and to
consummate the transactions contemplated hereby and thereby. This Agreement
has been, and each of the Seller Documents will be at or prior to the
Closing, duly and validly executed and delivered by each Seller and (assuming
the due
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authorization, execution and delivery by the other parties hereto and
thereto) this Agreement constitutes, and each of the Seller Documents when so
executed and delivered will constitute, legal, valid and binding obligations
of each Seller, enforceable against each Seller in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar Laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles
of equity, including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding at
law or in equity).
(b) The Company has all requisite corporate power and authority to
execute and deliver this Agreement and each other agreement, document,
instrument or certificate contemplated by this Agreement or to be executed by
it in connection with the consummation of the transactions contemplated by
this Agreement (collectively, the "COMPANY DOCUMENTS"), and to perform any of
its obligations contemplated hereby and thereby. At the Closing, each of the
Company Documents will be duly and validly executed and delivered by the
Company, and (assuming the due authorization, execution and delivery by the
other parties hereto and thereto) each of the Company Documents when so
executed and delivered will constitute, legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar Laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles
of equity, including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding at
law or in equity).
4.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 16,000
shares of common Stock, par value $12.50 per share, (the "COMMON STOCK"). As
of the date hereof, there are 3,693 shares of Common Stock issued and
outstanding and 3,328 shares of Common Stock are held by the Company as
treasury stock. All of the issued and outstanding shares of Common Stock were
duly authorized for issuance and are validly issued, fully paid and
non-assessable and have not been issued in violation of any preemptive or
similar rights. The Shares of Common Stock being acquired by the Purchaser
hereunder constitute all of the issued and outstanding shares of capital
stock of the Company.
(b) There is no existing option, warrant, call, right, stock
appreciation right or equivalent right, commitment or other agreement of any
character to which any Seller or the Company is a party requiring, and there
are no securities of the Company outstanding which upon conversion or
exchange would require, the issuance, sale or transfer of any additional
shares of capital stock, voting securities or other equity securities of the
Company or other securities convertible into, exchangeable for or evidencing
the right to subscribe for or purchase shares of capital stock, voting
securities or other equity securities of the Company. Except
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as set forth on SCHEDULE 4.3(b), no shares of capital stock or other voting
securities of the Company are outstanding. Except as set forth on SCHEDULE
4.3(b), none of the Sellers or the Company is a party to any voting trust or
other voting agreement with respect to any of the shares of Common Stock or
to any agreement relating to the issuance, sale, redemption, transfer or
other disposition of the capital stock of the Company.
4.4 NO SUBSIDIARIES. Except as set forth on SCHEDULE 4.4, the
Company does not, directly or indirectly, own any stock or other equity,
partnership or joint venture interest in any other Person.
4.5 CORPORATE RECORDS.
(a) The Shareholders have delivered (or caused to be delivered) to
the Purchaser true, correct and complete copies of the articles of
incorporation, certified by the Secretary of the Commonwealth of
Pennsylvania, and bylaws, certified by the secretary, assistant secretary or
other appropriate officer of the Company.
(b) Except as set forth on SCHEDULE 4.5(b), the minute books of the
Company previously made available to the Purchaser or its Representatives
contain complete and accurate records of all meetings and accurately reflect
all other corporate action of the shareholders and board of directors
(including committees thereof) of the Company. The stock certificate books
and stock transfer ledgers of the Company previously made available to the
Purchaser or its Representatives are true, correct and complete. All stock
transfer taxes levied or payable with respect to all transfers of shares of
the Company prior to the date hereof have been paid.
4.6 CONFLICTS; CONSENTS OF THIRD PARTIES.
(a) None of the execution and delivery by any Seller of this
Agreement and any other Seller Document or by the Company of this Agreement
and any other Company Document, the consummation of the transactions
contemplated hereby or thereby, or compliance by any Seller or the Company
with any of the provisions hereof or thereof will (i) conflict with, or
result in the breach of, any provision of the articles of incorporation,
bylaws or other organizational documents of the Company or any Seller; (ii)
conflict with, violate, result in the breach or termination of, or constitute
a default under any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which the Company or any Seller is a party
or by which it or any of its respective properties or assets is bound; (iii)
violate any Law, Order or decree of any Governmental Body or authority by
which the Company or any Seller is bound; or (iv) result in the creation of
any Lien upon the properties or assets of the Company or any Seller.
(b) Except as set forth on SCHEDULE 4.6(b), no consent, waiver,
approval, Order, Permit or authorization of, or declaration or filing with,
or notification to, any Person or Governmental Body is required on the part
of any Seller or the Company in connection with (i) the execution and
delivery of this Agreement, any other Seller Document or Company Document or
any Material Contract, (ii) the compliance by
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each Seller or the Company as the case may be, with any of the provisions
hereof or thereof, except for compliance with the applicable requirements of
the HSR Act or (iii) the consummation of the transactions contemplated
hereby. Neither the Company nor the Shareholders aware of any Material
Contract with a vendor which would require the consent of such vendor to
continue to supply the Company after the Closing Date. The Company purchases
products from a large number of vendors and many of its relationships with
vendors are based on oral understanding and custom. Some vendors have in the
past supplied the Company pursuant to written agreements which the Company
can no longer locate. The Company has not requested any such information from
such vendors.
4.7 OWNERSHIP AND TRANSFER OF SHARES. Each Seller is the record and
beneficial owner of the Shares indicated as being owned by such Seller on
EXHIBIT C, free and clear of any and all Liens. Each Seller has the power and
authority to sell, transfer, assign and deliver such Shares as provided in
this Agreement, and such delivery will convey to the Purchaser good and
marketable title to such Shares, free and clear of any and all Liens.
4.8 FINANCIAL STATEMENTS. The Shareholders have delivered (or caused
to be delivered) to the Purchaser copies of (i) the audited balance sheets of
the Company as at December 31, 1999, 1998 and 1997 and the related audited
statements of income and of cash flows of the Company for the years then
ended and (ii) the unaudited balance sheet of the Company as at September 30,
2000 and the related statements of income of the Company for the nine-month
period then ended (such audited statements, including the related notes and
schedules thereto, and unaudited statements are collectively referred to
herein as the "FINANCIAL STATEMENTS"). Each of the Financial Statements is,
and the Closing Date Balance Sheet when delivered will be, complete and
correct in all material respects, has been (or will be) prepared in
accordance with GAAP (subject to normal year-end adjustments in the case of
the unaudited statements) and in conformity with the practices consistently
applied by the Company without modification of the accounting principles used
in the preparation thereof (except, with respect to the unaudited financial
statements, as set forth on SCHEDULE 2.3(a)) and presents (or will present)
fairly the financial position, results of operations and cash flows of the
Company as at the dates and for the periods indicated.
For the purposes hereof, the audited balance sheet of the Company as
at December 31, 1999 is referred to as the "BALANCE SHEET" and December 31,
1999 is referred to as the "BALANCE SHEET DATE."
4.9 NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE 4.9,
since the Balance Sheet Date, the Company has no indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise,
and whether due or to become due) that would have been required to be
reflected in, reserved against or otherwise described on the Balance Sheet or
in the notes thereto in accordance with GAAP which was not fully reflected
in, reserved against or otherwise described in the
9
Balance Sheet or the notes thereto or was not incurred in the ordinary course
of business consistent with past practice.
4.10 ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly
contemplated by this Agreement or as set forth on SCHEDULE 4.10, since the
Balance Sheet Date:
(a) there has not been any Material Adverse Change nor has there
occurred any event which is reasonably likely to result in a Material Adverse
Change;
(b) there has not been any damage, destruction or loss, whether or
not covered by insurance, with respect to the property and assets of the
Company having a replacement cost of more than $10,000 for any single loss or
$25,000 for all such losses;
(c) there has not been any declaration, setting aside or payment of
any dividend or other distribution in respect of any shares of capital stock
of the Company or any repurchase, redemption or other acquisition by any
Seller or the Company of any outstanding shares of capital stock or other
securities of, or other ownership interest in, the Company;
(d) the Company has not awarded or paid any bonuses to employees of
the Company with respect to the fiscal year ended December 31, 2000, except
to the extent accrued on the Financial Statements or entered into any
employment, deferred compensation, severance or similar agreement (nor
amended any such agreement) or agreed to increase the compensation payable or
to become payable by it to any of the directors, officers, employees, agents
or representatives or agreed to increase the coverage or benefits available
under any severance pay, termination pay, vacation pay, company awards,
salary continuation for disability, sick leave, deferred compensation, bonus
or other incentive compensation, insurance, pension or other employee benefit
plan, payment or arrangement made to, for or with such directors, officers,
employees, agents or representatives (other than normal increases in the
ordinary course of business consistent with past practice and that in the
aggregate have not resulted in a material increase in the benefits or
compensation expense of the Company);
(e) there has not been any change by the Company in accounting or
Tax reporting principles, methods or policies;
(f) the Company has not entered into any transaction or Contract or
conducted its business other than in the ordinary course consistent with past
practice;
(g) the Company has not failed to promptly pay and discharge current
liabilities except where disputed in good faith by appropriate proceedings;
(h) the Company has not made any loans, advances or capital
contributions to, or investments in, any Person or paid any fees or expenses
to any Seller or any Affiliate of any Seller;
10
(i) the Company has not mortgaged, pledged or subjected to any Lien
any of its assets, or acquired any assets or sold, assigned, transferred,
conveyed, leased or otherwise disposed of any assets of the Company, except
for assets acquired or sold, assigned, transferred, conveyed, leased or
otherwise disposed of in the ordinary course of business consistent with past
practice;
(j) the Company has not discharged or satisfied any Lien, or paid
any obligation or liability (fixed or contingent), except in the ordinary
course of business consistent with past practice and which, in the aggregate,
would not be material to the Company;
(k) the Company has not canceled or compromised any debt or claim or
amended, canceled, terminated, relinquished, waived or released any Contract
or right except in the ordinary course of business consistent with past
practice and which, in the aggregate, would not be material to the Company;
(l) the Company has not made or is not a party to a Contract to make
any capital expenditures or capital additions or betterments in excess of
$10,000 individually or $25,000 in the aggregate;
(m) the Company has not instituted or settled any material Legal
Proceeding; and
(n) the Company has not agreed to do anything set forth in this
SECTION 4.10.
4.11 TAXES.
(a) All Tax Returns required to be filed by or on behalf of the
Company have been properly prepared and duly and timely filed with the
appropriate taxing authorities in all jurisdictions in which such Tax Returns
are required to be filed (after giving effect to any valid extensions of time
in which to make such filings), and all such Tax Returns were true, complete
and correct in all material respects. All Taxes with respect to the periods
covered by such Tax Returns have been fully and timely paid, and adequate
reserves or accruals for Taxes have been provided in the Closing Date Balance
Sheet with respect to any period for which Tax Returns have not yet been
filed or for which Taxes are not yet due and owing. The Company has not
executed or filed with the IRS or any other taxing authority any agreement,
waiver or other document or arrangement extending or having the effect of
extending the period for assessment or collection of Taxes (including, but
not limited to, any applicable statute of limitation), and no power of
attorney with respect to any Tax matter is currently in force.
(b) The Company has complied in all material respects with all
applicable Laws relating to the payment and withholding of Taxes and has duly
and timely withheld from employee salaries, wages and other compensation and
has paid over to the appropriate taxing authorities all amounts required to
be so withheld and paid over
11
for all periods under all applicable Laws and has accrued such liabilities
where appropriate.
(c) Purchaser has received complete copies of (i) all federal,
state, local and foreign income or franchise Tax Returns of the Company
relating to the taxable periods since and including December 31, 1997 and
(ii) any audit report issued within the last three years relating to Taxes
due from or with respect to the Company, its income, assets or operations.
Neither the Company nor the Shareholders have received any notice that any
such Tax Returns are being examined by the relevant taxing authority.
(d) SCHEDULE 4.11(d) lists all material types of Taxes paid and
material types of Tax Returns filed by or on behalf of the Company. No claim
has been made by a taxing authority in a jurisdiction where the Company does
not file Tax Returns such that it is or may be subject to taxation by that
jurisdiction.
(e) All deficiencies asserted or assessments made as a result of any
examinations by the IRS or any other taxing authority of the Tax Returns of
or covering or including the Company have been fully paid, and there are no
other audits or investigations by any taxing authority in progress, nor have
the Shareholders or the Company received any notice from any taxing authority
that it intends to conduct such an audit or investigation. No issue has been
raised by a federal, state, local or foreign taxing authority in any current
or prior examination which, by application of the same or similar principles,
could reasonably be expected to result in a proposed deficiency for any
subsequent taxable period.
(f) Except as set forth on SCHEDULE 4.11(f), neither the Company nor
any other Person (including any of the Sellers) on behalf of the Company has
(i) filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned by the
Company, (ii) agreed to or is required to make any adjustments pursuant to
Section 481(a) of the Code or any similar provision of state, local or
foreign Law by reason of a change in accounting method initiated by the
Company or has any knowledge that the IRS has proposed any such adjustment or
change in accounting method, or has any application pending with any taxing
authority requesting permission for any changes in accounting methods that
relate to the business or operations of the Company, (iii) executed or
entered into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof or any similar provision of state, local or
foreign Law with respect to the Company, (iv) requested any extension of time
within which to file any Tax Return, which Tax Return has since not been
filed, or (v) granted any power of attorney with respect to any Tax matter
currently in force.
(g) No property owned by the Company is (i) property required to be
treated as being owned by another Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in
effect immediately prior to the enactment of the Tax Reform Act of 1986, (ii)
constitutes "tax-exempt use property"
12
within the meaning of Section 168(h)(1) of the Code or (iii) is "tax-exempt
bond financed property" within the meaning of Section 168(g) of the Code.
(h) No Seller is a foreign person within the meaning of Section 1445
of the Code.
(i) The Company is not a party to any Tax sharing or similar
agreement or arrangement (whether or not written).
(j) There is no contract, agreement, plan or arrangement covering
any person that, individually or collectively, could give rise to the payment
of any amount that would not be deductible by the Purchaser or its Affiliates
by reason of Section 280G of the Code, or would constitute compensation in
excess of the limitation set forth in Section 162(m) of the Code.
(k) The Company is not subject to any private letter ruling of the
IRS or comparable rulings of other taxing authorities.
(l) There are no Liens as a result of any unpaid Taxes upon any of
the assets of the Company.
(m) Except as set forth on SCHEDULE 4.11(m), the Company has no
elections in effect for federal income tax purposes under Sections 108, 168,
338, 441, 463, 472, 1017, 1033 or 4977 of the Code.
(n) The Company has never owned any Subsidiaries and has never been
a member of any consolidated, combined or affiliated group of corporations
for any Tax purposes.
4.12 REAL PROPERTY.
(a) SCHEDULE 4.12(A) sets forth a complete list of (i) all real
property and interests in real property owned in fee by the Company
(individually, an "OWNED PROPERTY" and collectively, the "OWNED PROPERTIES"),
and (ii) all real property and interests in real property leased by the
Company (individually, a "REAL PROPERTY LEASE" and the real properties
specified in such leases, together with the Owned Properties, being referred
to herein individually as a "COMPANY PROPERTY" and collectively as the
"COMPANY PROPERTIES") as lessee or lessor. The Company has good and
marketable fee title to all Owned Property, free and clear of all Liens of
any nature whatsoever except (A) Liens set forth on SCHEDULE 4.12(A) and (B)
Permitted Exceptions. The Company Property constitutes all interests in real
property currently used or currently held for use in connection with the
business of the Company and which are necessary for the continued operation
of the business of the Company as the business is currently conducted.
13
(b) The Company has a valid and enforceable leasehold interest under
each of the Real Property Leases, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar Laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and the Company has not received any notice
of any default or event that with notice or lapse of time, or both, would
constitute a default by the Company under any of the Real Property Leases.
(c) All of the Company Property, buildings, fixtures and
improvements thereon owned or leased by the Company are in such condition and
repair (subject to normal wear and tear) necessary to operate the business of
the Company as currently conducted and as presently proposed to be conducted.
The Shareholders have delivered or otherwise made available to the Purchaser
true, correct and complete copies of (i) all deeds, title reports and surveys
for the Owned Properties and (ii) the Real Property Leases, together with all
amendments, modifications or supplements, if any, thereto.
(d) The Company has all material certificates of occupancy and
Permits of any Governmental Body necessary or useful for the current use and
operation of each Company Property, and the Company has complied with all
material conditions of the Permits applicable to it. No default or violation,
or event that with the lapse of time or giving of notice or both would become
a default or violation, has occurred in the due observance of any Permit.
(e) There does not exist any actual or, to the knowledge of the
Shareholders, threatened condemnation or eminent domain proceedings that
affect any Company Property or any part thereof, and none of the Sellers has
received any notice, oral or written, of the intention of any Governmental
Body or other Person to take or use all or any part thereof.
(f) None of the Shareholders or the Company has received any written
notice from any insurance company that has issued a policy of insurance to
the Company with respect to any Company Property requiring performance of any
structural or other repairs or alterations to such Company Property.
(g) Except as set forth on SCHEDULE 4.12(g), the Company does not
own or hold, and is not obligated under or a party to, any option, right of
first refusal or other contractual right to purchase, acquire, sell, assign
or dispose of any real estate or any portion thereof or interest therein.
(h) All governmental licenses and permits necessary for the current
use and occupancy of each of the Owned Real Properties have been obtained.
4.13 TANGIBLE PERSONAL PROPERTY.
14
(a) SCHEDULE 4.13(a) sets forth all leases of personal property
("PERSONAL PROPERTY LEASES") involving annual payments in excess of $10,000
relating to personal property used in the business of the Company or to which
the Company is a party or by which the properties or assets of the Company is
bound. The Shareholders have delivered or otherwise made available to the
Purchaser true, correct and complete copies of the Personal Property Leases,
together with all amendments, modifications or supplements thereto.
(b) The Company has a valid leasehold interest under each of the
Personal Property Leases under which it is a lessee, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting
creditors' rights and remedies generally and subject, as to enforceability,
to general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity), and there is no default under any
Personal Property Lease by the Company or, to the knowledge of the
Shareholders, by any other party thereto, and no event has occurred that with
the lapse of time or the giving of notice or both would constitute a default
thereunder.
(c) The Company has good and marketable title to all of the items of
tangible personal property reflected in the Balance Sheet (except as sold or
disposed of subsequent to the date thereof in the ordinary course of business
consistent with past practice), free and clear of any and all Liens other
than the Permitted Exceptions. All such items of tangible personal property
which, individually or in the aggregate, are material to the operation of the
business of the Company, are in good condition and in a state of good
maintenance and repair (ordinary wear and tear excepted) and are suitable for
the purposes used.
(d) All of the items of tangible personal property used by the
Company under the Personal Property Leases are in such condition and repair
(ordinary wear and tear excepted) to operate the business of the Company as
currently conducted and are suitable for the purposes used.
4.14 INTANGIBLE PROPERTY.
(a) Unless otherwise indicated in SCHEDULE 4.14(a)(i), the Company
is the sole and exclusive owner of, or has a valid right to use all
intellectual property used in or material to the business of the Company in
the ordinary course or which is necessary for the continued operation of the
business of the Company as presently conducted (the "COMPANY INTELLECTUAL
PROPERTY"), in each case, free and clear of any Liens, except for the license
terms of any licensed Company Intellectual Property as indicated on SCHEDULE
4.14(a)(i). The Company Intellectual Property is sufficient to conduct the
business of the Company as presently conducted. Except as set forth in
SCHEDULE 4.14(a)(i), to the knowledge of the Sellers, the Company
Intellectual Property is valid, subsisting and enforceable. SCHEDULE
4.14(a)(ii) hereto sets forth complete and correct lists of:
15
(i) all patents, trademarks, trade names, service marks, and
copyrights owned or used in or material to the businesses of the
Company or which are necessary for the continued operation of the
businesses of the Company as presently conducted, as well as all
registrations thereof and pending applications therefor, including the
jurisdictions in which such Intellectual Property has been issued or
registered or in which any such application for such issuance and
registration has been filed; and
(ii) any and all software (other than routine, non-negotiated,
shrink wrap or similar every day licenses of the type commonly
available at reasonable cost to the industry in general) owned or used
by the Company in the business (the "COMPANY SOFTWARE").
Except as set forth on SCHEDULE 4.14(a)(i), each of the foregoing is owned by
the party shown on such Schedule as owning the same, free and clear of all
Liens, and is not the subject of any dispute or challenge.
(b) Except as set forth on SCHEDULE 4.14(b), the Company is not
currently, nor as a result of the execution and delivery of this Agreement or
any of the Seller Documents or any of the Company Documents, the consummation of
the transactions contemplated hereby or thereby or the performance by the
Sellers or the Company of their obligations hereunder or thereunder will be, in
breach of any Contract relating to the Company Intellectual Property.
(c) The Company has not received any notice of any infringement of the
rights of others with respect to any Company Intellectual Property.
(d) SCHEDULE 4.14(D) sets forth a complete and accurate list of (i)
all Contracts to which the Company is a party granting to any third party any
right to use any of the Company Intellectual Property and (ii) all Contracts
permitting the Company to use any Company Intellectual Property (other than
routine, non-negotiated, shrink wrap or similar every day licenses of the
type commonly available at reasonable cost to the industry in general) of any
third party (collectively, the "COMPANY INTELLECTUAL PROPERTY LICENSES").
Except as set forth in SCHEDULE 4.14(d), the Company is not required or
obligated to pay any royalties or compensation to any Person for the use of
any Company Intellectual Property.
4.15 MATERIAL CONTRACTS. SCHEDULE 4.15 sets forth all of the
following Contracts which are currently in effect to which the Company is a
party or by which it is bound (collectively, the "MATERIAL CONTRACTS"): (a)
Contracts with any Seller or any current officer, director, employee or
consultant of the Company or with any Affiliate of such Persons; (b)
Contracts with any labor union or association representing any employee of
the Company; (c) Contracts pursuant to which the Company is required to
purchase or sell a stated portion of its requirements or output from or to
another party; (d) Contracts for the sale of any of the assets of the Company
other than in the ordinary course of business or for the grant to any Person
of any preferential rights to purchase any
16
of its assets; (e) joint venture agreements; (f) Contracts containing
covenants of the Company not to compete in any line of business or with any
Person in any geographical area or covenants of any other Person not to
compete with the Company in any line of business or in any geographical area;
(g) Contracts relating to the acquisition by the Company of any operating
business or the capital stock of any other Person; (h) Contracts relating to
the borrowing of money; (i) Contracts under which the Company acts as a
distributor, dealer or franchiser; (j) all Contracts concerning a
partnership, joint venture, joint development or other similar cooperation
arrangement; (k) all confidentiality and non-disclosure Contracts (other than
standard non-disclosure forms signed by employees generally, examples of
which have been provided to Purchaser); (l) all Contracts under which the
Company has advanced or loaned funds to any Person, including employees of
the Company (other than those with respect to travel, entertainment or other
expenses incurred in the ordinary course of business advanced to active
employees made in the ordinary course of business and consistent with past
practices and which are presently deductible under the Code as business
expenses); (m) all Contracts under which the Company has guaranteed any
indebtedness or obligation of any Person; (n) all Contracts with
distributors, sales representatives, dealers or other Persons (other than
customers who are end-users of such products) relating to the distribution,
sale or supply of products of the Company or (o) any other Contract, other
than Real Property Leases, which involves the expenditure of more than
$25,000 annually or requires performance by any party more than one year from
the date hereof. There have been made available to the Purchaser, its
Affiliates and their Representatives true and complete copies of all of the
Material Contracts. Except as set forth on SCHEDULE 4.15, all of the Material
Contracts and other agreements are in full force and effect and are the
legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar Laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a proceeding at law
or in equity). Except as set forth on SCHEDULE 4.15, the Company is not in
default in any material respect under any Material Contracts, nor, to the
knowledge of either Shareholder, is any other party to any Material Contract
in default thereunder in any material respect.
4.16 EMPLOYEE BENEFITS.
(a) SCHEDULE 4.16(a) sets forth a complete and correct list of (i)
all "employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and any other
pension plans or employee benefit arrangements, programs or payroll practices
(including, without limitation, severance pay, vacation pay, company awards,
salary continuation for disability, sick leave, retirement, deferred
compensation, bonus or other incentive compensation, stock purchase
arrangements or policies, hospitalization, medical insurance, life insurance
and scholarship programs) maintained or contributed to by the Company or to
which the Company contributes or is obligated to contribute or has any
liability thereunder with respect to employees of the Company ("EMPLOYEE
BENEFIT PLANS") and (ii) all "employee
17
pension plans," as defined in Section 3(2) of ERISA, maintained by the
Company or any trade or business (whether or not incorporated) which are
under control, or which are treated as a single employer, with Company under
Section 414(b), (c), (m) or (o) of the Code ("ERISA AFFILIATE") or to which
the Company or any ERISA Affiliate contributed or is obligated to contribute
thereunder ("PENSION PLANS"). SCHEDULE 4.16(a) clearly identifies, in
separate categories, Employee Benefit Plans or Pension Plans that are (i)
subject to Section 4063 and 4064 of ERISA ("MULTIPLE EMPLOYER PLANS"), (ii)
multiemployer plans (as defined in Section 4001(a)(3) of ERISA)
("MULTIEMPLOYER PLANS") or (iii) "benefit plans," within the meaning of
Section 5000(b)(1) of the Code providing continuing benefits after the
termination of employment (other than as required by Section 4980B of the
Code or Part 6 of Title I of ERISA and at the former employee's or his
beneficiary's sole expense).
(b) The Company does not have nor would it have any withdrawal or
other liability (contingent or otherwise) under Title IV of ERISA with
respect to any Multiple Employer Plan or Multiemployer Plan if the Purchaser
had not purchased the Shares from the Sellers on the Closing Date in
accordance with the terms of this Agreement.
(c) Each of the Employee Benefit Plans and Pension Plans intended to
qualify under Section 401 of the Code ("QUALIFIED PLANS") so qualify and the
trusts maintained thereto are exempt from federal income taxation under
Section 501 of the Code, and, except as disclosed on SCHEDULE 4.16(c),
nothing has occurred with respect to the operation of any such plan which
could cause the loss of such qualification or exemption or the imposition of
any liability, penalty or tax under ERISA or the Code.
(d) Except as set forth on SCHEDULE 4.16(d), there are no Employee
Benefit Plans which are defined benefit plans or Multiemployer Plans. All
contributions and premiums required by Law or by the terms of any Employee
Benefit Plan or Pension Plan or any agreement or commitment relating thereto
have been timely made (without regard to any waivers granted with respect
thereto) to any funds or trusts established thereunder or in connection
therewith, and no accumulated funding deficiencies exist in any of such plans
subject to Section 412 of the Code.
(e) The benefit liabilities, as defined in Section 4001(a)(16) of
ERISA, of each of the Employee Benefit Plans and Pension Plans subject to
Title IV of ERISA using the actuarial assumptions that would be used by the
Pension Benefit Guaranty Corporation (the "PBGC") in the event it terminated
each such plan do not exceed the fair market value of the assets of each such
plan. The liabilities of each Employee Benefit Plan that has been terminated
or otherwise wound up, have been fully discharged in full compliance with
applicable Law and no additional liability to the Company remains.
(f) There has been no "reportable event" as that term is defined in
Section 4043 of ERISA and the regulations thereunder with respect to any of
the Employee Benefit Plans or Pension Plans subject to Title IV of ERISA
which would
18
require the giving of notice, or any event requiring notice to be provided
under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(g) There has been no violation of ERISA with respect to the filing
of applicable returns, reports, documents and notices regarding any of the
Employee Benefit Plans or Pension Plans with the Secretary of Labor or the
Secretary of the Treasury or the furnishing of such notices or documents to
the participants or beneficiaries of the Employee Benefit Plans or Pension
Plans.
(h) True, correct and complete copies of the following documents,
with respect to each of the Employee Benefit Plans and Pension Plans (as
applicable), have been delivered to the Purchaser (i) any plans and related
trust documents, and all amendments thereto, (ii) the most recent Forms 5500
for the past three years and schedules thereto, (iii) the most recent
financial statements and actuarial valuations for the past three years, (iv)
the most recent IRS determination letter, (v) the most recent summary plan
descriptions (including letters or other documents updating such
descriptions) and (vi) written descriptions of all non-written agreements
relating to the Employee Benefit Plans and Pension Plans.
(i) There are no pending Legal Proceedings which have been asserted
or instituted against any of the Employee Benefit Plans or Pension Plans, the
assets of any such plans or the Company, or the plan administrator or any
fiduciary of the Employee Benefit Plans or Pension Plans with respect to the
operation of such plans (other than routine, uncontested benefit claims),
and, to the knowledge of the Shareholders, there are no facts or
circumstances which could form the basis for any such Legal Proceeding.
(j) Each of the Employee Benefit Plans and Pension Plans has been
maintained, in all material respects, in accordance with its terms and all
provisions of applicable Law. All amendments and actions required to bring
each of the Employee Benefit Plans and Pension Plans into conformity in all
material respects with all of the applicable provisions of ERISA and other
applicable Laws have been made or taken except to the extent that such
amendments or actions are not required by Law to be made or taken until a
date after the Closing Date and are disclosed on SCHEDULE 4.16(j).
(k) The Company and any ERISA Affiliate which maintains a "benefits
plan" within the meaning of Section 5000(b)(1) of ERISA, have complied with
the notice and continuation requirements of Section 4980B of the Code or Part
6 of Title I of ERISA and the applicable regulations thereunder.
(l) None of the Sellers, any ERISA Affiliate or any organization to
which any is a successor or parent corporation, has divested any business or
entity maintaining or sponsoring a defined benefit pension plan having
unfunded benefit liabilities (within the meaning of Section 4001(a)(18) of
ERISA) or transferred any such plan to any person other than the Sellers or
any ERISA Affiliate during the five-year period ending on the Closing Date.
19
(m) Neither the Company nor "party in interest" or "disqualified
person" with respect to the Employee Benefit Plans or Pension Plans has
engaged in a "prohibited transaction" within the meaning of Section 4975 of
the Code or Section 406 of ERISA.
(n) None of the Company or any ERISA Affiliate has terminated any
Employee Benefit Plan or Pension Plan subject to Title IV of ERISA, or
incurred any outstanding liability under Section 4062 of ERISA to the PBGC or
to a trustee appointed under Section 4042 of ERISA.
(o) Except as set forth on SCHEDULE 4.16(o), neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment becoming due to any
employee of the Company; (ii) increase any benefits otherwise payable under
any Employee Benefit Plan or Pension Plan; or (iii) result in the
acceleration of the time of payment or vesting of any such benefits under any
Employee Benefit Plan or Pension Plan.
(p) No stock or other security issued by the Company or any ERISA
Affiliate forms or has formed a material part of the assets of any Employee
Benefit Plan or Pension Plan.
4.17 LABOR; PERSONNEL.
(a) SCHEDULE 4.17(A) sets forth a complete list of all officers,
directors, employees and consultants (by type or classification) of or to, as
the case may be, the Company and their respective current rates of
compensation, including (i) the portions thereof attributable to bonuses,
(ii) any other salary, bonus, stock option, equity participation, severance
or other compensation arrangement made with or promised to any of them, and
(iii) copies of all employment agreements with non-union officers, directors,
employees (other than employees at will) and consultants.
(b) Except as set forth on SCHEDULE 4.17(b), the Company is not
party to any labor or collective bargaining agreement and there are no labor
or collective bargaining agreements which pertain to employees of the
Company. The Shareholders have delivered or otherwise made available to the
Purchaser true, correct and complete copies of the labor or collective
bargaining agreements listed on SCHEDULE 4.17(b), together with all
amendments, modifications or supplements thereto.
(c) Except as set forth on SCHEDULE 4.17(c), no employees of the
Company are represented by any labor organization. No labor organization or
group of employees of the Company has made a pending demand for recognition,
and there are no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the knowledge of the
Shareholders, threatened to be brought or filed, with the National Labor
Relations Board or other labor relations tribunal. There is no organizing
activity involving the Company pending or, to the knowledge of any Seller,
threatened by any labor organization or group of employees of the Company.
20
(d) There are no (i) strikes, work stoppages, slowdowns, lockouts or
arbitrations or (ii) material grievances or other labor disputes pending or,
to the knowledge of any Shareholder, threatened against or involving the
Company. There are no unfair labor practice charges, grievances or complaints
pending or, to the knowledge of any Shareholder, threatened by or on behalf
of any employee or group of employees of the Company.
4.18 LITIGATION. Except as set forth in SCHEDULE 4.18, there is no
suit, action, proceeding, investigation, claim or order pending or, to the
knowledge of either Shareholder or the Company, overtly threatened against
the Company (or to the knowledge of either Shareholder or the Company,
pending or threatened, against any of the officers, directors or key
employees of the Company with respect to their business activities on behalf
of the Company), or to which the Sellers or the Company is otherwise a party
before any court, or before any governmental department, commission, board,
agency, or instrumentality; nor to the knowledge of either Shareholder or the
Company is there any reasonable basis for any such action, proceeding, or
investigation. The Company is not subject to any judgment, order or decree of
any court or governmental agency and the Company is not engaged in any legal
action to recover monies due it or for damages sustained by it.
4.19 COMPLIANCE WITH LAWS; PERMITS.
(a) The Company is in compliance with all Laws applicable to the
Company or to the conduct of the business or operations of the Company or the
use of its properties (including any leased properties) and assets, except
for such non-compliances as could not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect. Except as set forth on
SCHEDULE 4.19(a) hereto, to the knowledge of either Shareholder, there has
been no assertion by any party, and the Company has not received any notice,
of any violation of any Laws.
(b) SCHEDULE 4.19(b) sets forth a full and complete list of all
Permits (including, without limitation, those issued pursuant to applicable
Environmental Laws) owned by, issued to, or otherwise benefiting the Company,
and which are material to the operation of the business of the Company and
the ownership or use of the Company Properties. Such Permits constitute all
Permits necessary or useful in the operation of the businesses of the Company
as currently conducted except where the failure to possess such Permits would
not have a Material Adverse Effect. All of such Permits are valid and in full
force and effect and there are no proceedings pending, or to the knowledge of
any Seller, threatened which may result in the revocation, cancellation,
suspension or adverse modification of any such Permit. Except as set forth on
SECTION 4.19(b), no default or violation, or event that with the lapse of
time or giving of notice or both would become a default or violation, has
occurred in the due observance of any such Permit, except for such defaults
or violations which, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect.
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4.20 ENVIRONMENTAL MATTERS. SCHEDULE 4.20 sets forth the addresses
of all of the Company's currently owned and leased sites and such previously
owned and leased sites within the last twenty (20) years (the "PREVIOUS
SITES") with a brief description of the use of each such site. Except as set
forth on SCHEDULE 4.20:
(a) the operations of the Company are in compliance with all
applicable Environmental Laws and all Permits issued pursuant to
Environmental Laws or otherwise;
(b) the Company has obtained all Permits required under all
applicable Environmental Laws necessary to operate its business;
(c) the Company is not the subject of any outstanding written order
or Contract with any Governmental Body or Person respecting (i) Environmental
Laws, (ii) Remedial Action or (iii) any Release or threatened Release of a
Hazardous Material;
(d) the Company has not received any written communication alleging
either or both that the Company may be in violation of any Environmental Law,
or any Permit issued pursuant to Environmental Law, or may have any liability
under any Environmental Law; (e) the Company does not have any current
contingent liability, and has not taken any action which could give rise to
any liability (including, without limitation, any indemnification liability
with respect to any Real Property Lease), in connection with any Release of
any Hazardous Materials into the indoor or outdoor environment (whether
on-site or off-site) on any currently operated or leased property or any
Previous Site, and to the Shareholders' knowledge, the Company does not have
any such liability with respect to any other previously owned, operated or
leased property of the Company;
(f) to the Shareholders' knowledge, there are no investigations of
the business, operations, or currently or previously owned, operated or
leased property of the Company pending or threatened which could lead to the
imposition of any liability pursuant to Environmental Law;
(g) there is not located at any of the currently operated or leased
properties of the Company or any Previous Site, or to the Shareholders'
knowledge, on any other previously owned, operated or leased property of the
Company any (i) underground storage tanks, (ii) asbestos-containing material
or (iii) equipment containing polychlorinated biphenyls; and
(h) the Sellers have provided to the Purchaser all environmentally
related audits, studies, reports, analyses, and results of investigations in
their possession or which can be acquired with reasonable effort that have
been performed with respect to the currently owned, leased or operated
properties of the Company and all Previous Sites.
22
4.21 INSURANCE. SCHEDULE 4.21 sets forth a complete and accurate
list of all policies of insurance of any kind or nature covering the Company
or any of its employees, properties or assets, including, without limitation,
policies of life, disability, fire, theft, workers compensation, employee
fidelity and other casualty and liability insurance. All such policies are in
full force and effect, and, to the Shareholders' knowledge, the Company is
not in default of any provision thereof.
4.22 INVENTORIES; RECEIVABLES; PAYABLES.
(a) The inventories of the Company are in good and marketable
condition, and are saleable in the ordinary course of business.
(b) All accounts receivable of the Company have arisen from bona
fide transactions in the ordinary course of business consistent with past
practice.
(c) All accounts payable of the Company reflected in the Balance
Sheet or arising after the date thereof are the result of bona fide
transactions in the ordinary course of business and have been paid, are
subject to a good faith dispute and set forth on SCHEDULE 4.22(c) or are not
yet due and payable.
4.23 RELATED PARTY TRANSACTIONS. Except as set forth on SCHEDULE
4.23, none of the Sellers nor any of their respective Affiliates has borrowed
any moneys from or has outstanding any indebtedness or other similar
obligations to the Company. Except as set forth in SCHEDULE 4.23, none of the
Sellers, the Company, any Affiliate of the Company or the Sellers nor any
officer or employee of any of them (a) owns any direct or indirect interest
of any kind in, or controls or is a director, officer, employee or partner
of, or consultant to, or lender to or borrower from or has the right to
participate in the profits of, any Person which is (i) a competitor,
supplier, customer, landlord, tenant, creditor or debtor of the Company, (ii)
engaged in a business related to the business of the Company, or (iii) a
participant in any transaction to which the Company is a party or (b) is a
party to any Contract with the Company.
4.24 CONTRACTS WITH VENDORS; CUSTOMERS AND SUPPLIERS.
(a) To the best of the Company's and the Shareholders' knowledge,
(i) all of the Company's Material Contracts with vendors are terminable
at-will and (ii) neither the Company nor the Shareholders' have reason to
believe that such vendors will no longer supply the Company after the Closing
Date.
(b) SCHEDULE 4.24(b) sets forth a list of the fifty (50) largest
customers and the twenty (20) largest suppliers of the Company, as measured
by the dollar amount of purchases therefrom or thereby, during the fiscal
year ended December 31, 1999 and for the nine months ended September 30,
2000, showing the approximate total sales by the Company to each such
customer and the approximate total purchases by the Company from each such
supplier, during such period. Since December 31, 1999, there has not
23
been any Material Adverse Change in the business relationship of the Company
with any customer or supplier listed on SCHEDULE 4.24(b).
4.25 BANKS. SCHEDULE 4.25 contains a complete and correct list of
the names and locations of all banks in which the Company has accounts or
safe deposit boxes and the names of all persons authorized to draw thereon or
to have access thereto. Except as set forth on SCHEDULE 4.25, no Person holds
a power of attorney to act on behalf of the Company.
4.26 NO MISREPRESENTATION. No representation or warranty of any
Seller contained in this Agreement or in any schedule hereto or in any
certificate or other instrument furnished by any Seller to the Purchaser
pursuant to the terms hereof, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.
4.27 BROKERS; FINDERS. Except as set forth on SCHEDULE 4.27, no
Person has acted, directly or indirectly, as a broker, finder or financial
advisor for the Sellers or the Company in connection with the transactions
contemplated by this Agreement and no Person is entitled to any fee or
commission or like payment in respect thereof. The Sellers acknowledge that
they are responsible for the payments of the fees and expenses of any Person
listed on SCHEDULE 4.27 in connection with the transactions contemplated by
this Agreement.
4.28 ADVANTAGE MARKETING. The Company has no obligation or
commitment of any kind whatsoever to continue to hold the shares of Advantage
Marketing, Inc. ("ADVANTAGE") owned by the Company and, once the Company
tenders such shares to Advantage or sells such shares to a third party in
accordance with the provisions of SECTION 6.17, the Company shall have no
further obligation or liability of any kind whatsoever with respect to
Advantage.
4.29 AFFILIATION WITH DELOITTE & TOUCHE LLP. Neither the Company nor
any Seller currently uses the services of Deloitte & Touche LLP for
substantial matters or has used such services within the past two years.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Sellers that:
5.1 ORGANIZATION AND GOOD STANDING. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Louisiana.
5.2 AUTHORIZATION OF AGREEMENT. The Purchaser has full corporate
power and authority to execute and deliver this Agreement, the Escrow
Agreement and
24
each other agreement, document, instrument or certificate contemplated by
this Agreement or to be executed by the Purchaser in connection with the
consummation of the transactions contemplated hereby and thereby (together
with the Escrow Agreement, the "PURCHASER DOCUMENTS"), and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by the Purchaser of this Agreement and each other Purchaser
Document have been duly authorized by all necessary corporate action on
behalf of the Purchaser. This Agreement has been, and each other Purchaser
Document will be at or prior to the Closing, duly executed and delivered by
the Purchaser and (assuming the due authorization, execution and delivery by
the other parties hereto and thereto) this Agreement constitutes, and each
other Purchaser Document when so executed and delivered will constitute,
legal, valid and binding obligations of the Purchaser, enforceable against
the Purchaser in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar
Laws affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
5.3 CONFLICTS; CONSENTS OF THIRD PARTIES.
(a) Except as set forth on SCHEDULE 5.3, neither of the execution
and delivery by the Purchaser of this Agreement and of the Purchaser
Documents, nor the compliance by the Purchaser with any of the provisions
hereof or thereof will (i) conflict with, or result in the breach of, any
provision of the articles of incorporation or bylaws of the Purchaser, (ii)
conflict with, violate, result in the breach of, or constitute a default
under any note, bond, mortgage, indenture, license, agreement or other
obligation to which the Purchaser is a party or by which the Purchaser or its
properties or assets are bound or (iii) violate any Law, Order or decree of
any Governmental Body or authority by which the Purchaser is bound, except,
in the case of clauses (ii) and (iii), for such violations, breaches or
defaults as would not, individually or in the aggregate, have a material
adverse effect on the Purchaser's ability to perform its obligations under
this Agreement.
(b) No consent, waiver, approval, Order, Permit or authorization of,
or declaration or filing with, or notification to, any Person or Governmental
Body is required on the part of the Purchaser in connection with the
execution and delivery of this Agreement or any other Purchaser Document or
the compliance by Purchaser with any of the provisions hereof or thereof,
except for compliance with the applicable requirements of the HSR Act.
5.4 LITIGATION. There are no Legal Proceedings pending or, to the
knowledge of the Purchaser, threatened that are reasonably likely to prohibit
or restrain the ability of the Purchaser to enter into this Agreement or
consummate the transactions contemplated hereby.
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5.5 INVESTMENT INTENTION. The Purchaser is acquiring the Shares for
its own account, for investment purposes only and not with a view to the
distribution (as such term is used in Section 2(11) of the Securities Act)
thereof. Purchaser understands that the Shares have not been registered under
the Securities Act and cannot be sold unless subsequently registered under
the Securities Act or an exemption from such registration is available.
5.6 BROKERS; FINDERS. No Person has acted, directly or indirectly,
as a broker, finder or financial advisor for the Purchaser in connection with
the transactions contemplated by this Agreement and no Person is entitled to
any fee or commission or like payment in respect thereof.
5.7 AFFILIATION WITH DELOITTE & TOUCHE LLP. Neither the Purchaser
nor United Stationers Inc. or any of its subsidiaries currently uses the
services of Deloitte & Touche LLP for substantial matters or has used such
services within the past two years.
ARTICLE VI
COVENANTS
6.1 ACCESS TO INFORMATION. The Company and the Sellers agree that,
prior to the Closing Date, the Purchaser shall be entitled, through its
officers, employees and representatives (including, without limitation, its
legal and financial advisors, accountants and consultants) (collectively, the
"REPRESENTATIVES"), to make such investigation of the properties (including,
without limitation, the taking of physical inventory), businesses and
operations of the Company and such examination of the books, records and
financial condition of the Company as it reasonably requests and to make
extracts and copies of such books and records. Any such investigation and
examination shall be conducted during regular business hours and under
reasonable circumstances, and the Sellers shall cooperate, and shall cause
the Company to cooperate, fully therein. No investigation by the Purchaser
prior to or after the date of this Agreement shall diminish or obviate any of
the representations, warranties, covenants or agreements of the Sellers
contained in this Agreement or the Seller Documents. In order that the
Purchaser may have full opportunity to make such physical, business,
accounting and legal review, examination or investigation as it may
reasonably request of the affairs of the Company, the Sellers shall cause the
officers, employees, consultants, agents, accountants, attorneys and other
representatives of the Company to cooperate fully with such Representatives
in connection with such review and examination. Without limiting the
generality of the foregoing, as reasonably requested by the Purchaser, the
Sellers and the Company will coordinate or will cause to be coordinated
meetings (whether in person or by telephone) between representatives of
customers of or suppliers to the Company and Representatives of the
Purchaser. Any information furnished or to be furnished by the Sellers, the
Company, or their respective representatives to the Purchaser or its
Representatives shall be subject to that certain Confidentiality Agreement,
dated March 7, 2000 (the "CONFIDENTIALITY AGREEMENT") by and between the
Company and United Stationers Supply Co.
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6.2 CONDUCT OF THE BUSINESS PENDING THE CLOSING.
(a) Except as otherwise expressly contemplated by this Agreement or
with the prior written consent of the Purchaser, the Sellers shall, and shall
cause the Company to:
(i) conduct the business of the Company only in the ordinary course
consistent with past practice;
(ii) use its commercially reasonable efforts to (A) preserve its
present business operations, organization (including, without limitation,
management and the sales force) and goodwill of the Company and (B)
preserve its present relationship with Persons having business dealings
(including, without limitation, customers and suppliers) with the Company;
(iii) maintain (A) all of the assets and properties of the Company in
their current condition, ordinary wear and tear excepted, and (B) insurance
upon all of the properties and assets of the Company in such amounts and of
such kinds comparable to that in effect on the date of this Agreement;
(iv) (A) maintain the books, accounts and records of the Company in
the ordinary course of business consistent with past practice, (B) continue
to collect accounts receivable and pay accounts payable utilizing normal
procedures and without discounting or accelerating payment of such
accounts, and (C) comply with all contractual and other obligations
applicable to the operation of the Company; and
(v) comply in all material respects with applicable Laws, including,
without limitation, Environmental Laws.
(b) Except as otherwise expressly contemplated by this Agreement or
with the prior written consent of the Purchaser, the Sellers shall not, and
shall cause the Company not to:
(i) take any action out of the ordinary course of business or
inconsistent with past practices to generate cash or increase the Adjusted
Tangible Net Book Value;
(ii) declare, set aside, make or pay any dividend or other
distribution in respect of the capital stock of the Company or repurchase,
redeem or otherwise acquire any outstanding shares of the capital stock or
other securities of, or other ownership interests in, the Company;
(iii) transfer, issue, sell or dispose of any shares of capital stock
or other securities of the Company or grant options, warrants, calls or
other rights to
27
purchase or otherwise acquire shares of the capital stock or other
securities of the Company;
(iv) effect any recapitalization, reclassification, stock split or
like change in the capitalization of the Company;
(v) amend the articles of incorporation or bylaws of the Company;
(vi) change or modify its credit, collection or payment policies,
procedures or practices, including acceleration of collections of
receivables (whether or not past due) or failure to pay or delay payment of
payables or other liabilities;
(vii) except as set forth on SCHEDULE 6.2(b)(vii), (A) materially
increase the annual level of compensation of any employee of the Company,
(B) increase the annual level of compensation payable or to become payable
by the Company to any of its executive officers, (C) grant any unusual or
extraordinary bonus, benefit or other direct or indirect compensation to
any employee, director or consultant, other than in the ordinary course of
business consistent with past practice and in such amounts as are fully
reserved against in the Financial Statements, (D) increase the coverage or
benefits available under any (or create any new) severance pay, termination
pay, vacation pay, company awards, salary continuation for disability, sick
leave, deferred compensation, bonus or other incentive compensation,
insurance, pension or other Employee Benefit Plan or arrangement made to,
for, or with any of the directors, officers, employees, agents or
representatives of the Company or otherwise modify or amend or terminate
any such plan or arrangement or (E) enter into any employment, deferred
compensation, severance, consulting, non-competition or similar agreement
(or amend any such agreement) to which the Company is a party or involving
a director, officer or employee of the Company in his or her capacity as a
director, officer or employee of the Company;
(viii) reduce the volume of production or purchases of inventory,
other than as a result of then current reasonable business demands in the
ordinary course of business consistent with past practice;
(ix) except for trade payables and for indebtedness for borrowed money
incurred in the ordinary course of business and consistent with past
practice, borrow monies for any reason or draw down on any line of credit
or debt obligation, or become the guarantor, surety, endorser or otherwise
liable for any debt, obligation or liability (contingent or otherwise) of
any other Person;
(x) subject to any Lien (except for Permitted Exceptions), any of the
properties or assets (whether tangible or intangible) of the Company;
28
(xi) acquire any material properties or assets or sell, assign,
transfer, convey, lease or otherwise dispose of any of the material
properties or assets (except for fair consideration in the ordinary course
of business consistent with past practice) of the Company;
(xii) cancel or compromise any debt or claim or waive or release any
material right of the Company except in the ordinary course of business
consistent with past practice;
(xiii) enter into any commitment for capital expenditures of the
Company in excess of $10,000 for any individual commitment and $50,000 for
all commitments in the aggregate;
(xiv) enter into, modify or terminate any labor or collective
bargaining agreement of the Company or, through negotiation or otherwise,
make any commitment or incur any liability to any labor organization with
respect to the Company;
(xv) introduce any material change with respect to the operation of
the Company, including any material change in the types, nature,
composition or quality of its products or services, experience any material
change in any contribution of its product lines to its revenues or net
income, or, other than in the ordinary course of business, make any change
in product specifications or prices or terms of distributions of such
products;
(xvi) permit the Company to enter into any transaction or to make or
enter into any Contract which by reason of its size or otherwise is not in
the ordinary course of business consistent with past practice;
(xvii) permit the Company to enter into or agree to enter into any
merger or consolidation with, any corporation or other entity, and not
engage in any new business or invest in, make a loan, advance or capital
contribution to, or otherwise acquire the securities of any other Person;
(xviii) except for transfers of cash pursuant to normal cash
management practices, permit the Company to make any investments in or
loans to, or pay any fees or expenses to, or enter into or modify any
Contract with, any Seller or any Affiliate of any Seller; or
(xix) agree to do anything prohibited by this SECTION 6.2 or anything
which would make any of the representations and warranties of the Sellers
in this Agreement or the Seller Documents untrue or incorrect in any
material respect as of any time through and including the Closing Date.
6.3 CONSENTS. The Sellers shall use their commercially reasonable
efforts, and the Purchaser shall cooperate with the Sellers, to obtain at the
earliest
29
practicable date all consents and approvals required to consummate the
transactions contemplated by this Agreement, including, without limitation,
the consents and approvals referred to in SECTION 4.6(b) hereof.
6.4 FILINGS WITH GOVERNMENTAL BODIES.
(a) Each party hereto agrees to use its commercially reasonable efforts
to comply and cause its Affiliates to comply in a full and timely manner with
any request from a Governmental Body for additional information. The Purchaser
and the Sellers shall keep each other apprised of the status of any
communications with, and any inquiries or requests for additional information
from, the Federal Trade Commission and the Department of Justice.
(b) Notwithstanding anything to the contrary contained herein, nothing
in this Agreement will require the Purchaser, whether pursuant to an order of
the Federal Trade Commission or the United States Department of Justice or
otherwise, to dispose of any assets, lines of business or equity interests in
order to obtain the consent of the Federal Trade Commission or the United States
Department of Justice to the transactions contemplated by this Agreement or to
contest any suit brought or threatened by the Federal Trade Commission or the
Department of Justice or to attempt to lift or rescind any injunction or
restraining order obtained by the Federal Trade Commission or the Department of
Justice or adversely affecting the ability of the parties hereto to consummate
the transactions contemplated hereby.
6.5 OTHER ACTIONS. Each of the Sellers and the Purchaser shall use
their commercially reasonable efforts to (a) take all actions necessary or
appropriate to consummate the transactions contemplated by this Agreement and
(b) cause the fulfillment at the earliest practicable date of all of the
conditions to their respective obligations to consummate the transactions
contemplated by this Agreement.
6.6 NO SOLICITATION. The Sellers will not, and will not cause or permit
the Company or any of the Company's representatives to, directly or indirectly,
(a) discuss, negotiate, undertake, authorize, recommend, propose or enter into,
either as the proposed surviving, merged, acquiring or acquired corporation, any
transaction involving a merger, consolidation, business combination, purchase or
disposition of any amount of the assets or capital stock or other equity
interest in the Company other than the transactions contemplated by this
Agreement (an "ACQUISITION TRANSACTION"), (b) facilitate, encourage, solicit or
initiate discussions, negotiations or submissions of proposals or offers in
respect of an Acquisition Transaction, (c) furnish or cause to be furnished, to
any Person, any information concerning the business, operations, properties or
assets of the Company in connection with an Acquisition Transaction, or (d)
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other Person to do or seek any of the
foregoing. The Sellers will inform the Purchaser in writing immediately
following the receipt by any Seller, the Company or any representative of any
proposal or inquiry in respect of any Acquisition Transaction
30
and shall disclose the material terms of any such Acquisition Transaction to
the Purchaser.
6.7 PRESERVATION OF RECORDS. The Sellers and the Purchaser agree
that each of them shall preserve and keep the records held by it relating to
the business of the Company for a period of three years from the Closing Date
and shall make such records and personnel available to the other as may be
reasonably required by such party in connection with, among other things, any
insurance claims by, Legal Proceedings against or governmental investigations
of the Sellers or the Purchaser or any of their Affiliates or in order to
enable the Sellers or the Purchaser to comply with their respective
obligations under this Agreement, the Escrow Agreement and each other
agreement, document or instrument contemplated hereby or thereby. In the
event the Sellers or the Purchaser wish to destroy such records after that
time, such party shall first give ninety (90) days prior written notice to
the other and such other party shall have the right at its option and
expense, upon prior written notice given to such party within that ninety
(90) day period, to take possession of the records within one hundred and
eighty (180) days after the date of such notice.
6.8 PUBLICITY. None of the Sellers nor the Purchaser shall issue any
press release or public announcement concerning this Agreement or the
transactions contemplated hereby without obtaining the prior written approval
of the other party hereto, which approval will not be unreasonably withheld
or delayed, unless, in the reasonable judgment of the Purchaser, disclosure
is otherwise required by applicable Law or, in the reasonable judgment of the
Purchaser, by the applicable rules of any stock exchange or interdealer
quotation system on which the Purchaser or its parent company lists
securities, PROVIDED that, to the extent required by applicable Law, the
party intending to make such release shall use its commercially reasonable
efforts consistent with such applicable Law to consult with the other party
with respect to the text thereof.
6.9 REPAYMENT OF LOANS. On or prior to the Closing Date, all loans
or other advances to the Sellers or any of their Affiliates listed on
SCHEDULE 4.23 (the "AFFILIATE LOANS"), including any accrued and unpaid
interest thereon, shall be repaid in full in cash to the Company.
6.10 PRE-PAYMENT OF DEBT AND OTHER OBLIGATIONS. On or prior to the
Closing Date, (a) the Company shall pay to Xxxxxx Xxxxxx, all of its
remaining obligations to make salary and expense reimbursement payments to
Xx. Xxxxxx and (b) the Shareholders shall cause the Company to apply its
available cash toward the reduction of Debt. The Shareholders shall cause the
Debt Notice to be delivered to Purchaser on or prior to the third Business
Day prior to the Closing Date. At the Closing, any Debt certified to be
outstanding immediately prior to the Closing in the Debt Notice will be
prepaid and extinguished at the Closing by the Purchaser and the aggregate
consideration shall be reduced by such amount of Debt as provided in SECTION
2.1.
6.11 SEVERANCE PAYMENTS. Prior to the Closing Date, the Shareholders
shall cause the Company to terminate the employment of Xxxxxx X. Xxxxx and
shall pay
31
any and all salary, benefit, severance or other obligations owed to Xx. Xxxxx
prior to the Closing Date.
6.12 RELEASE OF LIENS. At or prior to the Closing, the Shareholders
shall cause the Company to cause (or assist the Purchaser in causing) (a) all
Liens on the assets and properties of the Company in favor of any Debt Holder
to be released and (b) the Company to be released from any and all guarantees
under the Debt. In addition, the Shareholders shall cause the Company to
cause the Liens set forth on SCHEDULE 4.12 and SCHEDULE 4.13 hereto to be
released as of or prior to the Closing and provide the Purchaser with written
evidence thereof in form and substance reasonably satisfactory to the
Purchaser and its counsel. The Shareholders shall cause the Company to file,
or cause to be filed, Form UCC-3 termination statements and obtain, or cause
to be obtained, any other releases, consents, waivers or similar documents
necessary to effect the release of Liens or guarantees contemplated by this
SECTION 6.12.
6.13 USE OF NAME. The Sellers hereby agree that upon the
consummation of the transactions contemplated hereby, the Purchaser and the
Company shall have the right to the use of the name "The Peerless Paper
Xxxxx" and the Sellers shall not, and shall not cause or permit any Affiliate
to, use such name or any variation or simulation thereof in any business.
6.14 ENVIRONMENTAL MATTERS.
(a) Sellers shall permit Purchaser to conduct such investigations
(including investigations known as "Phase I" and "Phase II" environmental
audits) of the environmental conditions of the Company's properties and
facilities as Purchaser, in its sole discretion, shall deem necessary. Such
investigations shall be conducted in a manner that minimizes the disruption
of the operations of the Company.
(b) Prior to the Closing Date, the Shareholders, at the
Shareholders' or the Company's expense, shall promptly file all materials
required under Environmental Laws (including, without limitation, foreign or
state property transfer laws) and all requests required for the issuance,
transfer or reissuance to Purchaser of Permits necessary to conduct the
Company's business.
6.15 LEASES.
(a) The Shareholders have caused the Company to terminate that
certain Lease Agreement, dated as of September 16, 1999, between Twincorp
Master Distributors, Inc., as lessor, and the Company, as lessee, for the
property located at 00000 00xx Xxxxxx X., Xxxxxxxx, Xxxxxxxxx. The
Shareholders shall provide the Purchaser with written evidence of such
termination at or prior to Closing. Purchaser shall have no liability
whatsoever with respect to such lease. In addition, the Shareholders have
caused the Company to enter into a new lease in Minneapolis in the form
attached hereto as EXHIBIT E.
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(b) The Company shall have sold the facility located at 0000 Xxxxxxx
Xxxxx, Xxxxxx, Xxxxxxxx prior to Closing and the Company shall have leased
such facility back on a temporary basis not to exceed 180 days after the
Closing Date at a cost of not more than $4.00 per square foot. To the extent
that such period exceeds 180 days or the lease cost exceeds such amount, the
Sellers shall pay to the Purchaser the excess lease cost for the term of such
lease as follows: (i) the Base Purchase Price payable by the Purchaser at
Closing shall be reduced by one-sixth of such amount and (ii) one-sixth of
such amount shall be paid by the Sellers to the Purchaser by wire transfer of
immediately available funds on the first day of each of the next five months
until such amount is paid in full provided that such lease has not been
terminated by the Purchaser as of such date.
(c) The Purchaser shall enter into a lease for the Company's Oaks,
Pennsylvania facility with the BNB Family Limited Partnership in the form
attached hereto as EXHIBIT F, which lease shall be dated the date hereof to
be effective as of the Closing Date; PROVIDED, HOWEVER, that such lease shall
be for a minimum term of ten years at a rate of $5.30 per square foot on a
Triple Net Basis, subject to annual rent increases of 3%.
6.16 PERSONAL PROPERTY. Sellers shall be permitted to remove their
personal property, which includes various pictures and memorabilia, from the
premises of the Company prior to or on the Closing Date.
6.17 ADVANTAGE MARKETING ARRANGEMENT. The shareholders shall cause
all shares of Advantage owned by the Company to be tendered to Advantage or
sold to Advantage or a third party prior to the Closing Date and shall use
its best efforts to obtain a full release of the Company's current and future
obligations under such arrangement.
6.18 TERMINATION OF CERTAIN PLANS. Prior to the Closing Date, the
Company shall cause all of the Company's Supplemental Executive Retirement
Plans ("SERP") (which SERPs are listed on SCHEDULE 6.18) to be terminated and
shall obtain a full release of any and all remaining obligations of the
Company thereunder.
6.19 TERMINATION OF KEY-MAN LIFE INSURANCE. Prior to the Closing
Date, the Company shall cause the key-man life insurance policies maintained
for Xxxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx to be terminated, and the value
of such policies shall not be reflected as an asset of the Company on the
Closing Date Balance Sheet.
6.20 TAX MATTERS. The Purchaser shall prepare or cause to be
prepared and, after providing the Sellers' Representative with an opportunity
to review and comment on such Tax Returns, timely file, or cause to be filed
(a) all Tax Returns of the Company which related to taxable periods ending on
or before the Closing Date and which are required to be filed after the
Closing Date, including the period from January 1, 2000, through and
including the Closing Date, and (b) all Tax Returns of the Company which
relate to taxable periods ending subsequent to the Closing Date, including
the period from and after the Closing Date through December 31, 2001
(collectively, the "PURCHASER TAX RETURNS"). The Sellers' Representative
shall provide the Purchaser and
33
its Affiliates with such cooperation and information as they may reasonably
request in filing any of the Purchaser Tax Returns.
6.21 INVENTORY. Prior to the Closing Date, the Company shall permit
and shall assist the Purchaser and its accountants in conducting a full
physical count of the Company's inventory. Prior to the Closing Date, the
Purchaser and the Shareholders shall agree in writing on the physical count
of such inventory (including adjustments for obsolete or otherwise unusable
inventory); PROVIDED, HOWEVER, that the aggregate dollar value of such
inventory and adjustments thereto shall be determined after the Closing Date
in connection with the Closing Date Balance Sheet in accordance with SECTION
2.3.
6.22 ENVIRONMENTAL INSURANCE. In the event the Purchaser, in its
sole discretion, decides to procure insurance against any Environmental
losses which may arise with respect to the Company's previously owned
facility on Xxxxxxxxxx Avenue in Oaks, Pennsylvania, the Purchaser, on the
one hand, and the Sellers on the other hand, shall split the cost of any such
insurance provided that in no event, shall the Sellers be obligated to pay
more than $64,000 towards the cost of any such insurance. In the event that
the Purchaser procures such insurance prior to the Closing Date, the Sellers'
portion of the cost of such insurance (which amount shall not exceed $64,000)
shall be deducted from the Base Purchase Price payable to the Sellers by the
Purchaser at Closing.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligation
of the Purchaser to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by the
Purchaser in whole or in part to the extent permitted by applicable Law):
(a) each of the representations and warranties of the Shareholders
and the Sellers contained herein shall be true and correct on and as of the
Closing Date with the same force and effect as though the same had been made
on and as of the Closing Date; it being understood that, to the extent any
such representation or warranty was made as of a specified date the same
shall continue on the Closing Date to be true and correct as of the specified
date; and that all representations and warranties of the Shareholders and the
Sellers contained herein qualified as to materiality shall be true and
correct, and the representations and warranties of the Sellers contained
herein not qualified as to materiality shall be true and correct in all
material respects, at and as of the Closing Date with the same effect as
though those representations and warranties had been made again at and as of
that time;
(b) the Shareholders and the Sellers shall have performed and
complied, or caused to have been performed or complied, in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with
34
by them on or prior to the Closing Date; PROVIDED, that the covenants
contained in SECTION 6.9, 6.10, 6.11, 6.12, 6.15, 6.17, 6.18, 6.19, 6.21 and
6.22 shall have been performed and complied with in all respects;
(c) the Purchaser shall have been furnished with a certificate
(dated the Closing Date and in form and substance reasonably satisfactory to
the Purchaser) executed by each Seller certifying as to the fulfillment of
the conditions specified in SECTIONS 7.1(a) and 7.1(b);
(d) there shall not have been or occurred any Material Adverse
Change since December 31, 1999;
(e) the Sellers shall have or caused to have been obtained all
consents and waivers referred to in SECTION 4.6 hereof, in a form reasonably
satisfactory to the Purchaser, with respect to the transactions contemplated
by this Agreement and the Seller Documents;
(f) no Legal Proceedings shall have been instituted or threatened or
claim or demand made against the Sellers, the Company, or the Purchaser
seeking to restrain or prohibit or to obtain substantial damages with respect
to the consummation of the transactions contemplated hereby, and there shall
not be in effect any Order by a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby;
(g) each of the Sellers shall have provided the Purchaser with an
affidavit of non-foreign status that complies with Section 1445 of the Code
(a "FIRPTA AFFIDAVIT");
(h) the Purchaser shall have received the written resignations of
each director of the Company;
(i) the Purchaser's investigation of environmental conditions at the
properties and facilities of Sellers shall not have revealed any
circumstances which could reasonably result in (i) the criminal prosecution
of Sellers or any employee of Sellers under Environmental Laws, (ii) any
suspension or closure of operations at the Sellers' properties or facilities
or (iii) any liabilities arising under Environmental Laws;
(j) the Shareholders and the Sellers shall have executed and
delivered, or caused to have been executed and delivered, to the Purchaser at
the Closing all of the documents required to be delivered by them or the
Company pursuant to SECTION 8.1;
(k) each of the agreements set forth on SCHEDULE 4.3(b) and SCHEDULE
4.23, and any agreement, written or oral, between any of the Sellers or their
respective Affiliates and the Company, shall be terminated in all respects as
of or prior to the Closing, and written evidence of each such termination
shall be provided to the Purchaser;
35
(l) Sellers shall have satisfied all property transfer requirements
arising under Environmental Laws;
(m) the Company shall have tendered or sold its shares of Advantage;
(n) the board of directors of United Stationers Inc. and the Company
shall have approved the transactions contemplated hereby; and
(o) Xxxxx X. Xxxxx shall have transferred all of her right, title
and interest in and to 554 Shares held individually by her and 789 Shares
held jointly by her and Xxxxxx X. Xxxxx to Xxxxxx X. Xxxxx in a form
reasonably satisfactory by the Purchaser.
7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS. The
obligations of the Sellers to consummate the transactions contemplated by
this Agreement are subject to the fulfillment, prior to or on the Closing
Date, of each of the following conditions (any or all of which may be waived
by the Sellers in whole or in part to the extent permitted by applicable Law):
(a) each of the representations and warranties of the Purchaser
contained herein shall be true and correct on and as of the Closing Date with
the same force and effect as though the same had been made on and as of the
Closing Date; it being understood that, to the extent any such representation
or warranty was made as of a specified date, the same shall continue on the
Closing Date to be true and correct as of the specified date; and that all
representations and warranties of the Purchaser contained herein qualified as
to materiality shall be true and correct, and all representations and
warranties of the Purchaser contained herein not qualified as to materiality
shall be true and correct in all material respects, at and as of the Closing
Date with the same effect as though those representations and warranties had
been made again at and as of that date;
(b) the Purchaser shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by Purchaser on or prior to the Closing Date;
(c) the Sellers shall have been furnished with certificates (dated
the Closing Date and in form and substance reasonably satisfactory to the
Sellers) executed by the President of the Purchaser certifying as to the
fulfillment of the conditions specified in SECTIONS 7.2(a) and 7.2(b);
(d) the Purchaser shall have executed and delivered to the Sellers
at the Closing all of the documents required to be delivered by it pursuant
to SECTION 8.2;
(e) no Legal Proceedings shall have been instituted or threatened or
claim or demand made against the Sellers, the Company, or the Purchaser
seeking to restrain or prohibit or obtain substantial damages with respect to
the consummation of the transactions contemplated hereby, and there shall not
be in effect any Order by a
36
Governmental Body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated
hereby; and
(f) the Company shall have been released as a guarantor under that
certain Surety Agreement dated as of October 26, 2000 between BNB Family
Limited Partnership and PNC Bank; PROVIDED, HOWEVER, that this SECTION 7.2(f)
shall not be a condition to the Sellers obligation to consummate the
transactions contemplated by this Agreement in the event that the Purchaser
or its Affiliates secures alternative financing arrangements, credit support
or such other alternative as is reasonably satisfactory to PNC Bank and/or
BNB Family Limited Partnership without additional cost to BNB Family Limited
Partnership.
ARTICLE VIII
DOCUMENTS TO BE DELIVERED
8.1 DOCUMENTS TO BE DELIVERED BY THE SELLERS. At the Closing, the
Sellers shall deliver, or cause to be delivered, to the Purchaser the
following:
(a) stock certificates representing the Shares, duly endorsed in
blank or accompanied by stock transfer powers;
(b) the certificate referred to in SECTION 7.1(c);
(c) the opinion of Wisler, Pearlstine, Xxxxxx, Xxxxx, Xxxxxxx &
Potash, LLP, counsel to the Sellers, in form and substance reasonably
satisfactory to the Purchaser and its counsel;
(d) copies of all consents and waivers referred to in SECTION 7.1(e)
hereof;
(e) written evidence of the repayment to the Company in immediately
available funds of all Affiliate Loans;
(f) written evidence of the payment to Xxxxxx Xxxxx required by
SECTION 6.11 and termination of his employment;
(g) releases of Liens in accordance with SECTION 6.12;
(h) evidence of termination of the lease specified in SECTION
6.15(a) and the new lease specified in such section;
(i) written evidence of termination and release of liability with
respect to all of the Company's SERPs as set forth on SCHEDULE 6.18;
(j) written evidence of termination of the Advantage Marketing
Arrangement in accordance with SECTION 6.17;
37
(k) written resignations of each of the directors of the Company;
(l) duly executed FIRPTA Affidavits for each Seller;
(m) certificate of good standing with respect to the Company issued by
the Secretary of the Commonwealth of Pennsylvania and for each state in which
the Company is qualified to do business as a foreign corporation dated as close
as possible to the Closing Date and brought down to the Closing Date by
telegram;
(n) the existing minute books and stock transfer books and records of
the Company;
(o) a receipt executed by each Seller for the portion of the Base
Purchase Price (less the Escrow Amount) paid or delivered, as the case may be,
to such Seller at the Closing;
(p) a copy of the Articles of Incorporation of the Company, certified
by the Secretary of the Commonwealth of Pennsylvania;
(q) a copy of the Bylaws of the Company, certified by the Company's
secretary as being a true, correct and complete copy thereof as of the Closing
Date;
(r) duly executed stock powers or such other documents as the Purchaser
shall reasonably require to evidence the transfer of Shares required by SECTION
7.1(o); and
(s) such other documents as the Purchaser shall reasonably request.
8.2 DOCUMENTS TO BE DELIVERED BY THE PURCHASER. At the Closing, the
Purchaser shall deliver to the Sellers the following:
(a) the Base Purchase Price referred to in SECTION 2.2(a) (less the
Escrow Amount);
(b) the certificate referred to in SECTION 7.2(c) hereof;
(c) evidence that the Purchaser has deposited the Escrow Amount
pursuant to the Escrow Agreement;
(d) a receipt executed by the Purchaser for documents delivered by the
Sellers and the Company to the Purchaser; and
(e) such other documents as the Sellers shall reasonably request.
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ARTICLE IX
INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Except as to (i) the representations and warranties contained in
SECTION 4.11, which shall survive the Closing until the expiration of the
last day on which any Tax may be validly assessed by the IRS or any other
Governmental Body against the Company, and (ii) the representations and
warranties contained in SECTIONS 4.3, 4.7 and 4.20, which shall survive the
Closing indefinitely, the representations and warranties of the Sellers (or
the Shareholders as applicable) contained in this Agreement shall survive the
Closing until the expiration of three years from the Closing Date. Any claim
for indemnification with respect to any of such matters which is not asserted
by notice given as herein provided relating thereto within such specified
period of survival may not be pursued and is hereby irrevocably waived after
such time. Any claim for an Indemnifiable Loss (as defined in SECTION 9.2)
asserted within such period of survival as herein provided will be timely
made for purposes hereof.
(b) Unless a specified period is set forth in this Agreement (which
event such specified period will control), the covenants in this Agreement
will survive the Closing and remain in effect indefinitely.
9.2 LIMITATIONS ON LIABILITY.
(a) For purposes of this Agreement, (i) "INDEMNITY PAYMENT" means
any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "INDEMNITEE" means any Person entitled to indemnification
under this Agreement, (iii) "INDEMNIFYING PARTY" means any Person required to
provide indemnification under this Agreement, (iv) "INDEMNIFIABLE LOSSES"
means any and all damages, losses, liabilities, obligations, costs and
expenses, and any and all claims, demands or suits (by any Person, including
without limitation any Governmental Body) for which indemnification is
provided hereunder, including without limitation the costs and expenses of
any and all actions, suits, proceedings, demands, assessments, judgments,
settlements and compromises relating thereto and including reasonable
attorneys' fees and expenses in connection therewith, and (v) "THIRD PARTY
Claim" means any claim, action or proceeding made or brought by any Person
who or which is not a party to this Agreement or an Affiliate of a party to
this Agreement.
(b) Notwithstanding any other provision hereof or of any applicable
Law, no Indemnitee will be entitled to make a claim against an Indemnifying
Party in respect of any breach of a representation or warranty under SECTIONS
9.3(a)(i) or 9.3(b)(i) unless and until the aggregate amount of Indemnifiable
Losses in respect of breaches of representations and warranties incurred by
the Indemnitee exceeds $75,000 (the "BASKET"), in which event (subject to the
following provisions), such Indemnitee may
39
assert its right to indemnification hereunder to the full extent of its
Indemnifiable Losses in respect thereof.
(c) The Purchaser acknowledges and agrees that the maximum aggregate
amount of Indemnity Payments which the Sellers shall be obligated to make
under this Agreement (other than Indemnifiable Losses relating to, resulting
from or arising out of fraud on the part of the Sellers or the Company) shall
be $20.8 Million (the "CAP"). Each Seller acknowledges and agrees that the
maximum aggregate amount of Indemnity Payments which the Purchaser shall be
obligated to make under this Agreement (other than Indemnifiable Losses
relating to, resulting from or arising out of fraud on the part of the
Purchaser) shall be the Cap.
(d) Claims made pursuant to SECTION 9.3(a)(i) with respect to the
representations and warranties contained or made in SECTIONS 4.1, 4.2, 4.3,
4.7, 4.9, 4.11, 4.20 and 4.27, SECTION 9.3(a)(ii) or SECTION 9.4 will not be
subject to the Basket or Cap.
(e) Claims made pursuant to SECTION 9.3(b)(i) with respect to the
representation and warranty contained or made in SECTION 5.6 or SECTION
9.3(b)(ii) will not be subject to the Basket or Cap.
9.3 GENERAL INDEMNIFICATION.
(a) Subject to SECTIONS 9.1 and 9.2, the Sellers or the Shareholders,
as applicable, agree to indemnify, defend and hold harmless the Purchaser and
its Affiliates and their respective directors, officers, partners, employees,
agents and representatives from and against any and all Indemnifiable Losses to
the extent relating to, resulting from or arising out of:
(i) any breach of representation or warranty of the Sellers, or the
Shareholders, as applicable, under the terms of this Agreement or any other
Seller Document; and
(ii) any breach or nonfulfillment of any agreement (other than
representations and warranties) or covenant of the Sellers or the
Shareholders, as applicable, under the terms of this Agreement or any other
Seller Document.
(b) Subject to SECTIONS 9.1 and 9.2, the Purchaser agrees to indemnify,
defend and hold harmless the Sellers and their Affiliates and their respective
directors, officers, partners, employees, agents or representatives from and
against any and all Indemnifiable Losses to the extent relating to, resulting
from or arising out of:
(i) any breach of representation or warranty of the Purchaser under
the terms of this Agreement or any other Purchaser Document; and
40
(ii) any breach or nonfulfillment of any agreement (other than
representations and warranties) or covenant of the Purchaser under the
terms of this Agreement or any other Purchaser Document.
(c) For purposes of indemnification under this SECTION 9.3, any breach
of any representation or warranty by any Seller or by the Purchaser of any fact
or set of facts in the representations and warranties contained in this
Agreement shall be deemed to constitute a breach of such representation or
warranty, notwithstanding any limitation or qualification as to materiality set
forth in such representation, warranty or certificate on the scope, accuracy or
completeness thereof, it being the intention of the parties that any Indemnitee
shall, subject to the provisions of this ARTICLE IX, be indemnified and held
harmless from and against any Indemnifiable Losses caused by or resulting from
the failure of any such representation, warranty or certificate to be true,
correct and complete in any respect, or the failure of any Seller or the
Purchaser or any of their respective Affiliates to duly and punctually perform
any covenant, agreement or undertaking contained in this Agreement.
9.4 VENDOR REBATE RECEIVABLE INDEMNIFICATION. From and after the
Closing, Sellers shall indemnify, pay, reimburse, defend and otherwise hold
harmless the Purchaser from and against any Uncollectible Vendor Receivables. As
used in this Agreement, "UNCOLLECTIBLE VENDOR RECEIVABLES" means the amount, if
any, of gross vendor receivables reflected on the Closing Date Balance Sheet
(the "VENDOR RECEIVABLES") that are not collected within 180 days after the
Closing Date. The Purchaser hereby agrees to pursue the collection of the Vendor
Receivables in the same manner and at the same level of diligence as the
Purchaser shall pursue the collection of its other similar accounts receivable.
Not later than 195 days after the Closing Date, the Purchaser shall give notice
(the "RECEIVABLES NOTICE"), to the Sellers' Representative and the Escrow Agent
setting forth the collection of Vendor Receivables through such 180th day and
the amount, if any, of Uncollectible Vendor Receivables, together with a written
description in reasonable detail of the calculation thereof. The Escrow Agent
shall release funds from the Escrow Amount in the amount of any Uncollectible
Vendor Receivables to the Purchaser within five days after receipt of the
Receivables Notice. To the extent that any Uncollectible Vendor Receivables are
subsequently received by the Purchaser and the Purchaser has already received
funds from the Escrow Amount in lieu thereof pursuant to this SECTION 9.4, the
Purchaser shall return the amount of such funds to the Escrow Agent for deposit
into the Escrow Amount. To the extent that the Purchaser receives any payment
from the Escrow Amount pursuant to this SECTION 9.4, it shall assign all of its
rights, title and interest to the Uncollectible Vendor Receivables to the
Sellers in proportion to their interests set forth on EXHIBIT C.
9.5 DEFENSE OF CLAIMS.
(a) If any Indemnitee receives notice of assertion or commencement of
any Third Party Claim against such Indemnitee with respect to which an
Indemnifying Party is obligated to provide indemnification under this Agreement,
the Indemnitee will give such Indemnifying Party reasonably prompt written
notice thereof, but in any event
41
not later than thirty (30) calendar days after receipt of such notice of such
Third Party Claim. Such notice will describe the Third Party Claim in
reasonable detail, will include copies of all material written evidence
thereof and will indicate the estimated amount, if reasonably practicable, of
the Indemnifiable Loss that has been or may be sustained by the Indemnitee.
The Indemnifying Party will have the right to participate in, or, by giving
written notice to the Indemnitee, to assume, the defense of any Third Party
Claim at such Indemnifying Party's own expenses and by such Indemnifying
Party's own counsel (reasonably satisfactory to the Indemnitee), and the
Indemnitee will cooperate in good faith in such defense.
(b) If, within thirty (30) calendar days after giving notice of a
Third Party Claim to an Indemnifying Party pursuant to SECTION 9.5(a), an
Indemnitee receives written notice from the Indemnifying Party that the
Indemnifying Party has elected to assume the defense of such Third Party
Claim as provided in the last sentence of SECTION 9.5(a), the Indemnifying
Party will not be liable for any legal expenses subsequently incurred by the
Indemnitee in connection with the defense thereof; PROVIDED, HOWEVER, that if
the Indemnifying Party fails to take reasonable steps necessary to defend
diligently such Third Party Claim within ten calendar days after receiving
written notice from the Indemnitee or if the Indemnifying Party has not
undertaken fully to indemnify the Indemnitee in respect of all Indemnifiable
Losses relating to the matter, the Indemnitee may assume its own defense, and
the Indemnifying Party will be liable for all reasonable costs or expenses
paid or incurred in connection therewith. The Indemnifying Party will not
enter into any settlement of any Third Party Claim without the prior written
consent of the Indemnitee, which consent shall not be unreasonably withheld.
If a firm offer is made to settle a Third Party Claim without leading to
liability or the creation of a financial or other obligation on the part of
the Indemnitee for which the Indemnitee is not entitled to indemnification
hereunder or any other Material Adverse Effect on the Company and the
Indemnifying Party desires to accept and agree to such offer, the
Indemnifying Party will give written notice to the Indemnitee to that effect.
If the Indemnitee fails to consent to such firm offer within ten calendar
days after its receipt of such notice, the Indemnitee may continue to contest
or defend such Third Party Claim and, in such event, the maximum liability of
the Indemnifying Party as to such Third Party Claim will not exceed the
amount of such settlement offer, plus costs and expenses paid or incurred by
the Indemnitee through the end of such ten calendar day period.
(c) A failure to give timely notice or to include any specified
information in any notice as provided in SECTIONS 9.5(a) or 9.5(b) will not
affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under
its applicable insurance coverage or was otherwise damaged as a result of
such failure.
(d) The Indemnifying Party will have a period of thirty (30)
calendar days within which to respond in writing to any claim by an
Indemnitee on account of an Indemnifiable Loss which does not result from a
Third Party Claim (a "DIRECT CLAIM"). If the Indemnifying Party does not so
respond within such 30 calendar day period, the
42
Indemnifying Party will be deemed to have rejected such claim, in which event
the Indemnitee will be free to pursue such remedies as may be available to
the Indemnitee on the terms and subject to the provisions of this ARTICLE IX.
(e) If the amount of any Indemnifiable Loss, at any time subsequent
to the making of an Indemnity Payment, is reduced by recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any
claim, recovery, settlement or payment by or against any other entity, the
amount of such reduction, less any reasonable unreimbursed costs, expenses,
premiums or taxes incurred in connection therewith (together with interest
thereon from the date of payment thereof at the annualized rate of interest
equal to the "prime" or "reference" rate of interest as publicly announced by
Chase Manhattan Bank and in effect from time to time during the relevant
period, calculated on the basis of the actual number of days elapsed over
365) will promptly be repaid by the Indemnitee to the Indemnifying Party.
Upon making any Indemnity Payment the Indemnifying Party will, to the extent
of such Indemnity Payment, be subrogated to all rights of the Indemnitee
against any third party that is not an Affiliate of the Indemnitee in respect
of the Indemnifiable Loss to which the Indemnity Payment related; PROVIDED,
HOWEVER, that (i) the Indemnifying Party shall then be in compliance with its
obligations under this Agreement in respect of such Indemnifiable Loss and
(ii) until the Indemnitee recovers fully payment of its Indemnifiable Loss,
any and all claims of the Indemnifying Party against any such third party on
account of said Indemnity Payment will be subrogated and subordinated in
right of payment to the Indemnitee's rights against such third party in
respect of the Indemnifiable Loss. Without limiting the generality or effect
of any other provision hereof, each such Indemnitee and Indemnifying Party
will duly execute upon request all instruments reasonably necessary to
evidence and perfect the above-described subrogation and subordination rights.
(f) With respect to a Third Party Claim for which the Sellers are
the Indemnifying Party, the Purchaser shall, and shall cause each Indemnitee
to, make available to the Sellers and their representatives all books and
records of the Purchaser and the Indemnitees relating to such Third Party
Claim and shall render to the Sellers such assistance and access to records
and the representatives of the Purchaser and the Indemnitees as the Sellers
and their representatives may reasonably request, except that the Purchaser
shall not be required to make available to the Sellers and their
representatives any books, records, documents or other information that the
Purchaser reasonably determines to be confidential or subject to
attorney-client privilege unless and until the Sellers shall have entered
into such agreements as the Purchaser reasonably deems to be necessary in
light of all surrounding circumstances (including, without limitation,
Sellers' need for information in connection with the investigation or defense
of a Third Party Claim) to protect such confidentiality or privilege.
9.6 ADJUSTMENT TO PURCHASE PRICE. The Purchaser and the Sellers
agree that any Indemnity Payment hereunder shall be treated as an adjustment
to the Purchase Price.
43
9.7 RIGHT OF SET OFF. Any amount to which the Purchaser or its
Affiliates is entitled to receive under this ARTICLE IX shall be initially
disbursed from the Escrow Amount under the Escrow Agreement until the entire
Escrow Amount has been disbursed. Such right of set off shall be separate and
apart from any and all other rights and remedies that such Persons may have
against the Sellers.
ARTICLE X
MISCELLANEOUS
10.1 DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings specified in this SECTION 10.1:
"ACQUISITION TRANSACTION" shall have the meaning ascribed to such term
in SECTION 6.6.
"ADJUSTED TANGIBLE NET BOOK VALUE" shall have the meaning ascribed to
such term in SECTION 2.3(b).
"ADVANTAGE" shall have the meaning set forth in SECTION 4.28.
"AFFILIATE" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person.
"AFFILIATE LOANS" shall have the meaning ascribed to such term in
SECTION 6.9.
"AGREEMENT: shall have the meaning ascribed to such term in the
preamble.
"BALANCE SHEET" shall have the meaning ascribed to such term in
SECTION 4.8.
"BALANCE SHEET DATE" shall have the meaning ascribed to such term in
SECTION 4.8.
"BASE PURCHASE PRICE" shall have the meaning ascribed to such term
in SECTION 2.1.
"BASKET" shall have the meaning ascribed to such term in SECTION
9.1(b).
"BUSINESS DAY" means any day of the year on which national banking
institutions in New York are open to the public for conducting business and
are not required or authorized to close.
44
"CAP" shall have the meaning ascribed to such term in SECTION 9.2(C).
"CLOSING" shall have the meaning ascribed to such term in SECTION
3.1.
"CLOSING DATE" shall have the meaning ascribed to such term in
SECTION 3.1.
"CLOSING DATE BALANCE SHEET" shall have the meaning ascribed to such
term in SECTION 2.3(a).
"CLOSING STATEMENT" shall have the meaning ascribed to such term in
SECTION 2.2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall have the meaning ascribed to such term in
SECTION 4.3(a).
"COMPANY" shall have the meaning ascribed to such term in the
preamble.
"COMPANY DOCUMENTS" shall have the meaning ascribed to such term in
SECTION 4.2(b).
"COMPANY INTELLECTUAL PROPERTY" shall have the meaning ascribed to
such term in SECTION 4.14(a).
"COMPANY INTELLECTUAL PROPERTY LICENSES" shall have the meaning
ascribed to such term in SECTION 4.14(e).
"COMPANY PROPERTY" shall have the meaning ascribed to such term in
SECTION 4.12(a).
"COMPANY SOFTWARE" shall have the meaning ascribed to such term in
SECTION 4.14(a).
"COMPANY'S ACCOUNTANTS" shall have the meaning ascribed to such term
in SECTION 2.3(a).
"CONFIDENTIALITY AGREEMENT" shall have the meaning ascribed to such
term in SECTION 6.1.
"CONTRACT" means any Contract, agreement, indenture, note, bond,
loan, instrument, lease, commitment or other arrangement or agreement.
"DEBT" means any (i) amount or other obligation payable by the
Company in respect to indebtedness for borrowed money or interest-bearing
liabilities of the Company, including, without limitation, the aggregate
principal amount of and accrued
45
but unpaid interest on any outstanding borrowings under any document or
instrument evidencing interest-bearing, short-term or long-term liabilities
or indebtedness of the Company or any other indebtedness for borrowed money
of the Company (including capitalized leases), including, without limitation,
under any document or instrument set forth in SCHEDULE 10.1(a) hereto, (ii)
indebtedness from the Company to the Sellers or any Affiliate of any of the
Sellers, (iii) deferred compensation obligations of the Company, and (iv)
accrued but unfunded post-retirement benefits of the Company.
"DEBT HOLDER" means any holder of notes or other instruments or
documents evidencing any Debt.
"DEBT NOTICE" means a written certificate dated three (3) Business
Days prior to the Closing Date executed on behalf of the Company by its Vice
President with respect to the amount of the Debt to be outstanding
immediately prior to the Closing, which certificate shall detail the amount
of outstanding Debt, the respective amount that is owed to each Debt Holder
(including any prepayment penalty associated therewith, to the extent
applicable), and the respective account of each Debt Holder (including wire
transfer instructions) into which the Debt owed to such Debt Holder can be
paid at the Closing.
"DIRECT CLAIM" shall have the meaning ascribed to such term in
SECTION 9.4(D).
"EXCESS INVENTORY" shall have the meaning ascribed to such term in
SCHEDULE 2.3(a).
"EMPLOYEE BENEFIT PLANS" shall have the meaning ascribed to such
term in SECTION 4.16(a).
"ENVIRONMENTAL LAW" means any foreign, federal, state or local
statute, regulation, ordinance, or rule of common law as now or hereafter in
effect in any way relating to the protection of human health and safety or
the environment including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections
9601 ET SEQ.), the Hazardous Materials Transportation Act (49 U.S.C. App.
Sections 1801 et SEQ.), the Resource Conservation and Recovery Act (42 U.S.C.
Sections 6901 ET SEQ.), the Clean Water Act (33 U.S.C. Sections 1251 ET
SEQ.), the Clean Air Act (42 U.S.C. Sections 7401 ET SEQ.) the Toxic
Substances Control Act (15 U.S.C. Sections 2601 et SEQ.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sections 136 ET SEQ.),
and the Occupational Safety and Health Act (29 U.S.C. Sections 651 ET SEQ.),
and the regulations promulgated pursuant thereto.
"ERISA" shall have the meaning ascribed to such term in SECTION 4.16.
"ERISA AFFILIATE" shall have the meaning ascribed to such term in
SECTION 4.16.
46
"ESCROW AGENT" shall have the meaning ascribed to such term in
SECTION 2.4.
"ESCROW AGREEMENT" shall have the meaning ascribed to such term in
SECTION 2.4.
"ESCROW AMOUNT" shall have the meaning ascribed to such term in
SECTION 2.4.
"ESTIMATED TANGIBLE NET BOOK VALUE" shall have the meaning ascribed
to such term in SECTION 2.3(d).
"FINANCIAL STATEMENTS" shall have the meaning ascribed to such term
in SECTION 4.8.
"FIRPTA AFFIDAVIT" shall have the meaning ascribed to such term in
SECTION 7.1(h).
"GAAP" means generally accepted United States accounting principles
as of the date hereof.
"GOVERNMENTAL BODY" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof,
or any court or arbitrator (public or private).
"HAZARDOUS MATERIAL" means any substance, material or waste which is
regulated by the United States, or any state or local governmental authority
including, without limitation, petroleum and its by-products, asbestos, and
any material or substance which is defined as a "hazardous waste," "hazardous
substance," "hazardous material," "restricted hazardous waste," "industrial
waste," "solid waste," "contaminant," "pollutant," "toxic waste" or "toxic
substance" under any provision of Environmental Law.
"HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976.
"INDEMNITY PAYMENT" shall have the meaning ascribed to such term in
SECTION 9.2(a).
"INDEMNIFIABLE LOSSES" shall have the meaning ascribed to such term
in SECTION 9.2(a).
"INDEMNITEE" shall have the meaning ascribed to such term in SECTION
9.2.
"INDEMNIFYING PARTY" shall have the meaning ascribed to such term in
SECTION 9.2(a).
47
"IRS" means the Internal Revenue Service.
"LAW" means any federal, state, local or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement.
"LEGAL PROCEEDING" means any judicial, administrative or arbitral
actions, suits, proceedings (public or private), claims or governmental
proceedings.
"LIEN" means any lien, pledge, mortgage, deed of trust, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"MATERIAL ADVERSE CHANGE" means any material adverse change in the
business, properties, results of operations, prospects, condition (financial
or otherwise) of the Company.
"MATERIAL ADVERSE EFFECT" means any effect which has resulted in, or
could be reasonably expected to result in, a Material Adverse Change.
"MATERIAL CONTRACTS" shall have the meaning ascribed to such terms
in SECTION 4.15.
"MULTIEMPLOYER PLANS" shall have the meaning ascribed to such term
in SECTION 4.16(a).
"MULTIPLE EMPLOYER PLANS" shall have the meaning ascribed to such
term in SECTION 4.16(a).
"ORDER" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"OWNED PROPERTIES" shall have the meaning ascribed to such term in
SECTION 4.12.
"PBGC" shall have the meaning ascribed to such term in SECTION
4.16(e).
"PENSION PLANS" shall have the meaning ascribed to such term in
SECTION 4.16(a).
"PERMITS" means any approvals, authorizations, consents, licenses,
permits or certificates.
"PERMITTED EXCEPTIONS" means (i) all defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed in policies
of title insurance which have been made available to Purchaser; (ii)
statutory Liens for current taxes, assessments or other governmental charges
not yet delinquent or the amount or validity of which is
48
being contested in good faith by appropriate proceedings, provided an
appropriate reserve is established therefor; (iii) mechanics', carriers',
workers', repairers' and similar Liens arising or incurred in the ordinary
course of business that are not material to the business, operations and
financial condition of the property so encumbered or the Company; (iv)
zoning, entitlement and other land use and environmental regulations by any
Governmental Body, PROVIDED that such regulations have not been violated; and
(v) such other imperfections in title, charges, easements, restrictions and
encumbrances which do not materially detract from the value of or materially
interfere with the present use of any Company Property subject thereto or
affected thereby.
"PERSON" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
"PERSONAL PROPERTY LEASE" shall have the meaning ascribed to such
term in SECTION 4.13(a).
"PURCHASE PRICE" shall have the meaning ascribed to such term in
SECTION 2.1.
"PURCHASE PRICE CERTIFICATE" shall have the meaning ascribed to such
term in SECTION 2.3(b).
"PURCHASER" shall have the meaning ascribed to such term in the
preamble.
"PURCHASER DOCUMENTS" shall have the meaning ascribed to such term
in SECTION 5.2.
"PURCHASER TAX RETURNS" shall have the meaning ascribed to such term
in SECTION 6.20.
"PURCHASER'S ACCOUNTANTS" shall have the meaning ascribed to such
term in SECTION 2.3(a).
"QUALIFIED PLANS" shall have the meaning ascribed to such term in
SECTION 4.16(c).
"REAL PROPERTY LEASE" shall have the meaning ascribed to such term
in SECTION 4.12.
"RECEIVABLES NOTICE" shall have the meaning ascribed to such term in
SECTION 9.4.
"RELEASE" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, or leaching into the
indoor or outdoor environment, or into or out of any property;
49
"REMEDIAL ACTION" means all actions to (x) clean up, remove, treat
or in any other way address any Hazardous Material; (y) prevent the Release
of any Hazardous Material so it does not endanger or threaten to endanger
public health or welfare or the indoor or outdoor environment; or (z) perform
pre-remedial studies and investigations or post-remedial monitoring and care.
"REPRESENTATIVES" shall have the meaning ascribed to such term in
SECTION 6.1.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER DOCUMENTS" shall have the meaning ascribed to such term in
SECTION 4.2(a).
"SELLER RELEASES" shall have the meaning ascribed to such term in
SECTION 6.14.
"SELLERS" shall have the meaning ascribed to such term in the
preamble.
"SELLERS' REPRESENTATIVE" shall have the meaning ascribed to such
term in SECTION 10.13.
"SHARES" shall have the meaning ascribed to such term in the
recitals.
"SUBSIDIARY" means any Person of which a majority of the outstanding
voting securities or other voting equity interests are owned, directly or
indirectly, by the Company.
"SUPPLEMENTAL CLOSING" shall have the meaning ascribed to such term
in SECTION 2.3(c).
"TAX" or "TAXES" means (i) all federal, state, local or foreign
taxes, charges, fees, imposts, levies or other assessments, including,
without limitation, all net income, gross receipts, capital, sales, use, ad
valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, (ii) all
interest, penalties, fines, additions to tax or additional amounts imposed by
any taxing authority in connection with any item described in clause (i) and
(iii) any transferee liability in respect of any items described in clauses
(i) and/or (ii).
"TAX RETURN" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any
Taxes.
"THIRD PARTY CLAIM" shall have the meaning ascribed to such terms in
SECTION 9.2(a).
50
"TRIPLE NET BASIS" shall mean that all lease costs shall be borne by
the lessee.
"UNCOLLECTIBLE VENDOR RECEIVABLES" shall have the meaning ascribed
to such term in SECTION 9.4.
"VENDOR RECEIVABLES" shall have the meaning ascribed to such term in
SECTION 9.4.
10.2 PAYMENT OF SALES, USE OR SIMILAR TAXES. All sales, use,
transfer, intangible, recordation, documentary stamp or similar Taxes or
charges, of any nature whatsoever, applicable to, or resulting from, the
transactions contemplated by this Agreement shall be borne by the Sellers.
10.3 EXPENSES. Except as otherwise provided in this Agreement, the
Sellers and the Purchaser shall each bear their own expenses incurred in
connection with the negotiation and execution of this Agreement and each
other agreement, document and instrument contemplated by this Agreement and
the consummation of the transactions contemplated hereby and thereby, it
being understood that in no event shall the Company bear any of such costs
and expenses.
10.4 SPECIFIC PERFORMANCE. The Sellers acknowledge and agree that
the breach of this Agreement would cause irreparable damage to the Purchaser
and that the Purchaser will not have an adequate remedy at law. Therefore,
the obligations of the Sellers under this Agreement, including, without
limitation, the Sellers' obligation to sell the Shares to the Purchaser,
shall be enforceable by a decree of specific performance issued by any court
of competent jurisdiction, and appropriate injunctive relief may be applied
for and granted in connection therewith. Such remedies shall, however, be
cumulative and not exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
10.5 FURTHER ASSURANCES. The Sellers and the Purchaser each agree to
execute and deliver such other documents or agreements and to take such other
action as may be reasonably necessary or desirable for the implementation of
this Agreement and the consummation of the transactions contemplated hereby.
10.6 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement
(including the schedules and exhibits hereto) represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of
any such amendment, supplement, modification or waiver is sought. No action
taken pursuant to this Agreement, including without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein. The waiver by any party
hereto of a breach of any provision
51
of this Agreement shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or
remedy by such party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by Law.
10.7 SUBMISSION TO JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
State of New York over any dispute arising out of or relating to this
Agreement or any of the transactions contemplated hereby and each party
hereby irrevocably agrees that all claims in respect of such dispute or any
suit, action proceeding related thereto may be heard and determined in such
courts. The parties hereby irrevocably waive, to the fullest extent permitted
by applicable Law, any objection which they may now or hereafter have to the
laying of venue of any such dispute brought in such court or any defense of
inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by
the mailing of a copy thereof in accordance with the provisions of SECTION
10.10.
10.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
10.9 TABLE OF CONTENTS AND HEADINGS. The table of contents and
section headings of this Agreement are for reference purposes only and are to
be given no effect in the construction or interpretation of this Agreement.
10.10 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally or mailed by certified mail, return receipt requested, to the
parties (and shall also be transmitted by facsimile to the Persons receiving
copies thereof) at the following addresses (or to such other address as a
party may have specified by notice given to the other party pursuant to this
provision):
If to Sellers, to:
Xxxxxx X. Xxxxx
000 Xxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000 (c/o Xxxxxxx X. Xxxxxxxx)
52
Xxxxx X. Xxxxx
000 Xxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000 (c/o Xxxxxxx X. Xxxxxxxx)
Xxxxxxx X. Xxxxxxxx
000 Xxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Xxxxxxx Xxxxxxxx Irrevocable Trust
c/o Xxxxxxx X. Xxxxxxx, Esq., Co-Trustee
000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
With a copy to:
Wisler, Pearlstine, Xxxxxx, Xxxxx, Xxxxxxx & Potash, LLP
000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to Purchaser, to:
Xxxxxxx Bros., Inc.
0000 Xxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxx Xxxxxxxx
Facsimile No. (000) 000-0000
With a copy to:
United Stationers Supply Co.
0000 X. Xxxx Xxxx
Xxx Xxxxxxx, XX 00000-0000
Attention: Law Department
Facsimile No.: (000) 000-0000
and
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
53
Attention: Xxxx X. Xxxxx
Facsimile No.: (000) 000-0000
10.11 SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in effect.
10.12 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and permitted assigns. Nothing in this Agreement shall create or be deemed to
create any third party beneficiary rights in any person or entity not a party
to this Agreement except as provided below. No assignment of this Agreement
or of any rights or obligations hereunder may be made by either the Sellers
or the Purchaser (by operation of Law or otherwise) without the prior written
consent of the other parties hereto and any attempted assignment without the
required consents shall be void; PROVIDED, HOWEVER, that the Purchaser may
assign this Agreement and any or all rights or obligations hereunder
(including, without limitation, the Purchaser's rights to purchase the Shares
and the Purchaser's rights to seek indemnification hereunder) to any
Affiliate of the Purchaser; PROVIDED that Purchaser remains financially
responsible for the obligations of its assignee. Upon any such permitted
assignment, the references in this Agreement to the Purchaser shall also
apply to any such assignee unless the context otherwise requires.
10.13 SELLERS' REPRESENTATIVE. Xxxxxx X. Xxxxx and Xxxxxxx X.
Xxxxxxxx or such other persons as shall succeed them pursuant to this SECTION
10.13, are hereby designated as the representatives (the "SELLERS'
REPRESENTATIVE") to act for and represent the Sellers with respect to all
matters arising out of ARTICLE IX hereof and in those other matters with
respect to which this Agreement specifies that the Sellers' Representative
shall so act, as well as matters which require notice to be given to the
Sellers under this Agreement. In the event of the death or incapacity of
Xxxxxx X. Xxxxx or Xxxxxxx X. Xxxxxxxx, as the case may be, Xxxxx Xxxxx, or
such other person or persons as may be designated by a majority of the
Sellers, shall succeed Xxxxxx X. Xxxxx or Xxxxxxx X. Xxxxxxxx, as the
Sellers' Representative.
[The Remainder of this Page Is Intentionally Left Blank]
54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first written above.
XXXXXXX BROS., INC.
By:
------------------------------------------------
Name:
Title:
THE PEERLESS PAPER XXXXX
By:
------------------------------------------------
Name:
Title:
SELLERS:
----------------------------------------------------
Xxxxxx X. Xxxxx
----------------------------------------------------
Xxxxx X. Xxxxx
----------------------------------------------------
Xxxxxxx X. Xxxxxxxx
XXXXXXX X. XXXXXXXX IRREVOCABLE TRUST
By:
------------------------------------------------
Xxxxxxx X. Xxxxxxxx, Co-Trustee
By:
------------------------------------------------
Xxxxx X. Xxxxx, Co-Trustee
EXHIBITS X-0, X-0
Xxx-Xxxxxxxxxxx Agreements
EXHIBIT B
Employment Agreement
EXHIBIT C
See Schedules to the Stock Purchase Agreement
EXHIBIT D
Escrow Agreement
EXHIBIT E
Savage, Maryland Lease
EXHIBIT F
Oaks, Pennsylvania Lease
SCHEDULE 2.3(A)
Notwithstanding anything contained to the contrary in the Agreement,
the following adjustments to inventory of the Company shall be reflected on
the Closing Date Balance Sheet and included in the calculation of Adjusted
Tangible Net Book Value (regardless of whether such adjustments are
consistent with the Company's prior practice):
1. Inventory shall be reduced to reverse existing Section 263A
uniform capitalization (for purposes of example only, the amount
of Section 263A uniform capitalization at December 31, 1999 was
$455,000); and
2. Inventory shall be reduced by the value of Excess Inventory (as
defined below), if any.
For purposes of this Agreement, "EXCESS INVENTORY" means, with
respect to any SKU in the Company's inventory as of the Closing Date for
which the following two criteria are met: (i) total value of that SKU's
inventory is greater than $7,500; and (ii) has had less than one full
inventory turn over the 12 month period prior to the Closing Date; PROVIDED,
HOWEVER, that such SKU is not (i) a new item (i.e., an item that the Company
introduced for sale within the preceding six months) or (ii) a SKU that has
received a new part number that, when combined with the sales associated with
the previous SKU part number, would have had at least one inventory turn over
the 12 month period prior to the Closing Date. For purposes of example only,
if only $3,000 of a SKU with an aggregate inventory value of $10,000 as of
the Closing Date was sold during the 12 month period prior to the Closing
Date, the entire $10,000 value of such SKU would be considered Excess
Inventory for purposes of this Agreement.
Any Excess Inventory shall be the property of the Sellers. The
Sellers shall be permitted to remove the Excess Inventory from the facilities
of the Company within a reasonable period of time following the Closing Date.
