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STOCK PURCHASE AGREEMENT
by and among
AMSCAN HOLDINGS, INC.
and
THE SELLERS LISTED ON
THE SIGNATURE PAGES HERETO
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August 6, 1998
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TABLE OF CONTENTS
Page
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ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
SALE OF STOCK AND ASSETS; CLOSING
Section 2.1. Purchase and Sale..................................... 9
Section 2.2. Payment of the Cash Purchase Price.................... 9
Section 2.3. Stock Transfer Taxes.................................. 10
Section 2.4. Agreement to Issue Securities......................... 10
Section 2.5. Stockholders' Agreement............................... 10
Section 2.6. Restrictive Legends................................... 10
Section 2.7. Time and Place of Closing............................. 10
Section 2.8. Deliveries by the Sellers............................. 11
Section 2.9. Deliveries by Buyer................................... 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Section 3.1. Incorporation; Authorization; etc..................... 11
Section 3.2. Capitalization; Structure............................. 13
Section 3.3. Financial Statements.................................. 14
Section 3.4. Real Properties....................................... 15
Section 3.5. Tangible Personal Property............................ 17
Section 3.6. Absence of Certain Changes............................ 18
Section 3.7. Litigation; Orders.................................... 18
Section 3.8. Intellectual Property................................. 19
Section 3.9. Governmental Licenses, Approvals, Other Authorizations,
Consents, Reports, etc............................ 20
Section 3.10. Labor Matters......................................... 21
Section 3.11. Compliance with Laws.................................. 21
Section 3.12. Insurance............................................. 21
Section 3.13. Material Contracts.................................... 22
Section 3.14. Brokers, Finders, etc................................. 23
Section 3.15. Affiliate Transactions................................ 23
Section 3.16. Environmental Compliance.............................. 23
Section 3.17. Customer and Supplier Relationships................... 25
Section 3.18. Undisclosed Liabilities............................... 25
Section 3.19. Disclosure............................................ 26
Section 3.20. Banks, Powers of Attorney............................. 26
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Section 3.21. Sufficiency and Condition of Assets................... 26
Section 3.22. Non-Foreign Certification............................. 26
Section 3.23. Securities Laws Representations....................... 26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1. Incorporation; Authorization; Capitalization;
Structure......................................... 27
Section 4.2. Licenses, Approvals, Other Authorizations, Consents,
Reports, etc...................................... 29
Section 4.3. Investment Representations............................ 29
Section 4.4. Securities............................................ 30
Section 4.5. SEC Filings; Financial Statements..................... 30
Section 4.6. Brokers............................................... 30
Section 4.7. Financing............................................. 30
Section 4.8. Litigation; Orders.................................... 31
Section 4.9. Compliance with Laws.................................. 31
Section 4.10. Undisclosed Liabilities............................... 31
Section 4.11. Disclosure............................................ 32
ARTICLE V
COVENANTS OF SELLERS AND BUYER
Section 5.1. Investigation of Business; Access to Properties and
Records........................................... 32
Section 5.2. Efforts; Obtaining Consents........................... 33
Section 5.3. Further Assurances.................................... 34
Section 5.4. Conduct of Business................................... 34
Section 5.5. Preservation of Business.............................. 36
Section 5.6. Non-Solicitation...................................... 36
Section 5.7. Related Party Matters................................. 37
Section 5.8. Financing............................................. 37
Section 5.9. Stockholders' Agreement............................... 37
Section 5.10. Resignations; Nominee Shareholders.................... 37
Section 5.11. Current Information................................... 37
Section 5.12. Financial Statements.................................. 38
Section 5.13. Further Actions....................................... 38
Section 5.14. Liquidation of Anagram Exports........................ 39
Section 5.15. Employee Benefit Plans................................ 39
Section 5.16. Supplements and Updates to Schedules.................. 40
Section 5.17. Additional Filings or Approvals....................... 40
ARTICLE VI
EMPLOYEE BENEFITS
Section 6.1. Employee Benefit Plans................................ 41
Section 6.2. Company Employee Benefit Plans........................ 42
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Section 6.3. Non-U.S. Company Employee Benefit Plans............... 44
Section 6.4. Administration........................................ 45
ARTICLE VII
TAX MATTERS
Section 7.1. Tax Returns of the Companies and the Subsidiaries..... 45
Section 7.2. Elections and Forms................................... 47
Section 7.3. Allocation of Certain Taxes........................... 48
Section 7.4. Filing Responsibility................................. 49
Section 7.5. Refunds and Carrybacks................................ 49
Section 7.6. Cooperation and Exchange of Information............... 50
Section 7.7. Tax Indemnification by Sellers........................ 51
Section 7.8. Definitions........................................... 52
Section 7.9. Survival of Obligations............................... 53
ARTICLE VIII
CONDITIONS OF BUYER'S OBLIGATION TO CLOSE
Section 8.1. Representations, Warranties and Covenants of Seller... 54
Section 8.2. Filings; Consents; Waiting Periods.................... 54
Section 8.3. Litigation; Injunction................................ 54
Section 8.4. Financing............................................. 55
Section 8.5. Opinions.............................................. 55
Section 8.6. FIRPTA Affidavit...................................... 55
Section 8.7. Employment Arrangement................................ 55
Section 8.8. Stockholders' Agreement............................... 55
Section 8.9. Company Design Licenses............................... 55
Section 8.10. Proceedings; Certificates............................. 56
ARTICLE IX
CONDITIONS TO THE SELLERS' OBLIGATION TO CLOSE
Section 9.1. Representations, Warranties and Covenants of Buyer.... 56
Section 9.2. Filings, Consents and Waiting Periods................. 57
Section 9.3. Litigation; Injunction................................ 57
Section 9.4. Opinions.............................................. 57
Section 9.5. Proceedings; Certificates............................. 57
Section 9.6. Grant of Stock Options................................ 57
Section 9.7. Employment Agreement.................................. 57
Section 9.8. Stockholders' Agreement............................... 57
Section 9.9. No Material Adverse Change............................ 58
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ARTICLE X
SURVIVAL; INDEMNIFICATION
Section 10.1. Buyer Indemnified Parties' Right to Indemnification... 58
Section 10.2. Limitations on Buyer Indemnified Parties' Right to
Indemnification................................... 58
Section 10.3. Seller Indemnified Parties' Right to Indemnification.. 60
Section 10.4. Limitations on Seller Indemnified Parties' Right to
Indemnification................................... 60
Section 10.5. Indemnification Procedures............................ 61
Section 10.6. Satisfaction of Indemnification Obligations........... 62
Section 10.7. Sole Remedy Regarding Representations and Warranties.. 62
Section 10.8. Losses Net of Insurance............................... 62
ARTICLE XI
TERMINATION
Section 11.1. Termination........................................... 62
Section 11.2. Procedure and Effect of Termination................... 63
ARTICLE XII
MISCELLANEOUS
Section 12.1. Counterparts.......................................... 63
Section 12.2. Governing Law......................................... 63
Section 12.3. Entire Agreement...................................... 63
Section 12.4. Expenses.............................................. 64
Section 12.5. Notices............................................... 64
Section 12.6. Successors and Assigns................................ 65
Section 12.7. Designated Representative............................. 65
Section 12.8. Publicity............................................. 65
Section 12.9. Headings; Definitions................................. 66
Section 12.10. Amendments and Waivers................................ 66
Section 12.11. Severability.......................................... 66
Section 12.12. Interpretation........................................ 66
Signatures ...................................................... 67
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SCHEDULES
Schedule 2.1 Stock of the Companies
Schedule 2.2 Allocation of Purchase Price
Schedule 2.4 Allocation of Securities and Warrants
Schedule 3.1(a) Jurisdictions in Which Companies and Subsidiaries are
Qualified to Do Business
Schedule 3.1(d) Conflicts, Violations, Defaults and Accelerations
Schedule 3.2(a) Stock Information
Schedule 3.2(c) Officers and Directors
Schedule 3.2(d) Indebtedness
Schedule 3.3(a) Financial Statements and Exceptions to Applicable Accounting
Principles of Anagram
Schedule 3.3(b) Combined Financial Statements
Schedule 3.3(d) Non-Recurring, One-Time and Extraordinary Source of Income
Schedule 3.3(e) Liens on Inventory
Schedule 3.4 Owned & Leased Properties
Schedule 3.5 Tangible Personal Property
Schedule 3.6 Absence of Certain Changes
Schedule 3.7A&B Litigation
Schedule 3.8 Intellectual Property
Schedule 3.9(a) Government Licenses
Schedule 3.9(b) Seller Governmental Consents
Schedule 3.10 Labor Matters
Schedule 3.11 Compliance With Laws
Schedule 3.12 Insurance Policies
Schedule 3.13 Material Contracts
Schedule 3.14 Broker Payables
Schedule 3.15 Affiliate Transactions
Schedule 3.16 Environmental Compliance
Schedule 3.17 Customer, Supplier and Distributor Relationships
Schedule 3.18 Undisclosed Liabilities
Schedule 3.20 Access Bank Accounts
Schedule 4.1(a) Conflicts, Violations, Defaults and Accelerations
Schedule 4.1(c) Buyer Options
Schedule 4.2 Buyer Consents
Schedule 5.2 Seller Consents
Schedule 5.4 Conduct of Business
Schedule 5.18 Certain Guarantees
Schedule 6.1(a) Employee Benefit Plans
Schedule 6.1(d) Payments Caused By This Agreement
Schedule 7.1(a) Income Tax Returns
Schedule 7.1(b) Contested Taxes; Reserves
Schedule 7.1(c) Tax Extensions and Powers of Attorneys
Schedule 7.1(d) Audits
Schedule 7.2(c) Allocations
Schedule 8.2 Buyer Filings and Consents
Schedule 8.9 Company Design Licenses Condition
Schedule 9.2 Sellers' Filings and Consents
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EXHIBITS
Exhibit 1 Trust Agreements
Exhibit 2.4 Form of Warrant
Exhibit 2.5 Form of Stockholders' Agreement Amendment
Exhibit 3.14 Xxxxx Xxxxxxx Engagement Letter
Exhibit 4.7 Commitment Letter
Exhibit 8.5 Form of Opinions of Sellers' Counsel
Exhibit 8.7 Kieves Form of Employment Agreement
Exhibit 9.4 Forms of Opinions of Buyer's Counsels
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INDEX OF DEFINED TERMS
Page Page
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accredited investor.................24, 26 Determination................4, 48
Action...................................1 disqualified individuals........39
Affiliate................................1 disqualified person.............39
Agreement................................1 employee........................39
Allocation Schedule..................1, 44 Environmental Law............4, 21
Anagram...............................1, 2 ERISA............................4
Anagram Exports.......................1, 2 ERISA Affiliate..............4, 40
Anagram France........................1, 2 Ernst & Young....................4
Anagram Holdings......................1, 2 Evaluation Material.............29
Anagram Japan.........................1, 2 excess parachute payments.......39
Anagram Mexico........................1, 2 Exchange Act.....................4
Anagram Nevada........................1, 2 family..........................21
Anagram Spain.........................1, 2 Financial Statements.........4, 12
Anagram U.K...........................1, 2 Financing.......................34
Applicable Accounting Principles.....2, 12 FIRPTA affidavit.............4, 51
Xxxxxx Xxxxxxxx..........................2 foreign person..................24
Business.................................2 Governmental Authority.......4, 11
Business Condition...................2, 10 Hazardous Substance..........4, 21
Buyer.................................1, 2 HSR Act..........................4
Buyer Business Condition.............2, 25 including.......................62
Buyer Common Stock.......................2 Income Tax Returns...........4, 48
Buyer Indemnified Parties............2, 53 Income Taxes.................4, 48
Buyer's Confidentiality Agreement........2 Indebtedness.....................5
Cash Purchase Price...................2, 8 Indemnitee...................5, 56
Closing..................................2 Indemnitor...................5, 56
Closing Date.............................3 Intellectual Property........5, 17
Code.....................................3 IRS..........................5, 48
Combined Balance Sheet...............3, 12 Leased Properties............5, 13
Combined Financial Statements........3, 12 Licenses.....................5, 18
Commitment Letter....................3, 28 Lien.............................5
Company Design Licenses..................3 Losses.......................5, 54
Company Employee Benefit Plans.......3, 37 Non-U.S. Company Employee
Benefit Plans...........5, 38
Company Intellectual Property........3, 17 Notice of Claim..............5, 56
Company Leases.......................3, 13 Owned Properties.............5, 13
Company or Companies..................1, 3 party-in-interest...............40
Company Patents......................3, 17 Patents......................5, 17
Company Pension Plan.................3, 38 Permitted Liens..................5
Company Real Property................3, 22 Person...........................6
Company Trademarks...................3, 17 Xxxxx Xxxxxxx................6, 21
Controlled Group Liability...........3, 40 Pre-Closing Period...........6, 48
Covered Liabilities......................4 QSS Sub......................6, 48
Designated Representative............4, 60
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RCRA Hazardous Waste.................6, 21 Shares...........................7
Related Agreements...................6, 10 Statute Representations......7, 54
Related Party........................6, 21 Stock Purchases...............1, 7
Returns..............................6, 48 Stockholders..................1, 7
S Corp...............................6, 49 Stockholders' Agreement.......7, 8
SEC..................................6, 27 Straddle Period..............7, 45
SEC Reports..........................6, 27 Subsidiaries or Subsidiary....1, 7
Section 338 Elections................6, 49 Tax Audit....................7, 47
Section 338 Forms....................6, 49 Tax Laws.....................7, 49
Section 338(g) Election..............6, 49 Taxes........................7, 49
Section 338(h)(10) Election..........6, 49 Taxing Authority.............7, 49
Securities............................6, 8 Title Matters................7, 13
Securities Act...........................6 Trademarks...................7, 17
Seller Indemnified Parties...........7, 55 Trusts...........................7
Sellers...............................1, 6 U.S. GAAP....................7, 12
Sellers' Confidentiality Agreement.......7 Warrants.........................7
Sellers' knowledge or knowledge Withdrawal Liability.........7, 40
of Sellers..........................7
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated August
6, 1998, is by and among the persons and entities listed on the signature pages
hereto as the stockholders (the "Sellers" or the "Stockholders"), and Amscan
Holdings, Inc., a Delaware
corporation ("Buyer").
WHEREAS, the Business (as defined herein) of the Sellers is
conducted through Anagram International, Inc., a Minnesota corporation
("Anagram"), and its subsidiaries, Anagram International Holdings, Inc., a
Minnesota corporation ("Anagram Holdings"), Anagram France S.C.S., a French
corporation ("Anagram France"), Anagram Mexico S. de X.X., a Mexican corporation
("Anagram Mexico"), Anagram International Ltd., a U.K. corporation ("Anagram
U.K.") and Anagram International LLC, a Nevada limited liability company
("Anagram Nevada" and, together with Anagram Holdings, Anagram France, Anagram
Mexico and Anagram U.K., the "Subsidiaries," and each a "Subsidiary"), and
certain affiliates of Anagram consisting of Anagram Exports, Inc., a Minnesota
corporation ("Anagram Exports"), Anagram Espana, S.A, a Spanish corporation
("Anagram Spain") and Anagram International Japan, Ltd., a Japanese corporation
("Anagram Japan" and, together with Anagram Exports, Anagram Spain and Anagram,
the "Companies," and each a "Company"; provided, however, that from and after
the time of its liquidation pursuant to Section 5.14 hereof, Anagram Exports
shall not be a "Company" or included in "Companies");
WHEREAS, Buyer desires, either directly or through certain of
its subsidiaries, to purchase from the Sellers, and the Sellers desire to sell
to Buyer, 100% of the outstanding shares of capital stock of the Companies upon
the terms and subject to the conditions set forth herein (the "Stock
Purchases").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
As used in this Agreement the following terms shall have the
following respective meanings:
"Action" shall mean any complaint, claim, prosecution,
indictment, action, suit, arbitration, investigation, inquiry or proceeding by
or before any Governmental Authority.
"Affiliate" shall mean any Person that directly, or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with the party specified.
"Agreement" shall have the meaning set forth in the preamble
hereof.
"Allocation Schedule" shall have the meaning set forth in
Section 7.2(c) hereof.
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"Anagram" shall have the meaning set forth in the recitals
hereof.
"Anagram Exports" shall have the meaning set forth in the
recitals hereof.
"Anagram France" shall have the meaning set forth in the
recitals hereof.
"Anagram Holdings" shall have the meaning set forth in the
recitals hereof.
"Anagram Japan" shall have the meaning set forth in the
recitals hereof.
"Anagram Mexico" shall have the meaning set forth in the
recitals hereof.
"Anagram Nevada" shall have the meaning set forth in the
recitals hereof.
"Anagram Spain" shall have the meaning set forth in the
recitals hereof.
"Anagram U.K." shall have the meaning set forth in the
recitals hereof.
"Applicable Accounting Principles" shall have the meaning set
forth in Section 3.3(c) hereof.
"Xxxxxx Xxxxxxxx" shall mean Xxxxxx Xxxxxxxx LLP.
"Business" shall mean the business of designing,
manufacturing, selling and distributing metallic balloons and related products
and certain other products made by extruding synthetic materials and fabricating
flexible packaging therefrom and all other businesses conducted by the Companies
including any licensing of Intellectual Property by the Company.
"Business Condition" shall have the meaning set forth in
Section 3.1(a) hereof.
"Buyer" shall have the meaning set forth in the preamble
hereof.
"Buyer Business Condition" shall have the meaning set forth in
Section 4.1 hereof.
"Buyer Common Stock" shall mean the Common Stock, par value
$.10 per share, of Buyer.
"Buyer Indemnified Parties" shall have the meaning set forth
in Section 10.1 hereof.
"Buyer's Confidentiality Agreement" shall mean the letter
agreement dated May 7, 1998 by and between Anagram and Buyer.
"Cash Purchase Price" shall have the meaning set forth in
Section 2.2 hereof.
"Closing" shall mean the consummation of the transactions
contemplated by Section 2.1 of this Agreement.
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"Closing Date" shall mean, unless this Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 11.1, the date which is five days following the
date on which the closing conditions in Sections 8.2 and 9.2 have been
satisfied, or if all other closing conditions in Articles VIII and IX have not
then been satisfied, as soon as is reasonably practicable when all closing
conditions in Articles VIII and IX shall be satisfied or waived (but, subject to
such satisfaction or waiver, in no event later than the date specified in
Section 11.1(b)) or such other date as the Designated Representative and Buyer
may agree in writing, in either case, upon which the Closing shall occur.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"Combined Balance Sheet" shall have the meaning set forth in
Section 3.3(b) hereof.
"Combined Financial Statements" shall have the meaning set
forth in Section 3.3(b) hereof.
"Commitment Letter" shall have the meaning set forth in
Section 4.7 hereof.
"Companies" shall have the meaning set forth in the recitals
hereto.
"Company Design Licenses" shall mean licenses with respect to
the use of proprietary designs or characters which have been granted to any of
the Companies or the Subsidiaries.
"Company Employee Benefit Plans" shall have the meaning set
forth in Section 6.1(a) hereof.
"Company Intellectual Property" shall have the meaning set
forth in Section 3.8 hereof.
"Company Leases" shall have the meaning set forth in Section
3.4(b) hereof.
"Company Patents" shall have the meaning set forth in Section
3.8 hereof.
"Company Pension Plan" shall have the meaning set forth in
Section 6.1(c) hereof.
"Company Real Property" shall have the meaning set forth in
Section 3.16(a)(iv) hereof.
"Company Trademarks" shall have the meaning set forth in
Section 3.8 hereof.
"Controlled Group Liability" shall have the meaning set forth
in Section 6.2(d) hereof.
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"Covered Liabilities" shall mean any and all debts, losses,
liabilities, claims, fines, royalties, deficiencies, damages, obligations,
payments (including, without limitation, those arising out of any demand,
assessment, settlement, judgment or compromise relating to any Action), costs
and expenses (including, without limitation, interest and penalties due and
payable with respect thereto and reasonable attorneys' and accountants' fees and
any other out-of-pocket expenses incurred in investigating, preparing,
defending, avoiding or settling any Action or in enforcing another party's
obligations hereunder), mature or unmatured, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, known or unknown, including, without
limitation, any of the foregoing arising under, out of or in connection with any
Action, order or consent decree of any Governmental Authority or award of any
arbitrator of any kind, or any law, rule, regulation, contract, commitment or
undertaking.
"Designated Representative" shall have the meaning set forth
in Section 12.7 hereof.
"Determination" shall have the meaning set forth in Section
7.8(a) hereof.
"Environmental Law" shall have the meaning set forth in
Section 3.16(a)(ii) hereof.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
6.2(c) hereof.
"Ernst & Young" shall mean Ernst & Young LLP.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Financial Statements" shall have the meaning set forth in
Section 3.3(a) hereof.
"FIRPTA affidavit" shall have the meaning set forth in Section
8.6 hereof.
"Governmental Authority" shall have the meaning set forth in
Section 3.1(d) hereof.
"Hazardous Substance" shall have the meaning set forth in
Section 3.16(a)(i) hereof.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Income Tax Returns" shall have the meaning set forth in
Section 7.8(b) hereof.
"Income Taxes" shall have the meaning set forth in Section
7.8(c) hereof.
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"Indebtedness" shall mean (a) all obligations for borrowed
money or purchase money indebtedness, (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all obligations under conditional
sale or other title retention agreements relating to property purchased, (d)
capital lease or sale-leaseback obligations, (e) all reimbursement obligations
under letters of credit, bankers' acceptances and similar instruments (whether
or not matured) or (f) any guarantee or assumption of any of the foregoing in
clauses (a) through (e) or guaranty of minimum equity or capital or any
make-whole or similar obligation.
"Indemnitee" shall have the meaning set forth in Section
10.5(a).
"Indemnitor" shall have the meaning set forth in Section
10.5(a).
"Intellectual Property" shall have the meaning set forth in
Section 3.8 hereof.
"IRS" shall have the meaning set forth in Section 7.8(d)
hereof.
"Leased Properties" shall have the meaning set forth in
Section 3.4(a) hereof.
"Licenses" shall have the meaning set forth in Section 3.9(a)
hereof.
"Lien" shall mean any mortgage, lien, lease, claim, charge,
instrument, order, security interest, easement, restrictive covenant,
right-of-way, lease, purchase agreement, option and other legal or equitable
encumbrance or restriction of any kind or character to which a Person is or may
be subject or by which a Person is or any of such Person's property is or may be
bound.
"Losses" shall have the meaning set forth in Section 10.1
hereof.
"Non-U.S. Company Employee Benefit Plans" shall have the
meaning set forth in Section 6.1(a) hereof.
"Notice of Claim" shall have the meaning set forth in Section
10.5(a).
"Owned Properties" shall have the meaning set forth in Section
3.4(a) hereof.
"Patents" shall have the meaning set forth in Section 3.8
hereof.
"Permitted Liens" shall mean (a)(1) platting, subdivision,
zoning, building and other similar legal requirements, (2) easements,
restrictive covenants, rights-of-way, non-material leases, encroachments and
other encumbrances and agreements (other than contracts or options pursuant to
which any of the Owned Properties is or may be required to be sold), whether or
not of record, (3) reservations of coal, oil, gas, minerals and mineral
interests, whether or not of record, (4) governmental laws, rules, ordinances
and regulations, and (5) minor imperfections of title, none of which items set
forth in this clause (a), individually or in the aggregate, would have a
material adverse effect on the use or value of the property to which such
Permitted Lien relates, (b) mechanics', materialmen's, carriers', workmen's,
warehousemen's, repairmen's, landlords' or other like liens securing obligations
that are not delinquent or, if delinquent, that are being
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contested in good faith and by appropriate proceedings and which do not exceed
$50,000 in the aggregate, and (c) liens for Taxes and other governmental
charges, assessments or fees which (i) are not yet due and payable or which may
be paid without penalty or (ii) are being contested in good faith and by
appropriate proceedings; provided, however, that Permitted Liens shall not
include (1) Liens for delinquent Taxes (unless and to the extent reserved or
accrued on the books and records of the Companies or the Subsidiaries and for
which the Sellers are responsible pursuant to Section 7.7 hereof).
"Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity (including Governmental
Authorities), and shall include any successor (by merger or otherwise) of such
entity.
"Xxxxx Xxxxxxx" shall have the meaning set forth in Section
3.14 hereof.
"Pre-Closing Period" shall have the meaning set forth in
Section 7.8(f) hereof.
"QSS Sub" shall have the meaning set forth in Section 7.8(g)
hereof.
"RCRA Hazardous Waste" shall have the meaning set forth in
Section 3.16(a)(iii) hereof.
"Related Agreements" shall have the meaning set forth in
Section 3.1(c) hereof.
"Related Party" shall have the meaning set forth in Section
3.15 hereof.
"Returns" shall have the meaning set forth in Section 7.8(h)
hereof.
"S Corp" shall have the meaning set forth in Section 7.8(i)
hereof.
"SEC" shall have the meaning set forth in Section 4.5 hereof.
"SEC Reports" shall have the meaning set forth in Section 4.5
hereof.
"Section 338 Elections" shall have the meaning set forth in
Section 7.8(j) hereof.
"Section 338 Forms" shall have the meaning set forth in
Section 7.8(k) hereof.
"Section 338(g) Election" shall have the meaning set forth in
Section 7.8(l) hereof.
"Section 338(h)(10) Election" shall have the meaning set forth
in Section 7.8(m) hereof.
"Securities" shall have the meaning set forth in Section 2.4
hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Sellers" shall have the meaning set forth in the preamble
hereof.
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"Sellers' Confidentiality Agreement" shall mean the letter
agreement dated June 30, 1998, by and between the Sellers and Buyer.
"Seller Indemnified Parties" shall have the meaning set forth
in Section 10.3 hereof.
"Sellers' knowledge" or "knowledge of Sellers" shall mean the
knowledge of the Sellers and those individuals who as of the date hereof or at
any time thereafter and prior to the Closing are directors or officers of the
Companies.
"Shares" shall mean the shares of capital stock of the
Companies to be purchased and sold pursuant to Section 2.1.
"Statute Representations" shall have the meaning set forth in
Section 10.2(a) hereof.
"Stock Purchases" shall have the meaning set forth in the
recitals hereof.
"Stockholders" shall have the meaning set forth in the
preamble hereof.
"Stockholders' Agreement" shall have the meaning set forth in
Section 2.5 hereof.
"Straddle Period" shall have the meaning set forth in Section
7.3 hereof.
"Subsidiaries" shall have the meaning set forth in the
recitals hereof.
"Tax Audit" shall have the meaning set forth in Section 7.6(d)
hereof.
"Tax Laws" shall have the meaning set forth in Section 7.8(n)
hereof.
"Taxes" shall have the meaning set forth in Section 7.8(o)
hereof.
"Taxing Authority" shall have the meaning set forth in Section
7.8(p) hereof.
"Title Matters" shall have the meaning set for the Section
3.4(a) hereof.
"Trademarks" shall have the meaning set forth in Section 3.8
hereof.
"Trusts" shall mean the trusts that are parties hereto created
and governed by the respective trust agreements listed on Exhibit 1 hereto.
"U.S. GAAP" shall have the meaning set forth in Section 3.3(c)
hereof.
"Warrants" shall mean the warrants to purchase 10.00 shares of
Buyer Common Stock substantially in the form of Exhibit 2.4 hereto.
"Withdrawal Liability" shall have the meaning set forth in
Section 6.2(c) hereof.
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ARTICLE II
Sale of Stock and Assets; Closing
Section 2.1. Purchase and Sale. On the basis of the
representations, warranties, covenants and agreements and subject to the
satisfaction or waiver (to the extent permitted) of the applicable conditions
set forth herein, at the Closing the Sellers will sell, convey, transfer, assign
and deliver, and Buyer or direct or indirect subsidiaries of Buyer will
purchase, the number of shares of each of the Companies which is set forth in
Schedule 2.1, which constitute, and will constitute as of the Closing, 100% of
the issued and outstanding shares of capital stock of each of the Companies.
Section 2.2. Payment of the Cash Purchase Price. In partial
consideration of the sale, conveyance, transfer, assignment and delivery of the
Shares to Buyer, Buyer will pay to the Sellers at the Closing, the aggregate
amount of Seventy-Four Million Five Hundred Thousand Dollars ($74,500,000)
reduced dollar for dollar by (x) the principal amount of the consolidated
Indebtedness of the Companies and the Subsidiaries as of March 31, 1998 in the
amount of $16,249,719 and (y) any prepayment penalties and premiums and other
costs and expenses incurred by the Companies and the Subsidiaries in connection
with the repayment of any Indebtedness of the Companies and the Subsidiaries
made in connection with the Closing (as so reduced, the "Cash Purchase Price").
The Cash Purchase Price shall be payable in the respective percentages to the
Sellers as specified on Schedule 2.2, and by wire transfer of immediately
available federal funds to the accounts to be designated in writing at least
three business days prior to the Closing Date by the Designated Representative
to Buyer.
Section 2.3. Stock Transfer Taxes. Sellers shall pay any and
all stock transfer taxes which are due as a result of the sale of the Shares to
Buyer at the Closing. Buyer shall pay any and all stock transfer taxes or stamp
taxes as a result of the issuance of the Securities and the Warrants to the
Sellers at the Closing.
Section 2.4. Agreement to Issue Securities. In partial
consideration of the sale, conveyance, transfer, assignment and delivery of the
Shares to Buyer, Buyer shall issue to the Sellers (x) $ 12,600,000 worth of
Buyer Common Stock which the parties hereto agree shall be equal to an aggregate
of One-Hundred-Twenty (120.00) shares of Buyer Common Stock (the "Securities"),
and (y) $225,280 worth of Warrants which the parties hereto agree shall be equal
to the 10.00 Warrants, in each case, allocated to the respective Sellers as set
forth on Schedule 2.4.
Section 2.5. Stockholders' Agreement. Each Seller
acknowledges and agrees that the Securities and the Warrants (including the
Buyer Common Stock issuable upon exercise thereof) will be subject to the
Stockholders' Agreement, dated as of December 19, 1997, by and among Buyer, the
Estate of Xxxx X. Xxxxxxxxxxx and certain employees of Buyer who are signatories
thereto (the "Stockholders' Agreement") and that effective as of the Closing
Date Sellers shall become parties to the Stockholders' Agreement and the
transfer of the Securities and the Warrants (including the Buyer Common Stock
issuable upon exercise thereof) shall be governed
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by the Stockholders' Agreement, in each case as amended by the form of amendment
to the Stockholders' Agreement attached hereto as Exhibit 2.5, which is to be
executed at or prior to the Closing by Buyer, such other parties to the
Stockholders' Agreement as are necessary to effect such amendment, and the
Sellers.
Section 2.6. Restrictive Legends. Each Seller acknowledges
and agrees that any certificates representing the Securities and Warrants will
bear restrictive legends in substantially the forms set forth in the
Stockholders' Agreement and a stop-transfer order may be placed against their
transfer.
Section 2.7. Time and Place of Closing. Subject to
satisfaction or waiver of the conditions to Closing hereto, the Closing shall
take place on the Closing Date at 10:00 a.m., New York City time, at the offices
of Wachtell, Lipton, Xxxxx & Xxxx, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx and
shall be deemed effective as of the opening of business on the Closing Date.
Section 2.8. Deliveries by the Sellers. At the Closing, the
Sellers shall deliver or cause to be delivered to Buyer, in addition to such
other instruments or documents as are required by any other provisions of this
Agreement to be delivered on the Closing Date by the Sellers to Buyer, and such
other instruments and documents as Buyer may reasonably request, certificates
representing the Shares, which certificates shall be either duly endorsed in
blank or accompanied by stock powers duly executed in blank, in either case, as
is reasonably satisfactory to Buyer.
Section 2.9. Deliveries by Buyer. At the Closing, Buyer shall
deliver or cause to be delivered to the Sellers, in addition to such other
instruments or documents as are required by any other provisions of this
Agreement to be delivered on the Closing Date by Buyer to the Sellers, and such
other instruments and documents as the Designated Representative may reasonably
request, the Cash Purchase Price in accordance with Section 2.2 and certificates
representing the Securities and certificates representing the Warrants, in
accordance with Section 2.4.
ARTICLE III
Representations and Warranties of Sellers
Sellers hereby represent and warrant to Buyer as follows:
Section 3.1. Incorporation; Authorization; etc. (a) Each of
the Companies and each Subsidiary is a corporation or other entity (as listed on
Schedule 3.1(a)) duly organized, validly existing and, to the extent applicable,
in good standing under the laws of the jurisdiction of its incorporation. Each
of the Companies and each Subsidiary has full corporate or other power and
authority to own its properties and assets and to carry on its business as it is
now being conducted and is in good standing and is duly qualified to transact
business in each jurisdiction in which the nature of the property owned or
leased by it or the conduct of its business requires it to be so qualified,
except where the failure to be in good standing or to be duly qualified to
transact business, individually or in the aggregate, would not have a material
adverse
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effect on the business, assets, liabilities, prospects, financial condition or
results of operations of the Business (the "Business Condition"). For purposes
of this Agreement, a material adverse effect on the Business Condition shall not
include any change resulting from general economic conditions. Each jurisdiction
in which any of the Companies or the Subsidiaries is qualified to do business is
set forth in Schedule 3.1(a).
(b) Each of the Sellers which is a trust is duly formed,
validly existing and in good standing under the laws of the state of its
formation and has full power and authority to own the Shares and to sell the
Shares to Buyer pursuant to this Agreement.
(c) Each of the Sellers which is a natural person has all
power and authority to enter into this Agreement and each other agreement
contemplated hereby (the "Related Agreements") to which it is a party, to
perform its respective obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby. Each of the Sellers which is a
trust has full power to execute and deliver this Agreement and the Related
Agreements to which it is a party, to perform its respective obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Related
Agreements, the performance of their obligations hereunder and thereunder and
the consummation of the transactions contemplated hereby and thereby by the
Sellers have been duly and validly authorized with respect to those Sellers
which are trusts, by all necessary proceedings on the part of the trustees of
such Seller and, if required, the beneficiaries thereof. This Agreement and each
of the Related Agreements to which any Seller is a party have been duly executed
and delivered by each of the Sellers party thereto and, assuming the due
execution hereof and thereof by Buyer and any other parties thereto, constitute
the legal, valid and binding obligations of each of the Sellers party thereto,
each enforceable against such Seller in accordance with its respective terms.
(d) The execution, delivery and performance of this Agreement
and the Related Agreements by each Seller will not (i) violate or conflict with
any provision of the certificate of incorporation or by-laws of or any other
organizational or governing instrument or trust agreement of any Seller, the
Companies or the Subsidiaries, (ii) except as disclosed in Schedule 3.1(d),
conflict with, violate or constitute a default under any provision of, or be an
event that is (or with the giving of notice or passage of time or both will
result in) a violation of or default under, or result in the acceleration of or
entitle any party to accelerate (whether after the giving of notice or lapse of
time or both) any obligation or right under, or result in the imposition of any
Lien upon any of the Shares or any of the assets or properties of any of the
Companies or of any of the Subsidiaries pursuant to, or require a consent or
create a penalty or increase any Company's or Subsidiary's payment or
performance obligations under, any Lien, order, arbitration award, judgment,
decree or any contract, agreement, license or permit, to which any Seller,
Company or Subsidiary is a party or by which any of them or any of their
property is bound, or (iii) except as disclosed in Schedule 3.1(d), violate or
conflict with, or result in the imposition of any Lien (other than Liens arising
from any actions taken or arrangements made by Buyer and restrictions on
transferability of the Shares under applicable securities laws) upon any of the
Shares or any of the assets or properties of any Company or any Subsidiary
pursuant to, any provision of law, regulation, rule, writ, injunction, decree,
statute, order, judgment or ruling of
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any federal, state, local, foreign, supernational or supranational court or
tribunal (including any court or tribunal dealing with labor matters),
governmental, regulatory or administrative agency, department, bureau, authority
or commission or public or private arbitral panel or arbitrator ("Governmental
Authority") or any other material restriction of any kind or character to which
any Seller, Company or Subsidiary is subject or by which any of them or any of
their property is bound, that, in the case of clauses (ii) and (iii), would,
individually or in the aggregate, have a material adverse effect on the Business
Condition or prevent any of the Stock Purchases or otherwise impair the
performance of the other obligations of the Sellers under this Agreement or the
Related Agreements.
(e) Upon consummation of the Stock Purchases at the Closing,
as contemplated by this Agreement, the Stockholders will deliver to Buyer good
title to the Shares free and clear of any Liens (except those imposed by any
action taken or arrangement made by Buyer and restrictions on transferability of
the Shares under applicable securities laws).
(f) The Sellers have delivered or caused to be delivered to
Buyer complete and correct copies of the trust instruments establishing and
governing each Seller which is a trust, the organizational instruments of each
Seller and each Company or Subsidiary which is neither a corporation, a trust
nor an individual, the certificates of incorporation and by-laws (or similar
instruments) of each Company or Subsidiary which is a corporation, and has made
available to Buyer the corporate minute books and other books and records of the
Companies and the Subsidiaries requested by Buyer. The minutes of the Companies
and the Subsidiaries and the books and records delivered to Buyer are true and
correct in all material respects.
Section 3.2. Capitalization; Structure. (a) All of the
outstanding Shares of the Companies are owned beneficially and of record by the
Stockholders. The authorized capital stock of each of the Companies and the
amount of such stock which is outstanding is as set forth in Schedule 3.2(a).
All of the outstanding Shares of capital stock of the Companies, as listed on
Schedule 3.2(a), are validly issued, fully paid and nonassessable and owned by
the Stockholders in the respective amounts set forth in Schedule 3.2(a). The
authorized capital stock or other equity interests of the Subsidiaries and the
amount of such stock or other equity interests which is outstanding is as set
forth in Schedule 3.2(a). All of the outstanding shares of capital stock or
other equity interests of the Subsidiaries, as listed on Schedule 3.2(a), are
validly issued, fully paid and nonassessable and owned by the Companies or other
Subsidiaries, in the amounts and as set forth on Schedule 3.2(a). Neither the
Shares nor the shares of outstanding common stock or other equity interests of
any Subsidiary have been issued in violation of, or are subject to, any
preemptive rights. Except for the Liens set forth on Schedule 3.2(a) which will
be released prior to the Closing, the shares of capital stock or other equity
interests of the Subsidiaries and the Shares are owned in each case free and
clear of any Liens. There are no outstanding options, warrants, subscriptions or
other rights of any kind to acquire, or obligations to issue, shares of capital
stock of any class of, or other equity interests in, any Company or any
Subsidiary or any securities convertible into or exchangeable or exercisable for
any shares of capital stock of any class of, or other equity interests in, any
Company or any Subsidiary.
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(b) Neither any Company nor any Subsidiary directly or
indirectly owns any capital stock of or other equity interests in any
corporation, partnership or other entity or other Person except for the
ownership of the outstanding shares or other equity interests in the
Subsidiaries, as set forth in Schedule 3.2(a).
(c) Schedule 3.2(c) identifies the officers, directors,
partners or other governing or similarly empowered Persons of the Companies and
the Subsidiaries, which list shall be updated to reflect any changes as of a
date not later than ten business days prior to the Closing Date.
(d) Schedule 3.2(d) lists all of the contracts, loan
agreements, mortgages, notes, capital leases and similar instruments and
documents creating, evidencing or securing Indebtedness of the Companies and the
Subsidiaries (or pursuant to which the Companies or the Subsidiaries may incur
Indebtedness or otherwise be bound), and set forth in Schedule 3.2(d) are the
respective amounts of Indebtedness outstanding under such contracts, loan
agreements, mortgages, notes, capital leases and similar instruments and
documents as of June 30, 1998. Except as set forth on Schedule 3.2(d), all
Indebtedness of the Companies and the Subsidiaries is prepayable on not more
than 30 days' notice, without additional cost other than reimbursement of
customary breakage costs (calculations of which, as of June 30, 1998, are listed
on Schedule 3.2(d)) and reimbursement of legal costs.
Section 3.3. Financial Statements. (a) Attached hereto as
Schedule 3.3(a) are true and complete copies of the consolidated financial
statements of Anagram and the Subsidiaries, including consolidated balance
sheets as of December 31, 1996 and 1997 and consolidated statements of income
for the years ended December 31, 1996 and December 31, 1997, being audited and
accompanied by the unqualified opinion of Xxxxxx Xxxxxxxx (the "Financial
Statements").
(b) Attached hereto as Schedule 3.3(b) are true and complete
copies of unaudited combined financial statements consisting of Anagram and the
Subsidiaries and related parties Anagram Exports, Anagram Spain and Anagram
Japan, including the unaudited combined and combining balance sheets and
combined and combining statements of income (the "Combined Financial
Statements") as of and for the years ended December 31, 1996 and 1997 and as of
and for the three (3) months ended March 31, 1998 and the six (6) months ended
June 30, 1998. The unaudited combined balance sheet as of June 30, 1998 is
referred to in this Agreement as the "Combined Balance Sheet."
(c) The Financial Statements (including the notes thereto) and
the Combined Financial Statements have been prepared in accordance with United
States generally accepted accounting principles ("U.S. GAAP") applied on a
consistent basis throughout the periods (except as otherwise indicated therein
or in Schedule 3.3(a) or Schedule 3.3(b)) (such accounting principles, with such
indicated exceptions thereto, are referred to herein as "Applicable Accounting
Principles") covered thereby and present fairly the financial condition of the
Companies as of such dates and the results of operations of the Companies for
such periods; provided, however, that the Combined Financial Statements as of
and for the three (3) months ended March 31,
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1998 and the six (6) months ended June 30, 1998 are subject to normal year-end
adjustments (the effect of which will not, individually or in the aggregate, be
material) and lack certain footnotes (the effect of which will not, individually
or in the aggregate, be material) and other presentation items. The Combined
Financial Statements have been prepared on a basis consistent with the Financial
Statements. The Financial Statements and the Combined Financial Statements have
been prepared from and in accordance with the books and records of the Companies
and the Subsidiaries.
(d) Except as set forth on Schedule 3.3(d) or in the Financial
Statements and the Combined Financial Statements, the consolidated revenues of
the Companies and the Subsidiaries for each of the calendar months during the
period reflected in the Financial Statements and the Combined Financial
Statements are not attributable to any sales to customers of a non-repeating
nature other than sales to flexible packaging customers and sales to first time
customers not in excess of $250,000 in any such first time sale during the 1997
calendar year and the six-months ended June 30, 1998.
(e) To the knowledge of the Sellers, all of the inventory of
the Companies and the Subsidiaries consists of a quality and quantity reasonably
usable and saleable in the ordinary course of business, consistent with past
practice, subject to normal and customary allowances for spoilage, damage and
outdated items reflected on the books and records of the Companies and the
Subsidiaries. Except as set forth on Schedule 3.3(e), all items included in the
inventory of the Companies and the Subsidiaries are the property of the
Companies and the Subsidiaries, free and clear of any Liens (except with respect
to the sale thereof by the Companies and the Subsidiaries and Liens set forth on
Schedule 3.3(e)), are not held by the Companies and the Subsidiaries on
consignment from others and, to the knowledge of the Sellers, conform in all
material respects to all standards applicable to such inventory or its use or
sale imposed by any law.
Section 3.4. Real Properties. (a) The Companies or one of the
Subsidiaries has (i) good and marketable fee title to the real property owned in
fee by the Companies or any of the Subsidiaries (collectively, the "Owned
Properties") and (ii) valid leasehold interest or other occupancy right to the
real property leased, subleased or licensed by the Companies or any of the
Subsidiaries (collectively, the "Leased Properties"), in each case free and
clear of all options to purchase or lease (in the case of the Owned Properties),
leases, subleases, rights of first offer, conditions of limitation, Liens and
other restrictions and encumbrances (collectively, "Title Matters"), except for
Permitted Liens and such Title Matters set forth in Schedule 3.4, which
Permitted Liens and Title Matters, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the property to
which they relate or the Business Condition. Schedule 3.4 sets forth a complete
and accurate list and description of all Owned Properties and all Leased
Properties.
(b) Each agreement under which real property is leased,
subleased or licensed to the Companies or one of the Subsidiaries, including any
agreements with respect to the use or occupancy thereof and any and all
amendments or modifications thereof or side letters with respect thereto
(collectively the "Company Leases"), is in full force and effect and enforceable
in accordance with its respective terms and the Companies or one of the
Subsidiaries is the holder
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of the lessee's or tenant's interest thereunder and there exists no default
under any of the Company Leases by the Companies or any of the Subsidiaries and
no circumstance exists which, with the giving of notice, the passage of time or
both would result in such a default, except for such defaults or other
circumstances which, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the Business Condition. Except as
set forth in Schedule 3.4, the consummation of the transactions contemplated
hereby does not violate the terms of any of the Company Leases. Except as set
forth in Schedule 3.4 and except for Permitted Liens, the interests of any of
the Companies or Subsidiaries under any Company Lease is not subject to any
pledge, Lien, sublease, assignment, license or other agreement granting to any
third party any interest in such Company Lease or any right to the use or
occupancy of any of the Leased Properties. Except as set forth in Schedule 3.4,
true and complete copies of the Company Leases have previously been delivered to
Buyer, including (without limitation ) all amendments or modifications thereof
and all side letters or other instruments affecting the obligations of any party
thereunder. The lessees under the Company Leases are now in possession of the
applicable Leased Properties except as set forth in Schedule 3.4.
(c) Each of the Companies and the Subsidiaries has all permits
necessary to own or operate the Company Real Property as it is currently owned
or operated, and no such permits will be required, as a result of the
transactions contemplated hereby, to be issued after the Closing in order to
permit the Companies following the Closing to continue to own or operate such
Company Real Property, other than any such permits the absence of which,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on the Business Condition. Except as set forth in
Schedule 3.4, neither the Companies nor the Subsidiaries has received, with
respect to any Company Real Property, any written notice of default or any
written notice of non-compliance with respect to applicable federal, state,
local and foreign laws and regulations relating to zoning, building, fire, use
restriction or safety or health codes which have not been remedied in all
respects which would reasonably be expected to have a material adverse effect on
the Business Condition. There is no pending, or, to the Sellers' knowledge,
threatened condemnation or other governmental taking of any of the Owned Real
Property. Each parcel of the Owned Properties is located adjacent to public
roads or streets with adequate ingress and egress available between such roads
or streets and such Owned Real Property for all purposes related to the Business
and as contemplated by the expansion plans disclosed on Schedule 3.4. All
parcels of land included in the Owned Real Property that purport to be
contiguous are contiguous and are not separated by strips or gores. Except as
set forth on Schedule 3.4, no portion of any of the Owned Properties lies in any
flood plain area (as defined by the U.S. Army Corps of Engineers or otherwise)
or includes any wetlands, vegetation or species protected by any applicable law.
Except as set forth on Schedule 3.4, no improvements constituting a part of the
Owned Properties encroach on real property not owned by the Companies or the
Subsidiaries. To the knowledge of Sellers, all buildings, structures,
improvements and fixtures located on, under, over and within the Owned Real
Property, and all other aspects thereof, (A) are in good operating condition and
repair and are structurally sound and free of any material defects and (B) are
suitable, sufficient and appropriate in all respects for their current uses.
Subject to necessary governmental approvals, which the Sellers have no reason to
believe would not be available in the ordinary course (it being understood that
in connection with making this representation the Sellers are not required to
make any investigation with respect so such approvals), to the knowl-
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edge of Sellers, the Owned Properties are capable of being expanded to
accommodate increased production and distribution capacity thereat to the extent
and in the manner contemplated by the expansion plans disclosed on Schedule 3.4
and nothing has come to the attention of the Sellers (it being understood that
in connection with making this representation the Sellers are not required to
make any investigation with respect to such matters) regarding any applicable
federal, state, local and foreign laws and regulations relating to zoning,
building, fire, use restriction or safety or health codes or other matters
relating to the Owned Properties that would materially restrict the ability of
the Companies to so expand the Owned Properties.
(d) The Sellers have previously provided Buyer with all
existing surveys, title insurance policies, title insurance abstracts and other
evidence of title in the possession of or available to the Companies, the
Subsidiaries or the Sellers covering the Owned Properties and all Permitted
Liens arising with respect to the Owned Properties. Except as set forth in
Schedule 3.4, American Land Title Association policies of title insurance (or
marked title insurance commitments having the same force and effect as title
insurance policies) have been issued by national title insurance companies
insuring the fee simple title of the Companies and the Subsidiaries, as
applicable, to each parcel of Owned Properties in amounts at least equal to the
original cost thereof, subject only to Permitted Liens, and, to the Sellers'
knowledge, such policies are valid and in full force and effect and no claim has
been made under any such policy.
(e) Except as set forth in Schedule 3.4, the Owned Properties
and the Leased Properties constitute, in the aggregate, all of the real property
used to conduct the Business in the manner in which each of those Businesses was
conducted during the one year period ending December 31, 1997 and since such
date, except for additions thereto and deletions therefrom in the ordinary
course of business, consistent with past practice and which would not have a
material adverse effect on the Business Condition.
(f) Except as set forth in Schedule 3.4, there are no
outstanding options or contracts with other Persons for the sale, mortgage,
pledge, hypothecation assignment, sublease, lease or other transfer of all or
any part of the Owned Real Property. No Person has any right or option to
acquire, or right of first refusal with respect to, the interest of the
Companies and the Subsidiaries in the Company Real Property or any part thereof.
Section 3.5. Tangible Personal Property. Each of the Companies
and the Subsidiaries has good and valid title to all tangible personal property
which it owns, including all tangible personal property reflected in the
Combined Balance Sheet as being owned by such Company or Subsidiary, as the case
may be, except for tangible personal property disposed of to third parties since
June 30, 1998 in the ordinary course of business, consistent with past practice
and which would not have a material adverse effect on, the Business Condition,
in each case free and clear of all Liens, except (i) Permitted Liens; (ii) other
Liens, if any, set forth in Schedule 3.5; and (iii) Liens which would not,
individually or in the aggregate, have a material adverse effect on the Business
Condition. Except as would not, individually or in the aggregate, have a
material adverse effect on the Business Condition, all of the tangible personal
property which the Companies and the Subsidiaries lease are subject to leases
which are in full force and effect and which are the valid and binding
obligations of the Companies and the Subsidiaries and, to the
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knowledge of the Sellers, the other parties thereto, and there are no existing
defaults under such leases. The tangible personal property of the Companies and
the Subsidiaries which is used in the Business and owned or leased by the
Companies and the Subsidiaries is, in the aggregate, all of the tangible
personal property used to conduct such businesses in the manner in which each
such business was conducted during the one-year period ending December 31, 1997
and since such date, except for additions thereto and deletions therefrom during
such periods in the ordinary course of business, consistent with past practice
and which would not have a material adverse effect on the Business Condition.
Except as set forth on Schedule 3.5 or 3.15, no Seller owns or has any interest
in any tangible personal property used in conducting the Business.
Section 3.6. Absence of Certain Changes. Except as disclosed
in Schedules 3.6 and 5.4 hereto, since December 31, 1997 the Business has been
conducted in the ordinary course consistent with past practice and there has
been no material adverse change in, or any development which would have a
material adverse effect on, the Business Condition. In addition, except as
disclosed in Schedules 3.6 and 5.4, since December 31, 1997: (i) there has been
no physical damage, destruction, loss or abandonment that would have,
individually or in the aggregate, a material adverse effect on the Business
Condition; (ii) there has been no sale, assignment or transfer of any material
assets of any Company or Subsidiary, except in the ordinary course of business,
consistent with past practice and which would not have a material adverse effect
on the Business Condition; (iii) there has been no sale, assignment, transfer or
license of any Intellectual Property owned by any Company or Subsidiary nor has
any Company or Subsidiary sold, assigned, transferred or licensed any trade
secrets (including formulae) or software which it owns; (iv) none of the
Companies or the Subsidiaries has taken any action which, if taken from the date
hereof through the Closing, would violate Section 5.4(b) through (l) (and there
have been no changes required by U.S. GAAP referred to in Section 5.4(f)); and
(v) none of the Companies or the Subsidiaries has entered into any agreement to
do any of the things previously described in this Section 3.6.
Section 3.7. Litigation; Orders. Except as disclosed in
Schedule 3.7A hereto, there are no Actions pending with respect to which any
Company or Subsidiary or any Seller has been served with notice or process or,
to the knowledge of Sellers, pending in which no notice or process has been
served or threatened or claims asserted against any Company or Subsidiary (or
against any officer, director or employee of any Company or Subsidiary or any
Related Party or any other Person to the extent such officer, director,
employee, Related Party or other Person is entitled to indemnification from the
Companies or the Subsidiaries with respect to such Action or claim) that would,
individually or in the aggregate, have a material adverse effect on the Business
Condition or in which the complaint or claim specifically seeks to prohibit any
of the Stock Purchases or otherwise impair the consummation of this Agreement or
the transactions contemplated hereby. Except as disclosed in Schedule 3.7A
hereto, there are no judgments, verdicts or outstanding orders, injunctions,
decrees, stipulations, settlement agreements, citations, fines or awards against
or binding upon any Company or Subsidiary or any of their respective properties
or businesses (or to the knowledge of the Sellers against any officer, director
or employee of any Company or Subsidiary or any Related Party or any other
Person to the extent such officer, director, employee, Related Party or other
Person is entitled to indemnification from the Companies or the Subsidiaries
with respect to such Action or claim) that would have, individually or in
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the aggregate, a material adverse effect on the Business Condition or prohibit
any of the Stock Purchases or otherwise impair the ability of any Seller to
complete the Stock Purchases or the transactions contemplated hereby. Except as
set forth in Schedule 3.7A, there is no material Action by any Company or
Subsidiary, or by any Seller or Related Party and relating to the Business,
pending against any other party. Schedule 3.7B lists all Actions to which (i)
any of the Companies or the Subsidiaries is or was a party or subject or (ii)
any of the Sellers or Related Parties is or was a party or subject which relate
to the Business, in each case which was pending at any time since January 1,
1996 to the date hereof.
Section 3.8. Intellectual Property. Schedule 3.8 hereto is a
true, complete and accurate list, by country, of (a) all United States and
foreign trademarks and service marks (and registrations and applications
therefor) (collectively, "Trademarks") owned by any Company or Subsidiary or by
any Seller and utilized by or on behalf of any Company or Subsidiary, (b) any of
the foregoing licensed to or by or on behalf of any Company or Subsidiary
(together with the Trademarks referred to in clause (a), the "Company
Trademarks"), (c) all United States and foreign patents and patent applications
(collectively "Patents") owned by any Company or Subsidiary or by any Seller on
behalf of any Company or Subsidiary and (d) any of the foregoing (described in
clause (c)) licensed to or by or on behalf of any Company or Subsidiary
(together with the Patents referred to in clause (c), the "Company Patents").
Schedule 3.8 accurately identifies, where appropriate, the following for each
item of the foregoing: name of xxxx or title of patent, the registration or
patent number or serial number, patent issue or filing date and inventor(s).
Neither any Company nor any Subsidiary owns or licenses Company Trademarks or
Company Patents except as listed in Schedule 3.8. None of the Sellers owns any
Intellectual Property used by or on behalf of any of the Companies or the
Subsidiaries. "Intellectual Property" shall be defined herein as (i) Trademarks
and Patents, (ii) non-patented formulae, inventions, know-how, manufacturing
procedures, processes, trade secrets, proprietary information, software
licenses, registered and unregistered design rights and all other intellectual
property and proprietary rights, and (iii) the Company Design Licenses; and the
Intellectual Property owned by any Company or Subsidiaries is hereinafter
collectively referred to as the "Company Intellectual Property." Except as
otherwise set forth on Schedule 3.8 hereto, the Companies and Subsidiaries own
all Company Intellectual Property free and clear of any Liens, licenses, or, to
the knowledge of Sellers, adverse claims or other restriction (except those
imposed by any action taken or arrangement made by Buyer). Schedule 3.8 lists
the extent of any rights of any Persons other than the Companies or the
Subsidiaries in any Company Intellectual Property and all payments that have
been made or are required to be made by such other Persons in connection with
acquiring any such rights. Except as specifically identified in Schedule 3.8, no
Seller owns or has any interest in any Company Intellectual Property. Except as
set forth on Schedule 3.8, to the knowledge of the Sellers, there are no
existing claims or threatened claims, of any third party based on the use by, or
challenging the ownership of, the Companies, the Subsidiaries or the Sellers of
any of the Company Intellectual Property or claims of adverse ownership,
invalidity, unenforceability or misuse of the Company Intellectual Property. No
offers have been made to license to any of the Companies, the Subsidiaries or
the Sellers any Intellectual Property that any Company or Subsidiary purports to
own as Company Intellectual Property. Except as described in Schedule 3.8, to
the knowledge of the Sellers neither any Company nor any Subsidiary has
infringed or misappropriated, or is infringing or misappropriating, any U.S. or
foreign patents or
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copyrights or any U.S., state or foreign trademarks, or other Intellectual
Property rights of any Person. Except as described in Schedule 3.8, to the
knowledge of the Sellers, there are no uses or sales of the Company Intellectual
Property by any other Person that would limit the Companies' ability to make any
filing in respect of or enforce the exclusive rights of any Company Intellectual
Property in any domestic or foreign jurisdiction, whether or not any filings in
respect of such rights have been made in such jurisdictions (it being understood
that in connection with making this representation the Sellers are not required
to make any investigation with respect to such uses or sales in any jurisdiction
in which the Companies and the Subsidiaries do not sell any products as of the
date hereof). Except as described in Schedule 3.8, to the knowledge of the
Sellers, the Companies and the Subsidiaries have taken all reasonable actions to
maintain and protect all Company Intellectual Property in all material respects.
Except as described in Schedule 3.8, to the knowledge of the Sellers, neither
any Company nor any Subsidiary has used or enforced, or failed to use or
enforce, any of the Company Intellectual Property in any manner which limits its
validity or enforceability or is reasonably expected to result in its
invalidity, unenforceability or misuse. Except as set forth on Schedule 3.8
hereto, to the knowledge of Sellers there is no material infringement or
misappropriation by any Person of the Company Intellectual Property. The
consummation of the transactions contemplated by this Agreement will not alter,
impair or extinguish any of the Company Intellectual Property except as set
forth in Schedule 3.8.
Section 3.9. Governmental Licenses, Approvals, Other
Authorizations, Consents, Reports, etc. (a) The Companies and the Subsidiaries
possess or have been granted all registrations, filings, applications,
certifications, notices, consents, licenses, permits, approvals, certificates,
franchises, orders, qualifications, authorizations and waivers of any
Governmental Authority necessary to entitle it presently to conduct the Business
in the manner in which it is presently being conducted (the "Licenses"), except
as set forth in Schedule 3.9(a) and except those Licenses whose failure to
possess or have granted would not have, individually or in the aggregate, a
material adverse effect on the Business Condition. Except as noted in Schedule
3.9(a), (i) all of the Licenses are in full force and effect except for those
Licenses whose failure to be in full force and effect would not have,
individually or in the aggregate, a material adverse effect on the Business
Condition, and (ii) no Action is pending or, to the Sellers' knowledge,
threatened seeking the revocation or limitation of any License that would,
individually or in the aggregate, have a material adverse effect on the Business
Condition.
(b) Schedule 3.9(b) hereto contains a list of all
registrations, filings, applications, certifications, notices, consents,
licenses, permits, approvals, certificates, franchises, orders, qualifications,
authorizations and waivers required to be made, filed, given or obtained by any
Seller, Company or Subsidiary with, to or from any Governmental Authority in
connection with, the consummation of the Stock Purchases and performance of the
other obligations of Sellers under this Agreement, except for those (i) that
become applicable solely as a result of the specific regulatory status of Buyer
or its Affiliates, or (ii) the failure to make, file, give or obtain which would
not, individually or in the aggregate, either have a material adverse effect on
the Business Condition or prevent the consummation of the Stock Purchases and
the other transactions contemplated hereby.
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Section 3.10. Labor Matters. None of the Companies nor the
Subsidiaries are party to, or bound by any collective bargaining agreement,
contract or other agreement or understanding with any labor union, trade union,
employee representative, work committee, guild or association representing
employees of any of the Companies or the Subsidiaries. As of the date hereof, no
work stoppage against any of the Companies or the Subsidiaries is pending or, to
the Sellers' knowledge, threatened. Except as set forth on Schedule 3.10, none
of the Companies or the Subsidiaries is, or since January 1, 1996 has been,
involved in or, to the Sellers' knowledge, threatened with any labor dispute,
arbitration, lawsuit, grievance or administrative proceeding (other than
immaterial grievances), relating to material labor matters involving any current
or former employee of any Company or Subsidiary. No union or association
organizing or election activities involving any nonunion employees of any
Company or Subsidiary are in progress or, to the knowledge of Sellers, have been
threatened since January 1, 1996.
Section 3.11. Compliance with Laws. Except as may be
disclosed on Schedule 3.11, the conduct of the business of the Companies and the
Subsidiaries is in compliance and, to the knowledge of Sellers, has been in
compliance with all statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to their properties, except for
violations or failures so to comply, if any, that, individually or in the
aggregate, would not have a material adverse effect on the Business Condition.
Except as set forth on Schedule 3.11, none of the Sellers, and to the knowledge
of Sellers, none of the Companies or the Subsidiaries has received notice of any
alleged violation of any statute, law, regulation, ordinance, rule, judgment,
order or decree from any Governmental Authority applicable to the Companies or
the Subsidiaries or to their properties which has not been satisfactorily
addressed except for violations, if any, that would not, individually or in the
aggregate, have a material adverse effect on the Business Condition or would
give rise to material fines or other material civil penalties or any criminal
liabilities. In furtherance and not in limitation of the foregoing, none of the
Sellers, the Companies or the Subsidiaries has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of property, however
characterized, to any government official or other governmental party, in the
United States or any other country, which is in any manner related to the
business or operations of the Companies or the Subsidiaries and which was
illegal under any statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees of any Governmental Authority (including, without limitation,
the U.S. Foreign Corrupt Practices Act).
Section 3.12. Insurance. To the knowledge of the Sellers,
each of the Companies and the Subsidiaries is covered by valid and currently
effective insurance policies issued in favor of the Companies or the
Subsidiaries that are customary for privately-owned companies of similar size
and financial condition. Schedule 3.12 lists all insurance policies which are in
effect covering any of the Companies, the Subsidiaries, their respective Owned
Properties or Leased Properties or their employees and such Schedule lists each
of the parties to such policies. Except as set forth on Schedule 3.12, all such
policies are in full force and effect, all premiums due thereon have been paid,
no notices of limitation or non-renewal have been delivered with respect thereto
and the Sellers, the Companies and the Subsidiaries have complied with the
provisions of such policies, except for failures to be in full force and effect,
to pay premiums and to comply which, individually or in the aggregate, would not
have a material adverse effect on the Business Condition.
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Section 3.13. Material Contracts. Except as set forth on
Schedules 3.2(d), 3.4, 3.8, 3.13 or 6.1(a) hereto, as of the date hereof,
neither any of the Companies nor any of the Subsidiaries is a party to or bound
by any written or oral (a) employment, consulting or non-competition agreement
or contract (in the case of oral agreements or contracts, excluding those which
are terminable at will without any additional expense other than the payment of
previously accrued compensation) requiring payments of compensation to any one
Person in excess of $50,000 per year or aggregate payments of compensation to
any one Person in excess of $100,000; (b) joint venture or partnership contract
or agreement; (c) contract or agreement restricting the right of the Business to
compete in any way with any other Person, which would apply to Buyer or any
Affiliate thereof, including any Company or Subsidiary, after the Closing; (d)
agreement or contract creating, evidencing or securing obligations of any
Company or Subsidiary for Indebtedness or any loan or extension of credit by any
Company or Subsidiary; (e) agreement or contract relating to any outstanding
commitment for capital expenditures in excess of $50,000; (f) licenses, whether
as licensor or licensee, of any Intellectual Property, including the Company
Design Licenses; (g) other than as set forth on Schedule 3.4, lease or sublease
of, or option relating to, any of the Leased Properties; (h) any other material
lease as lessee or lessor of real or personal property; (i) material conditional
sale agreement; (j) material distributorship or franchise agreement; (k)
material raw material or other supply agreements other than routine purchase
orders entered into in the ordinary course of business consistent with past
practice or any exclusive dealing, requirements or take-or-pay contracts; (l)
any brokerage or finders fee agreements; or (m) other contract or agreement,
entered into other than in the ordinary course of business, involving an
estimated total future payment or payments in excess of $50,000. Schedule 3.8
lists and sets forth with respect to each Company Design License the party from
whom the license was granted, the date of expiration of the license, the royalty
rate, the total guaranteed royalties due under the license, the royalties paid
pursuant to the license as of June 30, 1998, and also lists, to the knowledge of
the Sellers, all open audits (both domestic and foreign) with respect to the
Company Design Licenses. Except as set forth on Schedule 3.8, no Action is
pending or, to the Sellers' knowledge, threatened seeking the revocation or
limitation of any Company Design License that would, individually or in the
aggregate, have a material adverse effect on the Business Condition. Except as
set forth on Schedule 3.13 hereto, each contract or agreement set forth on
Schedule 3.13 hereto is in full force and effect, and, to the Sellers'
knowledge, is legal, valid and binding and enforceable against each other Person
party thereto in accordance with its terms, subject to limitations imposed by
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws and principles of equity. Except as set forth in Schedule 3.13
hereto, neither any of the Companies or the Subsidiaries, nor, to the Sellers'
knowledge, is any other party to any such contract or agreement, in breach
thereof or default thereunder and there does not exist under any provision
thereof, any event that, with the giving of notice or the lapse of time or both,
would constitute such a breach or default by any Company or Subsidiary or, to
the Sellers' knowledge, by any other party to any such contract or agreement,
except for such breaches, defaults and events as to which requisite waivers or
consents have been obtained or which would not, individually or in the
aggregate, have a material adverse effect on the Business Condition. Except as
set forth on Schedule 3.13, Seller has delivered to Buyer true and correct
copies of each of such written agreements and contracts or provided written
summaries of any such oral agreements and contracts.
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Section 3.14. Brokers, Finders, etc. Except for the services
of Xxxxx Xxxxxxx Inc. ("Xxxxx Xxxxxxx"), neither any of the Sellers nor any of
their Affiliates (including any of the Companies or the Subsidiaries) has
employed, or is subject to any valid claim of, any broker, finder, or other
similar intermediary in connection with the transactions contemplated by this
Agreement who might be entitled to a fee or commission in connection with such
transactions. Schedule 3.14 sets forth the aggregate amount payable to Xxxxx
Xxxxxxx in connection with the transactions contemplated hereby plus out of
pocket expenses pursuant to the engagement letter between Xxxxx Xxxxxxx and the
Sellers and their Affiliates (including the Companies and the Subsidiaries),
which engagement letter has been provided to Buyer pursuant to Section 3.13.
Except as provided by Section 12.4, none of Buyer, the Companies or the
Subsidiaries has or will have any obligations to Xxxxx Xxxxxxx with respect to
the transactions contemplated by this Agreement.
Section 3.15. Affiliate Transactions. Except as disclosed in
Schedule 3.15 hereto, (i) no Seller and no trustee, fiduciary or beneficiary of
any Seller or any member of such Seller's family (as "family" is defined under
Section 267(c) of the Code) (a "Related Party") sells, provides or causes to be
sold or provided to any Company or Subsidiary any assets, loans, advances,
services (other than as an employee), goods or facilities and (ii) none of the
Companies or the Subsidiaries provides or causes to be provided to any such
Seller or Related Party any assets, loans, advances (other than immaterial
advances to employees in the ordinary course of business), services, goods or
facilities. Except as disclosed in Schedule 3.15 hereto, neither any Company nor
any Subsidiary, jointly with any Seller or Related Party, purchases or sells
goods or services and the Companies and the Subsidiaries do not have any other
significant business relationships with any Seller or Related Party. The only
agreements, arrangements, relationships or other items listed on Schedule 3.15
that will remain in place from and after the Closing or with respect to which
Buyer, the Companies, the Subsidiaries or any of their Affiliates will have any
ongoing obligations or duties, are those items (and only with respect to such
obligations or duties) which are explicitly identified in Schedule 3.15 as
remaining in place and having ongoing obligations or duties.
Section 3.16. Environmental Compliance. (a) For purposes of
this Section 3.16, (i) "Hazardous Substance" means any pollutant, contaminant,
hazardous or toxic substance or waste, solid waste, petroleum or any fraction
thereof, or any other chemical, substance or material listed or identified in or
regulated by or under any Environmental Law; (ii) "Environmental Law" means the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq., the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., the Clean Water Act,
33 U.S.C. ss. 1251 et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the
Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Safe Drinking
Water Act, 42 U.S.C. ss. 300f et seq., the Emergency Planning and Community
Right to Know Act, 42 U.S.C. ss. 11001 et seq., the Occupational Safety and
Health Act, 29 U.S.C. ss. 651 et seq., the Oil Pollution Act, 33 U.S.C. ss. 2701
et seq., and the Minnesota Environmental Response and Liability Act, Minn. Stat.
Section 115B et seq. and 115C et seq. in each case as amended from time to time,
and any other statute, rule, regulation, law, by-law, ordinance or directive of
any Governmental Authority dealing with the pollution or protection of natural
resources or the indoor or ambient environment or with the protection of human
health or safety; (iii) "RCRA Hazardous Waste" means a solid waste that is
listed
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or classified as a hazardous waste, as that term is defined in or pursuant to
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. ss. 6901 et
seq.; and (iv) "Company Real Property" means the Owned Properties and the Leased
Properties.
(b) Except as set forth on Schedule 3.16, there are no claims
pending or, to the knowledge of Sellers, threatened, and none of the Sellers,
the Companies or the Subsidiaries has received any notice, alleging, warning or
notifying any Company or Subsidiary that any Company or Subsidiary is, has been
or may be in violation of or non-compliance with any Environmental Law.
(c) Except as set forth in Schedule 3.16, to the knowledge of
the Sellers, no Hazardous Substances have ever been buried, spilled, leaked,
discharged, emitted, generated, stored, used or released, and to the knowledge
of the Sellers no Hazardous Substances are now present in amounts,
concentrations or conditions requiring investigation, study, removal,
remediation or any other response action or corrective action under, or forms
the basis of a claim pursuant to, any Environmental Law, in, on, from or under
the Company Real Property or any other property with respect to which any
Company or Subsidiary may be identified as a potentially responsible party or
otherwise bear liability, except for immaterial quantities stored or used by any
Company or Subsidiary in the ordinary course of its business and in accordance
with all applicable Environmental Laws.
(d) Except as set forth in Schedule 3.16, the Owned Properties
and, to the knowledge of the Sellers, the Leased Properties, are not being used
and, to the knowledge of Sellers, never have been used in connection with the
business of manufacturing, storing or transporting Hazardous Substances in
violation of any Environmental Law, in any material respect, and no RCRA
Hazardous Wastes have been treated, stored or disposed of there in violation of
any Environmental Law.
(e) Except as set forth in Schedule 3.16, there are not now
and, to the knowledge of Sellers, never have been any underground or above
ground storage tanks or other containment facilities of any kind on the Owned
Properties which contain or contained any Hazardous Substances.
(f) Except as set forth in Schedule 3.16, to the knowledge of
the Sellers, none of the Company Real Property is or has been listed on the
National Priorities List, the Comprehensive Environmental Response, Compensation
and Liability Information System or any similar federal, state, local or foreign
list, schedule, log, inventory or database of sites or facilities with
potential, threatened, suspected or actual releases of Hazardous Substances.
(g) Schedule 3.16 identifies, and Sellers have provided to
Buyer true and correct copies of, all written environmental audits or
assessments in the possession of or available to any Company, Subsidiary or
Seller relating in whole or in part to any of the Companies or the Subsidiaries
or the Business undertaken by or on behalf of any of the Sellers or any of their
Affiliates, or, to the Sellers' knowledge, by Governmental Authorities or other
third parties, and any written communications by the Companies or the
Subsidiaries or, to the Sellers' knowledge, relating in whole or in part to any
of the Companies or the Subsidiaries or the Business with
-22-
environmental agencies, within the past six years which describe the status of
any Company Real Property or the compliance of the owners or lessees thereof
with respect to any Environmental Law.
(h) Except as set forth in Schedule 3.16, neither any
Company nor any Subsidiary has received any notice from any Governmental
Authority or other third party that any of them or any of their predecessors is
or may be a potentially responsible party or may otherwise bear liability for
any actual or threatened release of Hazardous Substances at or from any site or
facility other than Company Real Property.
Section 3.17. Customer and Supplier Relationships. Schedule
3.17 lists the 10 largest suppliers to the Business, the 10 largest distributors
or other customers of the Business, in each case based on aggregate purchases or
sales, as the case may be, during each of (x) the period January 1, 1997 through
December 31, 1997 and (y) the period January 1, 1998 through June 30, 1998, and
the approximate dollar amount of such aggregate purchases or sales in each such
period. Except as set forth on Schedule 3.17, the relationships of the Companies
and Subsidiaries with such customers, suppliers and distributors are
satisfactory. To the knowledge of the Sellers, the purchase by Buyer of the
Shares pursuant to the Stock Purchases will not materially adversely affect the
relationships of the Companies and the Subsidiaries with such customers,
suppliers and distributors.
Section 3.18. Undisclosed Liabilities. To the knowledge of
the Sellers, except (i) as disclosed in Schedule 3.18 hereto, (ii) as and to the
extent disclosed or reserved against on the Combined Balance Sheet, (iii) as
incurred after the date of the Combined Balance Sheet in the ordinary course of
business consistent with past practice and not prohibited by this Agreement and
which would not, individually or in the aggregate, have a material adverse
effect on the Business Condition and (iv) those Covered Liabilities to the
extent constituting Taxes for which Sellers are responsible under Article VII,
the Companies and the Subsidiaries do not have any liabilities or obligations of
any nature, whether absolute, accrued, contingent or otherwise and whether due
or to become due, that, individually or in the aggregate, would have a material
adverse effect on the Business Condition.
Section 3.19. Disclosure. The representations and warranties
of Sellers contained in this Agreement are true and correct in all material
respects, and such representations and warranties do not omit any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
Section 3.20. Banks, Powers of Attorney. Except as set forth
in Schedule 3.20, neither any of the Companies or the Subsidiaries has any
accounts or safe deposit boxes under its or their control or for their benefit
at any bank or other financial institution and the Companies and Subsidiaries
have not entered into any powers of attorney other than customary powers of
attorneys. Schedule 3.20 sets forth the names of all Persons authorized to draw
on or have access to the accounts and safe deposit boxes of any of the Companies
or the Subsidiaries listed thereon.
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Section 3.21. Sufficiency and Condition of Assets. Except as
disclosed in the Schedules to this Agreement, as of the acquisition of the
Shares pursuant to the Stock Purchases, the Companies and the Subsidiaries will
own or have valid rights to use all of the assets, rights and interests which
are used in, and are sufficient for, the operation of the Business as it is
currently being conducted, and as it was conducted during the period January 1,
1997 through December 31, 1997 and since such date to the Closing Date, in all
material respects. The tangible assets of the Companies and the Subsidiaries are
in good working order, reasonable wear and tear excepted, and are suitable for
the use for which they are intended in all material respects.
Section 3.22. Non-foreign Certification. None of the Sellers
is a "foreign person" within the meaning of Section 1445 of the Code.
Section 3.23. Securities Laws Representations.
(a) Each Seller is acquiring the Securities for his or its own
account and not for the account or benefit of any other Person;
(b) The Designated Representative is an "accredited investor"
as defined in Rule 501 of Regulation D under the Securities Act;
(c) Each Seller, together with its advisors, has knowledge and
experience in financial and business matters such that such Seller is capable of
evaluating the merits and risks of an investment in the Securities;
(d) Each Seller understands that the Securities are a
speculative investment which involves a high degree of risk of loss of such
Seller's investment therein, that there are substantial restrictions on the
transferability of the Securities and that on the date hereof and for an
indefinite period following such date there will be no public market for the
Securities and, accordingly, it may not be possible to liquidate such Seller's
investment in the Company at all, including in the case of emergency;
(e) Each Seller's financial situation is such that such Seller
can afford to bear the economic risk of holding the Securities for an indefinite
period of time and suffer complete loss of such Seller's investment in the
Securities;
(f) Such Seller (i) has been furnished with all such
information as such Seller has deemed necessary to make an informed investment
decision with respect to the Securities and (ii) has been afforded an
opportunity to ask questions and receive answers from authorized officers and
other representatives of Buyer concerning Buyer;
(g) Each Seller confirms that he had the opportunity to obtain
such independent legal and tax advice and financial planning services as such
Seller has deemed appropriate prior to making a decision to invest in the
Securities;
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(h) The Securities are being acquired by each Seller solely
for investment, and are not being purchased with a view to a distribution or
resale thereof otherwise than in compliance with the Securities Act; and
(i) Each Seller understands that the Securities have not been
registered under the Securities Act, or any state securities laws, in reliance
upon exemptions from registration for non-public offerings and such Seller
understands that the Securities will be subject to the restrictions and other
terms and conditions of the Stockholders' Agreement, as amended as contemplated
hereby.
ARTICLE IV
Representations and Warranties of Buyer
Buyer hereby represents and warrants to the Sellers as
follows:
Section 4.1. Incorporation; Authorization; Capitalization;
Structure. (a) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Buyer has full corporate
power to execute and deliver this Agreement and each Related Agreement to which
it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. Buyer has full
corporate or other power and authority to own its properties and assets and to
carry on its business as it is now being conducted and is in good standing and
is duly qualified to transact business in each jurisdiction in which the nature
of the property owned or leased by it or the conduct of its business requires it
to be so qualified, except where the failure to be in good standing or to be
duly qualified to transact business, individually or in the aggregate, would not
have a material adverse effect on the business, assets, liabilities, prospects,
financial condition or results of operations of Buyer and its subsidiaries (the
"Buyer Business Condition"). For purposes of this Agreement, a material adverse
effect on the Buyer Business Condition shall not include any change resulting
from general economic conditions. The execution and delivery of this Agreement
and the Related Agreements, the performance of its obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby and
thereby by Buyer have been duly and validly authorized by the Board of Directors
of Buyer and no other corporate proceedings on the part of Buyer, its Board of
Directors or stockholders are necessary therefor. Except as set forth in
Schedule 4.1(a), the execution, delivery and performance of this Agreement and
the Related Agreements by Buyer will not (i) violate or conflict with any
provision of the charter or by-laws or similar organizational instrument of
Buyer, (ii) conflict with, violate or constitute a default under any provision
of, or be an event that is (or with the giving of notice or passage of time or
both will result in) a violation of or default under, or result in the
acceleration of or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any obligation or right under, or require a
consent under, any Lien or any material contract, agreement, license or permit,
to which Buyer is a party or any of its property is bound, or (iii) violate or
conflict with any provision of law, regulation, rule, writ, injunction, decree,
statute, order, judgment or ruling
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of any Governmental Authority or any other material restriction of any kind or
character to which Buyer is subject or by which any of its property is bound,
that, in the case of clauses (ii) and (iii), would, individually or in the
aggregate, have a material adverse effect on Buyer's ability to consummate the
Stock Purchases or would otherwise prevent the performance of the other
obligations of Buyer under this Agreement or the Related Agreements. This
Agreement and each of the Related Agreements to which Buyer is a party have been
duly executed and delivered by Buyer, and, assuming the due execution hereof and
thereof by the Sellers and the other parties thereto, constitutes the legal,
valid and binding obligations of Buyer, each enforceable against Buyer in
accordance with its terms.
(b) Buyer has delivered or caused to be delivered to the
Sellers complete and correct copies of the certificates of incorporation and
by-laws of Buyer, and has made available to the Sellers and their advisors the
corporate minute books and other books and records of Buyer. The corporate
minute books of Buyer made available to the Sellers and their advisors are true
and correct in all material respects.
(c) As of the date hereof 1,012.4088748 shares of Buyer Common
Stock are issued and outstanding. All of the issued and outstanding shares of
Buyer Common Stock are validly issued, fully paid and nonassessable and none of
such shares have been issued in violation of, or are subject to, any preemptive
rights. Except as set forth in the SEC Reports, on Schedule 4.1(c) hereof, or as
contemplated hereby and by the Related Agreements, as of the date hereof, there
are no outstanding options, warrants, subscriptions or other rights of any kind
to acquire, or obligations to issue, shares of capital stock of any class of, or
other equity interests in, Buyer or any securities convertible into or
exchangeable or exercisable for any shares of capital stock of any class of, or
other equity interests in, Buyer.
Section 4.2. Licenses, Approvals, Other Authorizations,
Consents, Reports, etc. Schedule 4.2 hereto contains a list of all
registrations, filings, applications, certifications, notices, consents,
approvals, certificates, franchises, orders, qualifications, authorizations and
waivers required to be made, filed, given or obtained by Buyer with, to or from
any Governmental Authority in connection with the consummation of the Stock
Purchases and performance of the other obligations of Buyer under this Agreement
except for those (i) that become applicable solely as a result of the specific
regulatory status of Sellers, the Companies or the Subsidiaries or any change of
ownership thereof or (ii) the failure to make, file, give or obtain which would
not, individually or in the aggregate, either have a material adverse effect on
the Business Condition of Buyer or prevent the consummation of the Stock
Purchases and the other transactions contemplated hereby.
Section 4.3. Investment Representations. In connection with
the acquisition of the Shares, Buyer makes the following representations:
(a) Buyer is acquiring the Shares for its own account and not
for the account or benefit of any other Person;
(b) Buyer is an "accredited investor" as defined in Rule 501
of Regulation D under the Securities Act;
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(c) Buyer has knowledge and experience in financial and
business matters such that Buyer is capable of evaluating the merits and risks
of an investment in the Shares;
(d) Buyer understands that the Shares are a speculative
investment which involves a high degree of risk of loss of such Buyer's
investment therein, that there are substantial restrictions on the
transferability of the Shares and that on the date hereof and for an indefinite
period following such date there will be no public market for the Shares;
(e) Buyer (i) has been furnished with all such information as
Buyer has deemed necessary to make an informed investment decision with respect
to the Shares and (ii) has been afforded an opportunity to ask questions and
receive answers from authorized officers and other representatives of Seller,
the Companies and the Subsidiaries concerning the Companies and the
Subsidiaries;
(f) Buyer confirms that it had the opportunity to obtain such
independent legal and tax advice and financial planning services as such Buyer
has deemed appropriate prior to making a decision to invest in the Shares;
(g) The Shares are being acquired by Buyer solely for
investment, and are not being purchased with a view to a distribution or resale
thereof otherwise than in compliance with the Securities Act; and
(h) Buyer understands that the Shares have not been registered
under the Securities Act, or any state securities laws, in reliance upon
exemptions from registration.
Section 4.4. Securities. At the Closing, the issuance of the
Securities and the Warrants will have been duly authorized and, upon their
issuance pursuant to the terms of this Agreement, the Securities will be validly
issued, fully paid and non-assessable and will not be subject to any preemptive
or similar right other than the rights and obligations under the Stockholders'
Agreement.
Section 4.5. SEC Filings; Financial Statements. (a) Buyer has
filed all forms, reports, statements and documents filed or required to be filed
with the Securities and Exchange Commission (the "SEC") since January 1, 1998
(collectively, including all exhibits and schedules thereto and documents
incorporated therein by reference, the "SEC Reports"), each of which has
complied in all material respects with the applicable requirements of the
Securities Act, and the rules and regulations promulgated thereunder, or the
Exchange Act and the rules and regulations promulgated thereunder, as
applicable, each as in effect on the date so filed.
(b) Each of the audited and unaudited consolidated financial
statements of Buyer (including any related notes thereto) included in the SEC
Reports, complies as to form in all material respects with all applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, has been prepared in accordance with U.S. GAAP applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereof) and fairly presents the consolidated financial position of
Buyer and its subsidiaries
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at the respective date thereof and the consolidated results of its operations
and changes in cash flows for the periods indicated.
Section 4.6. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of Buyer for which the Sellers or any of their Affiliates
would be responsible.
Section 4.7. Financing. Attached as Exhibit 4.7 hereto is a
true and complete copy of the commitment letter, dated on or about the date
hereof (the "Commitment Letter"), issued in connection with the financing of the
transactions contemplated by this Agreement. The terms and conditions of the
Commitment Letter are satisfactory to Buyer.
Section 4.8. Litigation; Orders. Except as disclosed in the
SEC Reports, there are no Actions pending or, to the knowledge of Buyer,
threatened or claims asserted against Buyer (or, to the knowledge of Buyer,
against any officer, director or employee of Buyer or any other Person to the
extent such officer, director, employee, or other Person is entitled to
indemnification from Buyer with respect to such Action or claim) that would,
individually or in the aggregate, have a material adverse effect on the Buyer
Business Condition or in which the complaint or claim specifically seeks to
prohibit any of the Stock Purchases or otherwise impair the consummation of this
Agreement or the transactions contemplated hereby. Except as disclosed in the
SEC Reports, there are no judgments, verdicts or outstanding orders,
injunctions, decrees, stipulations, settlement agreements, citations, fines or
awards against or binding upon Buyer or any of its properties or businesses (or,
to the knowledge of Buyer, against any officer, director or employee of Buyer or
any other Person to the extent such officer, director, employee, or other Person
is entitled to indemnification from Buyer with respect to such Action or claim)
that would have, individually or in the aggregate, a material adverse effect on
the Buyer Business Condition or prohibit any of the Stock Purchases or otherwise
impair the ability of Buyer to complete the Stock Purchases or the transactions
contemplated hereby.
Section 4.9. Compliance with Laws. Except as may be disclosed
in the SEC Reports, the conduct of the business of Buyer is in compliance and,
to the knowledge of Buyer, has been in compliance with all statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable thereto
or to its properties, except for violations or failures so to comply, if any,
that, individually or in the aggregate, would not have a material adverse effect
on the Buyer Business Condition. Except as set forth in the SEC Reports, Buyer
has not received notice of any alleged violation of any statute, law,
regulation, ordinance, rule, judgment, order or decree from any Governmental
Authority applicable to Buyer or its subsidiaries or to their properties which
has not been satisfactorily addressed except for violations, if any, that would
not, individually or in the aggregate, have a material adverse effect on the
Buyer Business Condition or would be reasonably likely to give rise to material
fines or other material civil penalties or any criminal liabilities. In
furtherance and not in limitation of the foregoing, Buyer has not, directly or
indirectly, paid or delivered any fee, commission or other sum of money or item
of property, however characterized, to any government official or other
governmental party, in the United States or any other country, which is in any
manner related to the business or operations of Buyer
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and which was illegal under any statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees of any Governmental Authority (including, without
limitation, the U.S. Foreign Corrupt Practices Act).
Section 4.10. Undisclosed Liabilities. Except as disclosed in
the balance sheet included in the most recent SEC Reports or as incurred after
the date of the most recent SEC Report in the ordinary course of business
consistent with past practice which could not, individually or in the aggregate,
have a material adverse effect on the Buyer Business Condition, Buyer does not
have any liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise and whether due or to become due, that, individually or
in the aggregate, have or could have a material adverse effect on the Buyer
Business Condition.
Section 4.11. Disclosure. The representations and warranties
of Buyer contained in this Agreement are true and correct in all material
respects, and such representations and warranties do not omit any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE V
Covenants of Sellers and Buyer
Section 5.1. Investigation of Business; Access to Properties
and Records. (a) After the date hereof until the Closing Date, each party hereto
shall continue to afford to representatives of the other parties hereto full
access (and the Sellers shall cause the Companies and Subsidiaries to continue
to afford to representatives of Buyer full access), to their respective
officers, employees, suppliers, customers, distributors, auditors, environmental
auditors, counsel, financial advisors and other agents, offices, plants,
warehouses, properties, books, contracts and records (including environmental
surveys and accountant's workpapers), during normal business hours, in order
that such party may continue to have full opportunity to make such
investigations as it desires of the affairs of the Companies and Subsidiaries or
Buyer, as the case may be; provided, however, that such investigation shall not
unreasonably disrupt the personnel and operations of the Companies, the
Subsidiaries or Buyer, as the case may be.
(b) After the date hereof until the Closing Date or the date
of termination of this Agreement, if earlier, Sellers will continue to supply
Buyer with all relevant documents and information for use in connection with
Buyer's investigation contemplated hereby. Such material, including the
materials provided prior to the date hereof, is hereinafter referred to as
"Evaluation Material." Buyer agrees that it and its representatives will hold in
confidence any Evaluation Material in accordance with the Buyer's
Confidentiality Agreement. If the transactions contemplated by this Agreement
are not consummated, the provisions of the Buyer's Confidentiality Agreement
shall survive and shall apply to the Evaluation Materials.
(c) At the Closing or as soon thereafter as practicable, but
in no event later than three days after the Closing Date, Sellers will deliver
or cause to be delivered to Buyer all
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corporate records of the Companies and the Subsidiaries, and all other original
(or copies thereof, if originals are not immediately available) agreements,
documents, books and records relating to the Business in the possession of
Sellers or their respective Affiliates to the extent not then in the possession
of any of the Companies or the Subsidiaries.
(d) Sellers agree to maintain confidentiality set forth in the
Sellers' Confidentiality Agreement, including with respect to "Evaluation
Material" as defined in the Sellers' Confidentiality Agreement supplied after
the date hereof, at all times, on the terms thereof, which are incorporated by
reference herein. If the transactions contemplated by this Agreement are not
consummated, the provisions of the Sellers' Confidentiality Agreement shall
survive and shall apply to such "Evaluation Material."
Section 5.2. Efforts; Obtaining Consents. (a) Subject to the
terms and conditions herein provided, each of the Sellers and Buyer (provided
that with respect to Buyer's financing, Section 5.8 and not this Section shall
govern the matters covered thereby) agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement and
to cooperate with the other in connection with the foregoing, including using
its commercially reasonable efforts (i) where practicable, to obtain all
necessary waivers, consents and approvals from other parties to material
agreements and contracts (including, without limitation, any agreements relating
to Indebtedness) and, on the part of Buyer and the Sellers, to obtain without
additional cost to Buyer, the Companies, the Subsidiaries or the Sellers (except
that Buyer and the Sellers agree to take such actions as specified on Schedule
5.2 hereto) all consents and agreements and to make such other provisions
reasonably necessary or requested by Buyer to enable Buyer to continue to
operate the Business and in the same manner and under the same terms and
arrangements currently operated without increasing the costs of such activity to
Buyer or the Companies and the Subsidiaries, (ii) to obtain all consents,
approvals and authorizations that are required to be obtained from Governmental
Authorities, (iii) to lift or rescind any injunction, restraining order, decree
or other order adversely affecting the ability of the parties hereto to
consummate the transactions contemplated hereby, (iv) to effect all necessary
registrations and filings including, but not limited to, filings under the HSR
Act and any similar required foreign filings and submissions of information
requested by Governmental Authorities, (v) to cooperate with the other parties
hereto in connection with planning the transition of the ownership of the
Companies and managing the integration of operations of the Business with the
operations of Buyer and (vi) to fulfill all conditions to this Agreement.
(b) The parties hereto shall promptly inform the others of any
material communications from the United States Federal Trade Commission, the
Department of Justice or any other Governmental Authority regarding any of the
transactions contemplated hereby. If any party or any Affiliate thereof receives
a request for additional information or documentary material from any such
Governmental Authority with respect to the transactions contemplated hereby,
then such party will endeavor in good faith to make, or cause to be made, as
soon as reasonably practicable and after consultation with the other party, an
appropriate response in compliance with such request.
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Section 5.3. Further Assurances. Sellers and Buyer agree that,
from time to time, whether before, at or after the Closing Date, each of them
will execute and deliver such further instruments of conveyance and transfer and
take such other action as may be reasonably necessary to carry out the purposes
and intents of this Agreement, to assure that Buyer has acquired all of the
rights and assets used or held for use in the Business during the one year
period ended December 31, 1997 and since such date to the Closing Date, other
than to the extent such rights or assets are owned by third parties or have been
disposed of to third parties prior to the Closing in the ordinary course of
business and consistent with past practice. From and after the Closing, the
Sellers will not use any Company Intellectual Property in their names or
operations of any of their affiliated businesses or entities.
Section 5.4. Conduct of Business. From the date hereof until
the Closing, except as disclosed on Schedule 5.4 hereto or otherwise provided
for in this Agreement, and, except as consented to or approved by Buyer in
writing, Sellers covenant and agree that:
(a) each of the Companies and the Subsidiaries shall operate
its business in the ordinary and usual course in accordance with past practices;
(b) neither any Company nor any of the Subsidiaries shall
issue, sell or agree to issue or sell (i) any shares of its capital stock or
other equity interests in any Company or any of the Subsidiaries, or (ii) any
securities convertible into, or options with respect to, or warrants to purchase
or rights to subscribe for, any shares of its capital stock or other equity
interests or make any change in its issued and outstanding capital stock or
other equity interests or redeem, purchase or otherwise acquire any of its
capital stock or other equity interests;
(c) neither any Company nor any Subsidiary shall (i) increase
in any manner the compensation of, or enter into any new bonus or incentive
agreement or arrangement with, any of its directors, officers or other
employees, other than as required by law; (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit to any director, officer or
employee, whether past or present, other than as required by contracts or plan
documents in effect on the date of this Agreement; (iii) enter into any new
employment, severance, consulting, or other compensation agreement with any
director, officer or employee or other Person; or (iv) commit itself to any
additional pension, profit-sharing, deferred compensation, group insurance,
severance pay, retirement or other employee benefit plan, fund or similar
arrangement or adopt or amend or commit itself to adopt or amend any of such
plans, funds or similar arrangements except as required by law or any contract
disclosed in paragraph (c)(iv) of Schedule 5.4;
(d) except as otherwise provided for in this Agreement,
neither any Company nor any Subsidiary shall (i) amend its certificate of
incorporation or by-laws, (ii) declare any dividend or make any distribution
with respect to its stock (other than dividends or distributions payable solely
to a Company or a Subsidiary) except for dividends or distributions made to any
of the Sellers from Anagram in an amount that, when added to any dividends or
distributions made from January 1, 1998 through the date hereof, is no greater
than the sum of (A) an amount equal to $974,152, which is reflected on the
Financial Statements as of December 31, 1997 as accrued dividends payable
relating to tax liabilities of the Sellers in respect of the taxable income
-31-
of Anagram in respect of the taxable period beginning on January 1, 1997 and
ending on December 31, 1997, which amount was paid on the dates and in the
amounts set forth on Schedule 5.4(d)(ii), and (B) the reasonably expected tax
liabilities of each Seller in respect of the taxable income of Anagram (and the
Subsidiaries of Anagram that are disregarded entities for Income Tax purposes)
arising from operations in the ordinary course of business of Anagram and such
disregarded Subsidiaries (or from transactions listed on Schedule 3.3(d)) in
respect of the taxable period beginning on January 1, 1998 and ending on the day
before the Closing Date (using in the case of (A) and (B) each such Seller's
actual effective tax rate for federal income tax and Minnesota income tax for
the purpose of calculating such tax liability); provided, however, that no less
than five days prior to making or paying such amount, the Sellers shall provide
to Buyer, for its review and approval, in writing the amount that the Sellers
propose to withdraw pursuant to this clause (ii) setting forth the calculation
thereof in reasonable detail, (iii) cancel or compromise any debts owed to it,
except for compromises of current or former short-term trade receivables or
other current assets in the ordinary course of business consistent with past
practice, (iv) waive or release any rights of material value, or (v) close any
of its facilities;
(e) neither any Company nor any Subsidiary shall (i) sell,
transfer, lease or otherwise dispose of any of its material assets or any
Company Intellectual Property other than expiration of licenses, leases or other
contracts, in the ordinary course of business and in accordance with their terms
on the date hereof, (ii) create or permit to exist any new Lien on any of its
properties or assets, other than Permitted Liens on Owned Properties, (iii)
enter into any joint venture, partnership or other similar arrangement or form
any other new material arrangement for the conduct of its business, or (iv) make
any investment or purchase any assets or securities of any Person or make any
capital expenditures in an amount in excess of $100,000 individually or $300,000
in the aggregate;
(f) neither any Company nor any Subsidiary shall permit a
material change in its credit practices or its methods of maintaining its books,
accounts or business records or, except as required by U.S. GAAP (in which event
prior notice shall be given to Buyer), change any of its accounting principles
or the methods by which such principles are applied for tax or financial
reporting purposes, and in the case of financial reporting purposes, from those
used in producing the Financial Statements and the Combined Financial Statements
with respect to the one-year period ended as of December 31, 1997;
(g) neither any of the Companies nor any of the Subsidiaries
shall substantially increase the total number of its employees or enter into any
collective bargaining agreement with any employees;
(h) neither any of the Companies nor any of the Subsidiaries
shall enter into a material lease of real property, other than renewals of
leases with unrelated third parties in the ordinary course of business and
consistent with past practice, or permit any modification, amendment or waiver
of the provisions of any existing lease of real property, whether in connection
with seeking or obtaining a lessor's consent to the transactions contemplated by
this Agreement or otherwise, without the consent of Buyer which will not be
unreasonably withheld if there are no significant changes to the economic terms
thereof;
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(i) neither any of the Companies nor any of the Subsidiaries
shall enter into a new Company Design License or permit any modification,
amendment or waiver of the provisions of any existing Company Design License,
whether in connection with seeking or obtaining a licensor's consent to the
transactions contemplated by this Agreement or otherwise, without the consent of
Buyer;
(j) neither any of the Companies nor any of the Subsidiaries
shall engage in purchases of inventory or raw materials other than in the
ordinary course of business and consistent with past practice;
(k) neither any of the Companies nor any of the Subsidiaries
shall enter into any non-competition agreement;
(l) neither any Company nor any of the Subsidiaries shall
enter into any financing transactions, including permitting or causing the
issuance of letters of credit, that would create an impediment to satisfaction
of the conditions and covenants contained in this Agreement or to timely
consummation of the Closing, and the Company and the Subsidiaries shall only
incur or assume additional Indebtedness under the contracts, loan agreements,
mortgages, notes, capital leases and similar instruments and documents listed on
Schedule 3.2(d); and
(m) neither any of the Companies nor any of the Subsidiaries
shall agree to take any action prohibited by this Section 5.4.
Section 5.5. Preservation of Business. From the date hereof
until the Closing, subject to the terms and conditions of this Agreement,
Sellers shall, and shall cause the Companies and Subsidiaries to, use
commercially reasonable efforts to preserve the Business and the Company
Intellectual Property intact, to preserve the good will of customers, suppliers,
employees and others having business relations with the Companies and
Subsidiaries, to retain key employees of the Companies and the Subsidiaries, and
to maintain insurance for the benefit of the Business in full force and effect
with responsible companies, comparable in amount to that in effect on the date
of this Agreement, subject to the availability thereof at costs not materially
greater than at present.
Section 5.6. Non-Solicitation. Prior to the Closing, until
termination of this Agreement, Sellers shall not, and shall not permit the
Companies or the Subsidiaries to, (i) solicit any inquiries or proposals for, or
enter into or continue or resume any discussions with respect to or enter into
any agreement with respect to, any acquisition of any Shares, any shares of
capital stock of any Subsidiary or all, or a substantial part, of the assets of
any of the Companies or the Subsidiaries or (ii) furnish or cause to be
furnished any non-public information concerning the business and operations of
the Companies or the Subsidiaries to any Person (other than to or at the request
of Buyer and its representatives) other than in the ordinary course of business
consistent with past practice. If at any time prior to the Closing, any Seller
or any of their representatives is approached by any third party which expresses
an interest in making an acquisition of the type referred to in clause (i) of
the preceding sentence, Sellers will promptly disclose to Buyer the nature of
such contact and the parties thereto.
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Section 5.7. Related Party Matters. Other than (i) the
Covenant Not To Compete, dated March 27, 1997, by and between Anagram and
Xxxxxxxx Xxxxx-Xxxxxx, which Buyer shall cause Anagram to pay in accordance with
its terms after the Closing, and (ii) compensation and benefits with respect to
services as an employee in the ordinary course of business and consistent with
past practice that will be paid in accordance with the customary practices of
the Companies and the Subsidiaries, Sellers shall cause the Companies and the
Subsidiaries to pay in full any amounts owed by the Companies or the
Subsidiaries to any Related Party, and the Sellers shall cause any Related Party
to pay in full any amounts owed by such Related Party to any Company or
Subsidiary (including any accounts receivable or accounts payable), in each case
at or prior to the Closing and otherwise in accordance with the terms thereof
(subject to Buyer's obligation to provide funds to repay certain Indebtedness of
the Companies and the Subsidiaries pursuant to Section 5.13(a)).
Section 5.8. Financing. Buyer shall use commercially
reasonable efforts to obtain by the Closing Date, on the terms described in the
Commitment Letter the financing required to consummate the transactions
contemplated hereby on the terms set forth therein (the "Financing"), unless
Buyer has made other arrangements for the necessary financing. If any portion of
the Financing becomes unavailable, Buyer will use commercially reasonable
efforts to obtain necessary debt financing from another source, on and subject
to substantially the same terms and conditions as the portion of the Financing
that has become unavailable, in order to consummate the transactions
contemplated hereby on the terms and within the time period set forth herein.
Section 5.9. Stockholders' Agreement. At or prior to the
Closing, each of the Sellers shall execute and become a party to the
Stockholders' Agreement as amended as contemplated by Section 2.5, to the extent
not executed on the date hereof.
Section 5.10. Resignations; Nominee Shareholders. At the
Closing, Sellers shall cause to be delivered to Buyer duly signed resignations,
effective immediately after the Closing, of all directors and officers of all
the Companies and the Subsidiaries designated in writing by Buyer to the Sellers
at least five business days prior to the Closing Date.
Section 5.11. Current Information. During the period from the
date of this Agreement to the Closing, (i) Sellers shall notify Buyer of (A) any
change in the normal course of business or operations of the Companies or the
Subsidiaries that would have a material adverse effect on the Business
Condition, (B) the making or commencement of any governmental complaints,
investigations or hearings of which any of the Sellers has knowledge that would
have a material adverse effect on the Business Condition (or the receipt by any
Seller, Company or Subsidiary of any communications indicating that the same may
be contemplated), (C) the institution or threat of any litigation relating to
any Company or Subsidiary or the Business of which any Seller has knowledge, or
the settlement of, or any other significant developments in, any litigation
relating to any of the Companies or the Subsidiaries or the Business or (D) any
notice received from any of the customers, suppliers or distributors listed on
Schedule 3.17 or any licensors under the Company Design Licenses regarding the
relationship between any Company or Subsidiary and such customer, supplier or
distributor and indicating any adverse change in
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such relationship as a whole, (ii) Buyer shall notify Sellers of (A) any change
in the normal course of business or operations of Buyer that would be reasonably
likely to have a material adverse effect on the Buyer Business Condition, or (B)
the making or commencement of any governmental complaints, investigations or
hearings of which Buyer has knowledge that would have a material adverse effect
on the Buyer Business Condition of Buyer (or the receipt by Buyer of any
communications indicating that the same may be contemplated); and (iii) Buyer
shall give prompt notice to the Sellers and the Sellers shall give prompt notice
to Buyer, of (A) any representation or warranty made by it or them contained in
this Agreement which has become untrue or inaccurate in any material respect, or
(B) the failure by it or them to comply with or satisfy in any material respect
any covenant, condition, or agreement to be complied with or satisfied by it
under this Agreement provided, however, that such notifications shall not excuse
or otherwise affect the representations, warranties, covenants or agreements of
the parties or the conditions to the obligations of the parties under this
Agreement.
Section 5.12. Financial Statements. Prior to the Closing,
Sellers shall deliver to Buyer promptly after they are prepared such monthly or
other financial statements or financial reports of the Companies as are prepared
by or relating to the Companies in the ordinary course of business consistent
with past practices and such other financial information as Buyer may reasonably
request, promptly after such request. Sellers shall use commercially reasonable
efforts to have Xxxxxx Xxxxxxxx consent (at Buyer's expense) to Buyer's use of
and reliance on the audited Financial Statements, the Combined Financial
Statements and such other audited financial statements of the Companies or its
predecessors as may be required for any portion of the Financing or
refinancings, exchanges or substitutions thereof, or in connection with filings
under the federal securities laws.
Section 5.13. Further Actions. At the Closing, Sellers agree
that they will, or will cause the Companies and Subsidiaries to, (a) except (i)
for the capital leases listed on Schedule 5.13, (ii) as provided in Section
5.7(i) or (iii) to the extent explicitly requested by Buyer prior to the
repayment thereof, repay in full at or prior to the Closing (with funds to be
provided by Buyer at the Closing) all of the Indebtedness of the Companies and
the Subsidiaries, including accrued interest, premium, penalties and other
costs, (b) use commercially reasonable efforts (without any payment of breakage
costs unless Buyer agrees to reimburse the Sellers therefor) to arrange for the
prepayment of the capital leases listed on Schedule 5.13 and (c) use
commercially reasonable efforts to eliminate or discharge all Liens on the stock
or assets of the Companies and the Subsidiaries and any other encumbrances on
the stock or assets of the Companies and the Subsidiaries, including, without
limitation, the Owned Properties, other than Permitted Liens. Buyer agrees to
cooperate in connection therewith. Buyer and Sellers agree to cooperate with
each other so that all outstanding letters of credit relating to any Company or
Subsidiary are replaced prior to the Closing and that the parties whose
obligations are being secured by such letters of credit shall take such actions
necessary in order to have such replacements issued for their own accounts.
Following the Closing until April 16, 1999, Buyer and the Sellers agree to
cooperate with each other and take all reasonable action to (i) cause Anagram to
distribute additional cash to the Sellers sufficient to cover any shortfall in
the amount of cash distributed to the Sellers pursuant to Section 5.4(d)(ii)(B)
hereof based on the actual amount of tax due in respect of the taxable income of
Anagram (and the Subsidiaries of Anagram that are
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disregarded entities for Income Tax purposes) described in Section 5.4(d)(ii)(B)
hereof and (ii) cause the Sellers to refund to Anagram any cash distributed to
the Sellers pursuant to Section 5.4(d)(ii)(B) hereof in excess of the actual
amount of tax due in respect of the taxable income of Anagram (and the
Subsidiaries of Anagram that are disregarded entities for Income Tax purposes)
described in Section 5.4(d)(ii)(B) hereof.
Section 5.14. Liquidation of Anagram Exports. Immediately
prior to the Closing, the Sellers shall cause Anagram Exports to be liquidated
and any assets held by Anagram Exports related to the Business shall be
contributed to Anagram or one of the remaining Companies without additional
consideration.
Section 5.15. Employee Benefit Plans. (a) Any transfer of
employment from any of the Companies or the Subsidiaries to Buyer or an
Affiliate or subsidiary of Buyer effected by or in connection with the
transactions contemplated by this Agreement shall not be considered a
termination of employment for purposes of any Company Employee Benefit Plan, any
Non-U.S. Company Employee Benefit Plan or any employee benefit plans of Buyer,
including any severance plans or arrangements. In the event that any employees
of the Companies or the Subsidiaries become subject to Buyer's employee benefit
plans, such employees will receive credit for their service with the Companies
or the Subsidiaries under Buyer's benefit plan for eligibility and vesting
purposes.
(b) In the event that Buyer provides the employees of the
Companies or the Subsidiaries coverage under Buyer's health and welfare plans:
(i) such coverage shall be, during the period ending twenty-four (24) months
after the Closing Date, in the aggregate, on terms no less favorable to such
employees than those applicable to, at the election of Buyer, either (x)
similarly situated employees of Buyer and its subsidiaries or (y) such employees
of Anagram on the date hereof; (ii) Buyer's health and welfare plans shall
credit the Companies' employees with all service credited to such employees
under the health and welfare plans provided by the Companies for purposes of
determining eligibility to participate in Buyer's health and welfare plans; and
(iii) Buyer shall waive any waiting periods, pre-existing condition exclusions
(except to the extent such exclusions applied immediately prior to the Closing)
and actively-at-work requirements and provide that any expenses incurred on or
before the Closing Date by such employees or such employees' covered dependents
shall be taken into account (to the extent taken into account under current
plans) for purposes of satisfying applicable deductible, coinsurance and maximum
out-of-pocket provisions of Buyer's health and welfare plans.
(c) Nothing in this Section 5.15 shall restrict or limit the
firing, demotion, laying off or transfer of employment of any employee of the
Companies or the Subsidiaries by Buyer.
Section 5.16. Supplements and Updates to Schedules. Not later
than three business days prior to Closing, by written notice to Buyer that the
condition in Section 8.1 is not capable of being satisfied at the Closing,
Sellers may update the Schedules (such update to be attached to such notice)
with respect to each event or occurrence occurring after the date of this
Agreement which (i) if such event or occurrence had occurred at or prior to the
date of this
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Agreement, would have been required to be set forth or described in such
Schedules to Article III and (ii) if such event or occurrence had been omitted
from the Schedules would cause the condition set forth in Section 8.1 hereof not
to be satisfied at the Closing. Following receipt of the updated Schedules,
Buyer may terminate this Agreement by delivering written notice to the
Designated Representative, provided that if Buyer does not elect to terminate
this Agreement within fifteen (15) business days of Buyer's receipt thereof and
instead elects to consummate the transactions contemplated by this Agreement,
unless the parties hereto agree otherwise in writing, the Schedules, as so
updated, will be deemed to be the Schedules for all purposes, including with
respect to Article X hereof.
Section 5.17. Additional Filings or Approvals. In the event
the exercise of any Warrant requires any filings, approvals or consents under
the applicable federal or state law, including the HSR Act, (a) Buyer shall use
reasonable efforts to effect such filings or to obtain such approvals or
consents (but not including the payment of any fees), as soon as reasonably
practicable after notice of or exercise of the Warrant is given to Buyer, and
(b) the expiration date for such Warrant shall be extended (but in no event for
longer than three months beyond such expiration date) until such approvals or
consents have been obtained to permit the exercise thereof.
Section 5.18. Release of Certain Guarantee. Buyer shall cause
the Companies and the Subsidiaries to use commercially reasonable efforts to
release Xxxxx Xxxxxx from his guarantees of certain obligations of Anagram U.K.
that are listed on Schedule 5.18 attached hereto, as soon as is reasonably
possible following the Closing, but in any case within six (6) months following
the Closing Date, or, if such release cannot be so obtained, to indemnify Xxxxx
Xxxxxx against all losses, liabilities, claims, damages, costs, expenses, fines
and penalties arising as a result of such guarantees.
ARTICLE VI
Employee Benefits
Section 6.1. Employee Benefit Plans. The Sellers hereby
represent and warrant to Buyer as follows:
(a) Schedule 6.1(a) includes a complete list of all employee
benefit plans, programs, policies, practices, employment agreements and other
arrangements providing benefits to any employee or former employee primarily
employed in the United States or subject to the laws of the United States or any
state or jurisdiction thereof or any beneficiary or dependent thereof, whether
or not written, and whether covering one person or more than one person,
sponsored or maintained by any of the Companies or the Subsidiaries or to which
any of the Companies or the Subsidiaries contribute or are obligated to
contribute (collectively, "Company Employee Benefit Plans") , provided that the
Company Employee Benefit Plans do not include any statutory requirements of the
United States or any jurisdiction thereof. Without limiting the generality of
the foregoing, the term "Company Employee Benefit Plans" includes all employee
welfare benefit plans within the meaning of Section 3(1) of ERISA and all
employee pension benefit plans
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within the meaning of Section 3(2) of ERISA. Schedule 6.1(a) also includes a
complete list of all employee benefit plans, programs, policies, employment
agreement, superannuation schemes, retirement schemes, provident schemes,
practices, and other arrangements for any employee or former employee (including
arrangements for the payment to employees or their retirement or death or on the
occurrence of any permanent or temporary disability) primarily employed in
countries other than the United States or subject to the laws of countries other
than the United States or any beneficiary or dependent thereof, whether or not
written and whether covering one person or more than one person, sponsored or
maintained by any of the Companies or the Subsidiaries or to which any of the
Companies or the Subsidiaries contribute or are obligated to contribute
(collectively, "Non-U.S. Company Employee Benefit Plans"), provided that the
Non-US Company Employee Benefit Plans do not include any statutory requirements
of the respective foreign country or any jurisdiction thereof.
(b) With respect to each Company Employee Benefit Plan and
Non-U.S. Company Employee Benefit Plan, Sellers have delivered to Buyer a true,
correct and complete copy of: (A) each writing constituting a part of such
Company Employee Benefit Plan and Non-U.S. Company Employee Benefit Plan,
including, without limitation, all plan documents, benefit schedules,
participant agreements, trust agreements, and insurance contracts and other
funding vehicles; (B) the most recent Annual Reports (Form 5500 Series where
applicable) and accompanying schedules, if any; (C) the current summary plan
description, if any; (D) the most recent annual financial report, if any; and
(E) the most recent determination letter from the IRS or other relevant Taxing
Authority, if any. All financial statements and actuarial reports, where such
statements or reports are required by applicable law, since January 1, 1996, for
each Company Employee Benefit Plan and each Non-U.S. Company Employee Benefit
Plan have been prepared in accordance with generally accepted accounting
principles and actuarial principles, applied on a uniform and consistent basis.
Except as specifically provided in the foregoing documents delivered to Buyer,
there are no amendments to any Company Employee Benefit Plan or Non-U.S. Company
Employee Benefit Plan that have been adopted or approved nor have Sellers
undertaken to make any such amendments.
(c) Schedule 6.1(a) identifies each Company Employee Benefit
Plan that is intended to be a "qualified plan" satisfying the requirements of
Section 401(a) of the Code (a "Company Pension Plan").
(d) Except as otherwise set forth in Schedule 6.1(d) hereto,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (either alone or in conjunction with any
subsequent or related event, including, without limitation, termination of
employment) (i) result in any material payment (including, without limitation,
severance, unemployment compensation, golden parachute or otherwise) becoming
due from the Companies or the Subsidiaries under any Company Employee Benefit
Plan or Non-U.S. Company Employee Benefit Plan or any collective bargaining
agreement or otherwise, (ii) materially increase any compensation or benefits
otherwise payable under any such Company Employee Benefit Plan or Non-U.S.
Company Employee Benefit Plan or collective bargaining agreement or otherwise or
(iii) accelerate any material liability under any Company Employee Benefit Plan
or Non-U.S. Company Employee Benefit Plan because of an acceleration of the
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time of payment or vesting of any rights or benefits to which employees may be
entitled thereunder. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby has resulted in or will
result in payments to "disqualified individuals" (as defined in Section 280G(c)
of the Code) of the Companies or the Subsidiaries which, individually or in the
aggregate, will constitute "excess parachute payments" (as defined in Section
280G(b) of the Code) resulting in the imposition of the excise tax under Section
4999 of the Code or the disallowance of deductions under Section 280G of the
Code.
(e) For purposes of this Article VI, the term "employee" shall
be considered to include individuals rendering personal services to the
Companies or the Subsidiaries as independent contractors.
(f) Each of the Companies and the Subsidiaries has withheld
appropriate withholding Taxes for all employees (within the meaning of the Code)
of the Companies and the Subsidiaries and has paid such Taxes over to the
appropriate Taxing Authority on a timely basis.
(g) The Companies and the Subsidiaries have no liability for
life, health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof, except for health continuation coverage as
required by Section 4980B of the Code or Part 6 of Title I of ERISA and at no
expense to the Companies or the Subsidiaries.
Section 6.2. Company Employee Benefit Plans. The Sellers
hereby represent and warrant to Buyer as follows:
(a) (a) All Company Employee Benefit Plans which are "employee
benefit plans," as defined in Section 3(3) of ERISA, are in all material
respects in compliance with and have been administered in compliance with all
applicable requirements of law, including but not limited to the Code and ERISA,
and all contributions required to be made to each such plan under the terms of
such plan, ERISA or the Code for all periods of time prior to December 31, 1997
or the Closing Date to the extent then due and payable, as the case may be, have
been or, as applicable, will by the Closing Date be timely made or paid in full
or, to the extent not required to be made or paid on or before December 31, 1997
or the Closing Date, have been fully reflected on the Combined Balance Sheet or
will be fully reflected as a liability of the Companies as of the Closing Date,
respectively.
(b) A favorable determination letter as to the qualification
of each Company Pension Plan under Section 401(a) of the Code has been issued
and remains in effect and the related trust has been determined to be exempt
from taxation under Section 501(a) of the Code and no amendment has been made to
such Company Pension Plan subsequent to the date of such determination letter,
nor has any event occurred or circumstance arisen, that could adversely affect
the qualified status of such Company Pension Plan. Each Company Pension Plan has
been administered in accordance with its terms and all applicable laws and
regulations. Sellers, the Companies and the Subsidiaries have performed all
material obligations required to be performed by them under, and are not in
default under or in violation of, the terms of any of the Company Employee
Benefit Plans in any material respect. None of Sellers, the Companies or the
Subsidiaries or any other "disqualified person" (as defined in Section 4975 of
the Code) or "party-in-
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interest" (as defined in Section 3(14) of ERISA) has engaged in any "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Section 406
of ERISA), which could subject any Company Employee Benefit Plan (or its related
trust), the Companies or the Subsidiaries or any officer, director or employee
of the Companies or the Subsidiaries to the tax or penalty imposed under Section
4975 of the Code; all "fiduciaries," as defined in Section 3(21) of ERISA, with
respect to the Company Employee Benefit Plans have complied in all respects with
the requirements of Section 404 of ERISA; and no "reportable event" within the
meaning of Section 4043 of ERISA has occurred with respect to any Company
Pension Plan.
(c) No Company Employee Benefit Plan is subject to Title IV or
Section 302 of ERISA or Section 412, 4971 or 4980B of the Code. None of the
Companies or the Subsidiaries nor any of their respective ERISA Affiliates now
contributes or has an obligation to contribute, nor has at any time during the
last six years contributed to or been obligated to contribute, to any
multiemployer plan (within the meaning of Section 3(37) of ERISA) or a multiple
employer plan (within the meaning of Section 413(c) of the Code), and none of
the Companies, the Subsidiaries and their respective ERISA Affiliates has
incurred any Withdrawal Liability that has not been satisfied in full. For these
purposes: (i) the term "ERISA Affiliate" means, with respect to any entity,
trade or business, any other entity, trade or business that is a member of a
group described in Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA that includes the first entity, trade or business, or that
is a member of the same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA; and (ii) "Withdrawal
Liability" means liability to a multiemployer plan as a result of a complete or
partial withdrawal from such multiemployer plan, as those terms are defined in
Part I of Subtitle E of Title IV of ERISA.
(d) There does not now exist, nor do any circumstances exist
that could result in, any Controlled Group Liability that would be a liability
of the Companies or the Subsidiaries following the Closing. Without limiting the
generality of the foregoing, neither the Companies, the Subsidiaries nor any
ERISA Affiliate of the Company or the Subsidiaries has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA. "Controlled
Group Liability" means any and all liabilities (i) under Title IV of ERISA, (ii)
under Section 302 of ERISA, (iii) under Sections 412 and 4971 of the Code and
(iv) as a result of a failure to comply with the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code,
other than such liabilities that arise solely out of, or relate solely to, the
Company Employee Benefit Plans.
(e) There are no pending or, to the knowledge of the Sellers,
threatened claims (other than claims for benefits in the ordinary course),
lawsuits, audits, investigations or arbitrations which have been threatened,
asserted or instituted against the Company Employee Benefit Plans, any
fiduciaries thereof with respect to their duties to the Company Employee Benefit
Plans or the assets of any of the trusts under any of the Company Employee
Benefit Plans, which would reasonably be expected to result in any material
liability of the Companies or the Subsidiaries to the Pension Benefit Guaranty
Corporation, the Department of Treasury, the Department of Labor.
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Section 6.3. Non-U.S. Company Employee Benefit Plans. The
Sellers hereby represent and warrant to Buyer as follows:
(a) The Non-U.S. Company Employee Benefit Plans comply in all
material respects with, and have been managed in accordance with, all applicable
laws, regulations and requirements.
(b) Where Non-U.S. Company Employee Benefit Plans are funded
or insured, all contributions and other amounts due to or in respect of them or
any state pension arrangements by the Companies and the Subsidiaries have been
fully paid at Closing to the extent then due and payable. Where such Non-U.S.
Company Employee Benefit Plans are unfunded or underfunded, appropriate reserves
are established therefor in the Financial Statements or Combined Financial
Statements as liabilities. The Companies and the Subsidiaries have not by any
act or omission, directly or indirectly, materially increased their liabilities
or obligations to the Non-U.S. Company Employee Benefit Plans since the date of
the last actuary's report described in Section 6.3(c) below.
(c) The Sellers have given Buyer the actuary's report on the
latest actuarial valuation of each of the Non-U.S. Company Employee Benefit
Plans or such other information which accurately describes the financial
position of each of the Non-U.S. Company Employee Benefit Plans. Nothing has
happened since the date of that information which would adversely affect the
funding position of the Non-U.S. Company Employee Benefit Plans in a material
way.
(d) None of the Companies or the Subsidiaries intends to
terminate any of the Non-U.S. Company Employee Benefit Plans and there is no
material deficiency in any of the Non-U.S. Company Employee Benefit Plans'
assets which would arise as a result of such a termination.
(e) There is no pending or threatened dispute about the
entitlements or benefits payable under any of the Non-U.S. Company Employee
Benefit Plans, and no pending or, to the knowledge of the Sellers, threatened
claim by or against the managers or administrators of the Non-U.S. Company
Employee Benefit Plans or any of the Companies or the Subsidiaries has been made
or threatened, and, to the knowledge of the Sellers, there are no circumstances
which might give rise to any such claim except where any such event would not
have, individually or in the aggregate, a material adverse effect on the
Business Condition.
(f) All Taxes which have been assessed or imposed upon a
Non-U.S. Company Employee Benefit Plan: (i) and which are due and payable have
been paid by the final date for payment by the trustee of the scheme; or (ii)
which are not yet payable but become payable prior to Closing will be paid by
the due date.
Section 6.4. Administration. Prior to Closing, the Seller
shall cause the Companies and the Subsidiaries to make themselves and their
appropriate representatives and employees available to Buyer and Buyer shall
make itself and its representatives available to the Companies and the
Subsidiaries at such reasonable times as may be necessary for the proper
administration by the other of any and all matters relating to employee benefits
affecting em-
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ployees of the Companies and the Subsidiaries, including benefits to which such
employees may become entitled after the Closing Date under any tax-qualified
retirement plan maintained by the Sellers or their Affiliates.
ARTICLE VII
Tax Matters
Section 7.1. Tax Returns of the Companies and the
Subsidiaries. Sellers represent and warrant that:
(a) Except as set forth in Schedule 7.1(a) (i) all material
Income Tax Returns required to be filed by, or with respect to any activities
of, any of the Companies or the Subsidiaries have been filed in all material
respects in accordance with all applicable laws, and all Taxes shown to be due
on such Income Tax Returns have been paid, (ii) all other material Returns
required to be filed by, or with respect to any activities of any of the
Companies or the Subsidiaries have been or will be filed in accordance with all
applicable laws and all Taxes shown as due on such Returns have been paid, (iii)
Anagram is and has been an S Corp since 1982 and Anagram Holdings is and has
always been either a QSS Sub or an S Corp, and no action has or will be taken
with respect to either Anagram or Anagram Holdings to terminate and no condition
exists which could result in the termination of such election or status prior to
the Closing; (iv) each of the Trusts is and has always been a "qualified
subchapter S trust" within the meaning of Section 1361(d)(3) of the Code; (v)
none of the Companies or the Subsidiaries are, will be or have been liable for
the tax imposed under Section 1375(a) of the Code; and (vi) none of the
Companies or the Subsidiaries are, will be or have been liable for the Tax
imposed under Section 1374(a) of the Code.
(b) Except as set forth on Schedule 7.1(b), (i) no claim has
been made by any authority in a jurisdiction where the Companies or the
Subsidiaries do not file Returns that any of the Companies or the Subsidiaries
are or may be subject to taxation by that jurisdiction; (ii) except for Taxes
being contested in good faith and by appropriate proceedings and for which
appropriate reserves are established (all of which are identified in Schedule
7.1(b)), all material Taxes owed and due by any of the Companies and the
Subsidiaries (whether or not shown on any Return) have (or by the Closing Date
will have) been duly and timely paid; (iii) the unpaid Taxes of any of the
Companies and the Subsidiaries did not, as of December 31, 1997, exceed the
accrued Tax liabilities on the books of any of the Companies or the Subsidiaries
and set forth on the Combined Balance Sheet and will not as of the Closing Date
exceed the accrued Tax liabilities recorded on the books and records of the
Companies and the Subsidiaries as of the Closing Date (recognizing the Sellers
are liable for such Taxes pursuant to Section 7.7); (iv) all material Taxes
required to be withheld by or on behalf of each of the Companies and the
Subsidiaries have been withheld, and such withheld Taxes have been duly and
timely paid to the proper Governmental Authorities; and (v) since December 31,
1997, no liability for Taxes has arisen for any of the Companies or the
Subsidiaries other than in the ordinary course of business.
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(c) Except as set forth on Schedule 7.1(c), no agreement or
other document extending, or having the effect of extending, the period of
assessment, payment or collection of any Taxes for which any of the Companies or
the Subsidiaries or any of their predecessors may be held liable.
(d) Sellers have provided to Buyer complete and accurate
copies of all Returns that are or have been required to be filed for all taxable
periods for which the statute of limitations has not run, examination reports,
and statements of deficiencies assessed against or agreed to by any of the
Companies or the Subsidiaries or any of their predecessors. Except as set forth
on Schedule 7.1(d), (i) no Lien exists with respect to any asset of any of the
Companies or the Subsidiaries that arose in connection with any failure (or
alleged failure) to pay Taxes; (ii) there are no material Taxes for which any of
the Companies or the Subsidiaries could be held liable which have been asserted
in writing by any Governmental Authority to be due; (iii) to the knowledge of
Sellers there are no pending audits, examinations, or investigations with
respect to any Taxes of any of the Companies or the Subsidiaries; and (iv) to
the knowledge of Sellers no unresolved issue has been raised in writing by any
Governmental Authority in the course of any audit or examination with respect to
Taxes for which any of the Companies or the Subsidiaries could be held liable.
(e) No consent or election has been made to have the
provisions of Section 341(f) of the Code apply to any of the Companies or the
Subsidiaries.
(f) None of the Companies or the Subsidiaries is party to or
bound by any closing agreement, gain recognition agreement, tax sharing, tax
indemnity, tax allocation or similar agreement or arrangement.
(g) None of the Companies or the Subsidiaries has either
agreed to or is required to make any adjustment under Section 481 of the Code
(or any comparable provision of state, local or foreign law) by reason of a
change in accounting method or otherwise.
(h) Each of Anagram Mexico, Anagram France and Anagram Nevada
is, and since the contribution of stock of Anagram Holdings to Anagram has been,
a disregarded entity, and not an association taxable as a corporation, for
United States federal and state Income Tax purposes. Prior to the contribution
of stock of Anagram Holdings to Anagram, each of Anagram Mexico, Anagram France
and Anagram Nevada was a partnership, and not an association taxable as a
corporation, for United States federal and state Income Tax purposes. Each of
Anagram U.K., Anagram Spain and Anagram Japan is a corporation for U.S. federal
and state Income Tax purposes.
(i) To the knowledge of Sellers, all information given to any
Taxing Authority in connection with or affecting any application for any ruling,
consent or clearance on behalf of any of the Companies or the Subsidiaries fully
and accurately disclosed all facts and circumstances material for the decision
of the Taxing Authority. To the knowledge of Sellers, each ruling, consent or
clearance is valid and effective, and each transaction for which such ruling,
consent or clearance has previously been obtained has been carried into effect
in accordance with the terms of the relevant application, ruling, consent or
clearance.
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(j) Each of Anagram France, Anagram Mexico, Anagram U.K.,
Anagram Nevada, Anagram Spain and Anagram Japan is not and has never been a (i)
passive foreign investment company, (ii) a foreign personal holding company,
(iii) a FSC or (iv) a foreign investment company, each within the meaning of the
Code.
Section 7.2. Elections and Forms. (a) With respect to Buyer's
acquisition of the Shares of Anagram hereunder, the Sellers and Buyer shall
properly make a Section 338(h)(10) Election in accordance with applicable Tax
Laws. With respect to the Sellers' sale of the Shares of Anagram Spain and
Anagram Japan, at Buyer's election, Buyer shall make Section 338(g) Elections in
accordance with applicable Tax Laws (and Buyer shall not make an election
pursuant to Section 338(g) of the Code, or any corresponding election under any
other applicable Tax Laws that requires a separate election, with respect to the
deemed sale of the shares of the capital stock of Anagram U.K.). Buyer and
Sellers agree to report such transfers under this Agreement consistent with the
Section 338 Elections, and shall take no position contrary thereto unless
required to do so by applicable Tax Laws pursuant to a Determination.
(b) Buyer shall be responsible for the preparation and filing
of all Section 338 Forms in accordance with applicable Tax Laws and the terms of
this Agreement. Sellers shall execute and deliver to Buyer such documents or
forms as are reasonably requested and are required by any Tax Laws properly to
complete the Section 338 Forms, at least 20 days prior to the date such Section
338 Forms are required to be filed, provided that Buyer provides such documents
or forms to Sellers at least 30 days prior to the date such Section 338 Forms
are required to be filed.
(c) Within 60 days following the Closing Date, Buyer and the
Sellers shall jointly prepare as follows a schedule (the "Allocation Schedule")
allocating the "modified aggregate deemed sales price," as defined in Treasury
Regulation Section 1.338(h)(10)-1(f), with respect to the Section 338(h)(10)
Election and the "aggregate deemed sales price," as defined in Treasury
Regulation Sections 1.338-3(b)(1) and 1.338-3(d), with respect to the Section
338(g) Elections. Buyer shall propose the allocations and provide the Sellers
with a reasonable opportunity to review and comment thereon. To the extent the
Sellers agree with Buyer with respect to the allocations and to the extent Buyer
agrees with the Sellers' comments, the Allocation Schedule shall reflect the
agreed-upon allocations, and to the extent the Sellers and Buyer are unable to
agree, the Allocation Schedule, as to such items as are not agreed, shall be
determined by a neutral accounting firm; provided, however, that the Allocation
Schedule shall be reasonable, shall be based on fair market values in accordance
with Section 338 of the Code and the regulations thereunder and shall be based
on the allocations set forth on Schedule 7.2(c) hereof. The parties agree to
have the fixed tangible assets of Anagram appraised by a mutually acceptable
valuation firm for the purpose of this allocation; provided, however, that the
cost of such appraisals shall be borne one-half by Buyer and one-half by the
Sellers. Each of the Sellers and Buyer agrees to file all Income Tax Returns in
accordance with the Allocation Schedule.
(d) Sellers shall not take a position before any Taxing
Authority or otherwise (including in any Income Tax Return) inconsistent with
the treatment that the net unrealized built-in gain (as defined in Section 1374
of the Code or any similar provisions of state and local
-44-
Tax Laws) of each of the Companies and the Subsidiaries is zero and that no net
recognized built-in gain (as defined in Section 1374 of the Code or any similar
provisions of state and local Tax Laws) results from any of the transactions
contemplated by this Agreement unless required to do so by applicable Tax Laws
pursuant to a Determination. None of the Companies, the Subsidiaries or the
Sellers shall take any action prior to the Closing that would cause Anagram to
be disqualified as an S Corp or Anagram Holdings to be disqualified as a QSS
Sub. Neither Buyer, the Companies, the Subsidiaries nor any of their respective
stockholders or Affiliates shall take any action (including in connection with
the filing of returns) inconsistent with the treatment of Anagram for any period
from 1982 to the Closing as an S Corp or inconsistent with the treatment of
Anagram Holdings for any period prior to the Closing as a QSS Sub, unless, in
either case, required to do so by applicable Tax Laws pursuant to a
Determination.
Section 7.3. Allocation of Certain Taxes. Buyer and Sellers
agree that if any of the Companies are permitted but not required under
applicable state or local Income Tax laws to treat the Closing Date as the last
day of a taxable period, Buyer and Sellers shall treat such day as the last day
of a taxable period. Where it is necessary to apportion between Buyer and the
Sellers the Tax liability of the Companies or the Subsidiaries for a period that
includes but does not end on the Closing Date a ("Straddle Period"), such
liability shall be apportioned between the period deemed to end at the close of
the Closing Date and the period deemed to begin at the beginning of the day
following the Closing Date on the basis of an interim closing of the books,
except that Taxes, such as real property Taxes, imposed on a periodic basis
shall be apportioned on a daily basis and exemptions, allowances and deductions
that are otherwise calculated on an annual basis shall be apportioned on a daily
basis.
Section 7.4. Filing Responsibility. (a) Sellers shall prepare
and file or shall cause each of the Companies, the Subsidiaries and their
Affiliates to prepare and file the following Returns with respect to each of the
Companies, the Subsidiaries and their Affiliates:
(i) all United States federal Income Tax Returns and any
other Income Tax Returns required to be filed in any
jurisdiction in which the relevant Company has in
effect an election similar to the election under
Section 1362 of the Code, in each case, for any
taxable period ending on or before the Closing Date;
provided, however, that Sellers shall provide Buyer
copies of such proposed Returns at least 30 days
prior to the due date of any such Returns, such
Returns shall be prepared consistently with this
Agreement and past practice and, in the event that
Buyer reasonably objects to any item in such Returns,
such dispute shall be resolved by a neutral
accounting firm prior to the date such Return is
required to be filed; and
(ii) all other Returns with respect to Taxes required to
be filed (taking into account extensions) prior to
the Closing Date.
(b) Buyer, the Companies, the Subsidiaries and the Affiliates
of the Companies and the Subsidiaries shall file all other Returns with respect
to the Companies, the Subsidiaries and the Affiliates of the Companies and the
Subsidiaries; provided, however, that the Sell-
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ers shall pay the appropriate Company or Subsidiary at least five days prior to
the due date of such Return any Taxes payable in connection with such Return for
which the Sellers are liable under Section 7.7 hereof. The Sellers shall pay the
appropriate Company or Subsidiary the amount of any Tax for which the Sellers
are liable under Section 7.7 hereof in connection with any audit, examination,
contest or litigation at least five days prior to the date such Taxes are
required to be paid to the applicable Taxing Authority.
Section 7.5. Refunds and Carrybacks. (a) Sellers shall be
entitled to any refunds or credits of Taxes (other than foreign Taxes arising by
reason of a loss, credit or other carryback from a taxable period ending after
the Closing Date) for which Sellers are liable pursuant to Section 7.7.
(b) Buyer, the Companies, the Subsidiaries or the Affiliates
of the Companies and the Subsidiaries, as the case may be (excluding Sellers),
shall be entitled to all other refunds or credits of Taxes.
(c) Buyer shall cause each of the Companies, the Subsidiaries
and the Affiliates of the Companies and the Subsidiaries (excluding Sellers)
promptly to forward to the Sellers or to reimburse the Sellers for any refunds
or credits due Sellers (pursuant to the terms of this Article VII) after receipt
thereof, and Sellers shall promptly forward to Buyer or reimburse Buyer for any
refunds or credits due Buyer (pursuant to the terms of this Article VII) after
receipt thereof.
Section 7.6. Cooperation and Exchange of Information. (a)
Sellers shall prepare and submit to Buyer no later than three months after the
Closing Date, 1998 blank tax return workpaper packages. Buyer shall and shall
cause each of the Companies and the Subsidiaries to prepare completely and
accurately and to submit to the Sellers within three months of receipt all
information as Sellers shall reasonably request in such tax return workpaper
packages.
(b) As soon as practicable, but in any event within 30 days
after request, from and after the Closing Date, Buyer shall provide Sellers, or
Sellers shall provide Buyer, respectively, with such cooperation and shall
deliver to the Sellers or Buyer, respectively, such information and data
concerning the pre-Closing operations of each of the Companies, the Subsidiaries
and the Affiliates of the Companies and the Subsidiaries and make available such
knowledgeable employees or representatives of the Sellers, the Companies, the
Subsidiaries and the Affiliates of the Sellers, the Companies and the
Subsidiaries as Sellers, or Buyer, may reasonably request, in order to enable
Sellers, or Buyer, respectively, to complete and file all Returns which they may
be required to file with respect to the operations and business of each of the
Companies, the Subsidiaries and the Affiliates of the Companies and the
Subsidiaries or to respond to audits by any Taxing Authorities with respect to
such operations.
(c) Buyer and Sellers and their respective Affiliates shall
cooperate in the preparation of all Returns relating in whole or in part to
taxable periods ending on or before or including the Closing Date that are
required to be filed after such date. Such cooperation shall include, but not be
limited to, furnishing prior years' Returns or return preparation packages
illustrating previous reporting practices or containing historical information
relevant to the prepa-
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ration of such Returns, and furnishing such other information within such
party's possession requested by the party filing such Returns as is relevant to
their preparation.
(d) The Designated Representative shall have the right to
control, at the expense of the Designated Representative, any audit or
examination by any Taxing Authority (a "Tax Audit"), initiate any claim for
refund (except to the extent such claim arises by reason of a net operating
loss, credit or other Tax benefit arising after the Closing) and contest,
resolve and defend against any assessment, notice of deficiency, or other
adjustment or proposed adjustment, in each case, with respect to any taxable
period that ends on or before the Closing Date; provided, however, that (i) the
Designated Representative shall provide Buyer with a timely and reasonably
detailed account of each stage of such Tax Audit or other proceeding, (ii) the
Designated Representative shall consult with Buyer before taking any significant
action in connection with such Tax Audit or other proceeding, (iii) the
Designated Representative shall consult with Buyer and offer Buyer an
opportunity to comment before submitting any written materials prepared or
furnished in connection with such Tax Audit or other proceeding, (iv) the
Designated Representative shall defend such Tax Audit diligently and in good
faith as if the Designated Representative were the only party in interest in
connection with such Tax Audit or other proceeding and (v) the Designated
Representative shall not settle, compromise or abandon any such Tax Audit or
other proceeding without obtaining the prior written consent, which consent
shall not be unreasonably withheld, of Buyer if such settlement, compromise or
abandonment could have an adverse impact on Buyer. Buyer shall have the right to
control any other Tax Audit or proceeding. Sellers shall furnish Buyer, and
Buyer shall furnish Sellers, and Buyer and Sellers shall each furnish each of
the Companies, the Subsidiaries and the Affiliates of the Company and the
Subsidiaries, with their complete cooperation, respectively, in connection with
any Tax Audit or other proceeding. Any Tax Audit or other proceeding with
respect to more than one taxable period shall be treated as a separate Tax Audit
or proceeding for each such taxable period.
Section 7.7. Tax Indemnification by Sellers. Sellers shall be
liable for, and shall hold Buyer, each of the Companies, the Subsidiaries and
their respective Affiliates and any successor corporations thereto or Affiliates
thereof harmless from and against the following Taxes with respect to the
Companies, the Subsidiaries and the Affiliates of the Companies and the
Subsidiaries:
(a) any and all Taxes imposed under Section 1374 of the Code;
(b) any and all Taxes arising by reason of the Section 338(g)
Elections and the Section 338(h)(10) Election contemplated by this Agreement;
(c) any and all Taxes resulting from or arising out of any
transaction undertaken by Sellers, the Companies, the Subsidiaries or any of
their respective Affiliates outside of the ordinary course of business pursuant
to or in anticipation of the transactions contemplated by this Agreement;
(d) any and all Taxes imposed by law on any of the Sellers (or
any of their beneficiaries) or Anagram Exports;
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(e) any and all Taxes imposed on any of the Companies or the
Subsidiaries for the Pre-Closing Period (including any Tax arising by reason of
the failure of Anagram to qualify as an S Corp or Anagram Holdings to qualify as
either an S Corp or a QSS Sub (or, in each case, a comparable provision of state
or local law) for any period prior to the Closing Date), other than Taxes
imposed on any of the Companies or the Subsidiaries that either (i) were accrued
as current Taxes payable on the Combined Balance Sheet or (ii) arose in the
ordinary course of business after June 30, 1998 and accrued as current Taxes
payable on or prior to the Closing Date (it being agreed and understood that any
Taxes arising as a result of any adjustment by any Taxing Authority shall not be
treated as described in clause (i) or (ii)); and
(f) any and all Taxes attributable to the operations of an
entity (other than the Companies, the Subsidiaries, or any of their
predecessors) for a Pre-Closing Period and for which the Companies or the
Subsidiaries (including their predecessors) may be held liable solely by virtue
of a relationship to or affiliation with such entity under Treasury Regulation
Section 1.1502-6 (relating to several liability) or any comparable or similar
provision providing for joint and several liability under state, local or
foreign Tax Laws.
Section 7.8. Definitions. For purposes of this Article VII,
the following terms shall have the meanings ascribed to them below:
(a) "Determination" means a "determination" as defined by
Section 1313(a) of the Code.
(b) "Income Tax Returns" means federal, state, local or
foreign Income Tax Returns required to be filed with any Taxing
Authority that include any of the Companies, the Subsidiaries or the
Affiliates (excluding
Sellers).
(c) "Income Taxes" means (a) federal, state, local or foreign
income, or capital gains, franchise taxes or other taxes measured by
reference to income, or capital gains and all other taxes reported on
any Returns, together with any interest, penalties, charges or fees
imposed with respect thereto, and (b) any obligations under any
agreements or arrangements with respect to Income Taxes described in
clause (a) above.
(d) "IRS" means the Internal Revenue Service.
(e) "Pre-Closing Period" shall mean each taxable period that
ends on or before the Closing Date and the portion, ending on the
Closing Date, of each Straddle Period.
(f) "QSS Sub" shall mean a "qualified subchapter S
subsidiary" within the meaning of Section 1361(b)(3) of the Code and
comparable provisions of state and local law.
(g) "Returns" means returns, reports and forms required
to be filed with any U.S. Taxing Authority or foreign Taxing Authority.
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(h) "S Corp" shall mean an "S corporation" within the meaning
of Section 1361(a) of the Code and comparable provisions of state and
local law.
(i) "Section 338 Elections" shall mean both a Section 338(g)
Election and a Section 338(h)(10) Election.
(j) "Section 338 Forms" means all returns, documents,
statements, and other forms that are required to be submitted to any
federal, state, county, or other local Taxing Authority in connection
with a Section 338(g) Election or a Section 338(h)(10) Election.
Section 338 Forms shall include, without limitation, any "statement of
section 338 election" and IRS Form 8023 (together with any schedules or
attachments thereto) that are required pursuant to Treas. Reg. Section
1.338-1 or Treas. Reg. Section 1.338(h)(10)-1.
(k) "Section 338(g) Election" means an election described in
Section 338(g) of the Code with respect to Buyer's acquisition of the
Shares of Anagram Spain and Anagram Japan pursuant to this Agreement,
if Buyer so elects. Section 338(g) Election shall include any
corresponding election under any other applicable Tax Laws that
requires a separate election with respect to Buyer's acquisition of
such Shares under this Agreement.
(l) "Section 338(h)(10) Election" means an election described
in Section 338(h)(10) of the Code with respect to Buyer's acquisition
of the Shares of Anagram pursuant to this Agreement. Section 338(h)(10)
Election shall include any corresponding election corresponding to Code
Section 338(h)(10) or Code Section 338(g) under any other relevant Tax
Laws for which a separate election is permissible with respect to
Buyer's acquisition of the Shares of Anagram from Sellers under this
Agreement.
(m) "Tax Laws" means the Code, federal, state, county, local,
or foreign laws relating to Taxes and any regulations or official
administrative pronouncements released thereunder.
(n) "Taxes" means (a) all taxes (whether federal, state,
local or foreign) based upon or measured by income and any other tax
whatsoever, including, without limitation, gross receipts, profits,
sales, levies, imposts, deductions, charges, rates, duties, use,
occupation, value added, ad valorem, transfer, franchise, withholding,
payroll and social security, employment, excise, stamp duty or property
taxes, together with any interest, penalties, charges or fees imposed
with respect thereto and (b) any obligations under any agreements or
arrangements with respect to any Taxes described in clause (a) above.
(o) "Taxing Authority" means any governmental authority
including social security administration, domestic or foreign, having
jurisdiction over the assessment, determination, collection, or other
imposition of Tax.
Section 7.9. Survival of Obligations. Notwithstanding
anything to the contrary in this Agreement, the obligations of the parties set
forth in this Article VII shall be uncon-
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ditional and absolute and shall remain in effect until 10 days after the
applicable statute of limitations has expired.
ARTICLE VIII
Conditions of Buyer's Obligation to Close
Buyer's obligation to consummate the Stock Purchases and the
other transactions contemplated hereby shall be subject to the satisfaction on
or prior to the Closing Date of all of the following conditions:
Section 8.1. Representations, Warranties and Covenants of
Seller. The representations and warranties of Sellers contained in this
Agreement (when read without regard to any qualifications to such
representations and warranties as to materiality, material adverse effect,
knowledge or any similar qualification) shall be true and correct when made on
the date hereof and, except for representations and warranties that speak as of
a specific date or time (which need only be true and correct as of such date or
time), on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, in any
case, except, in the case of all representations and warranties other than those
in Sections 3.1(b), 3.1(c), 3.1(e), 3.2(a) and 3.2(b) (to which this exception
shall not apply), for such breaches and inaccuracies in representations and
warranties which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Business Condition, and the
covenants and agreements of Sellers contained in this Agreement to be performed
on or before the Closing Date in accordance with this Agreement shall have been
duly performed in all material respects, and Buyer shall have received at the
Closing a certificate to the effect of the foregoing dated the Closing Date and
validly executed by the Designated Representative and the President or Vice
President of Finance of each of the Companies.
Section 8.2. Filings; Consents; Waiting Periods. Buyer shall
have received evidence, in form and substance reasonably satisfactory to it,
that such licenses, permits, authorizations, registrations, filings,
applications, notices, consents, approvals, orders, qualifications and waivers
of Governmental Entities and other third parties (except in connection with the
Company Design Licenses which are governed by Section 8.9) as are necessary in
connection with the transactions contemplated hereby have been filed, made or
obtained without any significant conditions or restrictions imposed, except
where the failure to obtain such items, individually or in the aggregate, would
not reasonably be expected to have a material adverse effect on the Business
Condition; provided, however, that in any case, the consents and amendments set
forth in Schedule 8.2 shall have been obtained and all applicable waiting
periods under the HSR Act and similar applicable foreign regulations shall have
expired or been terminated.
Section 8.3. Litigation; Injunction. There shall be no
injunction, restraining order or decree of any nature of any Governmental
Authority of competent jurisdiction that is in effect that (i) restrains,
prohibits or limits the ownership or operation by Buyer, the Companies or any of
the Subsidiaries of any material portion of the Business, (ii) imposes
limitations on the ability of Buyer or any Affiliate of Buyer to acquire or
hold, or exercise full rights of ownership
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of, the Shares, (iii) prohibits Buyer or any Affiliate of Buyer from effectively
controlling in any material respect the Business or (iv) restrains, prohibits or
imposes substantial restrictions, penalties or damages on Buyer, the Companies,
the Subsidiaries or their Affiliates with respect to (or any other materially
adverse relief or remedy in connection with) the consummation of the Stock
Purchases or the performance of the other material obligations of the Sellers or
Buyer under this Agreement, and there shall be no Action pending seeking such
relief.
Section 8.4. Financing. Buyer shall have received the
proceeds of the Financing or otherwise obtained the funds necessary to
consummate the transactions contemplated by this Agreement upon terms and
conditions which are, in the reasonable judgment of Buyer, substantially
equivalent to those contained in the Commitment Letter, and to the extent that
any terms and conditions are not set forth on Exhibit 4.7, on terms and
conditions reasonably satisfactory to Buyer.
Section 8.5. Opinions. Buyer shall have received at Closing
opinions addressed to Buyer and dated the Closing Date from Xxxxxx, Xxxxxxxx &
Xxxxxx, counsel to the Sellers, and, if requested, certain foreign counsel with
respect to the matters and substantially in the forms set forth in Exhibit 8.5
hereto. Such opinions shall state that such opinions are made for the benefit of
Buyer, Buyer's financing sources and Buyer's counsel and that Buyer's financing
sources and counsel shall be entitled to rely thereon as if such opinion were
addressed to such sources.
Section 8.6. FIRPTA Affidavit. Sellers shall have delivered
to Buyer an affidavit (a so-called "FIRPTA affidavit") in form and substance
reasonably satisfactory to Buyer duly executed and acknowledged, certifying
facts that would exempt the transactions contemplated hereby from the provisions
of the Foreign Investment in Real Property Tax Act.
Section 8.7. Employment Arrangement. Buyer shall be
reasonably satisfied that the employment agreement between Buyer and Xxxxx
Xxxxxx in substantially the form set forth in Exhibit 8.7 shall have been
entered into and is effective as of the Closing. Xxxxx Xxxxxx shall not have
died or become unable to perform his duties as an officer and employee of Buyer
or any of the Companies or the Subsidiaries as a result of any physical or
mental disability, and shall not have ceased, or notified any other party hereto
that he would cease to perform such duties if the Closing were to occur.
Section 8.8. Stockholders' Agreement. Each of the Sellers
shall have executed and become parties to the Stockholders' Agreement, as
amended as contemplated by Section 2.5.
Section 8.9. Company Design Licenses. The Company Design
Licenses shall be in full force and effect and shall be legal, valid, binding
and enforceable against each other Person party thereto. The Company Design
Licenses shall not have been terminated or cancelled (other than expiration at
the end of the stated term thereof in accordance with the terms in effect on the
date hereof) and there shall not have occurred any default or event that, with
notice or lapse of time, or both, would constitute a default by any party to any
of the Company Design
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Licenses; provided, however, that this condition shall be deemed satisfied as
provided in Schedule 8.9.
Section 8.10. Proceedings; Certificates. All corporate
proceedings of Sellers, the Companies and the Subsidiaries that are required in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to Buyer and its counsel, and
Buyer and its counsel shall have received such evidence of such corporate
proceedings, certified if requested, as may be reasonably requested and is
customary in transactions such as the Stock Purchases. Sellers shall have
delivered to Buyer certificates representing the Shares, duly endorsed in blank
or accompanied by stock powers or other instruments of transfer duly executed in
blank, and bearing or accompanied by all requisite stock transfer stamps. There
shall have been eliminated or discharged, in all material respects, all Liens on
the stock or assets of the Companies and the Subsidiaries (in the case of
assets, other than the Permitted Liens), and all Indebtedness of the Companies
and the Subsidiaries shall have been paid in full or shall be repayable in full
concurrent with the Closing (other than as provided in Sections 5.13(a) and
(b)), and Buyer shall have received evidence thereof which is satisfactory to
Buyer.
ARTICLE IX
Conditions to the Sellers' Obligation to Close
Sellers' obligation to consummate the transactions
contemplated hereby shall be subject to the satisfaction on or prior to the
Closing Date of all of the following conditions:
Section 9.1. Representations, Warranties and Covenants of
Buyer. The representations and warranties of Buyer contained in this Agreement
(when read without regard to materiality, material adverse effect, knowledge or
any similar qualification) shall be true and correct when made on the date
hereof and, except for representations and warranties that speak as of a
specific date or time (which need only be true and correct as of such date or
time), on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, in any
case, except for such breaches and inaccuracies in representations and
warranties which do not have a material adverse effect on Buyer Business
Condition, and the covenants and agreements of Buyer contained in this Agreement
to be performed on or before the Closing Date in accordance with this Agreement
shall have been duly performed in all material respects, and Sellers shall have
received at the Closing a certificate to that effect dated the Closing Date and
validly executed by a senior officer of Buyer.
Section 9.2. Filings, Consents and Waiting Periods. All
registrations, filings, applications, notices, consents, approvals, orders,
qualifications and waivers listed on Schedule 9.2 hereto shall have been filed,
made or obtained, and all applicable waiting periods under the HSR Act and
similar applicable foreign regulations shall have expired or been terminated.
Section 9.3. Litigation; Injunction. There shall be no
injunction, restraining order or decree of any nature of any Governmental
Authority of competent jurisdiction that is in effect that (i) restrains or
prohibits, or (ii) restrains, prohibits or imposes substantial penalties or
damages on the Sellers and their Affiliates (other than the Companies and the
Subsidiaries) with
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respect to (or any other materially adverse relief or remedy in connection
with), the consummation of the Stock Purchases or the performance of the other
material obligations of Sellers or Buyer under this Agreement and there shall be
no Action pending seeking such relief.
Section 9.4. Opinions. Sellers shall have received from
Wachtell, Lipton, Xxxxx & Xxxx, Buyer's special counsel and/or Buyer's regular
outside counsel (as apportioned by such counsel), their opinions addressed to
the Sellers and dated the Closing Date with respect to the matters and
substantially in the forms set forth in Exhibit 9.4 hereto.
Section 9.5. Proceedings; Certificates. All corporate
proceedings of Buyer that are required in connection with the transactions
contemplated by this Agreement shall be reasonably satisfactory in form and
substance to the Sellers and their counsel, and Sellers and their counsel shall
have received such evidence of such corporate proceedings, certified if
requested, as may be reasonably requested and is customary in transactions such
as the Stock Purchases. Buyer shall have wire transferred to the Sellers the
Cash Purchase Price in immediately available funds to the account or accounts
specified by the Designated Representative and shall have delivered certificates
representing the Securities and the Warrants.
Section 9.6. Grant of Stock Options. Contemporaneous with the
Closing, Buyer shall have granted to Xxxxx Xxxxxx, pursuant to his employment
agreement and under the terms and conditions of Buyer's 1997 Stock Incentive
Plan, stock options to purchase 6.648 shares of Buyer Common Stock at an
exercise price equal to $125,000 per share.
Section 9.7. Employment Agreements. Xxxxx Xxxxxx shall be
reasonably satisfied that the employment agreement between Buyer and Xxxxx
Xxxxxx in substantially the form set forth in Exhibit 8.7 shall have been
entered into, and is effective as of the Closing.
Section 9.8. Stockholders' Agreement. Each of the parties
other than the Sellers shall have executed and become parties to the
Stockholders' Agreement, as amended as contemplated by Section 2.5.
Section 9.9. No Material Adverse Change. Since the date of
the most recent balance sheet referred to in Section 4.5, there shall have been
no material adverse change in the Buyer Business Condition.
ARTICLE X
Survival; Indemnification
Section 10.1. Buyer Indemnified Parties' Right to
Indemnification. Except as to Xxxxx Xxxxxx whose obligations under this Section
10.1 shall be joint and several with the other Sellers and shall not be limited
to his proportionate consideration received, the Sellers severally in proportion
to the consideration received by each respective Seller, agree to indemnify and
hold Buyer, its Affiliates, each of their respective stockholders, partners,
directors, officers, employees and agents, and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Buyer
Indemnified Parties") harmless after the Closing against
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all losses, liabilities, claims, damages, costs, expenses, fines and penalties
(including (i) the cost of investigating, preparing or defending any Action
against which such Person would be indemnified if required to pay any Covered
Liabilities as a result thereof, (ii) reasonable attorneys' fees and expenses
and (iii) any such Covered Liabilities incurred in connection with the
enforcement of any valid demand or claim hereunder, but excluding consequential
damages, except to the extent the indemnified party is seeking reimbursement for
the cost of consequential damages it was required to pay to a third party)
(collectively, "Losses") suffered by any Buyer Indemnified Party resulting from
or arising out of (a) any inaccuracy in or breach of any of the representations
or warranties made by the Sellers herein or in any of the Schedules thereto; (b)
any breach or nonfulfillment of any covenants or agreements made by the Sellers
herein (including, without limitation, its obligations under Sections 5.3 and
7.7) or in any of the Schedules thereto; or (c) any inaccuracy or
misrepresentation by the Sellers in a certificate, affidavit or other document
or instrument executed and delivered in connection with the Closing in
accordance with the provisions of this Agreement.
Section 10.2. Limitations on Buyer Indemnified Parties' Right
to Indemnification. The Buyer Indemnified Parties' rights to indemnification
pursuant to Section 10.1 hereof are subject to the following specific
limitations:
(a) Except as provided in Section 10.2(b), a Buyer Indemnified
Party shall not be entitled to assert any right of indemnification pursuant to
clause (a) or (c) of Section 10.1 for any Losses suffered by it arising from a
breach by the Sellers of any warranty or representation set forth in this
Agreement after eighteen (18) months after the Closing Date or, in the case of
the representations and warranties contained in Section 3.16 and in Article VII
and any items referred to in Section 10.1(c) relating thereto (the "Statute
Representations"), after 10 days following the expiration of the relevant
statute of limitations (including extensions); provided that if on or prior to
the end of such eighteen-month period (or, in the case of the Statute
Representations, the 11th day following the expiration of the relevant statute
of limitations (including extensions)) a Notice of Claim shall have been given
to the Sellers, pursuant to Section 10.5 hereof, for such indemnification, the
Buyer Indemnified Party shall continue to have the right to be indemnified with
respect to such indemnification claim until such claim for indemnification has
been satisfied or otherwise resolved as provided in this Article X.
(b) The provisions of Section 10.2(a) shall not limit or
restrict any indemnification claims of any Buyer Indemnified Party (i) pursuant
to clause (b) of Section 10.1 or, except as provided in Section 10.2(a), clause
(c) of Section 10.1 or (ii) with respect to any inaccuracy in or breach of any
of the representations or warranties made by the Sellers in Sections 3.1, and
3.2 hereof, the first sentence of Section 3.4(a), the first sentence of Section
3.5 or Article VII and any items referred to in Section 10.1(c) relating thereto
or the Schedules to such Sections.
(c) Anything to the contrary in this Article X
notwithstanding, the Sellers shall (i) be liable to the Buyer Indemnified
Parties pursuant to Section 10.1(a) only to the extent that all Losses
experienced by all Buyer Indemnified Parties subject to indemnification pursuant
to Section 10.1(a) exceed $500,000 in the aggregate with respect to all such
Losses, in which event the indemnity provided for herein by the Sellers shall
apply with respect to all such Losses in
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excess of such initial $500,000 and (ii) the maximum aggregate liability of the
Sellers under this Article X shall not exceed $25 million, except with respect
to Losses arising from a breach of Sections 3.1, 3.2 and 3.23 hereof and Article
VII, as to which this Section 10.2(c) shall not apply.
(d) Buyer shall be entitled (but not required) to elect that
any Losses for which the Sellers are liable pursuant to Section 10.1 and which
have not been discharged in immediately available funds on or prior to the date
due pursuant hereto (and such failure to discharge has not been cured within
thirty (30) days after written notice thereof by Buyer to the Designated
Representative) be discharged by delivery of Securities and/or Warrants valued
at their respective fair market values as of the date of election by Buyer (as
determined in accordance with the procedures for determining "Fair Market Value"
of the Securities and/or Warrants applicable to the Sellers under the
Stockholders' Agreement); provided that notwithstanding anything to the contrary
in Section 10.1 or 10.2, the Sellers shall be jointly and severally liable to
the Buyer Indemnified Parties with respect to any Losses (and not limited to
their proportionate consideration received, but subject to the limitations in
Section 10.2(c)) with respect to which the Buyer Indemnified Parties make such
an election; and provided further that the Securities and the Warrants shall
remain subject to this Section 10.2(d) notwithstanding their subsequent transfer
by any of the Sellers (or any direct or indirect transferee thereof) to any
other Person (which transfer shall be made expressly subject to Buyer's right to
require the delivery of such transferred Securities or Warrants by such Seller
or transferee pursuant to this Section 10.2(d), except that, following an IPO
(as defined in the Stockholders' Agreement), such transfer may be made to a
third party not related to any Seller in an arm's length transaction solely for
cash at the then prevailing market price and then only the gross proceeds of
such sale shall remain subject to the provisions of this Section 10.2(d));
provided, however, that notwithstanding the foregoing, the provisions of this
Section 10.2(d) shall terminate and become null and void upon the third
anniversary of the Closing Date, other than with respect to Losses relating to
Notices of Claim given prior to such date.
Section 10.3. Seller Indemnified Parties' Right to
Indemnification. Buyer agrees to indemnify and hold the Sellers and each of the
heirs, successors and assigns of any of the foregoing (collectively, the "Seller
Indemnified Parties") harmless after the Closing against any Losses suffered by
the Sellers resulting from or arising out of (a) any inaccuracy in or breach of
any of the representations or warranties made by Buyer herein or in any of the
Schedules thereto; (b) any breach or nonfulfillment of any of the covenants or
agreements made by Buyer herein or in any of the Schedules thereto; or (c) any
inaccuracy or misrepresentation by Buyer in a certificate, affidavit or other
document or instrument executed and delivered in connection with the Closing in
accordance with the provisions of this Agreement.
Section 10.4. Limitations on Seller Indemnified Parties' Right
to Indemnification. The Seller Indemnified Parties' rights to indemnification
pursuant to Section 10.3 hereof are subject to the following specific
limitations:
(a) Except as provided in Section 10.4(b), a Seller
Indemnified Party shall not be entitled to assert any right of indemnification
pursuant to clause (a) or (c) of Section 10.3 for any Losses suffered by it
arising from a breach by Buyer of any warranty or representation set
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forth in this Agreement after eighteen (18) months after the Closing Date;
provided that if on or prior to the end of such eighteen-month period a Notice
of Claim shall have been given to Buyer, pursuant to Section 10.5 hereof, for
such indemnification, the Seller Indemnified Party shall continue to have the
right to be indemnified with respect to such indemnification claim until such
claim for indemnification has been satisfied or otherwise resolved as provided
in this Article X.
(b) The provisions of Section 10.4(a) shall not limit or
restrict any indemnification claims of any Seller Indemnified Party (i) pursuant
to clause (b) of Section 10.3 or, except as provided in Section 10.4(a), clause
(c) of Section 10.3 or (ii) with respect to any inaccuracy in or breach of any
of the representations or warranties made by Buyer in Sections 4.1 or 4.4 hereof
and any items referred to in Section 10.3(c) relating thereto.
(c) Anything to the contrary in this Article X
notwithstanding, Buyer shall (i) be liable to the Seller Indemnified Parties
pursuant to Section 10.3(a) only to the extent that all Losses experienced by
all Seller Indemnified Parties subject to indemnification pursuant to 10.3(a)
exceed $500,000 in the aggregate with respect to all such Losses, in which event
the indemnity provided for herein by Buyer shall apply with respect to all such
Losses in excess of such initial $500,000 and (ii) the maximum aggregate
liability of Buyer under this Article X shall not exceed $25 million, except
with respect to Losses arising from a breach of Sections 4.1, 4.3 and 4.4 as to
which this Section 10.4(c) shall not apply.
Section 10.5. Indemnification Procedures. (a) Upon obtaining
knowledge of any claim or demand which has given rise to, or is expected to give
rise to, a claim for indemnification hereunder, the party seeking
indemnification ("Indemnitee") shall give written notice ("Notice of Claim") of
such claim or demand to the indemnifying party ("Indemnitor"). Indemnitee shall
furnish to the Indemnitor in reasonable detail such information as Indemnitee
may have with respect to such indemnification claim (including, with respect to
any third party claim or demand, copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the same). Subject to
the limitations set forth in Sections 10.2(a) and 10.4(a) hereof, no failure or
delay by Indemnitee in the performance of the foregoing shall reduce or
otherwise affect the obligation of Indemnitor to indemnify and hold Indemnitee
harmless, except to the extent that such failure or delay shall have actually
adversely affected Indemnitor's ability to defend against, settle or satisfy any
Losses for which Indemnitee is entitled to indemnification hereunder.
(b) If the claim or demand set forth in the Notice of Claim
given by Indemnitee pursuant to Section 10.5(a) hereof is a claim or demand
asserted by a third party, Indemnitor shall have 15 days after the date on which
Notice of Claim is given to notify Indemnitee in writing of its election to
defend such third party claim or demand on behalf of the Indemnitee. If
Indemnitor elects to defend such third party claim or demand, Indemnitee shall
make available to Indemnitor and his agents and representatives all records and
other materials which are reasonably required in the defense of such third party
claim or demand and shall otherwise cooperate with, and assist Indemnitor in the
defense of, such third party claim or demand, and so long as Indemnitor is
defending such third party claim in good faith, Indemnitee shall not pay, settle
or compromise such third party claim or demand. If Indemnitor elects to defend
such third party
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claim or demand, Indemnitee shall have the right to participate in the defense
of such third party claim or demand, at Indemnitee's own expense. In the event,
however, that Indemnitee reasonably determines that representation by counsel to
Indemnitor of both Indemnitor and Indemnitee may present such counsel with a
conflict of interest, then such Indemnitee may employ separate counsel to
represent or defend it in any such action or proceeding and Indemnitor will pay
the fees and disbursements of such counsel; provided that, in such event,
Indemnitor shall only be responsible for the fees and disbursements of one
separate counsel per jurisdiction for all of the Indemnitees. The Indemnitor
shall not, except with the consent of the Indemnitee, enter into any settlement
or consent to entry of any judgment that provides for injunctive or other
non-monetary relief affecting the Indemnitee or that does not include as an
unconditional term thereof the giving by the Person or Persons asserting such
claim to all Indemnitees (i.e., the Seller Indemnified Parties or the Buyer
Indemnified Parties, as the case may be) of an unconditional release from all
liability with respect to such claim or consent to entry of any judgment. If
Indemnitor does not elect to defend such third party claim or demand or does not
defend such third party claim or demand in good faith, Indemnitee shall have the
right, in addition to any other right or remedy it may have hereunder, at
Indemnitor's expense, to defend such third party claim or demand; provided,
however, that (a) Indemnitee shall not have any obligation to participate in the
defense of, or defend, any such third party claim or demand; and (b)
Indemnitee's defense of or its participation in the defense of any such third
party claim or demand shall not in any way diminish or lessen the obligations of
Indemnitor under the agreements of indemnification set forth in this Article X.
Section 10.6. Satisfaction of Indemnification Obligations.
Except for third party claims being defended in good faith, Indemnitor shall
satisfy its obligations hereunder in respect of a valid claim for
indemnification hereunder in immediately available federal funds within 30 days
after the date on which Notice of Claim is given.
Section 10.7. Sole Remedy Regarding Representations and
Warranties. (a) The indemnification rights provided in this Article X shall be
the sole remedy to which a Seller Indemnified Party will be entitled for breach
of any representation or warranty of Buyer contained in Article IV hereof
(including the Schedules to such representations).
(b) The indemnification rights provided in this Article X
shall be the sole remedy to which a Buyer Indemnified Party will be entitled for
breach of any representation or warranty of the Sellers contained in Article III
hereof (including the Schedules to such representations).
Section 10.8. Losses Net of Insurance. The amount of any
Losses for which indemnification is provided under this Article X shall be net
of any amounts recovered by the Indemnitee under insurance policies with respect
to such Losses. In the event that an Indemnitee shall later collect any such
amounts recovered under insurance policies with respect to any Losses for which
such Indemnitee has previously received payments under this Article X from an
Indemnitor, such Indemnitee shall promptly repay to such Indemnitor such amount
recovered.
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ARTICLE XI
Termination
Section 11.1. Termination. This Agreement may be terminated at
any time prior to the Closing by:
(a) the mutual consent of Sellers, acting through the
Designated Representative, and Buyer; or
(b) either the Sellers, acting through the Designated
Representative, or Buyer, if any condition set forth herein for the benefit of
the Sellers or Buyer, respectively, shall not have been met or waived on or
before the earlier of (i) October 15, 1998 or (ii) the later of (x) forty-five
(45) days after the date hereof and (y) fifteen (15) days after the conditions
set forth in Sections 8.2 and 8.9 shall have been satisfied, or if so extended,
on such later date as the Closing Date may be extended as mutually agreed by the
Designated Representative and Buyer in writing as contemplated in the definition
thereof in Article I hereof.
Section 11.2. Procedure and Effect of Termination. In the
event of termination of this Agreement by either or both of Sellers and Buyer
pursuant to Section 11.1, written notice thereof shall forthwith be given by the
terminating party or parties to the other party or parties hereto, and this
Agreement shall thereupon terminate and become void and have no effect, and the
transactions contemplated hereby shall be abandoned without further action by
the parties hereto, except that the provisions of Sections 5.1(b), 5.1(d) and
12.4 shall survive the termination of this Agreement; provided, however, that
such termination shall not relieve any party hereto of any liability for any
breach of this Agreement (other than a non-willful breach of a representation,
as to which no party shall be liable hereunder). If this Agreement is terminated
as provided herein, all filings, applications and other submissions contemplated
by Sections 3.9 and 4.2 shall, to the extent practicable, be withdrawn from the
agency or other Persons to which they were made.
ARTICLE XII
Miscellaneous
Section 12.1. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party.
Section 12.2. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
reference to the choice of law principles thereof.
Section 12.3. Entire Agreement. This Agreement and the
Schedules and Exhibits hereto contain the entire agreement between the parties
with respect to the subject matter
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hereof and there are no agreements, understandings, representations or
warranties between the parties other than those set forth or referred to herein.
Except for the provisions in Article X, which are intended to benefit, and to be
enforceable by, any of the Buyer Indemnified Parties or the Seller Indemnified
Parties, as applicable, and Section 7.7 which is intended to benefit, and be
enforceable by, the indemnified Persons thereunder, this Agreement (including,
without limitation, Section 5.15 and Article VI hereof) is not intended to
confer and shall not confer upon any Person not a party hereto (other than the
parties' successors and assigns permitted by Section 12.6) any rights or
remedies hereunder.
Section 12.4. Expenses. Except as set forth in this Agreement
and the Schedule hereto, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, except that (A) Buyer
agrees to pay the filing fees required with respect to the filings under the HSR
Act required in connection with the Stock Purchases (except for filing fees
incurred in connection with the acquisition of the Securities by the Sellers,
which fees, if any, will be paid by the Sellers), (B) Buyer, on the one hand,
and the Sellers, on the other hand, each agree to pay one-half of any and all
real property and other property transfer, stamp, gains, conveyance duties and
other similar real property taxes and all documentary stamps, stamp duties,
filing fees, recording fees and sales and use taxes, and any similar expenses,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Stock Purchases; provided, however, that if
the Stock Purchases are consummated, Buyer, shall pay or cause Anagram to pay at
the Closing one-half of the fees and expenses of (A) Xxxxx Xxxxxxx, the Sellers'
financial advisor, (B) Xxxxxx, Xxxxxxxx and Xxxxxx, P.A., the Sellers' legal
advisor; and (C) Xxxxxx Xxxxxxxx, the Companies' independent auditor, in each
case, only to the extent such fees and expenses relate to the negotiation and
consummation of the transactions contemplated by this Agreement and in the
aggregate not to exceed $700,000, and Sellers shall pay all other such fees and
expenses directly.
Section 12.5. Notices. All notices hereunder shall be
sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is confirmed, telecopy, telefax or other electronic transmission service
to the appropriate address or number as set forth below. Notices to the Sellers
shall be given to the Designated Representative on behalf of any and all Sellers
and addressed to:
Xxxxx Xxxxxx
Anagram International
0000 Xxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Telecopy: (000) 000-0000
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with a copy to:
Xxxxx X. Xxxxxx
Xxxxxx, Xxxxxxxx and Xxxxxx, P.A.
0000 Xxxxxxx Xxxxxx
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
or at such other address and to the attention of such other person as Sellers
may designate by written notice to Buyer. Notices to Buyer shall be addressed
to:
Amscan Holdings, Inc.
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxx
Telecopier No: (000) 000-0000
or at such other address and to the attention of such other person as Buyer may
designate by written notice to the Seller.
Section 12.6. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that no party hereto will assign its
rights or delegate its obligations under this Agreement without the express
prior written consent of each other party hereto, except that Buyer may assign
any or all of its right, title and interest under this Agreement to any one or
more Affiliates, provided that in the event of such assignment, Buyer shall not
be released from any obligations under this Agreement. Notwithstanding the
foregoing sentence, Buyer may assign this Agreement to any lender to Buyer or
any subsidiary of Buyer as security for obligations to such lender in respect of
the financing arrangements entered into in connection with the transactions
contemplated hereby and any refinancings, extensions, refundings or renewals
thereof, provided, however, that no assignment hereunder shall in any way affect
Buyer's obligations or liabilities under this Agreement.
Section 12.7. Designated Representative. Xxxxx Xxxxxx shall
be the designated representative (the "Designated Representative") of each of
the Sellers hereunder and each of the Sellers hereunder hereby designates the
Designated Representative to make all decisions and determinations and take all
actions (including giving any consents or waivers or agreeing to
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any amendments to this Agreement or to termination hereof) required or permitted
hereunder on behalf of such Seller, and any such action, decision, determination
or action so made or taken shall be deemed the decision, determination or action
of such Seller, and any notice, document, certificate or information required to
be given to any Seller shall be deemed so given if given to the Designated
Representative.
Section 12.8. Publicity. Sellers and Buyer agree that prior
to the earlier of the termination of this Agreement and the Closing they shall
use reasonable efforts, to coordinate and agree, prior to the release or
issuance thereof, upon any public release or announcement concerning the
transactions contemplated hereby to be issued by Sellers, Buyer or any of their
Affiliates, and Sellers and Buyer further agree that, except to the extent
required by law, no such public release or announcement shall be released or
issued by any of them or their respective Affiliates without the mutual consent
of Buyer and the Designated Representative. The Sellers and Buyer agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement will be in the form previously agreed to.
Section 12.9. Headings; Definitions. The Section and Article
headings contained in this Agreement are inserted for convenience of reference
only and will not affect the meaning or interpretation of this Agreement. All
references to Sections or Articles contained herein mean Sections or Articles of
this Agreement unless otherwise stated. All capitalized terms defined herein are
equally applicable to both the singular and plural forms of such terms.
Section 12.10. Amendments and Waivers. This Agreement may not
be modified or amended except by an instrument or instruments in writing signed
by the party against whom enforcement of any such modification or amendment is
sought (or, in the case of the Sellers, if signed by the Designated
Representative). Any party hereto may, only by an instrument in writing (or, in
the case of the Sellers, if signed by the Designated Representative) waive
compliance by the other parties hereto with any term or provision of this
Agreement on the part of such other parties hereto to be performed or complied
with. The waiver by any party hereto of a breach of any term or provision of
this Agreement shall not be construed as a waiver of any subsequent breach.
Section 12.11. Severability. In the event that this
Agreement, or any of its provisions, or the performance of any provision, is
found to be illegal or unenforceable under applicable law now or hereafter in
effect, the parties shall be excused from performance of such portions of this
Agreement as shall be found to be illegal or unenforceable under the applicable
laws or regulations without affecting the validity of the remaining provisions
of the Agreement; provided that (i) the remaining provisions of the Agreement
shall in their totality constitute a commercially reasonable agreement, and (ii)
should any method of termination of this Agreement or a portion thereof be found
to be illegal or unenforceable, such method shall be reformed to comply with the
requirements of applicable law so as, to the greatest extent possible, to allow
termination by that method. Nothing herein shall be construed as a waiver of any
party's right to challenge the validity of such law.
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Section 12.12. Interpretation. For the purposes of this
Agreement, (i) a "subsidiary" of an entity means any entity more than 50% of the
voting power of whose outstanding voting securities or equity interests are
directly or indirectly owned by such other entity, and (ii) "including" shall
mean "including without limitation."
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties as of the day first above written.
AMSCAN HOLDINGS, INC.
By:/s/Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: President
STOCKHOLDERS:
/s/Xxxxx Xxxxxx
Xxxxx Xxxxxx
/s/Xxxx Xxxxxx
Xxxx Xxxxxx
/s/Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
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XXXXX XXXXXX RETAINED ANNUITY TRUST
dated December 30, 1992
By:/s/Xxxxxxxx Xxxxx
Name: Xxxxxxxx Xxxxx
Title: Co-Trustee
By:/s/Xxxxx Xxxxx
Name: Xxxxx Xxxxx
Title: Co-Trustee
By:/s/Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: Co-Trustee
XXXXX XXXXXX IRREVOCABLE TRUST
dated December 31, 1992
By:/s/Xxxxxxxx Xxxxx
Name: Xxxxxxxx Xxxxx
Title: Co-Trustee
By:/s/Xxxxx Xxxxx
Name: Xxxxx Xxxxx
Title: Co-Trustee
By:/s/Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: Co-Trustee
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