STOCK PURCHASE AGREEMENT
by and among
XXXXXX SCIENTIFIC INTERNATIONAL INC.
and
THE SHAREHOLDERS OF
XXXX-XXXXXX INSTRUMENT COMPANY,
LABCOR TECHNICAL SALES, INC.
and
SPECIALTY MOTORS, INC.
Dated as of September 4, 2001
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I SALE OF STOCK...........................................................................................1
Section 1.1 Sale of Stock................................................................................1
Section 1.2 Purchase Price...............................................................................1
Section 1.3 Instruments of Conveyance and Transfer.......................................................2
Section 1.4 Closing......................................................................................2
Section 1.5 Transfer Taxes...............................................................................2
Section 1.6 Deliveries by the Sellers....................................................................2
Section 1.7 Deliveries by the Purchaser..................................................................2
ARTICLE II REPRESENTATIONS OF EACH SELLER RELATING TO THE SELLER..................................................3
Section 2.1 Ownership of Stock...........................................................................3
Section 2.2 Authorization and Validity of Agreement......................................................3
Section 2.3 Consents and Approvals: No Violations.......................................................4
Section 2.4 Broker's or Finder's Fees....................................................................4
ARTICLE III REPRESENTATIONS OF THE SELLERS RELATING TO THE COMPANIES..............................................4
Section 3.1 Existence and Good Standing..................................................................4
Section 3.2 Capital Stock................................................................................5
Section 3.3 Subsidiaries.................................................................................5
Section 3.4 Consents and Approvals; No Violation.........................................................6
Section 3.5 Financial Statements.........................................................................6
Section 3.6 Properties...................................................................................7
Section 3.7 Absence of Certain Changes or Events.........................................................8
Section 3.8 Litigation...................................................................................9
Section 3.9 Intellectual Property........................................................................9
Section 3.10 Taxes.......................................................................................11
Section 3.11 Compliance with Laws; Permits...............................................................12
Section 3.12 Employee Benefit Plans......................................................................13
Section 3.13 Transactions with Affiliates................................................................15
Section 3.14 Insurance...................................................................................15
Section 3.15 Environmental Matters.......................................................................15
Section 3.16 Receivables.................................................................................17
Section 3.17 Inventories.................................................................................17
Section 3.18 Certain Contracts...........................................................................17
Section 3.19 Labor Matters...............................................................................18
Section 3.20 Disclaimer of Certain Warranties............................................................19
Section 3.21 No Undisclosed Liabilities..................................................................19
Section 3.22 Product Liability...........................................................................19
ARTICLE IV REPRESENTATIONS OF THE PURCHASER......................................................................19
Section 4.1 Existence and Good Standing of the Purchaser; Authorization.................................20
Section 4.2 Consents and Approvals; No Violations.......................................................20
Section 4.3 Securities Laws Representations.............................................................20
Section 4.4 Available Funds.............................................................................21
Section 4.5 Litigation..................................................................................21
Section 4.6 Broker's or Finder's Fees...................................................................21
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ARTICLE V COVENANTS .............................................................................................21
Section 5.1 Conduct of Business of the Companies........................................................21
Section 5.2 Review of the Companies; Access to Properties and Records...................................22
Section 5.3 Commercially Reasonable Efforts.............................................................23
Section 5.4 Directors' and Officers' Indemnification....................................................23
Section 5.5 Affected Employees..........................................................................24
Section 5.6 Employee Benefits...........................................................................24
Section 5.7 Sellers Non-Compete.........................................................................25
Section 5.8 Transfer of Certain Non-Operating Assets and Liabilities....................................25
Section 5.9 Notification of Certain Matters.............................................................25
Section 5.10 No Solicitation of Competing Transaction....................................................25
Section 5.11 Subsequent Actions..........................................................................26
Section 5.12 Adoption of Employee Bonus and Severance Plan...............................................26
Section 5.13 Financial Statements........................................................................26
Section 5.14 Transfers of Shares to Trusts...............................................................26
ARTICLE VI TAXES; ALLOCATION OF PURCHASE PRICE...................................................................27
Section 6.1 Indemnification.............................................................................27
Section 6.2 Filing Responsibility.......................................................................28
Section 6.3 Cooperation.................................................................................28
Section 6.4 Section 338 Elections and Forms; Allocation of Purchase Price...............................29
Section 6.5 Refunds or Credits..........................................................................29
Section 6.6 Contests....................................................................................30
Section 6.7 Characterization of Indemnification Payments................................................30
Section 6.8 Survival and Exclusivity....................................................................30
ARTICLE VII CONDITIONS TO THE PURCHASER'S OBLIGATIONS............................................................31
Section 7.1 Truth of Representations and Warranties.....................................................31
Section 7.2 Performance of Agreements...................................................................31
Section 7.3 No Injunction...............................................................................31
Section 7.4 Governmental and Other Approvals............................................................31
Section 7.5 Resignations................................................................................31
Section 7.6 FIRPTA Certificate..........................................................................31
Section 7.7 Delivery of Financial Statements............................................................32
Section 7.8 Patents on Schedule 3.9(b)..................................................................32
Section 7.9 Section 116(2) Certificate..................................................................32
Section 7.10 Termination of Stock Transfer Agreement.....................................................32
ARTICLE VIII CONDITIONS TO THE SELLERS' OBLIGATIONS..............................................................32
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Section 8.1 Truth of Representations and Warranties.....................................................32
Section 8.2 Performance of Agreements...................................................................33
Section 8.3 No Injunction...............................................................................33
Section 8.4 Governmental Approvals......................................................................33
ARTICLE IX SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION..........................................................33
Section 9.1 Survival of Representations.................................................................33
Section 9.2 Indemnities.................................................................................33
Section 9.3 Limits on Indemnification...................................................................35
ARTICLE X TERMINATION............................................................................................36
Section 10.1 Termination.................................................................................36
Section 10.2 Effect of Termination.......................................................................37
ARTICLE XI MISCELLANEOUS.........................................................................................37
Section 11.1 Expenses....................................................................................37
Section 11.2 Governing Law; Consent to Jurisdiction......................................................38
Section 11.3 Captions....................................................................................38
Section 11.4 Publicity...................................................................................38
Section 11.5 Business Records............................................................................38
Section 11.6 Notices.....................................................................................39
Section 11.7 Sellers' Representatives....................................................................40
Section 11.8 Parties in Interest.........................................................................40
Section 11.9 Counterparts................................................................................40
Section 11.10 Entire Agreement............................................................................40
Section 11.11 Interpretation..............................................................................40
Section 11.12 Third Party Beneficiaries...................................................................41
Section 11.13 Attorneys' Fees and Costs...................................................................41
Section 11.14 Amendments; Waivers.........................................................................41
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ANNEXES
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ANNEX A Ownership of Stock A-1
ANNEX B Form of Employee Bonus Plan B-1
ANNEX C Allocation of Purchase Price C-1
ANNEX D FIRPTA Certificate D-1
ANNEX E Joinder Agreement E-1
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INDEX OF DEFINED TERMS
----------------------
116(2) Certificate...............................................................................................29
1933 Act.........................................................................................................19
2000 Original CPIC Financial Statements...........................................................................6
2000 LTSI Balance Sheet...........................................................................................6
2000 LTSI Financial Statements....................................................................................6
2000 SMI Balance Sheet............................................................................................6
2000 SMI Financial Statements.....................................................................................6
2000 Reissued CPIC Balance Sheets.................................................................................6
2000 Reissued CPIC Financial Statements...........................................................................6
2001 Balance Sheet................................................................................................6
2001 Financial Statements.........................................................................................6
Acquisition Proposal.............................................................................................24
Affected Employees...............................................................................................22
Affiliate Leased Real Property...................................................................................15
Affiliate(s).....................................................................................................14
Agreement.........................................................................................................1
Balance Sheets....................................................................................................6
business day.....................................................................................................37
Closing...........................................................................................................2
Closing Date......................................................................................................2
COBRA............................................................................................................22
Code.............................................................................................................12
Companies.........................................................................................................1
Companies' knowledge.............................................................................................37
Company...........................................................................................................1
Company Plans....................................................................................................12
Confidentiality Agreement........................................................................................21
CP Plan..........................................................................................................22
CPIC..............................................................................................................1
Damages..........................................................................................................30
Encumbrances......................................................................................................3
Environmental Claim..............................................................................................15
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Environmental Law................................................................................................15
Environmental Permits............................................................................................15
ERISA............................................................................................................11
ERISA Affiliate..................................................................................................12
Financial Statements..............................................................................................6
FIRPTA Certificate...............................................................................................29
Form 8023........................................................................................................26
GAAP..............................................................................................................6
Governmental Authority............................................................................................3
Hazardous Materials..............................................................................................16
Hazardous Waste Manifest.........................................................................................16
HSR Act...........................................................................................................3
Indemnified Party................................................................................................31
Indemnifying Party...............................................................................................31
Indemnity Claim..................................................................................................32
Intellectual Property.............................................................................................8
IP Agreement......................................................................................................8
ITA..............................................................................................................29
JCP..............................................................................................................23
JJC..............................................................................................................23
Leased Real Property..............................................................................................7
LTSI..............................................................................................................1
Material Adverse Effect...........................................................................................4
Material Contracts...............................................................................................16
Other Filings....................................................................................................21
Owned Real Property...............................................................................................6
Permitted Encumbrances............................................................................................6
Person............................................................................................................3
Proportionate Indemnity Interest.................................................................................30
Proportionate Interest............................................................................................1
Purchase Price....................................................................................................1
Purchaser.........................................................................................................1
Purchaser Indemnified Parties....................................................................................25
Sale..............................................................................................................1
Section 338(h)(10) Election......................................................................................26
Seller............................................................................................................1
Sellers...........................................................................................................1
Sellers' knowledge...............................................................................................37
ii
Sellers' Representatives.........................................................................................36
SMI...............................................................................................................1
Stock.............................................................................................................1
Straddle Period..................................................................................................25
Subsidiary........................................................................................................5
Tax..............................................................................................................10
Tax Benefit......................................................................................................32
Tax Return.......................................................................................................10
Tax Returns......................................................................................................10
Taxes............................................................................................................10
Third Party Claims...............................................................................................31
Transfer Taxes....................................................................................................2
WARN Act.........................................................................................................17
Welfare Plans....................................................................................................22
iii
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of September 4,
2001, by and among the shareholders set forth on the signature pages hereof
(each, a "SELLER" and collectively, the "SELLERS") of Xxxx-Xxxxxx Instrument
Company, an Illinois corporation ("CPIC"), Labcor Technical Sales, Inc., an
Ontario corporation ("LTSI"), and Specialty Motors, Inc., a California
corporation ("SMI") (each such company, or any Subsidiary or Subsidiaries
thereof, a "COMPANY" and collectively, the "COMPANIES"), and Xxxxxx Scientific
International Inc., a Delaware corporation (the "PURCHASER").
WITNESSETH:
WHEREAS, the Sellers are the owners of all of the outstanding capital
stock of CPIC, LTSI and SMI (collectively, the "STOCK"); and
WHEREAS, the Sellers desire to sell, and the Purchaser desires to
purchase, the Stock in accordance with and subject to the terms and conditions
of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein
contained, the parties hereto agree as follows:
ARTICLE I
SALE OF STOCK
Section 1.1 SALE OF STOCK. Subject to the terms and conditions herein
stated, each Seller severally agrees to sell, assign, transfer and deliver to
the Purchaser on the Closing Date, and the Purchaser agrees to purchase and
accept from the Sellers on the Closing Date, all of the shares of Stock owned by
the Sellers (the "SALE"). The certificates representing the Stock shall be duly
endorsed in blank, or accompanied by stock powers duly executed in blank, by the
applicable Sellers.
Section 1.2 PURCHASE PRICE.
(a) The purchase price for the Sale of the Stock (the
"PURCHASE PRICE") is (i) $208,322,116 less (ii) the aggregate amount of
obligations of any Company relating to any mortgages, loan agreements, capital
leases, letters of credit, payments in respect of the deferred purchase price of
property or any other agreement relating to the borrowing of money or extension
of credit, including accrued and unpaid interest thereon, with or from any
Person other than the Companies outstanding at the time of Closing.
(b) On the Closing Date, the Purchaser shall pay to each
Seller, by wire transfer of immediately available funds to the account or
accounts designated by the Sellers on or before the second business day prior to
the Closing, such Seller's Proportionate Interest in the Purchase Price.
"PROPORTIONATE INTEREST," as used herein, shall mean, with respect to each
Seller, the percentage interest set across from such Seller's name on SCHEDULE
1.2 which schedule shall be updated and delivered by or on behalf of the Sellers
to the Purchaser no later than two business days prior to the Closing Date.
Section 1.3 INSTRUMENTS OF CONVEYANCE AND TRANSFER. On the Closing
Date, the Sellers shall, and shall cause each Company to, deliver or cause to be
delivered to the Purchaser such deeds, bills of sale, endorsements, consents,
assignments, schedules and other good and sufficient instruments of conveyance
and assignment as the parties and their respective counsel shall deem necessary
or appropriate or as may be required by the jurisdiction of organization of each
Company to vest in the Purchaser all right, title and
interest in the Stock (including such supplemental purchase agreements,
consistent with the provisions of this Agreement, as may be required to be
executed and delivered by the Purchaser and the Sellers pursuant to the laws and
regulations of any foreign jurisdiction).
Section 1.4 CLOSING. The closing of the Sale (the "CLOSING") shall take
place at 10:00 a.m., local time, at the offices of Xxxxxx Xxxxxx & Xxxxx, 0000
Xxxxx Xxxxx, Xxxxxxx, Xxxxxxxx, as promptly as practicable following, but in no
event later than the third business day after, the satisfaction or waiver of the
conditions set forth in Articles VII and VIII hereof, unless another date or
place is agreed in writing by the Sellers' Representatives and the Purchaser.
Such time and date are herein referred to as the "CLOSING DATE."
Section 1.5 TRANSFER TAXES. The Sellers, on the one hand, and the
Purchaser, on the other hand, shall each pay and be responsible for 50% of all
stamp, transfer, documentary, sales, use, value added, registration, property,
real estate gain, excise and other such taxes and fees (including any penalties
and interest), if any, incurred in connection with this Agreement and the
transactions contemplated hereby (collectively, the "TRANSFER TAXES").
Section 1.6 DELIVERIES BY THE SELLERS. At the Closing, the Sellers
shall deliver to the Purchaser:
(a) certificates representing the number of shares of Stock
set opposite such Seller's name on ANNEX A attached hereto, each such
certificate to be duly and validly endorsed in favor of the Purchaser or
accompanied by a separate stock power duly and validly executed by such Seller
and otherwise sufficient to vest in the Purchaser title to such Stock;
(b) a certificate signed by the Sellers certifying as to the
amount outstanding immediately prior to the Closing of the obligations referred
to in Section 1.2(a)(ii) for borrowed money and extensions of credit of the
Companies including all accrued and unpaid interest thereon; and
(c) such other documents, instruments and writings as may be
reasonably requested by the Purchaser at or prior to the Closing pursuant to
this Agreement or otherwise in connection herewith.
Section 1.7 DELIVERIES BY THE PURCHASER. At the Closing, the Purchaser
shall deliver to each Seller:
(a) such Sellers' Proportionate Interest in the Purchase
Price; and
(b) such other documents, instruments and writings as may be
reasonably requested by the Sellers' Representatives at or prior to the Closing
pursuant to this Agreement or otherwise in connection herewith.
ARTICLE II
REPRESENTATIONS OF EACH SELLER RELATING TO THE SELLER
Each Seller hereby severally represents and warrants to the Purchaser
as of the date of this Agreement and as of the Closing as set forth below. The
exceptions, modifications, descriptions and disclosures in any Schedule attached
hereto are made for all relevant purposes of this Agreement and are exceptions
by the Sellers to all representations and warranties set forth in this
Agreement; PROVIDED, THAT, there are no exceptions, modifications, descriptions
or disclosures to Section 3.5 and the only exceptions, modifications,
descriptions or disclosures to Sections 3.7 and 3.13 are those set forth in
SCHEDULE 3.7 and 3.13, respectively.
2
Section 2.1 OWNERSHIP OF STOCK. Such Seller is the record and
beneficial owner of all of the shares of Stock which are set forth next to its
name on ANNEX A attached hereto, which are free and clear of all mortgages,
liens, pledges, charges, encumbrances, restrictions and claims of every kind and
character ("ENCUMBRANCES"). There are no existing (a) options, warrants, calls,
pre-emptive rights, subscriptions or other rights, convertible securities,
agreements or commitments of any character to which such Seller is a party
obligating such Seller to transfer or sell, or cause to be transferred or sold,
any shares of capital stock or other equity interest in CPIC, LTSI, SMI or any
Subsidiary thereof, or securities convertible into or exchangeable for such
shares or equity interests; (b) rights or obligations of such Seller to purchase
or otherwise acquire any capital stock of CPIC, LTSI, SMI or any Subsidiary or
Affiliate thereof or to provide funds to make any investment (in the form of a
loan, capital contribution or otherwise) in any Company; or (c) voting trusts,
stockholders' agreements or similar agreements to which such Seller is a party
with respect to CPIC, LTSI, SMI or any Subsidiary thereof. The delivery to the
Purchaser of the Stock owned by such Seller in accordance with the terms and
provisions of this Agreement will transfer to the Purchaser valid title thereto,
free and clear of any and all Encumbrances other than any Encumbrances arising
from the acts or omissions of the Purchaser. Such Seller does not own or have
the right to acquire any securities issued by CPIC, LTSI, SMI or any Subsidiary
thereof that are not listed on ANNEX A.
Section 2.2 AUTHORIZATION AND VALIDITY OF AGREEMENT.
(a) Such Seller is a natural person or a legal entity of the
type set forth opposite such Seller's name in ANNEX A. Such Seller who is a
natural person is competent and has all requisite power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. Such Seller which is not a natural person has been duly organized, and
is validly existing and in good standing, under the laws of its jurisdiction of
formation, has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, and has taken
all necessary corporate or other action to authorize the execution, delivery and
performance of this Agreement.
(b) This Agreement has been duly and validly executed and
delivered by such Seller and, assuming the due execution of this Agreement by
the Purchaser and each of the other Sellers, is a legal, valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium, receivership and
similar laws affecting the enforcement of creditors' rights generally and to
general equitable principles.
Section 2.3 CONSENTS AND APPROVALS: NO VIOLATIONS. Assuming that
filings required, if any, under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR ACT") or any foreign antitrust, competition or
investment laws and regulations, are made and the waiting period thereunder has
been terminated or has expired, the execution and delivery of this Agreement by
such Seller and the consummation by such Seller of the Sale and the other
transactions contemplated by this Agreement (a) will not violate any statute,
rule, regulation, order or decree of any foreign, federal, state or local
governmental or regulatory body, agency or authority ("GOVERNMENTAL AUTHORITY")
by which such Seller is bound or by which any of its respective properties or
assets are bound, (b) will not require any permit, consent or approval of, or
the giving of any notice to, or filing with, any individual, partnership, joint
venture, corporation, limited liability company, trust, unincorporated
organization, Governmental Authority or any other person (a "PERSON"), and (c)
will not result in a violation or breach of, conflict with, constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, loss of rights or benefits, payment or
acceleration) under, or result in the creation of any Encumbrance upon any of
the properties or assets of such Seller under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise, permit,
agreement,
3
lease, franchise agreement or any other instrument or obligation to which such
Seller is a party, or by which it or any of its respective properties or assets
may be bound, excluding from the foregoing clauses filings, permits, consents,
approvals and notices the absence of which, and violations, breaches, defaults,
conflicts and Encumbrances, the existence of which, in the aggregate, will not
prevent or materially delay such Seller from performing its obligations
hereunder or have a Material Adverse Effect.
Section 2.4 BROKER'S OR FINDER'S FEES. No agent, broker, firm or other
Person acting on behalf of such Seller or any of the Companies is, or will be,
entitled to any investment banking commission, broker's or finder's fees from
any of the parties hereto, or from any Person controlling, controlled by or
under common control with any of the parties hereto, in connection with any of
the transactions contemplated by this Agreement, except for Xxxxxx X. Xxxxx &
Co. Incorporated, whose fees and expenses will be paid by CPIC prior to the
Closing.
ARTICLE III
REPRESENTATIONS OF THE SELLERS RELATING TO THE COMPANIES
Each Seller hereby severally represents and warrants to the Purchaser
as of the date of this Agreement and as of the Closing (or, if made as of a
specified date, as of such date) as set forth below. The exceptions,
modifications, descriptions and disclosures in any Schedule attached hereto are
made for all relevant purposes of this Agreement and are exceptions by the
Sellers to all representations and warranties set forth in this Agreement;
PROVIDED, THAT, there are no exceptions, modifications, descriptions or
disclosures to Section 3.5 and the only exceptions, modifications, descriptions
or disclosures to Sections 3.7 and 3.13 are those set forth in Schedule 3.7 and
3.13, respectively.
Section 3.1 EXISTENCE AND GOOD STANDING. CPIC, LTSI and SMI are
corporations duly incorporated, validly existing and in good standing under the
laws of Illinois, Ontario and California, respectively, and have all requisite
corporate power and authority to own, lease and operate their properties and
assets and to carry on their business as currently being conducted. CPIC, LTSI
and SMI are duly qualified or licensed as foreign corporations to conduct their
business as is currently being conducted and, to the extent applicable, are in
good standing in each jurisdiction in which the character or location of the
property and assets owned, leased or operated by them or the nature of the
business conducted by them makes such qualification necessary, except where the
failure to be so duly qualified or licensed would not have a Material Adverse
Effect. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT" means any
change, effect, event or occurrence that is materially adverse to, or has a
materially adverse effect on, the business, assets, liabilities (absolute,
accrued, contingent or otherwise), condition (whether financial or otherwise) or
results of operations of CPIC, LTSI, SMI and their Subsidiaries, taken as a
whole, other than any change, effect, event or occurrence (a) relating to the
business, financial condition or results of operations of CPIC, LTSI, SMI or any
of their Subsidiaries that has been disclosed in SCHEDULE 3.1, (b) resulting
from general economic, financial, regulatory or market conditions, (c) resulting
from conditions or circumstances generally affecting the industry in which the
Companies operate, or (d) resulting from the announcement of the Sale or the
other transactions contemplated herein or in any other agreement or document
executed and delivered pursuant to this Agreement. Each of CPIC, LTSI, and SMI
has heretofore delivered to the Purchaser complete and correct copies of its
certificate of incorporation and by-laws as presently in effect.
Section 3.2 CAPITAL STOCK. SCHEDULE 3.2 sets forth the authorized,
issued and outstanding capital stock of CPIC, LTSI, SMI and each of their
Subsidiaries. All of the outstanding shares of capital stock of CPIC, LTSI, SMI
and their Subsidiaries have been duly authorized and validly issued and are
fully paid and nonassessable. There are no existing (a) options, warrants,
calls, pre-emptive rights, subscriptions or other rights, convertible
securities, agreements or commitments of any character obligating CPIC, LTSI,
SMI or any of their Subsidiaries to issue, transfer or sell, or cause to be
issued, transferred or sold, any shares of capital stock or other equity
interest in CPIC, LTSI, SMI or any such Subsidiary or securities convertible
into or exchangeable for such shares or equity interests except as set forth in
SCHEDULE 3.2(a); (b) rights or obligations of CPIC, LTSI, SMI or any of their
Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of
CPIC, LTSI,
4
SMI or any such Subsidiary, or to provide funds to make any investment (in the
form of a loan, capital contribution or otherwise) in any Subsidiary or any
other Person except as set forth in SCHEDULE 3.2(b); or (c) voting trusts,
stockholders' agreements or similar agreements to which CPIC, LTSI, SMI or any
of their Subsidiaries are a party with respect to CPIC, LTSI, SMI or any such
Subsidiary except as set forth in SCHEDULE 3.2(c).
Section 3.3 SUBSIDIARIES. SCHEDULE 3.3(a) sets forth all of the
Subsidiaries of CPIC, LTSI and SMI, their respective jurisdictions of
incorporation, the authorized and outstanding capital of each Subsidiary and the
jurisdictions in which each such Subsidiary is qualified to do business. Each
Subsidiary of CPIC, LTSI and SMI is wholly owned, directly or indirectly, by
CPIC, LTSI or SMI, except as set forth in SCHEDULE 3.3(b). None of the
Subsidiary shares identified in SCHEDULE 3.3(b) are being sold to the Purchaser
in the Sale or otherwise hereunder. No Company owns, directly or indirectly, any
capital stock or other equity securities of any corporation other than a
Subsidiary or has any direct or indirect equity or ownership interest in any
business other than a Subsidiary. All of the outstanding capital stock of each
Subsidiary owned directly or indirectly by CPIC, LTSI or SMI is free and clear
of all Encumbrances, and is validly issued, fully paid and nonassessable. Each
such Subsidiary (a) is a corporation duly organized, validly existing and in
good standing under the laws of its state or province of incorporation; (b) has
full corporate power and authority to carry on its business as it is now being
conducted and to own the properties and assets it now owns; and (c) is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction listed opposite the name of such Subsidiary in SCHEDULE 3.3(a)
which are the only jurisdictions in which the properties owned or leased or the
nature of the business conducted by it makes such qualification necessary. Each
such Subsidiary has heretofore delivered to the Purchaser complete and correct
copies of the certificate of incorporation and bylaws thereof, as presently in
effect. As used in this Agreement, the word "SUBSIDIARY"means, with respect to
any Person, any other Person, whether incorporated or unincorporated, of which
(i) such Person or any other Subsidiary of such Person is a general partner
(excluding such partnerships where such Person or any Subsidiary of such Person
does not have a majority of the voting interest in such partnership) or (ii) at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions with respect to such Person is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries.
Section 3.4 CONSENTS AND APPROVALS; NO VIOLATION. Assuming that filings
required under the HSR Act or any foreign antitrust, competition or investment
laws and regulations are made and the waiting period thereunder has been
terminated or has expired, the consummation by the Sellers of the Sale and other
transactions contemplated hereby will not (a) conflict with or violate the
provisions of the articles of incorporation, the bylaws or any other similar
corporate governance instrument of any Company, (b) except as set forth in
SCHEDULE 3.4, conflict with or violate any statute, rule, regulation, order or
decree of any Governmental Authority by which any Company is bound or by which
any Company's properties or assets are bound, (c) require any permit, consent or
approval of, or the giving of any notice to, or filing with any Governmental
Authority on or prior to the Closing Date, and (d) except as set forth in
SCHEDULE 3.4 result in a violation or breach of, conflict with, constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, loss of rights or benefits, payment or
acceleration) under, or result in the creation of any Encumbrance upon any of
the properties or assets of any Company under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise, permit,
agreement, lease, franchise agreement or any other instrument or obligation to
which any Company is a party, or by which any Company or any of its
5
properties or assets may be bound, excluding from the foregoing clauses (b), (c)
and (d) permits, consents, approvals, notices and filings the absence of which,
and violations, breaches, defaults, rights, conflicts and Encumbrances the
existence of which, would not have a Material Adverse Effect.
Section 3.5 FINANCIAL STATEMENTS.
(a) (i) The Sellers have heretofore furnished the Purchaser
with (A) the audited consolidated balance sheets and consolidated statements of
income and cash flows of CPIC as at and for the fiscal year ended March 31, 2000
(the financial statements in this clause (A) are collectively referred to herein
as the "2000 ORIGINAL CPIC FINANCIAL STATEMENTS"), (B) the audited balance sheet
and statements of income and cash flows of LTSI as at and for the fiscal year
ended March 31, 2000 (such balance sheet is referred to herein as the "2000 LTSI
BALANCE SHEET," and the financial statements in this clause (B) are collectively
referred to herein as the "2000 LTSI FINANCIAL STATEMENTS"), and (C) the audited
balance sheet and statements of income and cash flows of SMI as at and for the
fiscal year ended October 31, 2000 (such balance sheet is referred to herein as
the "2000 SMI BALANCE SHEET," and the financial statements in this clause (C)
are collectively referred to herein as the "2000 SMI FINANCIAL STATEMENTS").
(ii) The 2000 Original CPIC Financial Statements,
including the footnotes thereto, except as indicated therein, have been prepared
in accordance with generally accepted accounting principles ("GAAP") in the
United States, consistently applied throughout the periods presented, and fairly
present in all material respects the consolidated financial position and
consolidated results of operations and cash flows of CPIC as at and for the
fiscal year ended March 31, 2000. The 2000 LTSI Financial Statements, including
the footnotes thereto, except as indicated therein, have been prepared in
accordance with GAAP in Canada, consistently applied throughout the periods
presented, and fairly present in all material respects the financial position
and results of operations and cash flows of LTSI as at and for the fiscal year
ended March 31, 2000. The 2000 SMI Financial Statements, including the footnotes
thereto, except as indicated therein, have been prepared in accordance with GAAP
in the United States, consistently applied throughout the periods presented, and
fairly present in all material respects the financial position and results of
operations and cash flows of SMI as at and for the fiscal year ended October 31,
2000.
(b) (i) The Sellers shall, prior to the Closing, furnish the
Purchaser with (A) the reissued audited consolidated balance sheets and
consolidated statements of income and cash flows of CPIC as at and for the
fiscal year ended March 31, 2000, which will be recalled and reissued by the
Company to reflect certain changes to historical accounting principles agreed to
by the Company's auditors and management of the Company (such balance sheets are
collectively referred to herein as the "2000 REISSUED CPIC BALANCE SHEETS," and
the financial statements in this clause (A) are collectively referred to herein
as the "2000 REISSUED CPIC FINANCIAL STATEMENTS"), and (B) the combined balance
sheet and combined statements of income and cash flows of the Companies as at
and for the fiscal year ended March 31, 2001, all of which shall be audited by
Deloitte & Touche as the Company's auditors (such balance sheet is referred to
herein as the "2001 BALANCE SHEET," and the financial statements in this clause
(B) are collectively referred to herein as the "2001 FINANCIAL STATEMENTS"). The
2000 Reissued CPIC Balance Sheets, the 2000 LTSI Balance Sheet and the 2000 SMI
Balance Sheet are collectively referred to herein as the "BALANCE SHEETS," and
the 2001 Financial Statements, the 2000 Reissued CPIC Financial Statements, the
2000 LTSI Financial Statements and the 2000 SMI Financial Statements are
collectively referred to herein as the "FINANCIAL STATEMENTS."
(ii) Upon delivery to the Purchaser of the 2000
Reissued CPIC Financial Statements, the 2000 Reissued CPIC Financial Statements,
including the footnotes thereto, except as indicated therein, have been prepared
in accordance with GAAP in the United States, consistently applied throughout
the periods presented, and fairly present in all material respects the
consolidated financial
6
position and consolidated results of operations and cash flows of CPIC as at and
for the fiscal year ended March 31, 2000. Upon delivery to the Purchaser of the
2001 Financial Statements, the 2001 Financial Statements, including the
footnotes thereto, except as indicated therein, have been prepared in accordance
with GAAP in the United States, consistently applied throughout the periods
presented, and fairly present in all material respects the combined financial
position and the combined results of operations and cash flows of the Companies
as at and for the fiscal year ended March 31, 2001.
Section 3.6 PROPERTIES.
(a) Except as set forth in SCHEDULE 3.6(A), each Company has
good title to, or holds by valid lease or license, all of its material tangible
properties and assets, subject to no Encumbrances (other than Permitted
Encumbrances) and such properties and assets include all the tangible properties
and assets necessary for the conduct of its business and operations as currently
conducted, including all the tangible assets reflected in the 2000 Reissued CPIC
Financial Statements, the 2000 LTSI Financial Statements, or the 2000 SMI
Financial Statements, or acquired since March 31, 2000, other than those
tangible assets disposed of in the ordinary course of business. As used herein,
"PERMITTED ENCUMBRANCES" shall mean (i) Encumbrances reflected on the Balance
Sheets, (ii) Encumbrances for Taxes not yet due and delinquent or the validity
of which are being contested in good faith by appropriate proceedings, (iii)
Encumbrances consisting of zoning or planning restrictions, easements, permits
or other restrictions or limitations on the use of real property which do not
materially detract from the value of, or impair the use of such property in the
ordinary course of business consistent with past practice, (iv) mechanics',
carriers', workmen's, repairmen's and other like Encumbrances arising or
incurred in the ordinary course of business, and (v) Encumbrances arising under
equipment leases with third parties entered into in the ordinary course of
business.
(b) SCHEDULE 3.6(b) sets forth a list of all real property
("OWNED REAL PROPERTY") owned by each Company. With respect to each parcel of
Owned Real Property, (i) there are no condemnation proceedings pending or, to
the knowledge of the Sellers, threatened, relating to such parcel; (ii) there
are no leases or subleases granting to any party the right of use or occupancy
of any such parcel; (iii) there is no pending or, to the knowledge of the
Sellers, threatened, proceeding to change the zoning classification of the
parcel; and (v) all of the material buildings and improvements constructed on
the parcel are in satisfactory operating condition and repair, subject to
ordinary wear and tear, and are adequate for the purposes for which they are
presently used.
(c) SCHEDULE 3.6(c) sets forth a list of all real property
leased to each Company (the "LEASED REAL Property"). The Sellers have made
available to the Purchaser accurate and complete copies of such leases and
subleases, each as amended to date. With respect to each lease and sublease of
Leased Real Property, (i) no lease or sublease to which a Company is a party
requires any permission, consent or notice in connection with this Agreement or
the transactions contemplated hereby, (ii) no Company nor, to the Sellers
knowledge, any lessor thereunder, is in breach or default in any material
respect under any such lease or sublease and there has not occurred any event
that, with lapse of time or the giving of notice or both, would constitute such
a default, (iii) there are no leases or subleases granting to any third party
the right of use or occupancy of any Leased Real Property, and (iv) each lease
or sublease is in full force and effect with respect to the Company that is a
party thereto.
Section 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.Since March 31, 2000,
each Company has conducted its respective business only in the ordinary course
and consistent with past practice, and no Company has:
(a) suffered any Material Adverse Effect;
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(b) incurred any liability or obligation (absolute, accrued,
contingent or otherwise) which is outstanding except for items incurred in the
ordinary course of business and consistent in nature and amount with past
practice, none of which exceeds $200,000 (counting obligations or liabilities
arising from one transaction or a series of similar transactions, and all
periodic installments or payments under any lease or other agreement providing
for periodic installments or payments, as a single obligation or liability but
excluding agreements, commitments and understandings with utility providers and
vendors that are not Affiliates of any Company or any Seller entered into in the
ordinary course of business and consistent with past practice);
(c) written down the value of any inventory (including
write-downs by reason of shrinkage or xxxx-down) or written off as uncollectible
any notes or accounts receivable, except for write-downs and write-offs in the
ordinary course of business and consistent with past practice;
(d) cancelled any debts of substantial value or waived any
claims or rights of substantial value;
(e) sold, transferred, or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible), except
in the ordinary course of business and consistent with past practice;
(f) disposed of or permitted to lapse any rights to the use of
any material Intellectual Property, or disposed of or disclosed to any Person
other than representatives of the Purchaser any trade secret, formula, process,
know-how or other Intellectual Property not theretofore a matter of public
knowledge;
(g) granted any increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension, profit
sharing or other compensation-related plan or commitment), other than grants or
increases in compensation made in the ordinary course of business and consistent
with past practice or pursuant to a plan, commitment or other arrangement set
forth in SCHEDULE 3.7(g);
(h) made any single capital expenditure or commitment
therefore in excess of $100,000 for additions to property, plant or equipment;
(i) except as permitted pursuant to Section 5.8, declared,
paid or set aside for payment any dividend or other distribution in respect of
its capital stock or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of any Company;
(j) made any change in any method of accounting or accounting
practice or maintained its books of account and records other than in the usual
manner and consistent with past practice;
(k) made or rescinded any election relating to Taxes, settled
any claim, action, suit, litigation, proceeding, arbitration, investigation,
audit or controversy relating to Taxes, or filed any amended Tax Return or claim
for refund;
(l) taken, suffered or incurred any action or circumstance of
the nature covered by Sections 3.13; or
(m) agreed, whether in writing or otherwise, to take any
action described in this Section 3.7.
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Section 3.8 LITIGATION. Except as set forth in SCHEDULE 3.8, there is
no action, suit or proceeding at law or in equity by any Person or any
arbitration or any administrative or other proceeding by or before any
Governmental Authority pending or, to the knowledge of the Sellers, threatened
against any Company which, if determined adversely to such Company, would
reasonably be expected to result in a liability in excess of $50,000. To the
knowledge of the Sellers, no Company, or executive officer, director or
shareholder of any Company has been permanently or temporarily enjoined or
barred by order, judgment or decree of or agreement with any Governmental
Authority from engaging in or continuing any conduct or practice in connection
with the business of any Company. There is no outstanding order, judgment,
ruling, injunction or decree requiring any Company or, to the knowledge of the
Sellers, any executive officer, director or shareholder of any Company, to take
action with respect to the business of any Company.
Section 3.9 INTELLECTUAL PROPERTY.
(a) Each Company owns or possesses adequate licenses or other
valid right to use all patents, patent rights, inventions, processes, formulas,
software, trademarks, trademark rights, trade names, trade name rights, Internet
domain names, copyrights (including all content contained on all World Wide Web
sites of such Company), service marks, trade secrets, and know-how and other
proprietary rights and information and all registrations and/or applications for
any of the foregoing, necessary for the conduct of the business of such Company
as currently conducted (collectively, the "INTELLECTUAL PROPERTY"). SCHEDULE 3.9
sets forth as of the date hereof a true and complete list of all material items
of Intellectual Property including all material patents, patent applications,
registered trademarks and applications therefore, registered copyrights and
applications therefore, domain names, trade names and all agreements which
grant, or by which such Company has obtained, any right to use or practice any
of the material Intellectual Property, excluding software licenses pursuant to
"click-wrap," "shrink-wrap" agreements or agreements contained in
"off-the-shelf" software (each an "IP AGREEMENT"). There are no claims against
any Company pending or, to the knowledge of the Sellers, threatened, nor, to the
knowledge of the Sellers, has any Company received notice from any Person (i)
challenging the validity of any Intellectual Property, or (ii) alleging that any
Company has engaged in any actual or potential infringement, dilution,
misappropriation or other unauthorized use of any intellectual property of any
third party. To the knowledge of the Sellers, none of the Intellectual Property
infringes upon the intellectual property rights of any other Person. The conduct
of the business of each Company as currently conducted does not infringe upon
any patent, patent right, license, trademark, trademark right, trade name, trade
name right, service xxxx, copyright, trade secret or other proprietary right of
any third party. To the knowledge of the Sellers, there are no infringements of
any of the Intellectual Property.
(b) Each registration and application for Intellectual
Property owned by any Company and set forth on SCHEDULE 3.9 (i) is valid,
subsisting, in proper form and enforceable, and has been duly maintained,
including the submission of all necessary filings and fees, in each case, in
accordance in all material respects with the legal and administrative
requirements of the appropriate jurisdictions, and (ii) has not lapsed, expired
or been abandoned. No Intellectual Property owned by any Company is the subject
of any opposition, interference, cancellation proceeding or other legal or
governmental proceeding before any governmental or quasi-governmental authority
in any jurisdiction. CPIC, LTSI, SMI or a Subsidiary thereof is currently listed
as the record owner of each such Intellectual Property registration or
application.
(c) No Company has entered into any material indemnification,
forbearance to xxx, settlement agreement or cross-licensing arrangement with any
other person relating to any Intellectual Property or the intellectual property
of any third party. As of the date hereof, no Company has licensed or
sublicensed its rights in any Intellectual Property, or received or been granted
any such rights, other than
9
pursuant to the IP Agreements as set forth in SCHEDULE 3.9, or pursuant to
"click-wrap," "shrink-wrap" agreements or agreements contained in
"off-the-shelf" software.
(d) Each of the IP Agreements set forth in SCHEDULE 3.9 is in
full force and effect with respect to any Company. With respect to each IP
Agreement, no Company, and to the knowledge of the Sellers, no other party
thereto, is in material breach or default thereunder and no event has occurred
which, with notice or lapse of time or both, would constitute a material breach
or default thereunder or give rise to any right of termination, modification or
acceleration thereunder, except for any such breaches, defaults, terminations,
modifications or accelerations which have been cured or waived. No Company is,
nor will be as a result of the execution and delivery of this Agreement or the
performance of this Agreement, in breach of any license or any loss of rights
thereunder, sublicense or other agreement relating to any Intellectual Property.
(e) To the knowledge of the Sellers, no trade secret or
confidential know-how or other material confidential information relating to any
Company or the business of any Company has been disclosed or authorized to be
disclosed to any third party, other than pursuant to a non-disclosure agreement
that protects such Company's interests in and to such confidential information.
To the knowledge of the Sellers, all such trade secrets have been maintained by
each Company in confidence in accordance with protection procedures sufficient
to protect rights of like importance and to prevent the disclosure of such trade
secrets to unauthorized Persons.
(f) To the knowledge of the Sellers, the operation of any
World Wide Web site by or on behalf of each Company is in compliance, in all
material respects, with all applicable laws, rules and regulations, including,
without limitation, those pertaining to the collection and use of personal data.
Section 3.10 TAXES.
(a) TAX RETURNS. Each Company has duly and timely filed or
caused to be filed with the appropriate taxing authorities all Tax Returns that
are required to be filed by, or with respect to, such Company and all such
returns are true, correct and complete. No claim has been made by a taxing
authority in a jurisdiction where a Company does not file a Tax Return to the
effect that such Company is or may be subject to taxation by that jurisdiction.
For purposes of this Agreement, "TAX" or "TAXES" shall mean all taxes,
assessments, charges, duties, fees, levies or other governmental charges,
including, without limitation, all federal, state, local and foreign income,
franchise, profits, capital gains, capital stock, transfer, sales, use, value
added, occupation, property, excise, severance, windfall profits, stamps,
license, payroll, social security, withholding and other taxes, or other
governmental assessments, duties, fees, levies or charges of any kind
whatsoever, all estimated taxes, deficiency assessments, additions to tax,
penalties and interest. For purposes of this Agreement, the term "TAX RETURN" or
"TAX RETURNS" shall mean any report, return, statement, declaration or other
written information required to be supplied to a taxing authority in connection
with Taxes and any amended returns, including claims for refund.
(b) PAYMENT OF TAXES. All Tax liabilities of each Company for
all taxable periods, or portions thereof, ended on or prior to the date hereof
have been timely paid or are adequately reserved for in financial statements of
the relevant Company according to U.S. GAAP or Canadian GAAP, as applicable,
whether or not shown as being due on any Tax Return.
(c) S CORPORATION STATUS. At all times since the taxable year
ended March 31, 1983 with respect to CPIC, and at all times since its
incorporation in 1993 with respect to SMI, (A) each of CPIC and SMI has validly
elected to be a Subchapter S corporation for federal, state and local Tax
purposes (with respect to each state and locality that recognizes Subchapter S
corporation status), has taken all actions necessary to maintain its status as
such, has taken no action (including, without limitation, actions
10
pursuant to Section 5.8 hereof) which has violated or terminated, or could have
the effect of violating or terminating, such status, and has been properly
treated as such by all relevant taxing authorities, except that SMI has elected
to be treated, and is treated, as a C corporation for California state Tax
purposes, (B) neither CPIC nor SMI has had a liability for any federal and, as
applicable, state or local income taxes, other than Illinois replacement Taxes
and California state income Taxes, and (C) neither CPIC nor SMI nor any Seller
has filed any Tax Return that is inconsistent in any manner with the treatment
of either Company as a Subchapter S corporation.
(d) OTHER TAX MATTERS.
(i) SCHEDULE 3.10(D)(I) sets forth (A) each taxable
period of any Company (and the relevant taxing authority) for which such Company
has been notified in writing that an audit or other examination of Taxes by any
taxing authority is currently in progress, (B) the taxable years of each Company
for which any tax will not be subject to the normally applicable statute of
limitations because of written waivers or comparable consents given by such
Company and (C) a list of all written notices received by each Company within
the last five years from any taxing authority pertaining to the commencement or
contemplation of a Tax audit or similar proceeding of such Company.
(ii) No Company has been included in any
"consolidated," "unitary" or "combined" income or Franchise Tax Return provided
for under the laws of any jurisdiction with respect to Taxes for any taxable
period for which the statute of limitations has not expired.
(iii) There are no tax sharing, tax allocation,
indemnification or other agreements in effect between any Company and any other
party under which the Purchaser or any Company could be liable for any Taxes or
other claims of any Person.
(iv) Each Company has complied in all material
respects with all applicable laws relating to information reporting and returns
and the payment and withholding of Taxes by or with respect to each such Company
and has, within the time and in the manner prescribed by law, withheld and paid
over to the proper taxing authorities all Taxes required to have been withheld
and paid.
(v) No Company is required to include in income any
adjustment pursuant to Section 481(a) of the Code (or any comparable provision
of state or foreign law) by reason of any change in tax accounting method nor
has any taxing authority proposed any such adjustment or change of tax
accounting method.
(vi) No Company is or has ever been a "United States
real property holding corporation" within the meaning of Section 897 of the
Code.
(vii) No power of attorney has been granted or
executed by any Company with respect to any matter relating to Taxes, which
power of attorney will remain in effect as of the Closing Date.
(viii) No election under 341(f) of the Code has ever
been made to treat any Company as a consenting corporation, as defined in
Section 341 of the Code.
(ix) Each Company uses the accrual method of tax
accounting.
(x) No Company has made an election to be treated as
a partnership for U.S. federal income tax purposes.
11
(xi) No Company has made a disposition of property
using the installment method of reporting pursuant to Section 453 of the Code
with respect to which a payment has yet to be received.
Section 3.11 COMPLIANCE WITH LAWS; PERMITS.
(a) Each Company has complied in all material respects with
all laws, rules, regulations, ordinances, judgments, decrees, orders, writs and
injunctions of all United States federal, state, local, and foreign Government
Authorities that affect the business, properties or assets of such Company, and
no written notice, claim or action has been received by such Company or, to the
knowledge of the Sellers, has been filed, commenced or threatened, against such
Company in the last three years alleging any material violation of any of the
foregoing.
(b) Each Company has all material permits, licenses and other
authorizations of Governmental Authorities that are required for the conduct of
its business and operations as presently conducted (including permits, licenses
and other authorizations relating to health and safety matters, environmental
protection and pollution control); and each Company is in compliance in all
material respects with provisions of such permits, licenses and authorizations.
No material consent, authorization of, filing with or notice to, any
Governmental Authority is required with respect to any such permit, license or
authorization as a result of the transactions contemplated by this Agreement.
Section 3.12 EMPLOYEE BENEFIT PLANS. SCHEDULE 3.12 contains a true and
complete list of each deferred compensation and each bonus or other incentive
compensation, stock purchase, stock option and other equity compensation plan,
program, agreement or arrangement; each severance or termination pay, medical,
surgical, hospitalization, life insurance and other "welfare" plan, fund or
program (within the meaning of Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), but without regard to whether such
plan, fund or program is subject to ERISA); each profit-sharing, stock bonus or
other "pension" plan, fund or program (within the meaning of Section 3(2) of
ERISA but without regard to whether such plan, fund or program is subject to
ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each case,
that is sponsored, maintained or contributed to or required to be contributed to
by the Sellers, or any Company or by any trade or business, whether or not
incorporated (an "ERISA AFFILIATE"), that together with any Company would be
deemed a "single employer" within the meaning of Section 4001(b) of ERISA, or to
which any Company is party, whether written or oral, for the benefit of any
employee or former employee of any Company (the "COMPANY PLANS"). No Company,
nor any ERISA Affiliate has any commitment or formal plan, whether legally
binding or not, to create any additional employee benefit plan or modify or
change any existing Plan that would affect any employee or former employee of
any Company. Except as set forth in SCHEDULE 3.12:
(a) each Plan has been established, administered and operated
in all material respects in accordance with its terms and applicable law;
(b) each Plan which is intended to be "qualified" (within the
meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"CODE")) has received a favorable determination letter from the Internal Revenue
Service and is qualified under Section 401(a) of the Code and its related trust
is tax-exempt under Section 501(a) of the Code;
(c) no Plan is or has been since January 1, 1996, subject to
Title IV of ERISA;
12
(d) full payment has been made of all amounts which any
Company was required to have paid under the terms of any Plan as contributions
to such Plan on or prior to the date hereof (excluding any amounts not yet due);
(e) to the knowledge of the Sellers, no "disqualified person"
or "party in interest" (as defined in Section 4975(e)(2) of the Code and Section
3(14) of ERISA, respectively) has engaged in any transaction in connection with
a Plan that could reasonably be expected to result in the imposition of a
material penalty pursuant to Section 502(i) of ERISA or a tax pursuant to
Section 4975 or 4976 of the Code;
(f) no liability, claim, action or litigation has been
commenced or, to the knowledge of the Sellers, threatened with respect to any
Plan (other than claims for benefits payable submitted in the ordinary course);
(g) no Plan is a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA);
(h) no Company has taken any action or incurred any liability
(i) under Section 412 of the Code or Title IV of ERISA with respect to any
"single-employer plan" (as defined in Section 4001(a)(15) of ERISA), or (ii) on
account of a partial or complete withdrawal (as defined in Sections 4205 and
4203 of ERISA, respectively) with respect to any "multiemployer plan", or on
account of unpaid contributions by any Company to any "multiemployer plan;"
(i) no Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) for employees or former employees
of any Company for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits under any "pension plan," or (iii) benefits the full cost of
which is borne by the current or former employee (or his beneficiary);
(j) the consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event, (i)
entitle any current or former employee of any Company to severance pay,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee;
(k) (i) there has been no material failure of a Plan that is a
group health plan (as defined in section 5000(b)(1) of the Code) to meet the
requirements of section 4980B(f) of the Code with respect to a qualified
beneficiary (as defined in section 4980B(g) of the Code) and (ii) no Company has
contributed to a nonconforming group health plan (as defined in section 5000(c)
of the Code) and no ERISA Affiliate of any Company has incurred a tax under
section 5000(a) of the Code which is or could become a liability of any Company;
(l) with respect to each Plan that is not subject to United
States Law (a "Foreign Benefit Plan"), (i) the fair market value of the assets
of each funded Foreign Benefit Plan, the liability of each insurer for any
Foreign Benefit Plan funded through insurance or the book reserve established
for any Foreign Benefit Plan, together with any accrued contributions, is
sufficient to procure or provide for the accrued benefit obligations, as of the
Closing Date, with respect to all current and former participants in such plan
according to the actuarial assumptions and valuations most recently used to
determine employer contributions to such Foreign Benefit Plan and no transaction
contemplated by this Agreement shall cause such assets or insurance obligations
to be less than such benefit obligations, (ii) each Foreign Benefit Plan
required to be registered has been registered and has been maintained in good
standing in all material
13
respects with applicable regulatory authorities, (iii) each Foreign Benefit Plan
has been operated in material compliance with applicable laws and regulations;
(m) the Sellers have delivered or caused to be delivered to
the Purchaser or its representatives the following with respect to each Plan:
(i) a copy of such Plan and any amendments thereto (or if the Plan is not a
written Plan, a description thereof); (ii) a copy of the two most recent annual
reports and actuarial reports, if required under ERISA or other applicable law;
(iii) a copy of the most recent Summary Plan Description required under ERISA
with respect thereto; (iv) if the Plan is funded through a trust, insurance
contract, or any third party funding vehicle, a copy of the trust, insurance
contract, or other funding agreement and the latest financial statements
thereof, (v) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify under section 401
of the Code; and (vi) the most recent tax exemption letter for each trust
intended to be exempt from tax under Code Section 501(c)(a);
(n) each Plan which is intended to qualify for favorable tax
treatment under Code Section 125 so qualifies and has been operated in material
compliance with Code Section 125;
(o) no "leased employee", as that term is defined in Code
Section 414(n), performs any service for any Company;
(p) each Company is in material compliance with respect to its
obligations under the Health Insurance Portability and Accountability Act of
1996 with respect to each and every group health plan covered by such act; and
(q) no amounts payable under any Plan, program or agreement to
which any Company is a party, as a result of the transactions contemplated in
this Agreement, or previously paid, will fail or have failed when paid to be
deductible for Federal income tax purposes by reason of Section 280G of the
Code.
Section 3.13 TRANSACTIONS WITH AFFILIATES.
SCHEDULE 3.13 sets forth a list of each agreement, commitment and understanding,
written or oral, that, to the knowledge of any Seller, is in effect (except as
contemplated by the last sentence of this Section 3.13) between a Company and
(i) any Seller or any Affiliate of any Seller (other than a Company), or (ii)
any director, officer or employee of such Company, any Seller or any Affiliate
of any Seller (other than a Company). Except as set forth in SCHEDULE 3.13, to
the knowledge of the Sellers, none of the Persons named in clauses (i) or (ii)
of the preceding sentence, directly or indirectly, (x) owns, or has the right to
acquire, any interest in any asset used or held for use in connection with the
business and operations of any Company, (y) owns or has any interest in a
supplier, customer or competitor of any Company, or (z) has received any loans
that are currently outstanding from or is otherwise a debtor of, or made any
loans that are currently outstanding to, or is otherwise a creditor of, any
Company. As used in this Agreement, the term "AFFILIATE(S)" shall have the
meaning set forth in Rule 12b-2 of the Securities Exchange Act of 1934, as
amended. SCHEDULE 3.13 indicates such agreements, commitments and understandings
creating an obligation, financial or otherwise, on the part of any Company,
which will terminate and be of no further force and effect as of the Closing
with no liability on the part of such Company.
Section 3.14 INSURANCE.
SCHEDULE 3.14 sets forth all of the material policies and contracts for
insurance maintained by each Company and, to the knowledge of the Sellers,
maintained by each Company at any time during the five years prior to the date
hereof. All such policies are in full force and effect in all material respects
and such policies are of the type and in the amount customarily carried by
persons conducting business similar
14
to the business conducted by the Companies. Each Company will use its
reasonable best efforts to keep or cause to be kept such policies (or
substantial equivalents) in such amounts duly in force until the Closing Date,
and the Sellers' Representatives shall give the Purchaser notice of any material
change in such policies. There are no pending, or to the knowledge of the
Sellers, threatened disputes relating to coverage or other disputed claims under
any Company's insurance policies.
Section 3.15 ENVIRONMENTAL MATTERS.
(a) SCHEDULE 3.15(a) sets forth all Environmental Permits
required under all Environmental Laws applicable to the ownership and operation
of each Company's assets or business.
(b) The Sellers have not been notified in writing by any
Governmental Authority that any Environmental Permit may be modified, suspended,
reissued or revoked or may not be renewed or otherwise obtained in the ordinary
course of business.
(c) Each Company is in material compliance with all applicable
Environmental Laws and Environmental Permits and there are no claims, charges,
arbitrations, actions, suits or proceedings pending, or to the knowledge of the
Sellers, threatened, against or affecting such Company's assets or business
before any tribunal or court in law or equity, or before any foreign or domestic
Governmental Authority with respect to Environmental Laws or Environmental
Permits, or otherwise relating to environmental matters.
(d) There is no Environmental Claim by any Person or
Governmental Authority that is pending or, to the knowledge of the Sellers,
threatened against any Person whose liability for such claim any Company has
retained or assumed either contractually or by operation of law.
(e) There are no outstanding or pending orders (unilateral or
by consent), decrees, notices of violation, fines or penalties assessed against
any Company under the Environmental Laws.
(f) (i) No underground storage tanks used for the storage of
Hazardous Materials by any Company are or have been located (x) on the Owned
Real Property or the Leased Real Property located at 28 W092 and 00 X000
Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx and 000 Xxxx Xxxxxx Xxxxx, Xxxxxx Xxxxx,
Xxxxxxxx (collectively, the "AFFILIATE LEASED REAL PROPERTY" ) or (y) to the
knowledge of the Sellers, on the Leased Real Property which is not Affiliate
Leased Real Property; (ii) no equipment or fixtures owned or used by any Company
containing polychlorinated biphenyls in excess of concentrations allowed by
applicable Environmental Law are located (x) at the Owned Real Property or the
Affiliate Leased Real Property or (y) to the knowledge of the Sellers, at the
Leased Real Property which is not Affiliate Leased Real Property; and (iii) no
friable asbestos-containing materials or lead based coatings are located (x) on
the Owned Real Property or the Affiliate Leased Real Property or (y) to the
knowledge of the Sellers, at the Leased Real Property which is not Affiliate
Leased Real Property.
(g) No spill, release, disposal, burial or placement of any
Hazardous Material on, upon, into or from any Company's assets, the Owned Real
Property or the Affiliate Leased Real Property or, to the knowledge of the
Sellers, the Leased Real Property which is not Affiliate Leased Real Property
has occurred which requires Remedial Action under any Environmental Law or
Environmental Permit or could reasonably be expected to form the basis of any
Environmental Claim.
(h) The Sellers have made available to the Purchaser, true,
complete and correct copies of all reports, analyses, data and investigatory
materials in the possession of any Company or its consultants related to
environmental conditions at the Owned Real Property or the Leased Real Property.
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(i) (i) The Sellers have provided to the Purchaser copies of all Hazardous
Waste Manifests in any Company's possession; (ii) the Sellers have provided to
the Purchaser all written records of off-site transportation, treatment, storage
or disposal of non-hazardous wastes including but not limited to industrial,
residual, special, demolition and debris, wastes from any Company location, but
excluding putrescable (e.g., lunchroom wastes) and office paper wastes and such
written records include shipping papers, state manifests, weigh tickets,
purchase orders, contracts, receipts and any and all other documents evidencing
the destination of such wastes, if any, in the Company's possession; and (iii)
to the knowledge of the Sellers SCHEDULE 3.15(I) lists all off-site locations
where wastes identified in subsections (i) or (ii) above are believed to have
been transported, treated, stored or disposed of other than those off-site
locations identified by the documents provided in response to subsections (i)
and (ii) above.
(j) As used in this Agreement:
(i) "ENVIRONMENTAL CLAIM" means any and all administrative, regulatory
or judicial actions, orders, decrees, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance, potential responsibility or violation by any Governmental
Authority or other person asserted against any Company alleging liability of any
Company arising out of, based on or relating to (A) the presence, release or
threatened release of, or exposure to, any Hazardous Materials at any location
(including off-site disposal sites), whether or not owned, operated, leased or
managed by any Company, or (B) circumstances forming the basis of any violations
or alleged violation of any Environmental Law or Environment Permit.
(ii) "ENVIRONMENTAL PERMITS" means all permits, licenses,
registrations, approvals (including waivers, exemptions and amendments) and
other authorizations required to be held by any Company under the Environmental
Laws.
(iii) "ENVIRONMENTAL LAW" means any foreign, multinational, federal,
state, provincial or local statute, law, constitutional provision, judgment,
decree, order, regulation, ordinance or rule relating to pollution, the
protection of the environment, or the storage, management, treatment, disposal,
release, or threat of a release of Hazardous Materials in the environment or
occupational health and safety.
(iv) "HAZARDOUS MATERIALS" means all hazardous, toxic, explosive, or
radioactive substances or materials, wastes, pollutants and contaminants
including without limitation, petroleum, petroleum distillates and derivatives,
asbestos and asbestos containing materials, and all other substances of any
nature regulated pursuant to any Environmental Law.
(v) "HAZARDOUS WASTE MANIFEST" means the Uniform Hazardous Waste
Manifest or the state counterpart of the same that is required to be completed
for the off-site shipment of any hazardous waste (as that term is defined in 40
CFR Part 261).
Section 3.16 RECEIVABLES. Except as set forth in SCHEDULE 3.16, all
accounts receivable reflected on the Balance Sheets arose from the arm's length
sales of inventory in the ordinary course of business, are valid claims of the
applicable Company free and clear of all Encumbrances, and are not subject to
any valid claims of set off or other defenses or counterclaims other than
returns, customer programs, allowances or discounts in the ordinary course of
business or as otherwise reserved for in the Balance Sheets.
Section 3.17 INVENTORIES. The inventory of each Company (a) was acquired or
manufactured in the ordinary course of business and (b) is valued at the lower
of cost or market value, and following the
16
Closing, such Company will own such inventory free and clear of all Encumbrances
except Encumbrances set forth in SCHEDULE 3.17.
Section 3.18 CERTAIN CONTRACTS.
(a) Other than those agreements, commitments and understandings listed
in SCHEDULE 3.6(c), SCHEDULE 3.7, SCHEDULE 3.9, SCHEDULE 3.12, SCHEDULE 3.13 or
SCHEDULE 3.14, SCHEDULE 3.18 sets forth as of the date hereof a complete and
correct list of each agreement, commitment and understanding (whether written or
oral) to which each Company is a party or to which its assets (tangible or
intangible) are bound that (i) involves or would involve the expenditure by any
party thereto of more than $100,000 per annum and is not cancelable within 90
days after notice without material premium or penalty, or (ii) requires or would
require performance by any party thereto (except upon termination by such
Company permitted under the agreement, commitment or understanding without
resulting in the payment of any material premium or penalty) for more than 24
months from the date hereof (together with those agreements, commitments and
understandings listed in SCHEDULE 3.6(c), SCHEDULE 3.7, SCHEDULE 3.9, SCHEDULE
3.12, SCHEDULE 3.13 or SCHEDULE 3.14, collectively, "MATERIAL CONTRACTS"). The
Sellers have delivered to the Purchaser complete and correct copies of all
written Material Contracts and accurate descriptions of all material terms of
all oral Material Contracts.
(b) All Material Contracts are in full force and effect with respect to
each Company that is a party thereto, and enforceable in all material respects
against each Company that is a party thereto. There does not exist any material
default thereunder by the Company which is a party thereto or, to the knowledge
of the Sellers, by any other party thereto.
Section 3.19 LABOR MATTERS. Except as set forth in SCHEDULE 3.19:
(a) there is no labor strike, dispute, slowdown, work stoppage or
lockout presently pending, or to the knowledge of the Sellers, threatened,
against or affecting any Company and during the past three years there has not
been any such action;
(b) no Company is a party to or bound by any collective bargaining or
similar agreement with any labor organization or work rules or practices agreed
to with any labor organization or employee association applicable to employees
of such Company;
(c) no labor union has been certified, to the knowledge of the Sellers,
by the National Labor Relations Board as bargaining agent for any of the
employees of any Company; no written notice has been received from any labor
union stating that it has been designated as the bargaining agent for any of
said employees; and, to the knowledge of the Sellers, no petition has been filed
by any labor union requesting an election to determine whether or not it is the
exclusive bargaining agent for any of said employees;
(d) to the knowledge of the Sellers, none of the employees of any
Company are represented by any labor organization and there have been no union
organizing activities among the employees of such Company within the past three
years;
(e) no collective bargaining agreement which is binding on any Company
restricts such Company from relocating or closing its operations;
(f) each Company is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of
17
work and occupational safety and health, and, to the knowledge of the Sellers,
is not engaged in any unfair labor practices, as defined in the National Labor
Relations Act or other applicable laws;
(g) to the knowledge of the Sellers, there is no unfair labor practice
charge or complaint against any Company pending or threatened before the
National Labor Relations Board or any similar state or foreign agency;
(h) there is no presently pending grievance against any Company arising
out of any collective bargaining agreement or other grievance procedure;
(i) to the knowledge of the Sellers, no charge with respect to or
relating to any Company is pending before the Equal Employment Opportunity
Commission or any other agency responsible for the prevention of unlawful
employment practices;
(j) since the enactment of the "WARN ACT," (i) no Company has
effectuated a "plant closing" (as defined in the WARN Act) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of such Company, (ii) there has not occurred a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or
facility of any Company and (iii) no Company has been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state, local or foreign law or
regulation; and
(k) there are no complaints, lawsuits or other proceedings pending or,
to the knowledge of the Sellers, threatened in any forum by or on behalf of any
present or former employee of any Company, any applicant for employment or
classes of the foregoing alleging breach by any Company of any express or
implied contract of employment, any laws governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct with the
employment relationship.
Section 3.20 DISCLAIMER OF CERTAIN WARRANTIES. NONE OF THE SELLERS MAKES
ANY REPRESENTATION OR WARRANTY TO THE PURCHASER, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY COMPANY, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION OR
WARRANTY AS TO TITLE, OWNERSHIP, USE, POSSESSION, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, QUANTITY, VALUE, CONDITION, LIABILITIES, OPERATION,
CAPACITY, FUTURE RESULTS OR OTHERWISE, OTHER THAN AS EXPRESSLY PROVIDED IN
ARTICLE II OR THIS ARTICLE III. WITHOUT LIMITING THE FOREGOING, NONE OF THE
SELLERS MAKES ANY REPRESENTATION OR WARRANTY TO THE PURCHASER, EXPRESS OR
IMPLIED, WITH RESPECT TO (A) THE INFORMATION SET FORTH IN THE CONFIDENTIAL
MEMORANDUM DISTRIBUTED BY OR ON BEHALF OF THE SELLERS IN CONNECTION WITH THE
SALE OR (B) ANY FINANCIAL PROJECTION OR FORECAST RELATING TO ANY COMPANY.
Section 3.21 NO UNDISCLOSED LIABILITIES. Except (a) as disclosed, reflected
or reserved for in the Financial Statements, (b) for liabilities and obligations
incurred in the ordinary course of business consistent with past practice, and
(c) for liabilities and obligations under agreements, commitments and
understandings (whether written or oral) to which any Company is a party or to
which its assets (tangible or intangible) are bound which are set forth in the
Disclosure Schedule, no Company has any liability or obligation of any nature,
whether or not accrued, contingent or otherwise, which exceeds $100,000
(counting obligations or liabilities arising from a series of similar and
related transactions, and all periodic installments or payments under any lease
or other agreement providing for periodic installments or payments, as a single
obligation or liability).
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Section 3.22 PRODUCT LIABILITY. There are not presently pending, or, to the
knowledge of the Sellers, threatened, any civil, criminal or administrative
actions, suits, demands, claims, hearings, proceedings or demand letters
relating to any alleged hazard or alleged defect in design or manufacture
relating to any product manufactured by any Company.
ARTICLE IV
REPRESENTATIONS OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows:
Section 4.1 EXISTENCE AND GOOD STANDING OF THE PURCHASER; AUTHORIZATION.
(a) The Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) The Purchaser has full corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Purchaser, and the consummation by it of the transactions
contemplated hereby, have been duly authorized and approved by its Board of
Directors, and no other corporate or stockholder action on the part of the
Purchaser or its stockholders is necessary to authorize the execution, delivery
and performance of this Agreement by the Purchaser and the consummation of the
Sale and the other transactions contemplated by this Agreement. This Agreement
has been duly and validly executed and delivered by the Purchaser and, assuming
the due execution of this Agreement by the Sellers, is a legal, valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except to the extent that enforceability may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
receivership and similar laws affecting the enforcement of creditors' rights
generally and to general equitable principles.
Section 4.2 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming that the
filings required, if any, under the HSR Act or any foreign antitrust,
competition or investment laws and regulations are made and the waiting period
thereunder has been terminated or has expired, the execution and delivery of
this Agreement by the Purchaser and the consummation of the transactions
contemplated hereby (a) will not violate any provisions of the Articles of
Incorporation or Bylaws of the Purchaser, (b) will not violate any statute,
rule, regulation, order or decree of any Governmental Authority by which the
Purchaser is bound or by which any of its properties or assets are bound, (c)
will not require any permit, consent or approval of, or the giving of any notice
to, or filing with any Governmental Authority on or prior to the Closing Date
and (d) will not result in a violation or breach of, conflict with, constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation, loss of rights or benefits, payment or
acceleration) under, or result in the creation of any Encumbrance upon any of
the properties or assets of the Purchaser under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise, permit,
agreement, lease, franchise agreement or any other instrument or obligation to
which the Purchaser is a party, or by which it or any of its properties or
assets may be bound, excluding from the foregoing clauses (b), (c) and (d)
permits, consents, approvals, notices and filings, the absence of which, and
violations, breaches, defaults, conflicts and Encumbrances, the existence of
which, would not prevent the Purchaser from performing its obligations under
this Agreement or prevent, or establish any materially burdensome condition on,
the consummation of the Sale and the other transactions contemplated by this
Agreement.
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Section 4.3 SECURITIES LAWS REPRESENTATIONS.
(a) GENERAL. The Purchaser is acquiring the Stock in good faith solely
for its own account with the present intention of holding such Stock for
purposes of investment, and the Purchaser is not acquiring the Stock with a view
to or for subdivision, distribution, fractionalization or distribution thereof,
in whole or in part, or as an underwriter or conduit to other beneficial owners
or subsequent purchasers.
(b) LIQUIDITY. The Purchaser acknowledges and understands that (i) the
Stock has not been registered under the Securities Act of 1933, as amended (the
"1933 ACT"), or qualified under the securities or "blue sky" laws of applicable
states in reliance upon exemptions from registration or qualification
thereunder; (ii) the Stock may not be sold, offered, transferred, assigned,
pledged, hypothecated or otherwise disposed of or encumbered, except in
compliance with the 1933 Act and such laws; and (iii) the Sellers have no
obligations, and do not currently intend, to cause the Stock to be registered or
qualified under the 1933 Act and applicable state securities or "blue sky" laws
or to comply with an exemption under the 1933 Act (including, without
limitation, any exemption pursuant to Rule 144 promulgated thereunder) and such
laws which would permit the Purchaser to sell the Stock; (iv) for an indefinite
period of time, it may not be possible for the Purchaser to liquidate its
investment in the Stock on an emergency or other basis; (v) it is not
anticipated that there will be a public market for the Stock, and (vi) the
practical and legal consequences of the foregoing means that the Purchaser may
bear the economic risk of its investment in the Stock for an extended and
indefinite period of time. The Purchaser has adequate means of providing for its
current liabilities and possible contingencies and has no need for liquidity in
the investment it is making in the Stock.
(c) EXPERIENCE IN FINANCIAL MATTERS; KNOWLEDGE OF RISKS. The Purchaser
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of an acquisition of the Stock by the
Purchaser. To the extent the Purchaser has deemed it necessary or advisable, it
has consulted with its advisors regarding the merits and risks of an investment
by the Purchaser in the Stock.
(d) INVESTMENT DECISION. The Purchaser is not purchasing the Stock as a
result of or subsequent to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting whose
attendees, to the Purchaser's knowledge, have been invited as a result of,
subsequent to or pursuant to any of the foregoing means of communication.
Section 4.4 AVAILABLE FUNDS. The Purchaser has sufficient funds and
financial resources to perform all of its obligations under this Agreement,
including, without limitation, to make the payments required hereunder.
Section 4.5 LITIGATION. There is no action, suit or proceeding, at law or
in equity by any Person or any arbitration or any administrative or other
proceeding before any Governmental Authority, pending or, to the knowledge of
the Purchaser, threatened in writing, which is reasonably likely to materially
affect the Purchaser's ability to consummate the Sale and the other transactions
contemplated by this Agreement.
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Section 4.6 BROKER'S OR FINDER'S FEES. No agent, broker, firm or other
Person acting on behalf of the Purchaser is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated herein,
except for Deutsche Banc Alex. Xxxxx Inc., whose fees and expenses will be paid
by the Purchaser.
ARTICLE V
COVENANTS
---------
Section 5.1 CONDUCT OF BUSINESS OF THE COMPANIES. During the period from
the date hereof to the Closing Date, the Sellers hereby covenant that they shall
cause each Company to conduct its operations in the ordinary course of business,
consistent with past practice. Notwithstanding the immediately preceding
sentence, during the period from the date hereof to the Closing Date, except as
may be approved in writing by the Purchaser (such approval not to be
unreasonably withheld or delayed) or as expressly provided in this Agreement or
required by law or as set forth in SCHEDULE 5.1(a) attached hereto, the Sellers
shall not permit any Company to (a) amend its articles of incorporation, bylaws
or other similar corporate governance instruments, (b) increase the compensation
payable to, or to become payable by such Company to, any of its directors,
officers or employees being paid $100,000 per year or more at the date of this
Agreement except pursuant to the terms of any contract, agreement, plan or
arrangement set forth in SCHEDULE 3.12 or with the Purchaser's consent, which
shall not be unreasonably withheld or delayed, (c) increase any bonus, pension,
retirement or insurance payment or arrangement to or with any such Persons
except pursuant to the terms of any contract, agreement, plan or arrangement set
forth in SCHEDULE 5.1(c), (d) enter into any contract or commitment which would
require such Company to pay in excess of $100,000 per annum, and is not
cancelable within 90 days notice without payment of any material premium or
penalty in respect thereof, except contracts and commitments in the ordinary
course of business consistent with past practice, (e) increase its indebtedness
for borrowed money, except borrowings under such Company's existing credit
agreements, (f) except as permitted pursuant to Section 5.8, declare or pay any
dividends in respect of any capital stock of such Company, or redeem, purchase
or otherwise acquire any of such Company's capital stock, (g) issue or sell any
shares of its capital stock or any other securities, or issue any securities
convertible into, or options, warrants or rights to purchase or subscribe to, or
enter into any arrangement or contract with respect to the issue and sale of,
any shares of its capital stock or any other securities, or make any other
changes in its capital structure, (h) organize any new subsidiary or acquire any
capital stock or other equity securities, or equity or ownership interest in the
business of any Person, (i) modify, amend or terminate any of its Material
Contracts or waive, release or assign any material rights or claims, except in
the ordinary course of business and consistent with past practice, (j) transfer,
lease, license, mortgage, pledge or encumber or otherwise dispose of any assets,
other than in the ordinary course of business and consistent with past practice,
or dispose of or permit to lapse any material rights, (k) fail to maintain its
books of account and records in its usual, regular and ordinary manner
consistent with past practice, (l) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation or other reorganization, (m)
make or rescind any election relating to Taxes, settle any claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, or file any amended Tax Return or claim for refund, (n) make
any change in its method of accounting, except as required by applicable law or
GAAP, (o) take any other action that would cause any of their representations
and warranties in Articles II and III to be untrue, and (p) agree, whether or
not in writing, to do any of the foregoing.
Section 5.2 REVIEW OF THE COMPANIES; ACCESS TO PROPERTIES AND RECORDS. The
Sellers shall permit the Purchaser and its appropriate representatives to have
reasonable access, prior to the Closing Date, to the properties and to the books
and records of each Company during normal working hours and upon reasonable
notice to familiarize itself with such properties and the business of such
Company and to
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prepare for the Closing and the Sale; PROVIDED, HOWEVER, that (a) the Purchaser
shall not unreasonably disrupt the personnel and operations of any Company and
(b) nothing herein shall require the Sellers to disclose any information or
provide any access to the Purchaser if such disclosure or access would be in
violation of applicable laws or regulations of any Governmental Authority. The
parties hereto acknowledge that the Purchaser has entered into a confidentiality
agreement with CPIC, dated February 9, 2001 (the "CONFIDENTIALITY AGREEMENT"),
and the Purchaser confirms that it and its Affiliates will comply with their
respective obligations thereunder and that information obtained during any such
review will be subject to the terms of the Confidentiality Agreement.
Section 5.3 COMMERCIALLY REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all commercially reasonable efforts to take, or cause
to be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Sale and the other transactions contemplated
hereby, including without limitation using all commercially reasonable efforts
to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Authorities and parties to contracts
with such Company as are necessary for the consummation of the Sale and the
other transactions contemplated hereby, to effect all necessary registrations
and submissions of information requested by Governmental Authorities, and to
fulfill the conditions to the Sale. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, the parties shall use all commercially reasonable efforts to take all
such action.
(b) Without limiting the generality of the foregoing, as promptly as
practicable after the date hereof, the Purchaser and the Sellers'
Representatives each shall properly prepare and file any other filings required
under federal, state or foreign law relating to the Sale and the other
transactions contemplated hereby (including filings, if any, required under the
HSR Act) (collectively, the "OTHER FILINGS"). The Purchaser and the Sellers'
Representatives shall each promptly notify the other of the receipt of any
comments on, or any request for amendments or supplements to, any Other Filings
by any Governmental Authority or official, and the Purchaser and the Sellers'
Representatives shall each supply the other with copies of all correspondence
between the Purchaser or the Sellers, as the case may be, and any other
appropriate governmental official with respect to any Other Filings. The
Purchaser and the Sellers hereby covenant and agree to use their respective
commercially reasonable efforts to secure termination of any waiting periods
under the HSR Act and obtain the approval of any Governmental Authority
necessary to consummate the Sale, PROVIDED, HOWEVER, that nothing contained
herein shall require the Purchaser to agree to divest or hold separate any
assets or businesses or limit its freedom of action in connection with any
assets or businesses or its ability to retain any assets or businesses. The
Purchaser and the Sellers' Representatives shall each keep the other apprised of
the status of matters relating to the completion of the transactions
contemplated hereby and work cooperatively in connection with obtaining any
consents from Governmental Authorities, including, without limitation, (i)
promptly notifying the other of, and if in writing, furnishing the other with
copies of (or, in the case of material oral communications, advising the other
orally of) any communications from or with any Governmental Authority with
respect to the Sale or any of the other transactions contemplated by this
Agreement, (ii) permitting the other party to review and discuss in advance, and
considering in good faith the views of one another in connection with, any
proposed written (or any material proposed oral) communication with any
Governmental Authority, (iii) not participating in any meeting with any
Governmental Authority unless it consults with the other party in advance and to
the extent permitted by such Governmental Authority gives the other party the
opportunity to attend and participate thereat, (iv) furnishing the other party
with copies of all correspondence, filings and communications (and memoranda
setting forth the substance thereof) between it and any Governmental Authority
with respect to this Agreement and the Sale, and (v) furnishing the other party
with such necessary information and reasonable assistance as such
22
other party may reasonably request in connection with its preparation of
necessary filings or submissions of information to any Governmental Authority.
Section 5.4 DIRECTORS' AND OFFICERS' INDEMNIFICATION. The provisions of the
articles of incorporation, the bylaws and the other similar corporate governance
instruments of each Company concerning elimination of liability and
indemnification of directors and officers shall not be amended in any manner
that would adversely affect the rights thereunder in such capacity of any Person
that is as of the date hereof an officer or director of such Company.
Section 5.5 AFFECTED EMPLOYEES. The Purchaser agrees that the employees of
each Company (including employees on vacation, leave of absence, short or
long-term disability or layoff) (the "AFFECTED EMPLOYEES") at the Closing Date
will remain employees of a Company immediately following the Closing Date.
Nothing herein however shall be construed as an offer of employment to any
individual on other than an employee-at-will basis.
Section 5.6 EMPLOYEE BENEFITS.
(a) For a period of at least one year after the Closing Date, the
Purchaser shall continue, or shall cause CPIC to continue, to maintain the
Xxxx-Xxxxxx Employees' Profit Sharing Plan and Trust (the "CP PLAN") in
accordance with the terms and conditions in effect immediately prior to the
execution of this Agreement, which shall include continuation of (i) pre-tax,
company matching and company discretionary contributions (as such terms are
defined in the CP Plan), which company matching contributions and profit sharing
contributions shall be made in the same amounts and substantially at the same
times as such contributions are made immediately prior to the Closing Date and
(ii) the same investment options as currently offered under the CP Plan.
(b) For a period of at least one year after the Closing Date, the
Purchaser shall provide, or shall cause each Company to provide, the Affected
Employees with such compensation and pension (if any), health, welfare and other
employee benefit plans, programs and policies, and fringe benefits, which are
comparable in the aggregate to those provided to the Purchaser's employees or
which are provided by the applicable Company Plan immediately prior to the
Closing Date; PROVIDED, HOWEVER, that the Purchaser shall not be required to
provide a 401(k) or profit sharing plan for Affected Employees who are employed
by any Company while the Purchaser maintains the CP Plan as described in clause
(a) above. The Purchaser will, and will cause each Company to, give to each
Affected Employee the same service credit as each such Affected Employee
previously earned up to the Closing Date only in connection with the CP Plan.
(c) The Purchaser shall cause each Company's plans that are employee
welfare benefit plans as defined in Section 3(1) of ERISA ("WELFARE PLANS") that
are subject to Part 6 of Subtitle B of ERISA or Section 4980B of the Code
("COBRA") to offer continuation of health benefits coverage to former employees
of such Company (and their eligible dependents) to the extent required by COBRA.
For purposes of computing deductible amounts, co-payments (or similar
adjustments or limitations on coverage) of an Affected Employee (including the
Affected Employee's spouse and dependents) under any Welfare Plan after the
Closing Date, expenses and claims previously recognized for similar purposes
under any Company's existing Welfare Plans during the calendar year or plan
year, as applicable, in which the Closing Date occurs shall be credited or
recognized under the applicable Welfare Plan.
(d) From and after the Closing, the Purchaser shall pay, or shall cause
the applicable Company to pay, when due, all direct and indirect damages, costs,
expenses and other liabilities incurred or accrued subsequent to the Closing in
respect of any claim of any Affected Employee that such Affected Employee's
employment has been terminated, either voluntarily or involuntarily, in
conjunction
23
with the transaction contemplated hereby or otherwise, including, without
limitation, any claim for severance pay, unemployment benefits, claims under the
Worker Adjustment and Retraining Notification Act of 1988, as amended or any
other liabilities, claims, costs, interest, penalties and fees of legal counsel,
asserted against, imposed upon or incurred by the Sellers or any Company arising
from or relating in any way to such claims. Nothing herein, however, shall be
construed as an offer of employment to any individual on other than an
employee-at-will basis.
Section 5.7 SELLERS NON-COMPETE. Without the express prior written consent
of the Purchaser, neither Xxxx X. Xxxxxx ("JCP") nor Xxxxxx X. Xxxx ("JJC")
shall, at any time during the five-year period immediately following the Closing
Date:
(a) directly or indirectly, own, manage, control or participate in the
ownership, management or control of, or be related or otherwise affiliated in
any manner with, any business that competes with the business presently engaged
in by any Company; PROVIDED, THAT, the foregoing shall not prohibit JCP and JJC
from owning as a passive investment 5% or less each of the equity of any
publicly-traded entity; and
(b) in any manner, directly or indirectly hire, solicit, induce, or
attempt to solicit or induce for employment or hire, in any business enterprise
or activity, any Person now employed by any Company.
Section 5.8 TRANSFER OF CERTAIN NON-OPERATING ASSETS AND LIABILITIES. The
Sellers and each Company shall be permitted to, and shall, prior to the Closing
Date, transfer, by distribution, redemption of capital stock of any Company or
otherwise, the cash and life insurance policies set forth in SCHEDULE 5.8 to one
or more of the Sellers or to a Person or Persons affiliated with one or more of
the Sellers (other than a Company) for no or nominal consideration at the
election of the Sellers, and all such cash and life insurance policies shall,
from and after such time, be assets and liabilities of such Sellers and such
other Person(s) and shall not be assets or liabilities of the Purchaser or any
Company, and neither the Purchaser nor any Company shall have any right,
interest, title, claim or ownership in any of such cash or life insurance
policies and such Sellers and such other Person(s) shall assume all liabilities
of each Company with respect to such life insurance policies from and after the
Closing Date.
Section 5.9 NOTIFICATION OF CERTAIN MATTERS. Between the date of this
Agreement and the Closing, the Companies, or the Sellers, as applicable, on the
one hand, and the Purchaser, on the other hand, shall give prompt notice to the
other of the occurrence, or failure to occur, of any event which occurrence or
failure would be reasonably likely to have a Material Adverse Effect; PROVIDED,
HOWEVER, that such disclosure shall not be deemed to cure any breach of a
representation, warranty, covenant or agreement or to satisfy any condition.
During the same period, each party hereto shall promptly notify the other of the
occurrence of any event that may make the satisfaction of the conditions in
Articles VII or VIII impossible or unlikely. Without limiting the foregoing,
between the date of this Agreement and the Closing, the Purchaser shall give
prompt notice to the Sellers' Representatives of any change, circumstance,
occurrence or event which could adversely affect the Purchaser's ability to
fund, or to obtain sufficient funds and financial resources to perform, all of
its obligations under this Agreement.
Section 5.10 NO SOLICITATION OF COMPETING TRANSACTION. None of the Sellers
shall (and the Sellers shall cause each Company and its officers, directors,
representatives and agents, including investment bankers, attorneys and
accountants, not to), directly or indirectly, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any information to,
any person or group (other than the Purchaser, any of its Affiliates or
representatives) concerning any Acquisition Proposal. None of the Sellers nor
any Company shall enter into any agreement with respect to any Acquisition
Proposal. The Sellers shall immediately cease any existing discussions or
negotiations with any third party relating
24
to an Acquisition Proposal. For the purpose of this Agreement, "ACQUISITION
PROPOSAL" shall mean any proposal or offer made by any person other than the
Purchaser or any Subsidiary of the Purchaser to acquire all or a substantial
part of the assets of any Company or any capital stock of any Company.
Section 5.11 SUBSEQUENT ACTIONS. If at any time after the Closing, the
Purchaser shall reasonably request any instruments of conveyance, assignments,
assurances or any similar documents that are reasonably necessary or desirable
to vest, perfect or confirm ownership (of record or otherwise) in the Purchaser,
its right, title or interest in, to or under any or all of the Stock, the
Sellers shall use commercially reasonable efforts to execute and deliver all
instruments of conveyance, assignments and assurances and other similar
documents as may be reasonably requested by the Purchaser in order to so vest,
perfect or confirm any and all right, title and interest in, to and under the
Stock; PROVIDED, HOWEVER, that the Purchaser shall bear or reimburse promptly
the Sellers for all costs and expenses incurred by or on behalf of the Sellers
in connection with any and all requests made by the Purchaser pursuant to this
Section 5.11 (including reasonable attorneys fees).
Section 5.12 ADOPTION OF EMPLOYEE BONUS AND SEVERANCE PLAN. Immediately
prior to the Closing, the Sellers shall cause CPIC to adopt and approve an
employee bonus and severance plan, to be effective at the Closing, in the form
attached hereto as Annex B (the "EMPLOYEE BONUS PLAN"); PROVIDED, THAT, on or
prior to the Closing Date, the Sellers may deliver to the Purchaser an updated
Exhibit A-1 and/or Exhibit A-2 to the Employee Bonus Plan to (a) remove
therefrom employees who will no longer be employed by any Company as of the
Closing Date, provided, that, the Sellers will cause each Company not to
Terminate any non-clerical or non-general warehouse employee without the prior
written consent of the Purchaser, which consent shall not be unreasonably
withheld or delayed, (b) subject to the reasonable approval of the Purchaser,
re-allocate the dollar amounts and percentages (subject to the limit set forth
in Section 3.2 of the Employee Bonus Plan) among some or all of the employees
listed on the updated Exhibit A-1 or Exhibit A-2 to account for employees who
were removed from the updated Exhibit A-1 and Exhibit A-2, and (c) subject to
the reasonable approval of the Purchaser ,add to the Exhibits employees who were
employed by a Company as of the date of this Agreement but who were
inadvertently left off of an Exhibit and re-allocate the dollar amounts and
percentages to effect such additions, or to correct dollar amounts that were not
correctly stated, in each case, subject to the limitations set forth in Section
3.2 of the Employee Bonus Plan. From and after the Closing Date, CPIC shall, and
the Purchaser shall cause CPIC to, perform and comply with its obligations under
the Employee Bonus Plan.
Section 5.13 FINANCIAL STATEMENTS.
The Sellers shall deliver to the Purchaser, as soon as practicable but not less
than 10 business days prior to the Closing Date, the 2000 Reissued CPIC
Financial Statements and the 2001 Financial Statements. The Sellers shall use
their best efforts to cooperate with each of the Company's auditors in
connection with the issuance of an unqualified opinion with respect to the 2000
Reissued CPIC Financial Statements and the 2001 Financial Statements. The
Purchaser shall use its best efforts to cooperate, and in no way interfere, with
each of the Company's auditors in connection with the issuance of an unqualified
opinion with respect to the 2000 Reissued CPIC Financial Statements and the 2001
Financial Statements.
Section 5.14 TRANSFERS OF SHARES TO TRUSTS.
Notwithstanding anything to the contrary contained herein, any descendant of
JCP that is a Seller may take all actions necessary to transfer ownership of his
or her shares of Stock to a trust established for estate planning purposes prior
to the Closing if, (a) all of the beneficiaries of such trusts are a Seller or a
member of the immediate family of such Seller, (b) prior to such transfer, the
transferee executes and delivers to CPIC and the Purchaser a joinder agreement
substantially in the form of Annex E hereto, and (c) no such action (taken
together with all other actions and transfers pursuant to this Section 5.14)
would
25
breach any of the representations or warranties contained in Section 3.10(c)
hereof. Any transferee of shares of Stock pursuant to this Section 5.14 shall
take and hold such shares subject to this Agreement and to all the obligations,
covenants, representations and warranties hereunder, and shall, from and after
the time of such transfer, be deemed to be, and shall replace (in whole or in
part) the transferee as a "Seller" for all purposes hereunder. Any such Seller
agrees to use its best efforts to cause any such trust to comply with all of the
provisions of this Agreement.
ARTICLE VI
TAXES; ALLOCATION OF PURCHASE PRICE
Section 6.1 INDEMNIFICATION.
(a) Subject to Section 6.8, the Sellers shall be responsible for and
shall indemnify and hold harmless the Purchaser and its Affiliates and, after
the Closing, each Company (collectively, the "PURCHASER INDEMNIFIED PARTIES")
against (i) all Taxes of the Companies or any consolidated, combined or unitary
group of which any Company is or has been a member, (ii) all Taxes with respect
to Tax periods or portions of Tax periods ending on or before the Closing Date,
of the Companies (including any deferred Taxes with respect to such periods),
(iii) all Taxes payable by any Company on the deemed sale of its assets by
reason of the Section 338(h)(10) Election, including any such Taxes imposed by
any state or local taxing authority as a result of an election or deemed
election pursuant to Section 338(g) of the Code (or any comparable election
under state, local or foreign law) if an election under Section 338(h)(10) is
made and such state or local taxing authority does not allow or respect a
Section 338(h)(10) election with respect to the Sale of the Stock and (iv) any
Damages (as defined in Section 9.2(a)) incurred by the Purchaser Indemnified
Parties as a result of or arising out of the inaccuracy or incompleteness of any
representation or warranty set forth in Section 3.10, (v) all Taxes payable by
the Purchaser resulting from any failure to receive a valid 116(2) Certificate
(as defined in Section 7.9) from any Seller, and (vi) any Transfer Taxes for
which the Sellers are responsible pursuant to Section 1.5. For purposes of
Section 6.1(a)(iv), Damages for which the Sellers are responsible include the
cost to the Purchaser Indemnified Parties of failing to obtain an aggregate
"step-up" in the tax basis of any of the assets of CPIC and SMI resulting from
any invalid Section 338(h)(10) Election (and any comparable elections under
applicable state and local law) attributable solely to any inaccuracy or
incompleteness of any representation or warranty set forth in Section 3.10,
which, for purposes of this Agreement, shall equal the net present value of the
loss of any deductions, amortizations, exclusions from income or other
allowances that would have been available to the Purchaser Indemnified Parties
if a valid Section 338(h)(10) election had been made (including all comparable
elections available under state or local tax law) and the Purchase Price had
been allocated as provided in ANNEX C, as amended, calculated by (x) using the
maximum marginal federal, state, local and foreign Tax rates applicable to the
Purchaser Indemnified Parties for 2001, (y) using a discount rate equal to the
mid-term applicable federal rate in effect on the Closing Date (compounded
semi-annually) and (z) assuming that all deductions, amortizations, exclusions
from income or other allowances would be utilized at the earliest date or dates
allowable by applicable law; provided, however, that the Sellers make no
representation or warranty to any of the Purchaser Indemnified Parties as to
whether the allocation of Purchase Price described in Section 6.4 will be
respected (in whole or in part) by any taxing authority or other Governmental
Authority.
(b) Subject to Section 6.8, the Purchaser shall be responsible for and
shall indemnify and hold harmless the Sellers against (i) all Taxes of the
Purchaser, or any consolidated, combined or unitary group of which the Purchaser
is or will be a member, (ii) all Taxes with respect to Tax periods or portions
of Tax periods beginning after the Closing Date, of any Company, excluding all
Taxes described in Section 6.1(a)(iii), which shall be the Sellers' sole
responsibility, as provided for in Section 6.1(a) and (iii) all Transfer Taxes
for which the Purchaser is responsible pursuant to Section 1.5.
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(c) Any Taxes of any Company attributable to a Tax period which begins
before and ends after the Closing Date (a "STRADDLE Period") shall be
apportioned between the Sellers and the Purchaser based on the actual operations
and transactions of such Company during the portion of such period ending on the
Closing Date, and the portion of such period beginning after the Closing Date,
respectively, calculated as though the taxable year of such Company terminated
at the close of business on the Closing Date, except that (i) exemptions,
allowances or deductions that are allowed on an annual basis shall be
apportioned on a per diem basis and (ii) real property, personal property,
intangibles and other similar Taxes shall be allocated in accordance with the
principles of Section 164(d) of the Code. The Sellers shall be obligated to pay
the Purchaser for all Straddle Period Taxes apportioned to the Sellers pursuant
hereto. Nothing in this Section 6.1(c) shall be deemed to affect the Sellers'
obligation to indemnify the Purchaser and its Affiliates pursuant to Section
6.l(a)(ii).
(d) Upon timely notice from the Purchaser, the Sellers shall pay to the
Purchaser any payment required to be paid by the Sellers pursuant to Section
6.1(a) and/or Section 6.1(c), and upon timely notice from the Sellers, the
Purchaser shall pay to the Sellers any payment required to be paid by the
Purchaser pursuant to Section 6.1(b), in each case at least five business days
prior to the date any such payment is due.
Section 6.2 FILING RESPONSIBILITY.
(a) The Sellers shall timely prepare and file, or cause to be timely
prepared and filed, all Tax Returns of each Company for all Tax periods ending
on or before the Closing Date and timely pay, or cause to be paid, when due, all
Taxes relating to such returns.
(b) The Purchaser shall timely prepare and file, or cause to be timely
prepared and filed, all Tax Returns of each Company for all Straddle Periods,
and timely pay, or cause to be paid, when due, all Taxes relating to such
returns. The Purchaser shall provide, or cause to be provided, to the Sellers'
Representatives a substantially final draft of each such Tax Return at least 30
days prior to the due date for filing such Tax Return, for review by the
Sellers' Representatives. The Sellers' Representatives shall notify the
Purchaser of any reasonable objections the Sellers may have to any items set
forth in such draft Tax Return and the Purchaser and the Sellers'
Representatives agree to consult and resolve in good faith any such objection
and to mutually consent to the filing of such Tax Return.
Section 6.3 COOPERATION. After the Closing, the Purchaser and the Sellers'
Representatives shall promptly make available or cause to be made available to
the other, as reasonably requested, and to any taxing authority, all
information, records or documents relating to Tax liabilities and potential Tax
liabilities relating to each Company for all periods prior to or including the
Closing Date and any Straddle Periods and shall preserve all such information,
records and documents until 60 days after the expiration of any applicable
statute of limitations or extensions thereof. The Purchaser shall prepare and
provide to the Sellers' Representatives any Tax information packages requested
by the Sellers' Representatives for the Sellers' use in preparing the Sellers'
or any Company's Tax Returns. Such Tax information packages shall be completed
by the Purchaser and provided to the Sellers' Representatives within 75 days
after the Sellers' Representatives' request therefore. Each party shall bear its
own expenses in complying with the foregoing provisions.
Section 6.4 SECTION 338 ELECTIONS AND FORMS; ALLOCATION OF PURCHASE PRICE.
(a) With respect to the Purchaser's acquisition of the stock of CPIC
and SMI hereunder, the Sellers and the Purchaser hereby covenant and agree with
each other that they will join in making an election under Section 338(h)(l0) of
the Code, and the Treasury Regulations promulgated thereunder (the "SECTION
338(h)(10) ELECTION"), (ii) prior to the Closing Date, the Sellers'
Representatives and the
27
Purchaser shall prepare, in accordance with the terms set forth in Section
6.4(c), the respective IRS Forms 8023 (the "FORM 8023") on which the Section
338(h)(10) Elections shall be made, (iii) at or prior to the Closing, the
Sellers' Representatives shall deliver to the Purchaser properly executed Forms
8023 containing information prepared in accordance with the terms set forth in
Section 6.4(c), which the Purchaser shall file with the Internal Revenue Service
not later than five days following the Closing Date, (iv) Sellers and the
Purchaser shall jointly and timely make all elections under state or local tax
law comparable to the Section 338(h)(10) Elections with respect to CPIC and SMI
not later than 30 days following the Closing Date, (v) Sellers and the Purchaser
shall, as promptly as practicable following the Closing Date, cooperate with
each other to take all other actions necessary and appropriate (including filing
such forms, returns, elections, schedules and other documents as may be
required) otherwise to effect, perfect and preserve timely Section 338(h)(10)
Elections in accordance with applicable Treasury regulations (or any comparable
provisions of state or local tax law) or any successor provisions and (vi)
Sellers and the Purchaser shall report the sale and acquisition, respectively,
of the stock of CPIC and SMI consistent with the Section 338(h)(10) Elections
(and any comparable elections under state or local tax laws) and shall take no
position to the contrary thereto in any Tax Return, or in any proceeding before
any taxing authority or otherwise.
(b) To the extent permissible or required by law, Sellers and the
Purchaser shall cooperate in the preparation and timely filing of (i) any
corrections, amendments or supplements to the Forms 8023 and (ii) any state or
local forms or reports that are necessary or appropriate for purposes of
complying with the requirements for making any state or local election that is
comparable to the Section 338(h)(10) Elections. To the extent necessary for the
valid filing of any such corrections, amendments, supplements, forms or reports,
Sellers and the Purchaser shall cooperate in the timely execution thereof.
(c) The Purchase Price shall be allocated among the assets of the
Companies acquired by the Purchaser in connection with the Purchaser's
acquisition of the stock of CPIC and SMI hereunder as provided in ANNEX C,
subject to any adjustment required thereto as a result of adjustments to the
Purchase Price after the date hereof or to update asset values as of the Closing
Date, provided that any such adjustments to the allocation are agreed to in
writing by the Purchaser and the Sellers' Representatives. The Purchaser and the
Sellers shall use the asset values determined from the allocation of Purchase
Price described in ANNEX C (subject to any adjustments to the allocation agreed
to in writing by the Purchaser and the Sellers' Representatives) for purposes of
all reports and returns with respect to Taxes, including Form 8023.
Section 6.5 REFUNDS OR CREDITS. The Purchaser and the Companies shall
promptly pay to the Sellers any refunds or credits of Taxes for which the
Sellers may be entitled under Section 6.1(a). For purposes of this Section 6.5,
the term "refund" shall include a reduction in Taxes and the use of an
overpayment of Taxes as an audit or other Tax offset and receipt of a refund
shall occur upon the filing of a return or an adjustment thereto using such
reduction, overpayment or offset, or upon the receipt of cash. Upon the
reasonable request of the Sellers' Representatives and subject to the consent of
the Purchaser (which consent shall not be unreasonably withheld), the Purchaser
shall prepare and file, or cause to be prepared and filed, all claims for
refunds relating to such Taxes; PROVIDED, HOWEVER, that the Purchaser shall not
be required to file such claims for refund to the extent such claims for refund
would have a Material Adverse Effect in future periods or to the extent the
claims for refund relate to a carryback of an item. The Purchaser shall be
entitled to all other refunds and credits of Taxes; PROVIDED, HOWEVER, it will
not allow the amendment of any Tax Return relating to any Taxes for a period
ending on or prior to the Closing Date or the carryback of an item to a period
ending on or prior to the Closing Date without the prior written consent of the
Sellers' Representatives.
Section 6.6 CONTESTS. Whenever any taxing authority asserts a claim, makes
an assessment, or otherwise disputes the amount of Taxes for which the Sellers
are or may be liable under this Agreement,
28
the Purchaser shall, if informed of such an assertion, promptly inform the
Sellers Representatives', and the Sellers Representatives shall have the right
to control any resulting proceedings and to determine whether and when to settle
any such claim, assessment or dispute to the extent such proceedings or
determinations affect the amount of Taxes for which the Sellers may be liable
under this Agreement, PROVIDED, that the Sellers' Representatives shall not be
entitled to settle, pay, compromise, litigate or dispose of any such claim
without Purchaser's consent (which consent shall not be unreasonably withheld or
delayed). Whenever any taxing authority asserts a claim, makes an assessment or
otherwise disputes the amount of Taxes for which the Purchaser is or may be
liable under this Agreement, the Purchaser shall have the right to control any
resulting proceedings and to determine whether and when to settle any such
claim, assessment or dispute, except to the extent such proceedings affect the
amount of Taxes for which the Sellers are liable under this Agreement.
Notwithstanding anything to the contrary in this Agreement, whenever any taxing
authority asserts a claim, makes an assessment or otherwise disputes the amount
of any Taxes with respect to a Straddle Period, the Purchaser shall, if informed
of such an assertion, promptly inform the Sellers' Representatives, and the
Purchaser and the Sellers' Representatives agree to consult and jointly control
in good faith any resulting proceedings and to jointly determine whether and
when to settle any such claim, assessment or dispute.
Section 6.7 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS. Any payments made
pursuant to this Article VI, Section 9.2 or Section 9.3 shall be treated for all
Tax purposes as adjustments to the Purchase Price and allocated to the relevant
Company.
Section 6.8 SURVIVAL AND EXCLUSIVITY. Notwithstanding anything to the
contrary in this Agreement, the indemnification obligations contained in this
Article VI shall be in addition to those contained in Article IX, but shall be
subject to the limits on indemnification contained in Section 9.3 (other than
Section 9.3(a)), and together with the representations and warranties made in
Section 3.10, shall survive with full force and effect until 60 days after the
applicable statute of limitations has expired (giving effect to valid extensions
thereto) with respect to each such Tax; PROVIDED, HOWEVER, that any
indemnification obligations arising out of any Taxes with respect to the state
of Michigan or the city of Philadelphia for Tax periods or portions of Tax
periods ending on or before the Closing Date will not be subject to the limits
on indemnification contained in Section 9.3.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
The Purchaser's obligations to consummate the Closing are conditioned upon
the satisfaction or waiver, at or prior to the Closing, of the following
conditions:
Section 7.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. Each representation
and warranty of the Sellers contained in this Agreement or in any Annex or
Schedule delivered pursuant hereto shall be true and correct in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties have been made on and as of such date (except to
the extent that any such representation and warranty is stated in this Agreement
to be made as of a specific date, in which case such representation and warranty
shall be true and correct as of such specified date), and the Sellers shall have
delivered to the Purchaser a certificate dated the Closing Date to such effect.
Section 7.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements of
the Sellers to be performed at or prior to the Closing Date pursuant to the
terms hereof shall have been duly performed in all material respects, and the
Sellers shall have delivered to the Purchaser a certificate dated the Closing
Date to such effect.
29
Section 7.3 NO INJUNCTION. No court or other Governmental Authority shall
have issued an injunction or order which shall then be in effect restraining or
prohibiting the completion of the transactions contemplated by this Agreement.
Section 7.4 GOVERNMENTAL AND OTHER APPROVALS. All of the governmental
consents and approvals which are required to be obtained in connection with this
Agreement or the consummation of the transactions contemplated hereby, and all
other consents and approvals which are set forth in SCHEDULE 7.4 shall have been
received and any violations cured or waived, and such approvals or waivers shall
be in full force and effect. All waiting periods under the HSR Act shall have
been terminated or expired.
Section 7.5 RESIGNATIONS. All Persons who are directors of a Company whose
principal employment is not as an officer of that Company and whom the Purchaser
so requests shall have resigned such directorship effective upon the Closing.
Section 7.6 FIRPTA CERTIFICATE. The Purchaser shall have received from the
Sellers a duly executed certification (in the form attached hereto as ANNEX D,
"FIRPTA CERTIFICATE") that the Sellers are not foreign persons in the form set
forth in Treasury Regulation Section 1.1445-2(b)(2)(iii)(a). Notwithstanding
anything to the contrary contained herein, if any of the Sellers fails to
provide the Purchaser with the FIRPTA Certificate, the Purchaser shall be
entitled to withhold the requisite amount from the Purchase Price in accordance
with Section 1445 of the Code and the Treasury Regulations promulgated
thereunder.
Section 7.7 DELIVERY OF FINANCIAL STATEMENTS. The Sellers shall have
delivered to the Purchaser the 2000 Reissued CPIC Financial Statements and the
2001 Financial Statements, and the Purchaser shall have received the associated
unqualified opinion of each of the Company's auditors with respect to the 2000
Reissued CPIC Financial Statements and the 2001 Financial Statements.
Section 7.8 PATENTS ON SCHEDULE 3.9(b). The assignment to CPIC of the
patents listed in SCHEDULE 3.9(B) shall be filed for recording with the United
States Patent and Trademark Office prior to Closing.
Section 7.9 SECTION 116(2) CERTIFICATE. The Purchaser shall have received
from each of the Sellers a certificate issued by the Minister of National
Revenue of Canada pursuant to subsection 116(2) of the Income Tax Act of Canada
(the "ITA") which evidences a certificate limit (as defined in subsection 116(2)
of the ITA) that is no less than such Seller's proportionate amount of the
Purchase Price allocated to LTSI (a "116(2) Certificate"). Notwithstanding
anything to the contrary contained herein, if any of the Sellers fails to
provide the Purchaser with a valid 116(2) Certificate prior to the Closing Date,
the Purchaser shall be entitled to withhold an amount equal to 25% of the
Purchase Price allocated to such Seller's interest in LTSI. If the Purchaser
receives a valid 116(2) Certificate from such Seller no later than two business
days prior to the thirtieth day after the end of the month which includes the
Closing Date, the Purchaser shall pay the withheld amount to such Seller in
immediately available funds; if no such 116(2) Certificate is received by the
Purchaser within such period, the Purchaser shall pay the withheld amount to the
Receiver General of Canada and shall have no further liability to such Seller
with respect to such withheld amount.
Section 7.10 TERMINATION OF STOCK TRANSFER AGREEMENT.The Stock Transfer
Agreement, dated as of April 30, 1992, between JJC, JCP, CPIC and Lake Shore
National Bank, shall be terminated prior to the Closing and notice of such
termination shall have been delivered to Lake Shore National Bank.
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ARTICLE VIII
CONDITIONS TO THE SELLERS' OBLIGATIONS
The Sellers' obligations to consummate the Closing are conditioned upon the
satisfaction or waiver, at or prior to the Closing, of the following conditions:
Section 8.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. Each representation
and warranty of the Purchaser contained in this Agreement shall be true and
correct in all material respects 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 (except to the extent that any such representation and warranty is
stated in this Agreement to be made as of a specific date, in which case such
representation and warranty shall be true and correct as of such specified
date), and in each case except where the failure to be true and correct would
not prevent the Purchaser from performing its obligations hereunder, and the
Purchaser shall have delivered to the Sellers a certificate dated the Closing
Date to such effect.
Section 8.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements of
the Purchaser to be performed at or prior to the Closing Date pursuant to the
terms hereof shall have been duly performed in all material respects, including,
without limitation, the payment by the Purchaser of the Purchase Price, and the
Purchaser shall have delivered to the Sellers a certificate dated the Closing
Date to such effect.
Section 8.3 NO INJUNCTION. No court or other Governmental Authority shall
have issued an injunction or order which shall then be in effect restraining or
prohibiting the completion of the transactions contemplated by this Agreement.
Section 8.4 GOVERNMENTAL APPROVALS. All of the governmental consents and
approvals which are required to be obtained by the Purchaser in connection with
this Agreement or the consummation of the transactions contemplated hereby shall
have been received and any violations cured or waived, and such approvals or
waivers shall be in full force and effect. All waiting periods under the HSR Act
shall have been terminated or expired.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 9.1 SURVIVAL OF REPRESENTATIONS. The representations and warranties
made in this Agreement or any certificate delivered pursuant to this Agreement
shall terminate 18 months after the Closing Date; PROVIDED, THAT, (i) the
representations and warranties contained in Sections 2.1, 2.2, 3.1, 3.2 and 3.10
shall survive until 60 days following the expiration of the statute of
limitations period applicable to the matters covered thereby (giving effect to
any waiver, mitigation or extension there) if later, (ii) the representations
and warranties as to title to the Stock in Sections 2.1 and 3.3 shall survive
indefinitely, (iii) the representations and warranties contained in Section 3.15
shall survive until four years after the Closing Date and (iv) the
representations and warranties contained in Section 3.12 shall survive until
three years after the Closing Date; PROVIDED, FURTHER, HOWEVER, that any claims
of a breach of any surviving representation or warranty made in good faith prior
to the applicable expiration date therefore shall survive such date to the
extent of the facts alleged in such claim and any other claim related to such
claim or the facts underlying such claim prior to such expiration date. The
covenants and agreements contained herein to be performed or complied with after
the Closing shall survive the execution and delivery of this Agreement, the
Closing and the consummation of the transactions contemplated hereby.
31
Section 9.2 INDEMNITIES.
(a) From and after the Closing, each of JCP and JJC hereby agrees,
severally to the extent of his Proportionate Indemnity Interest, and not
jointly, to indemnify and hold harmless the Purchaser and, without duplication
each Company, from and against any and all claims, losses, damages, liabilities,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) (collectively, "DAMAGES") suffered or paid by the Purchaser or any
Company as a result of the breach by any Seller of (i) any representation or
warranty made by any Seller in this Agreement and (ii) any covenant, undertaking
or other agreement of any Seller contained in this Agreement. "PROPORTIONATE
INDEMNITY INTEREST," as used herein, shall mean 50% with respect to JCP and 50%
with respect to JJC.
(b) From and after the Closing, the Purchaser hereby agrees to
indemnify and hold harmless the Sellers against Damages suffered or paid by each
and, without duplication, all of them as a result of the breach by the Purchaser
of (i) any representation or warranty made by the Purchaser in this Agreement
and (ii) any covenant, undertaking or other agreement of the Purchaser contained
in this Agreement.
(c) Any party seeking indemnification under this Article IX (an
"INDEMNIFIED PARTY") shall give each party from whom indemnification is being
sought (each, an "INDEMNIFYING PARTY") notice of any matter for which such
Indemnified Party is seeking indemnification, stating the amount of the Damages,
if known, and method of computation thereof, and containing a reference to the
provisions of this Agreement in respect of which such right of indemnification
is claimed or arises. The obligations of an Indemnifying Party under this
Article IX with respect to Damages arising from any claims of any third party
which are subject to the indemnification provided for in this Article IX
(collectively, "THIRD PARTY CLAIMS") shall be governed by the following
additional terms and conditions: if an Indemnified Party shall receive, after
the Closing Date, initial notice of any Third Party Claim, the Indemnified Party
shall give the Indemnifying Party notice of such Third Party Claim within such
time frame as necessary to allow for a timely response and in any event within
30 days of the receipt by the Indemnified Party of such notice; PROVIDED,
HOWEVER, that the failure to provide such timely notice shall not release the
Indemnifying Party from any of its obligations under this Article IX except to
the extent the Indemnifying Party is materially prejudiced by such failure. The
Indemnifying Party shall be entitled to assume and control the defense of such
Third Party Claim at its expense and through counsel of its choice if it gives
notice of its intention to do so to the Indemnified Party within 30 days of the
receipt of such notice from the Indemnified Party; PROVIDED, HOWEVER, that if
there exists a conflict of interest (including, without limitation, the
availability of one or more legal defenses to the Indemnified Party which are
not available to the Indemnifying Party) that would make it inappropriate in the
reasonable judgment of the Indemnified Party (upon and in conformity with advice
of counsel) for the same counsel to represent both the Indemnified Party and the
Indemnifying Party, then the Indemnified Party shall be entitled to retain one
counsel (plus appropriate local counsel), at the expense of the Indemnifying
Party, provided that the Indemnified Party and such counsel shall contest such
Third Party Claims in good faith. In the event the Indemnifying Party exercises
the right to undertake any such defense against any such Third Party Claim as
provided above, the Indemnified Party shall cooperate with the Indemnifying
Party in such defense and make available to the Indemnifying Party, at the
Indemnifying Party's expense, all witnesses, pertinent records, materials and
information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the Indemnifying
Party. Similarly, in the event the Indemnified Party is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Indemnifying
Party shall cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party, at the Indemnifying Party's expense, all
such witnesses, records, materials and information in the Indemnifying Party's
possession or under the Indemnifying Party's control relating thereto as is
reasonably required by the Indemnified Party. The Indemnifying Party shall not,
without the written consent of the Indemnified Party (which shall not be
unreasonably withheld or delayed), (i) settle
32
or compromise any Third Party Claim or consent to the entry of any judgment
which does not include as an unconditional term thereof the delivery by the
claimant or plaintiff to Indemnified Party of a written release from all
liability in respect of such Third Party Claim or (ii) settle or compromise any
Third Party Claim in any manner that may adversely affect the Indemnified Party.
Finally, no Third Party Claim which is being defended in good faith by the
Indemnifying Party or which is being defended by the Indemnified Party as
provided above in this Section 9.2(c) shall be settled by the Indemnified Party
without the written consent of the Indemnifying Party which shall not be
unreasonably withheld or delayed.
Section 9.3 LIMITS ON INDEMNIFICATION.
(a) No amount shall be recoverable by the Purchaser pursuant to Section
9.2(a) unless the aggregate amount of Damages (other than those relating to
representations and warranties in Section 3.10 in respect of which no "basket"
shall apply) so recoverable exceeds $2,000,000, and in such case each of JCP and
JJC shall be required to pay his Proportionate Indemnity Interest of all of the
Damages in excess of $1,000,000.
(b) No amount shall be recoverable by the Sellers pursuant to Section
9.2(b) unless the aggregate amount of Damages (other than those relating to the
covenants in Section 5.12 in respect of which no "basket" shall apply) so
recoverable exceeds $2,000,000, and in such case the Purchaser shall be required
to pay all of the Damages in excess of $1,000,000.
(c) Notwithstanding anything to the contrary contained in this
Agreement but subject to Section 6.8, the maximum amount of indemnifiable
Damages which may be recovered by the Purchaser arising out of or resulting from
the causes enumerated in Section 9.2(a) shall be an amount equal to $22,500,000
from JCP and $22,500,000 from JJC.
(d) Notwithstanding anything to the contrary contained in this
Agreement but subject to Section 6.8, the maximum amount of indemnifiable
Damages which may be recovered by the Sellers arising out of or resulting from
the causes enumerated in Section 9.2(b) shall be an amount equal to $45,000,000.
(e) In case any event shall occur which would otherwise entitle either
party to assert a claim for indemnification hereunder, no Damage shall be deemed
to have been sustained by such party to the extent of any proceeds received or
to be received by such party from any insurance policies with respect thereto.
The indemnification provided for in Article VI and in this Article IX shall
constitute the sole remedy of any party to the Agreement with respect to (i)
breaches by any other party to the Agreement of any of the representations,
warranties, agreements or covenants contained in the Agreement, (ii) any events,
circumstances or conditions which are the subject of the representations,
warranties, covenants or agreements contained in the Agreement, (iii) any other
matters related to the Sale or the transactions contemplated by the Agreement,
and (iv) any other events, circumstances or conditions relating to the ownership
or operation of any Company prior to the Closing.
(f) If the Damages suffered or paid by a party pursuant to Section 9.2 (an
"INDEMNITY CLAIM") results in an adjustment to the Purchase Price, then the
indemnity payment shall equal the full amount of the Indemnity Claim. If the
Indemnity Claim does not result in an adjustment to the Purchase Price and gives
rise to a currently realizable Tax Benefit to the party making the claim, the
indemnity payment shall be reduced by the amount of the Tax Benefit available to
the party making the claim. To the extent such Indemnity Claim does not give
rise to a currently realizable Tax Benefit, if the amount with respect to which
any indemnity payment is made gives rise to a subsequently realized Tax Benefit
to the party that made the claim, such party shall refund to the Indemnifying
Party the amount of such Tax
33
Benefit when, as and if realized. For the purposes of this Agreement, any
subsequently realized Tax Benefit shall be treated as though it were a reduction
in the amount of the initial indemnity payment, and the liabilities of the
parties shall be redetermined as though both occurred at or prior to the time of
the indemnity payment. For purposes of this Section 9.3(f), a "TAX BENEFIT"
means an amount by which the net Tax liability of the party (or Persons
including or related to the party) is reduced (including, without limitation, by
deduction, reduction of income by virtue of increased Tax basis or otherwise,
entitlement to refund, credit or otherwise) plus any related interest received
from the relevant taxing authority (net of any Taxes payable as a result of the
receipt thereof) and taking into account the net present value (as determined
below) of any net increase in the party's liability for Taxes which is
attributable to the loss of deductions, amortizations, exclusions from income or
other allowances resulting from any adjustments to the Purchase Price (which
gives rise to any adjustments to the tax basis of any Company asset or assets)
by reason of the party's receipt of the indemnity payment. The net present value
of any net increase in the party's liability for Taxes shall be calculated by
(x) using the maximum marginal federal, state, local and foreign Tax rates
applicable to the party for 2001, (y) using a discount rate equal to the
mid-term applicable federal rate in effect on the Closing Date (compounded
semi-annually) and (z) assuming that all deductions, amortizations, exclusions
from income or other allowances would be utilized at the earliest date or dates
allowable by applicable law. Where a party has other losses, deductions, credits
or items available to it, the Tax Benefit from any losses, deductions, credits
or items relating to the Indemnity Claim shall be deemed to be utilized last
relative to any other losses, deductions, credits or items. For purposes of this
Section 9.3(f), a Tax Benefit is "currently realizable" to the extent it can be
reasonably anticipated that such Tax Benefit will be realized in the current
taxable period or year or in any Tax Return with respect thereto (including
through a carryback to a prior taxable period) or in any taxable period or year
prior to the date of the Indemnity Claim. In the event that there should be a
determination disallowing the Tax Benefit, the Indemnifying Party shall be
liable to refund to the Indemnified Party the amount of any related reduction
previously allowed or payments previously made to the Indemnifying Party
pursuant to this Section 9.3(f). The amount of the refunded reduction or payment
shall be deemed a payment under Section 9.2.
(g) Except as provided in Section 9.3(f), an Indemnifying Party shall
not be liable under this Article IX for consequential damages, special damages,
incidental damages, indirect damages, lost profits or similar items; PROVIDED,
HOWEVER, that this Section 9.3(g) shall not relieve the Indemnifying Party of
obligations to pay consequential damages, special damages, incidental damages,
indirect damages, lost profits or similar items required to be paid for the
benefit of a third party pursuant to a Third Party Claim.
(h) To the extent that the Indemnifying Party discharges any claim for
indemnification hereunder, they shall be subrogated to all related rights of the
Indemnified Party against third parties.
(i) Each Indemnified Party shall be obligated in connection with any
claim for indemnification under Section 9.2 to use commercially reasonable
efforts to mitigate Damages upon and after becoming aware of any event which
could reasonably be expected to give rise to such Damages.
ARTICLE X
TERMINATION
Section 10.1 TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing Date:
(a) by the mutual consent of the Sellers and the Purchaser;
34
(b) by either the Sellers or the Purchaser:
(i) if the Closing shall not have occurred on or prior to
January 31, 2002; provided, however, that the right to terminate this Agreement
under this Section 10.1(b)(i) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or prior to such date; or
(ii) if any Governmental Authority shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their commercially reasonable efforts to
lift), in each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement;
(c) by the Sellers if the Purchaser (x) breaches or fails in any
material respect to perform or comply with any of its material covenants and
agreements contained herein or (y) breaches its representations and warranties
in any material respect in each case such that the conditions set forth in
Article VIII would not be satisfied; PROVIDED, HOWEVER, that if any such breach
is curable by the Purchaser through the exercise of its reasonable best efforts
and for so long as the Purchaser shall be so using its reasonable best efforts
to cure such breach, the Sellers may not terminate this Agreement pursuant to
this Section 10.1(c); or
(d) by the Purchaser if the Sellers (x) breach or fail in any material
respect to perform or comply with any of their material covenants and agreements
contained herein or (y) breach their representations and warranties in any
material respect in each case such that the conditions set forth in Article VII
would not be satisfied; PROVIDED, HOWEVER, that if any such breach is curable by
the Sellers through the exercise of the Sellers' reasonable best efforts and for
so long as the Sellers' shall be so using their reasonable best efforts to cure
such breach, the Purchaser may not terminate this Agreement pursuant to this
Section 10.1(d).
Section 10.2 EFFECT OF TERMINATION. In the event that this Agreement
shall be terminated pursuant to Section 10.1, written notice thereof shall be
given to the other parties specifying the provision hereof pursuant to which
such termination is made, and all further obligations of the parties hereto
under this Agreement (other than pursuant to the last sentence of Section 5.2,
this Section 10.2 and Sections 11.1,11.2, 11.4, 11.6, 11.7, 11.8, 11.10, 11.l3
and 11.14, all of which shall continue in full force and effect) shall terminate
without further liability or obligation of either party to the other party
hereunder; PROVIDED, HOWEVER, that no party shall be released from liability
hereunder if this Agreement is terminated by reason of any willful breach of
this Agreement by such party.
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1 EXPENSES. The parties hereto shall pay all of their own
expenses relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective counsel, financial
advisors and accountants.
35
Section 11.2 GOVERNING LAW; CONSENT TO JURISDICTION.
(a) The interpretation and construction of this Agreement, and
all matters relating hereto, shall be governed by the laws of the State of
Illinois applicable to contracts made and to be performed entirely within the
State of Illinois without giving effect to any conflict of law provisions
thereof.
(b) Each of the parties agrees that any legal action or
proceeding with respect to this Agreement may be brought in the Courts of the
State of Illinois, and, by execution and delivery of this Agreement, each party
hereto hereby irrevocably submits itself in respect of its property, generally
and unconditionally, to the exclusive jurisdiction of the aforesaid courts in
any legal action or proceeding arising out of this Agreement. Each of the
parties hereto hereby irrevocably waives any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
courts referred to in the preceding sentence. Each party hereto hereby consents
to process being served in any such action or proceeding by the mailing of a
copy thereof to the address set forth in Section 11.6 hereof below its name and
agrees that such service upon receipt shall constitute good and sufficient
service of process or notice thereof. Nothing in this paragraph shall affect or
eliminate any right to serve process in any other manner permitted by law.
Section 11.3 CAPTIONS. The Article and Section captions used herein and
in the Schedules are for reference purposes only, and shall not in any way
affect the meaning or interpretation of this Agreement.
Section 11.4 PUBLICITY. Neither of the parties hereto shall issue any
press release or make any other public statement, in each case relating to or
connected with or arising out of the Sale, this Agreement or the matters
contained herein, without obtaining the prior approval of the other party,
except as such party believes, after receiving the advice of outside counsel,
may be required by law or by any listing agreement with or listing rules of a
national securities exchange or trading market or inter-dealer quotation system
in which case, the party proposing to issue such press release or make such
public statement shall use its reasonable best efforts to consult in good faith
with the other party before issuing such press release or making such public
statement. The requirements of this Section 11.4 shall be in addition to those
included in the Confidentiality Agreement.
Section 11.5 BUSINESS RECORDS. After the Closing Date, the Purchaser
shall afford each of the Sellers and their attorneys, accountants, officers and
other representatives reasonable access, during normal business hours, to such
books and records of each Company (and shall permit such Persons to examine and
copy such books and records to the extent reasonably requested by such party)
and shall cause the directors, officers and employees of such Company to furnish
all such information reasonably requested by any of the Sellers in connection
with financial reporting and Tax matters (including financial and Tax audits and
Tax contests), third party litigation and other similar business purposes. The
Purchaser shall cause the Companies to maintain all such books and records in
the jurisdiction in which such books and records were located prior to the
Closing Date if required by applicable law and shall not destroy or dispose of
any such books and records without the prior written consent of the Sellers'
Representatives; PROVIDED, HOWEVER, that the Purchaser shall be entitled to
destroy any of such books and records after the seventh anniversary of the
Closing Date with the prior written consent of the Sellers' Representatives;
PROVIDED FURTHER, HOWEVER, that if the Sellers' Representatives do not consent
to the destruction of such books and records, the Purchaser may deliver them to
the Sellers.
Section 11.6 NOTICES. Any notice or other communications required or
permitted hereunder shall be sufficiently given if delivered in person,
transmitted via facsimile (with confirmation thereof), or
36
sent by telecopy or by registered or certified mail, postage prepaid, or
recognized overnight courier service addressed as follows:
if to the Purchaser:
Xxxxxx Scientific International Inc.
Xxx Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxxxxx 00000
Attention: Xxxx XxXxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
if to any of the Sellers, to the Sellers' Representatives:
Xxxx X. Xxxxxx
0 Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx
Tel: (000) 000-0000
and:
Xxxxxx X. Xxxx
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Xxxxx
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
or such other address or number as shall be furnished in writing by any such
person, and such notice or communication shall be deemed to have been given (a)
as of the date so personally delivered, transmitted via facsimile or sent by
telecopy, (b) on the third business day after the mailing thereof or (c) on the
first business day after delivery by recognized overnight courier service.
37
Section 11.7 SELLERS' REPRESENTATIVES. The Sellers hereby appoint JCP
and JJC as their representatives (the "SELLERS' REPRESENTATIVES") for purposes
of making all investigations, receiving all payments and notices, giving all
consents, and taking any other Sellers' action permitted or required under this
Agreement to be taken by any of the Sellers, including the enforcement of the
Sellers' rights under Sections 9.2 and 9.3. All action permitted or required to
be taken by the Sellers' Representatives hereunder must be taken by both
Sellers' Representatives. In the event of the death or written resignation
(delivered to the Purchaser) of JCP or JJC as a Sellers' Representative
hereunder, the Sellers hereby appoint Xxxxxxx Xxxxxx Xxxxxx to serve as the
successor Sellers' Representative to JCP hereunder and Xxxxx X. Xxxx to serve as
the successor Sellers' Representative to JJC hereunder. The Purchaser may, for
all purposes of this Agreement, assume and treat every notice, payment or other
action directed to, or taken by, the Sellers' Representatives as if such notice,
payment or other action had been directed to, or taken by, each Seller.
Section 11.8 PARTIES IN INTEREST. This Agreement may not be
transferred, assigned, pledged or hypothecated by any party hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties except that the Purchaser may assign all or a portion of its rights and
obligations under this Agreement to one or more wholly owned Subsidiaries of
Xxxxxx Scientific International Inc.; PROVIDED, HOWEVER, that in the event the
Purchaser assigns all or a portion of its rights and obligations under this
Agreement, the Purchaser hereby unconditionally and irrevocably guarantees to
the Sellers the prompt and full discharge by such Subsidiaries of all of the
Purchaser's obligations under this Agreement in accordance with the terms
hereof. The Purchaser also hereby agrees that, if such Subsidiaries fail to
perform and discharge promptly all such obligations and liabilities in
accordance with such terms, the Purchaser will, forthwith, upon demand, perform
and discharge the same. The unconditional obligation of the Purchaser hereunder
will not be affected, impaired or released by any extension, waiver or amendment
(other than such Subsidiaries' performance). This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 11.9 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
Section 11.10 ENTIRE AGREEMENT. This Agreement, including the Annexes,
Schedules and other documents referred to herein which form a part hereof, and
the Confidentiality Agreement, contain the entire understanding of the parties
hereto with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter other than the Confidentiality Agreement.
Section 11.11 INTERPRETATION. For the purposes hereof, when any fact is
stated to be to the "SELLERS' KNOWLEDGE" or the "COMPANIES' KNOWLEDGE" or words
of similar impact, this shall mean the actual knowledge of the existence or
non-existence of such fact by one of the persons identified in SCHEDULE 11.11
hereto. The words "HEREOF," "HEREIN" and "HEREWITH" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Article,
Section, Paragraph, Annex and Schedule references are to the Articles, Sections,
Paragraphs, Annexes and Schedules of this Agreement unless otherwise specified.
Whenever the words "INCLUDE," "INCLUDES" or "INCLUDING" are used in this
Agreement they shall be deemed to be followed by the words "without limitation."
The words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa. The phrases "THE DATE OF THIS AGREEMENT," "THE DATE HEREOF" and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to September 4, 2001. As used in this Agreement, the term "BUSINESS DAY"means a
day, other than a Saturday or a Sunday, on which banking institutions in The
City of
38
Chicago, Illinois are required to be open. The parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
Section 11.12 THIRD PARTY BENEFICIARIES. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto; PROVIDED, HOWEVER, that
notwithstanding this Section 11.12, the provisions of Section 5.4, to the extent
applicable, shall inure to the benefit of officers, directors and employees of
the Companies, and may be enforced by such officers, directors and employees and
their respective heirs and personal representatives.
Section 11.13 ATTORNEYS' FEES AND COSTS. Should any party institute any
action, suit or other proceeding arising out of or relating to this Agreement,
the prevailing party shall be entitled to receive from the losing party
reasonable attorneys' fees and costs incurred in connection therewith.
Section 11.14 AMENDMENTS; WAIVERS. This Agreement may be amended,
modified and supplemented in any and all respects, but only by a written
instrument signed by the Sellers' Representatives and the Purchaser expressly
stating that such instrument is intended to amend, modify or supplement this
Agreement. Except as otherwise provided in this Agreement, any failure of any of
the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party or parties entitled to the benefits thereof
only by a written instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
[Remainder of page intentionally left blank.]
39
IN WITNESS WHEREOF, each of the parties have caused this Agreement to
be duly executed, all as of the day and year first above written.
XXXXXX SCIENTIFIC INTERNATIONAL INC.
By:____________________________________
Name:
Title:
_______________________________________
Name: Xxxxxx X. Xxxx, for the purposes
of Section 5.7 hereof
_______________________________________
Name: Xxxx X. Xxxxxx, for the purposes
of Section 5.7 hereof
SELLERS:
_______________________________________
Name: Xxxxxxx Xxxxxx Xxxxxx
_______________________________________
Name: Xxxxx Xxxxxxx Xxxxxx
_______________________________________
Name: Xxxxxxx Xxxxxx Xxxxxx-Xxxxxxxxxx
_______________________________________
Name: Xxxxxxx Xxxxxxx Xxxxxx
_______________________________________
Name: Xxxxxxx Xxxxx Xxxxxx
_______________________________________
Name: Xxxx Xxxxxxx Xxxxxx
40
XXXXXX X. XXXX TRUST
By:
-----------------------------------------
Name: Xxxxxx X. Xxxx, as Trustee of the
Xxxxxx X. Xxxx Trust
XXXXX X. XXXX XXXXX REVOCABLE TRUST
By:
-----------------------------------------
Name: Xxxxx X. Xxxx Xxxxx, as Trustee of the
Xxxxx X. Xxxx Xxxxx Revocable Trust
XXXXXXXX X. XXXX REVOCABLE TRUST
By:
-----------------------------------------
Name: Xxxxxxxx X. Xxxx, as Trustee of the
Xxxxxxxx X. Xxxx Revocable Trust
XXXX XXXXXXX XXXXXX TRUST
By:
-----------------------------------------
Name: Xxxx X. Xxxxxx, as Trustee of the
Xxxx Xxxxxxx Xxxxxx Trust
XXXXXXX X. XXXXXX TRUST
By:
-----------------------------------------
Name: Xxxx X. Xxxxxx, as Trustee of the
Xxxxxxx X. Xxxxxx Trust
By:
-----------------------------------------
Name: Xxxxxxx Xxxxxx Xxxxxx, as Trustee
of the Xxxxxxx X. Xxxxxx Trust
By:
-----------------------------------------
Name: Xxxxxxx X. Xxxxxx, as Trustee of
the Xxxxxxx X. Xxxxxx Trust
41
XXXX X. XXXXXX TRUST
By:
-----------------------------------------
Name: Xxxx X. Xxxxxx, as Trustee of the
Xxxx X. Xxxxxx Trust
By:
-----------------------------------------
Name: Xxxxxxx Xxxxxx Xxxxxx, as Trustee
of the Xxxx X. Xxxxxx Trust
By:
-----------------------------------------
Name: Xxxx X. Xxxxxx, as Trustee of
the Xxxx X. Xxxxxx Trust
42
